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As filed with the Securities and Exchange Commission on December 15, 2005
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
               REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
                      EXCHANGE ACT OF 1934
OR
               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                      1934
OR
               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                      ACT OF 1934
OR
               SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                      EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2005
Commission file number 0-28800
DRDGOLD LIMITED
(Exact name of Registrant as specified in its charter
and translation of Registrant's name into English)
REPUBLIC OF SOUTH AFRICA
(Jurisdiction of incorporation or organization)
299 PENDORING AVENUE, BLACKHEATH, RANDBURG, 2195, SOUTH AFRICA
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act
None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period
covered by the annual report.
As of June 30, 2005, the Registrant had outstanding 296,206,048 ordinary shares, of no par value.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for past 90 days. Yes No
Indicate by check mark which financial statement item the registrant has elected to follow. Item 17
Item 18
Contact details:
Mr. D.J. Pretorius – Group Legal Counsel
DRDGOLD Limited, 299 Pendoring Avenue, Randburg, 2195, South Africa
Telephone: +2711 219 8700
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TABLE OF CONTENTS
Page
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS .....................................................
5
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE .........................................................................................
5
ITEM 3.
KEY INFORMATION ..............................................................................................................................................
5
ITEM 3A.
Selected Financial Data ...............................................................................................................................................
5
ITEM 3B.
Capitalization and Indebtedness ..................................................................................................................................
7
ITEM 3C.
Reasons For The Offer And The Use Of Proceeds ....................................................................................................
7
ITEM 3D.
Risk Factors ................................................................................................................................................................
7
ITEM 4.
INFORMATION ON THE COMPANY ..................................................................................................................
19
ITEM 4A.
History And Development Of The Company .............................................................................................................
19
ITEM 4B.
Business Overview......................................................................................................................................................
25
ITEM 4C.
Organizational Structure .............................................................................................................................................
38
ITEM 4D.
Property, Plant And Equipment ..................................................................................................................................
39
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS...........................................................................
77
ITEM 5A.
Operating Results .......................................................................................................................................................
78
ITEM 5B.
Liquidity And Capital Resources v..............................................................................................................................
104
ITEM 5C.
Research And Development, Patents And Licenses Etc  ............................................................................................
108
ITEM 5D.
Trend Information ......................................................................................................................................................
108
ITEM 5E.
Off-Balance Sheet Items ............................................................................................................................................
108
ITEM 5F.
Tabular Disclosure Of Contractual Obligations .........................................................................................................
109
ITEM 5G.
Safe Harbor .................................................................................................................................................................
109
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES ...........................................................................
110
ITEM 6A.
Directors And Senior Management ............................................................................................................................
110
ITEM 6B.
Compensation..............................................................................................................................................................
114
ITEM 6C.
Board Practices............................................................................................................................................................
116
ITEM 6D.
Employees ..................................................................................................................................................................
120
ITEM 6E.
Share Ownership ........................................................................................................................................................
122
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS..........................................................
124
ITEM 7A.
Major Shareholders ....................................................................................................................................................
124
ITEM 7B.
Related Party Transactions..........................................................................................................................................
125
ITEM 7C.
Interest Of Experts And Counsel ...............................................................................................................................
129
ITEM 8.
FINANCIAL INFORMATION.................................................................................................................................
130
ITEM 8A.
Consolidated Financial Statements And Other Financial Information   ......................................................................
130
ITEM 8B.
Significant Changes.....................................................................................................................................................
130
ITEM 9.
THE OFFER AND LISTING ....................................................................................................................................
131
ITEM 9A.
Offer And Listing Details............................................................................................................................................
131
ITEM 9B.
Plan Of Distribution  ..................................................................................................................................................
131
ITEM 9C.
Markets .......................................................................................................................................................................
131
ITEM 9D.
Selling Shareholders....................................................................................................................................................
132
ITEM 9E.
Dilution........................................................................................................................................................................
132
ITEM 9F.
Expenses Of The Issue ................................................................................................................................................
132
ITEM 10.
ADDITIONAL INFORMATION ..............................................................................................................................
133
ITEM 10A.
Share Capital  ...............................................................................................................................................................
133
ITEM 10B.
Memorandum And Articles Of Association  ...............................................................................................................
133
ITEM 10C.
Material Contracts .......................................................................................................................................................
135
ITEM 10D.
Exchange Controls ......................................................................................................................................................
140
ITEM 10E.
Taxation .......................................................................................................................................................................
142
ITEM 10F.
Dividends And Paying Agents  ...................................................................................................................................
147
ITEM 10G.
Statement By Experts ..................................................................................................................................................
147
ITEM 10H.
Documents On Display ...............................................................................................................................................
147
ITEM 10I.
Subsidiary Information................................................................................................................................................
147
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........................................
148
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES .........................................................
151
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PART II
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES...................................................................
152
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS..
152
ITEM 15.
CONTROLS AND PROCEDURES .........................................................................................................................
152
ITEM 16.
CORPORATE GOVERNANCE ...............................................................................................................................
155
ITEM 16A.
Audit Committee Financial Expert  ...........................................................................................................................
155
ITEM 16B.
Code Of Ethics ...........................................................................................................................................................
155
ITEM 16C.
Principal Accountant Fees And Services  ...................................................................................................................
155
ITEM 16D.
Exemptions From The Listing Standards For Audit Committees  .............................................................................
155
ITEM 16E.
Purchase Of Equity Securities By The Issuer ............................................................................................................
155
PART III
ITEM 17.
FINANCIAL STATEMENTS....................................................................................................................................
156
ITEM 18.
FINANCIAL STATEMENTS.................................................................................................................................... F-pages
ITEM 19.
EXHIBITS...................................................................................................................................................................
157
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1
Preparation of Financial Information
We are a South African company and currently the majority of our operations, as measured in production ounces, are located
there. Accordingly, our books of account are maintained in South African Rands. Our financial statements attached hereto are presented
in United States Dollars and unless otherwise stated herein, in accordance with generally accepted accounting principles in the United
States, or US GAAP. All references to “Dollars” or “$” herein are to United States Dollars, references to “Rand” or “R” are to South
African Rands, references to “A$” are to Australian Dollars, references to “F$” are to the Fiji Dollar, and references to “Kina” or “K” are
to Papua New Guinean Kinas.
Certain information in this Annual Report on Form 20-F, or the Annual Report, presented in Rands, Australian Dollars, Fiji
Dollars or Kinas has been translated into Dollars. Unless otherwise stated, the conversion rates for currency translations for the 2005
fiscal year are R6.684 per $1.00, A$1.313 per $1.00 and K3.115 per $1.00, which reflect the noon buying rate in New York City at
June 30, 2005. For statement of operations amounts, the average conversion rate for Rand during the 2005 fiscal year of R6.222 per $1.00
is used. The rates used for currency translations for transactions occurring during the 2004 and 2003 fiscal years are the respective year
end exchange rates for balance sheet amounts and the average exchange rate for that year for statements of operations amounts. By
including convenience currency translations in this Annual Report, we are not representing that the Rand, Australian Dollars or Kinas
amounts actually represent amounts shown in Dollars or that these amounts could be converted at the rates indicated into Dollars.
DRDGOLD Limited
When used in this Annual Report, the term the “Company” refers to DRDGOLD Limited and the terms “we,” “our,” “us” or
“the Group” refer to the Company and its subsidiaries, associates and joint venture, as appropriate in the context.
Special Note Regarding Forward-Looking Statements
This Annual Report contains certain “forward-looking statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934, (the “Exchange Act”), regarding future events or other future financial performance and information relating to us
that are based on the beliefs of our management, as well as assumptions made by and information currently available to our management.
Some of these forward-looking statements include forward-looking phrases such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “intend,” “may,” “should,” or “will continue,” or similar expressions or the negatives thereof or other variations on these
expressions, or similar terminology, or discussions of strategy, plans or intentions. These statements also include descriptions in
connection with, among other things:
•
our ability to successfully restructure our South African operations and significantly reduce costs;
•
estimates regarding future production and throughput capacity;
•
our anticipated commitments;
•
our ability to fund our operations in the next 12 months; and
•
estimated production costs, cash costs per ounce, total costs per ounce.
Such statements reflect our current views with respect to future events and are subject to risks, uncertainties and assumptions.
Many factors could cause our 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 continuing strengthening of the Rand against the Dollar;
•
regulatory developments adverse to us or difficulties in maintaining necessary licenses or other governmental approvals;
•
changes in our competitive position;
•
changes in business strategy;
•
any major disruption in production at our key facilities; or
•
adverse changes in foreign exchange rates.
For a discussion of such risks, see Item 3D.: “Risk Factors.” The risk factors described in Item 3D could affect our future results,
causing these results to differ materially from these expressed in any forward-looking statements. These risk factors are not necessarily all
of the important factors that could cause our results to differ materially from those expressed in any forward-looking statements. Other
unknown or unpredictable factors could also have material adverse effects on future results.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
We do not undertake any obligation to update publicly or release any revisions to these forward-looking statements to reflect events or
circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events.
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2
Imperial units of measure and metric equivalents
Units stated in this Annual Report are measured in Imperial and Metric.
Metric
Imperial
Imperial
Metric
1 metric tonne
1.10229 short tons
1 short ton
0.9072 metric tonnes
1 kilogram
2.20458 pounds
1 pound
0.4536 kilograms
1 gram
0.03215 troy ounces
1 troy ounce
31.10353 grams
1 kilometer
0.62150 miles
1 mile
1.609 kilometres
1 meter
3.28084 feet
1 foot
0.3048 metres
1 liter
0.26420 gallons
1 gallon
3.785 liters
1 hectare
2.47097 acres
1 acre
0.4047 hectares
1 centimeter
0.39370 inches
1 inch
2.54 centimetres
1 gram/tonne
0.0292 ounces/ton
1 ounce/ton
34.28 grams/tonnes
0 degree Celsius
32 degrees Fahrenheit
0 degrees Fahrenheit
- 18 degrees Celsius
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3
Glossary of Terms and Explanations
Adularia.............................................  A transparent or translucent variety of common feldspar.
Archaean ...........................................  A period of the geological time scale between 2.5 and 4.6 billion years ago, the earliest part of the
  Precambrian.
Assaying............................................  The chemical testing process of rock samples to determine the mineral content.
Auriferous .........................................  Containing gold.
Bonanza ............................................  Unexpected high-grade occurrences.
Care and maintenance.......................   Cease active mining activity at a shaft, but continue to incur costs to ensure that the Ore Reserves
are open, serviceable and legally compliant.
Cash costs per ounce.........................    Cash costs are production costs incurred directly in the production of gold and include labor
costs, contractor and other related costs, inventory costs and electricity costs. Cash costs per
ounce are calculated by dividing cash costs by ounces of gold produced. Cash costs per ounce
have been calculated on a consistent basis for all periods presented. This is a non-US GAAP
financial measure and should not be considered a substitute measure of costs and expenses
reported by us in accordance with US GAAP.
Caving ...............................................    A type of mining in which the ore is blasted and drawn in a manner causing the overhead rock to
cave in.
Conglomerate ....................................  A coarse-grained sedimentary rock consisting of rounded or sub-rounded pebbles.
Cut-and-fill........................................   A mining method in which a slice of rock is removed after blasting and replaced with a slice of
fill material to provide workers with a platform to mine the next slice of rock.
Cut-off grade .....................................  The minimum in-situ grade of ore blocks for which the cash costs per ounce, excluding overhead
costs, are equal to a projected gold price per ounce.
Depletion ...........................................  The decrease in the quantity of ore in a deposit or property resulting from extraction or
production.
Dilution .............................................   Broken rock entering the ore flow at zero or minimal grade and therefore diluting the gold
content.
Diorite................................................  An igneous rock formed by the solidification of molten material.
Doré...................................................    Unrefined gold and silver bullion bars consisting of approximately 90% precious metals which
will be further refined to almost pure metal.
Electrowinning..................................     The process of recovering a metal from an ore by means of electro-chemical processes.
Grade .................................................  The amount of gold contained within auriferous material generally expressed in ounces per ton or
  grams per ton of ore.
g/t.......................................................    Grams per ton.
Horizon..............................................  A plane indicating a particular position in a stratigraphic sequence. This may be a theoretical
  surface with no thickness or a distinctive bed.
Igneous rock......................................    Rock which is magmatic in origin.
Intrusive.............................................  Rock which while molten, penetrated into or between other rocks, but solidified before reaching
the surface.
Life of mine.......................................    Projected life of a mining operation based on the Proven and Probable Ore Reserves.
Metallurgical plant ............................  A processing plant (mill) erected to treat ore and extract the contained gold.
Mine call factor .................................  This is the gold content recovered expressed as a percentage of the gold content called.
Mill .................................................... Material passed through the metallurgical plant for processing.
Mt ...................................................... Million tons.
Opening up........................................  The potential that previously abandoned shafts have to be reopened and mined.
Ore.....................................................    A mixture of valuable and worthless minerals from which the extraction of at least one mineral is
                                                             technically and economically viable.
Ore Reserves .....................................    Total Ore Reserves of wholly-owned subsidiaries and our 20% attributable share of the Ore
Reserves from the Porgera Joint Venture.
Pay-limit............................................    The minimum in-situ grade of ore blocks for which cash costs, including all overhead costs, are
equal to a projected gold price per ounce.
Proven Ore Reserves.........................    Reserves for which (a) the quantity is computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from the results of detailed sampling
and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth, and mineral content of Ore Reserves are
well-established.
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4
Probable Ore Reserves ...................... Reserves for which quantity and grade and/or quality are computed from information similar to
that used for Proven Ore Reserves, but the sites for inspection, sampling, and measurement are
farther apart or are otherwise less adequately spaced. The degree of assurance, although lower
than that for Proven Ore Reserves, is high enough to assume continuity between points of
observation.
oz/t ..................................................... Ounces per ton.
Reef ................................................... A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic
levels of gold.
Refining.............................................  The final purification process of a metal or mineral.
Rehabilitation ....................................  The process of restoring mined land to a condition approximating its original state.
Reserves ............................................ That part of a mineral deposit which could be economically and legally extracted or produced at
the time of the reserve determination.
Sedimentary ......................................  Formed by the deposition of solid fragmental material that originated from weathering of rocks
and was transported from a source to a site of deposition.
Shaft .................................................. An opening cut downwards for transporting personnel, equipment, supplies, ore and waste. It is
equipped with a hoist system that lowers and raises a cage in the shaft, transporting equipment,
personnel, materials, ore and waste.
Shrinkage stoping..............................  A mining method in which a small percentage of the broken ore is drawn as mining progresses to
make room for subsequent mining activities. Most of the blasted ore is left to accumulate in the
stope and is drawn after the stope is completely mined.
Slimes ................................................ The fraction of tailings discharged from a processing plant after the valuable minerals have been
recovered.
Sloughing ..........................................  The localized failure of part of the slimes dam wall caused by a build up of water within the dam.
Stope.................................................. Underground production working area on the Ore Horizon.
Sub-level stoping .............................. A method of mining in which the ore is blasted, on multiple levels in one stope, and drawn off as
it is blasted, leaving an open stope.
Tailings.............................................. Finely ground rock from which valuable minerals have been extracted by milling, or any waste
rock, slimes or residue derived from any mining operation or processing of any minerals.
Tailings dam...................................... A dam created from waste material of processed ore after the economically recoverable gold has
been extracted.
Tonnage/Tons ................................... Quantities where the metric ton is an appropriate unit of measure. Typically used to measure
reserves of gold-bearing material in-situ or quantities of ore and waste material mined,
transported or milled.
Total costs per ounce ........................ Total costs per ounce represent the full amount of costs incurred and represents the difference
between revenues from gold bullion delivered to refineries and profits or losses before taxation.
Total costs per ounce are calculated by dividing total costs by ounces of gold produced. Total
costs per ounce have been calculated on a consistent basis for all periods presented. This is a
non-US GAAP financial measure and should not be considered a substitute measure of costs and
expenses reported by us in accordance with US GAAP.
Tpm ................................................... Tons per month.
Up-dip mining................................... A mining method in which the drilled and blasted ore gravitates into slushers or gullies leaving
an open space. This is normally used in narrow stopes.
Waste rock......................................... Non-auriferous rock.
Yield .................................................. The amount of recovered gold from production generally expressed in ounces or grams per ton of
ore.
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5
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
3A. SELECTED FINANCIAL DATA
The following selected consolidated financial data as of June 30, 2005 and 2004 and for the years ended June 30, 2005, 2004
and 2003 are derived from our consolidated financial statements set forth elsewhere in this Annual Report, which have been prepared in
accordance with US GAAP. These consolidated financial statements have been audited by KPMG Inc. The selected consolidated
financial data as of June 30, 2002 and 2001 (as restated) and for the years ended June 30, 2002 and 2001 (as restated) are derived from
audited consolidated financial statements not appearing in this Annual Report which have been prepared in accordance with US GAAP.
The selected consolidated financial data set forth below should be read in conjunction with Item 5.: “Operating and Financial Review and
Prospects” and with the consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in
this Annual Report.
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6
Selected Consolidated Financial Data
(in thousands, except share, per share and ounce data)
Year ended June 30,
2005
2004
1 2
2003
1 2
2002
2
2001
2
(as restated)
(as restated)
(as restated)
(as restated)
$’000
$’000
$’000
$’000
$’000
Consolidated Statement of Operations Data
Revenues .......................................................................
183,609
183,254
109,419
143,262
123,214
Production costs ............................................................
(136,520)
(143,026)
(90,761)
(99,791)
(106,873)
Net operating income/(loss).................................... . .......
6,597
(16,110)
47,237
(24,919)
962
(Loss)/profit from continuing operations before tax and
other items ...................................................................
(11,155)
(11,882)
59,406
(24,839)
(77,131)
Income and mining tax (expense)/ benefit ............. ... ......
(5,762)
(14,230)
(15,830)
21,092
128
Equity in loss from associates.............. . ..........................
(20,511)
(11,975)
(6,867)
-
-
Minority interest.............................................................
(2)
(7)
-
-
258
Net (loss)/profit from continuing operations applicable
to common stockholders .............................................
(37,430)
(38,094)
36,709
(3,747)
(76,745)
Loss from discontinued operation .................................
(44,359)
(20,804)
(22,577)
(47,962)
(7,736)
Net (loss)/profit applicable to common stockholders .. . .
(81,789)
(58,898)
13,959
(51,709)
(84,481)
Basic (loss)/profit per share - continuing operations
(cents) ..........................................................................
(15)
(17)
20
(2)
(57)
Basic (loss)/profit per share - discontinued operation
(cents) ..........................................................................
(17)
(10)
(12)
(30)
(6)
Basic (loss)/profit per share (cents) ...............................
(32)
(27)
8
(32)
(63)
Diluted (loss)/profit per share - continuing operations
(cents) ..........................................................................
(15)
(17)
18
(2)
(57)
Diluted (loss)/profit per share (cents) - discontinued
operation......................................................................
(17)
(10)
(12)
(30)
(6)
Diluted (loss)/profit per share (cents) ............................
(32)
(27)
6
(32)
(63)
Consolidated Balance Sheet Data
Cash and cash equivalents .............................................
36,085
22,453
44,423
23,852
13,889
Total assets ....................................................................
238,257
282,735
207,335
197,306
193,621
Total liabilities ...............................................................
(158,330)
(200,194)
(197,145)
(212,777)
(214,188)
Long-term loans ............................................................
(69,314)
(59,865)
(63,149)
(25,368)
(7,273)
Stockholders' (equity)/deficit.............................. . ..........
(79,053)
(81,612)
(10,190)
15,471
20,567
Total liabilities and stockholders' equity .......................
(238,257)
(282,735)
(207,335)
(197,306)
(193,621)
Number of shares issued as at June 30 .........................
296,206,048
233,307,667
184,222,073
177,173,485
154,529,578
Non-US GAAP Financial Data
Working capital..............................................................
11,597
(24,993)
2,419
(34,311)
(16,500)
Cash costs per ounce
3
- continuing operations..............
315
307
275
205
235
Cash costs per ounce
3
- discontinued operation ............
504
393
312
219
231
Cash costs per ounce
3
....................................................
374
343
297
212
232
Total costs per ounce
4
- continuing operations .............
449
418
151
345
440
Total costs per ounce
4
- discontinued operation............
630
441
321
426
300
Total costs per ounce
4
...................................................
506
428
250
388
360
1
The selected consolidated financial data for fiscal 2004 and 2003 has been restated for the equity method of accounting of our investment in
Emperor Mines Limited.
2
The selected consolidated financial data for fiscal 2004, 2003, 2002 and 2001 has been restated for the disclosure of Buffelsfontein Gold Mines
Limited as a discontinued operation.
3
Cash costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs for fiscal 2005, 2004 and 2003 see Item 5A.: “Operating
Results.”
4
Total costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs for fiscal 2005, 2004 and 2003 see Item 5A.: “Operating
Results.”
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7
3B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3C. REASONS FOR THE OFFER AND THE USE OF PROCEEDS
Not applicable.
3D. RISK FACTORS
In conducting our business, we face many risks that may interfere with our business objectives. Some of these risks relate to our
operational processes, while others relate to our business environment. It is important to understand the nature of these risks and the
impact they may have on our business, financial condition and operating results.
Some of the most relevant risks are summarized below and have been organized into the following categories:
•
Risks related to our business and operations;
•
Risks related to the gold mining industry;
•
Risks related to doing business in South Africa, Papua New Guinea and Fiji; and
•
Risks related to ownership in our ordinary shares, American Depositary shares, or ADSs.
Risks related to our business and operations
A strong Rand and a weak gold price negatively affect our operations.
As the majority of our production costs in South Africa are in Rands, while gold is generally sold in Dollars, our financial
condition has been and could be materially harmed in the future by an appreciation in the value of the Rand. For our South African
Operations, the continuing appreciation of the Rand since December 2001 has resulted in a sustained reduction in revenue received by
us in Rands. These circumstances most adversely affected the North West Operations during fiscal 2005. After undergoing various
restructuring activities due to high underground operating costs, in addition to reporting a net loss of $48.9 million for the six months
ended December 31, 2004, compounded by the collective negative impact of a series of events that culminated in a devastating
earthquake, Buffelsfontein Gold Mines Limited (a wholly owned subsidiary of the Company and operator of the Buffelsfontein and
Hartebeestfontein mines better known as the North West Operations) was placed into provisional liquidation on March 22, 2005. Due
to the marginal nature of our mines in South Africa, any sustained decline in the market price of gold, in Rand terms, below the cost of
production, could result in the closure of our other South African mines which would result in significant costs and expenditure, for
example, incurring retrenchment costs earlier than expected, that would negatively and adversely affect our financial situation.
Changes in the market price for gold, which in the past has fluctuated widely, and exchange rate fluctuations affect the
profitability of our operations and the cash flows generated by those operations.
We generally do not enter into forward contracts to reduce our exposure to market fluctuations in the Dollar gold price or the
exchange rate movements of the Rand, Kina and Fiji Dollar. We sell our gold and trade our foreign currency at the spot price in the
market on the date of trade. If the Dollar gold price should fall and/or the regional functional currencies should strengthen against the
Dollar, resulting in revenue below our cost of production and remain at such levels for any sustained period, we may experience losses
and may be forced to curtail or suspend some or all of our operations. In addition, we might not be able to recover any losses we may
incur during that period or maintain adequate gold reserves for future exploitation.
Exchange rates are influenced by global economic trends which are beyond our control. In fiscal 2005, 2004 and 2003, the Rand
appreciated against the Dollar by 9.8%, 23.9% and 11.0 %, respectively (based on average exchange rates for each year). As at June 30,
2005, the Rand had appreciated by 50.3% since reaching R13.44 = $1.00 in December 2001 (based on closing rates). In fiscal 2005 and
2004, the Kina also appreciated against the Dollar by 3.9% and 13.7% respectively and in fiscal 2003 depreciated against the Dollar by
5.9% (based on average exchange rates for each year).
A decrease in the gold price and a strengthening of the foreign exchange rate of the Rand and Kina has resulted and could
continue to result in a decrease in profitability. In fiscal 2005 and 2004, 57% and 71% of production (including the discontinued
operation), respectively, was from South African mines providing significant exposure to the strengthening of the Rand and a decrease in
profitability. If the Rand continues to appreciate in such a manner, our South African Operations could continue to experience a reduction
in cash flow and profitability.
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8
We have a history of losses and may continue to incur losses in the future .
We incurred net losses of $81.8 million for fiscal 2005, $58.9 million for fiscal 2004 and $51.7 million for fiscal 2002. However,
we may still continue to incur losses in the future. Our profits and cash flows of the South African Operations are directly exposed to the
strength of the Rand and higher input costs as we generally do not hedge against currency fluctuations. These mines are also regarded as
older, generally higher cost gold producers. In addition to our ability to identify Ore Reserves that can be mined economically and to
maintain sufficient controls on production and other costs, exchange rate fluctuations will have a material influence on the future viability
of these mines.
We may not be able to meet our cash requirements because of a number of factors, many of which are beyond our control.
Management’s estimates on future cash flows are subject to risks and uncertainties. If we are unable to meet our cash
requirements out of cash flows generated from our operations, we would need to fund our cash requirements from alternative financing
and we cannot guarantee that any such financing would be on acceptable terms, or would be permitted under the terms of our existing
financing arrangements. In the absence of such financing, our ability to respond to changing business and economic conditions, make
future acquisitions, react to adverse operating results, meet out debt service obligations and fund required capital expenditures or
increased working capital requirements may be adversely affected.
The failure to discover or acquire new Ore Reserves, particularly outside South Africa, could negatively affect our cash
flow, results of operations and financial condition.
Our future cash flow, results of operations and financial condition are directly related to the success of our exploration and
acquisition efforts and our ability to replace depleted South African reserves with reserves offshore. In fiscal 2005, our Ore Reserves
decreased by 49.1% from 11.0 million ounces at June 30, 2004 to 5.6 million ounces at June 30, 2005, primarily as a result of placing the
North West Operations into provisional liquidation and losing access to its ore reserves and because the strength of the Rand caused a
decline in the Rand gold price. Mining higher grade reserves in our South African mines is likely to be more difficult in the future and
could result in increased production costs and reduced profitability. A failure to discover or acquire new reserves in sufficient
quantities to maintain or grow the current level of our reserves will negatively affect our future cash flow, results and financial
condition. There can be no assurances that any new or ongoing exploration programs will result in new mineral producing operations.
The ability to grow through acquisitions, particularly outside South Africa, may be restricted by not successfully achieving
our acquisition strategy.
Our objective is to grow our business by improving efficiency at our existing operations as well as through acquisitions.
From time to time we consider the acquisition of mining assets including Ore Reserves, development properties, operating mines or
mining companies. Successfully acquiring mining assets may be hindered by the following:
•
the market for acquisitions is competitive and we may not always be successful in identifying and purchasing assets that fit
our strategy;
•
the ability to conduct a comprehensive due diligence analysis could be restricted due to unavailable information;
•
we may need to use a combination of historical and projected data in order to evaluate the financial and operational feasibility
of the target assets. These analyses are based on a variety of factors including historical operating results, estimates of and
assumptions about future reserves, cash and other operating costs, metal prices and projected economic returns and
evaluations of existing or potential liabilities associated with the property and its operations. Other than historical operating
results, all of these parameters could differ significantly from the estimates and assumptions used in the evaluation process,
which could result in an incorrect evaluation of the quality of the assets to be acquired;
•
our inability to make suitable acquisitions at an appropriate price could adversely affect our ongoing business and financial
position, particularly if the Rand continues to strengthen against the Dollar;
•
we may experience difficulty in negotiating acceptable terms with the seller of the business to be acquired;
•
we may not be able to obtain the financing necessary to complete future acquisitions;
•
we may not be able to obtain necessary approvals from regulatory authorities;
•
acquisitions financed through the issue of shares may result in a dilution in the value of our shares if the value of the business
acquired is not realized;
•
we could experience financial loss through costs incurred in evaluating and pursuing failed acquisitions or overpayment for
an acquisition; and
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9
•
an acquisition may not have a positive effect on our results if we do not:
o assimilate the operations of an acquired business in a timely and efficient manner;
o maintain our financial and strategic focus while integrating the acquired business;
o implement uniform standards, controls, procedures and policies at the acquired business at minimum expense and
without restriction; and
o efficiently conduct and manage the new operations in a new operating environment, particularly if this acquisition is
outside South Africa.
We do not control the operations at CGR, including the Crown and ERPM Sections, the Porgera Joint Venture or the
Emperor Section.
We do not control Crown Gold Recoveries, or CGR, the Porgera Joint Venture or Emperor Mines Limited, or Emperor, and
cannot unilaterally cause these entities to adopt a particular budget, pay dividends or repay indebtedness, including debt held by us.
Because we do not control these entities, current management may not continue to manage these entities in a manner that is favorable to
us. With a minority interest stake in these entities, our ability to raise funding is dependent on access to capital from their shareholders,
joint venture partners or third party financiers. Decisions which reduce gold production, revenues or profitability, over which we have no
control, may serve to reduce our cash flows and decrease our profitability.
Our production costs may fluctuate and have an adverse effect on our results of operations.
Our historical production costs have varied significantly and we cannot predict what our production costs may be in the future.
Production costs are affected by, amongst other things:
•
labor stability, lack of productivity and increases in labor costs;
•
unforeseen changes in ore grades and recoveries;
•
unexpected changes in the quality or quantity of reserves;
•
unstable or unexpected ground conditions and seismic activity;
•
technical production issues;
•
environmental and industrial accidents;
•
gold theft;
•
environmental factors;
•
pollution; and
•
oil prices.
Increased production costs would affect profitability.
The majority of our production costs consist of labor, steel, electricity and water. The production costs incurred at our South
African Operations have, and could in the future, increase at rates in excess of our annual expected inflationary increase and result in the
restructuring of these operations at substantial cost. The majority of our South African labor force is unionized and their wage increase
demands are usually above the then prevailing rates of inflation. In October 2005, we entered into a two year wage agreement for the
Blyvoor Section with the National Union of Mine Workers, or NUM, that provided wage increases of 6% as of July 1, 2005 and 6.5% as
of July 1, 2006. Similar agreements for the Crown and ERPM Sections are currently being negotiated. In addition, we have received
notification of price increases, far in excess of the current rate of inflation, to be imposed by our South African steel suppliers and
parastatal entities which supply us with electricity and water. These, combined with the increase in labor costs, could result in our costs
of production increasing above the gold price received. Discussions with suppliers to moderate price increases have so far been
unsuccessful. The costs of fuels, lubricants and other oil and petroleum based products have increased in fiscal 2005 as a result of the
general increase in the cost of crude oil in global markets.
Due to the location of the Tolukuma Section in the highlands of Papua New Guinea, all transportation to the mine site is by
heavy lift helicopters. Approximately $79 per ounce, or 23.9%, of production costs relate to transportation, including the cost of JET A1
fuel for the helicopters. In the event that the increase in crude oil prices continues, this will have a significant impact on production costs
at the Tolukuma Section and will increase the cost of mining at our other operations.
Production costs have increased significantly at the Emperor Section due to the current high crude oil prices and increased power
consumption associated with the Phase 2 expansion project. Power generation represents approximately 20% of the operating costs at the
Emperor Section. Increasing production costs at this Section will negatively impact on the profitability of the Company.
Our initiatives to reduce costs may not be sufficient to offset the increases imposed on our operations and could negatively affect
our business and operating results.
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Our operations are subject to extensive environmental regulations which could impose significant costs and liabilities.
Our operations are subject to increasingly extensive laws and regulations governing the protection of the environment, under
various state, provincial and local laws, which regulate air and water quality, hazardous waste management and environmental
rehabilitation and reclamation. Our mining and related activities impact the environment, including land, habitat, streams and
environment near the mining sites. Delays in obtaining, or failures to obtain government permits and approvals may adversely impact
our operations. In addition, the regulatory environment in which we operate could change in ways that could substantially increase
compliance costs, therefore having a material adverse effect on our profitability.
We have made, and expect to make in the future, expenditures to comply with these laws and regulations. We have estimated
these liabilities and included them in the $22.6 million provision for the Group’s environmental rehabilitation, reclamation and closure
costs on our balance sheet as at June 30, 2005. However the ultimate amount of rehabilitation costs may in the future exceed the current
estimates due to influences beyond our control, such as changing legislation or unidentified rehabilitation costs. The closure of mining
operations, without sufficient financial provision for the funding of rehabilitation liabilities, or unacceptable damage to the environment,
including pollution or environmental degradation, may expose us and our directors to litigation and potentially significant liabilities.
Seismicity and other natural disasters could impact the going concern of our operations.
We run the inherent risk that seismic activity and/or other natural disasters could cripple our operations and affect their ability to
continue production. On March 9, 2005, the North West Operations suffered the effects of an earthquake of 5.3 on the Richter scale. As a
consequence of the extensive damage caused by the earthquake, the No. 5 Shaft of the North West Operations was closed. There was
continuing seismic activity in the area and on March 16, 2005, the Company closed the No. 2 Shaft because of concerns for the safety of
employees. Seismic activity has had, and may continue to have, a harmful effect on our business.
Our Papua New Guinea Operations are subject to environmental risks associated with tailings discharge.
The Tolukuma and Porgera Sections in Papua New Guinea have site specific environmental risks associated with their
operations. Tailings are routinely discharged into the surrounding river systems in accordance with approved environmental water
discharge permits issued by the Papua New Guinea Department of the Environment and Conservation under the Papua New Guinea
Environmental Act 2000 and Regulations 2000. The Papua New Guinea Government has approved disposal into certain natural rivers as
the most appropriate method for treated tailings and soft incompetent waste rock because the mines are located in extremely rugged
mountainous terrain, subject to seismic activity, high rainfall and landslides, so construction of a tailings impoundment would be very
difficult and the risk of an engineering failure high.
Due to the elevated concentrations of heavy metals naturally occurring in the ore, in particular lead, mercury and arsenic,
discharges are monitored in accordance with the terms of our approved environmental management monitoring program. Cyanide
associated with the tailings deposited is detoxified and cyanide levels are monitored daily. However, should we be unable to control the
levels of lead, mercury, arsenic or cyanide, it could pose potential adverse health risks to the surrounding communities and may result in
us violating our environmental water discharge permit and may expose us to civil or criminal liability. While our Papua New Guinea
Operations currently comply with the applicable license conditions accepted by the Papua New Guinea Government in granting approval,
the eventual, cumulative environmental impacts could be greater than the estimates in, or contemplated by, the environmental plans and
environmental management monitoring programs approved by the Papua New Guinea Government. In such event the Papua New
Guinea Government could require us to remedy such consequences and the costs of such remediation could be material. We have also
encountered opposition from local people and landowners regarding our discharge of tailings. This opposition could cause delays or
stoppages which could reduce our production capacity and results of operations.
Changes in Papua New Guinean Government legislation or policy on regulatory discharges into the environment could result in
operational disruptions, especially if the government changes the method it requires for us to test tailings discharges, and may have a
material adverse affect on our profitability as additional costs may need to be incurred to facilitate other waste discharge methods.
Flooding at our operations may cause us to incur liabilities for environmental damage.
Flooding of underground mining areas is an inherent risk at all our operations. If the rate of water rise is not controlled, water
from our workings could potentially rise to the surface or decant into surrounding underground workings or natural underground water
sources. Due to the withdrawal of Government pumping subsidies at the Durban Deep and West Wits Sections, we have ceased active
pumping of underground water at these sections. We expect that progressive flooding could eventually cause the discharge of polluted
water to the surface and to local water sources.
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Estimates of the probable rate of water rise in those mines are contradictory and lack scientific support, however, should
underground water levels not reach a natural subterranean equilibrium, and in the event that underground water rises to the surface, we
may face claims relating to environmental damage and pollution of ground water, streams and wetlands.
In addition, our underground and opencast mines in Papua New Guinea may experience flooding due to excessive annual
rainfall.
We have ageing assets in South Africa, which exposes us to greater risk of our infrastructure failing, higher maintenance
costs and potentially greater health, safety and environmental liabilities.
Our South African assets are made up predominantly of mature assets, which we acquired after they had reached the end of the
planned production cycle under their previous owners, and our strategy has been to revive these assets through specialist planning and
mining techniques. The ageing infrastructure and installations typical of these operations require constant maintenance and continuing
capital expenditure. This materially increases our operational costs. The mature state of these assets, coupled with the technology applied
in many of our installations was not regularly updated and accordingly has become obsolete compared to the technology used in more
modern mines. As a result the risk of technology failure is high, and the maintenance of these installations, costly.
Due to the nature of the business, particularly in South Africa where our marginal mines predominantly comprise aged
infrastructures, we inherently run the risk of exposure to greater health, safety and environmental liabilities which we closely monitor but
are not always able to fully mitigate.
Due to the nature of our business, our employees face health and safety risks.
Regrettably 10 people died in work-related incidents during fiscal year 2005. These fatalities were largely attributable to
seismicity-related rockfalls. While seismic monitoring continues to be an invaluable tool in the management of seismicity, there is still
risk of seismic induced fatalities occurring which we may not be able to prevent. Preventing occupational diseases such as tuberculosis
and noise-induced hearing loss is a priority and is addressed through close adherence to legislated requirements. However, there has been
an increase year on year in employees suffering from these kinds of conditions. Mine and safety regulations of the countries in which we
conduct our operations impose various duties on us at our mines and grant the authorities broad powers to, among other things, close
unsafe mines and order corrective action relating to health and safety matters. In the event of any future accidents at any of our mines,
regulatory authorities could take steps which could increase our costs or reduce our production capacity.
If we are unable to attract and retain key personnel our business may be harmed.
The success of our business will depend, in large part, upon the skills and efforts of a small group of management and technical
personnel including Mr. M.M. Wellesley-Wood, our Chief Executive Officer, and Mr. J.W.C. Sayers, our Chief Financial Officer (as of
September 5, 2005). Factors critical to retaining our present staff and attracting additional highly qualified personnel include our ability to
provide these individuals with competitive compensation arrangements, equity participation and other benefits. If we are not successful in
retaining or attracting highly qualified individuals in key management positions, our business may be harmed. We do not maintain “key
person” life insurance policies on any members of our executive team. The loss of any of our key personnel could prevent us from
executing our business plans, which may result in decreased production, increased costs and decreased profitability.
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Events may occur for which we are not insured which could affect our cash flows and profitability.
We may become subject to liability for pollution or other hazards against which we are unable to insure, including those in
respect of past mining activities. Our existing property and liability insurance contains certain exclusions and limitations on coverage. We
have insured property, including loss of profits due to business interruption in the amount of $822.9 million (R5.5 billion). Claims for
each and every event are limited by the insurers to $74.8 million (R500.0 million). This policy is limited by initial deductible amounts
covering the loss of surface and underground assets, and losses due to seismic events, machinery breakdown, flooding, fire and accidents.
Business interruption is only covered from the time the loss actually occurs. The deductible amounts vary between categories with the
maximum deductible of $4.5 million (R30.0 million). A specific limitation of $15.0 million (R100.0 million) applies for loss suffered or
claims as a result of any landslide at the Tolukuma Section, however, no cover will apply for any seismic event smaller than 4.5 on the
Richter scale. General liability insurance cover is in the amount of $86.8 million (R580.0 million).
Future insurance coverage may not cover the extent of claims against us, including claims for environmental, industrial or
pollution related accidents, for which coverage is not available. If we are required to meet the costs of claims which exceed our insurance
coverage, our costs may increase which could decrease our profitability.
Failure to discover and remedy material weaknesses in our internal controls in relation to our US GAAP financial reporting
could have an adverse effect on our business.
During fiscal 2004, we discovered material weaknesses in our internal controls. Effective internal controls are necessary for us to
provide reliable US GAAP financial reports. Failure to remedy these material weaknesses and provide reliable US GAAP financial
reports could have an adverse effect on our share price. Remedying these material weaknesses is challenging in light of the limited
availability within South Africa, where our head office is located, of internal accounting employee candidates who have sufficient
knowledge and experience regarding the application of US GAAP and the United States Securities and Exchange Commission, or SEC,
requirements and of potential external advisers with US GAAP expertise to supplement our internal resources.
In response to these discoveries, we have been working to improve our internal controls over financial reporting, including in the
areas of compliance with US GAAP and SEC reporting requirements. We documented these efforts in the form of a US GAAP Action
Plan (see Item 15: “Controls and Procedures”) which we have implemented as of the current year end. If we encounter any difficulties in
sustaining the application of our US GAAP Action Plan, or remedying any control weaknesses discovered, or any difficulties encountered
in their implementation, we could fail to meet our US GAAP reporting obligations. If we are unable to sustain our US GAAP Action
Plan, investors could lose confidence in our reported financial information, which could have a negative effect on the trading price of our
shares.
Risks related to the gold mining industry
Changes in the price of gold, which in the past has fluctuated widely, are beyond our control.
Historically, the gold price has fluctuated widely and is affected by numerous industry factors, over which we have no control,
including:
•
the physical supply of gold from world-wide production and scrap sales, and the purchase, sale or divestment by central
banks of their gold holdings;
•
the demand for gold for investment purposes, industrial and commercial use, and in the manufacturing of jewellery;
•
speculative trading activities in gold;
•
the overall level of forward sales by other gold producers;
•
the overall level and cost of production of other gold producers;
•
international or regional political and economic events or trends;
•
the strength of the Dollar (the currency in which gold prices generally are quoted) and of other currencies;
•
financial market expectations regarding the rate of inflation; and
•
interest rates.
Our profitability may be negatively impacted if revenue from gold sales drops below the cost of production for an extended
period.
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The exploration of mineral properties is highly speculative in nature, involves substantial expenditures, and is frequently
unproductive.
Our future growth and profitability will depend, in part, on our ability to identify and acquire additional mineral rights, and on
the costs and results of our continued exploration and development programs. Gold mining companies undertake exploration activities
to discover gold mineralization, which may give rise to new gold bearing ore bodies. Exploration is highly speculative in nature and
requires substantial expenditure for drilling, sampling and analysis of ore bodies in order to quantify the extent of the gold reserve.
Many exploration programs, including some of ours, do not result in the discovery of mineralization and any mineralization discovered
may not be of sufficient quantity or quality to be mined profitably. If we discover a viable deposit, it usually takes several years from the
initial phases of exploration until production is possible. During this time, the economic feasibility of production may change. Moreover,
we rely on the evaluations of professional geologists, geophysicists, and engineers for estimates in determining whether to commence or
continue mining. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and
could result in the expenditure of substantial amounts of money on a deposit before it can be determined with any degree of accuracy
whether or not the deposit contains economically recoverable mineralization. Uncertainties as to the metallurgical recovery of any gold
discovered may not warrant mining on the basis of available technology. As a result of these uncertainties, we may not successfully
acquire additional mineral rights, or identify new Proven and Probable Ore Reserves in sufficient quantities to justify commercial
operations in any of our properties. Our mineral exploration rights may also not contain commercially exploitable reserves of gold. The
costs incurred on unsuccessful exploration activities are, as a result, not likely to be recovered and we could incur a write-down on our
investment in that interest or the irrecoverable loss of funds spent.
There is uncertainty in our Ore Reserve estimates.
Our Ore Reserve figures described in this document are the best estimates of our current management as of the dates stated
and are reported in accordance with the requirements of Industry Guide 7 of the SEC. These estimates may be imprecise and may not
reflect actual reserves or future production.
Should we encounter mineralization or formations different from those predicted by past drilling, sampling and similar
examinations, reserve estimates may have to be adjusted and mining plans may have to be altered in a way that might ultimately cause
our results of operations and financial condition to decline. Moreover, if the price of gold declines, or stabilizes at a price that is lower
than recent levels, or if our production costs, and in particular our labor costs, increase or recovery rates decrease, it may become
uneconomical to recover Ore Reserves containing relatively lower grades of mineralization. Under these circumstances, we would be
required to re-evaluate our Ore Reserves. Short-term operating factors relating to the Ore Reserves, such as the need for sequential
development of ore bodies and the processing of new or different grades, may increase our production costs and decrease our profitability
during any given period. These factors have and could result in reductions in our Ore Reserve estimates, which could in turn adversely
impact upon the total value of our mining asset base and our business and operating results.
Gold mining is susceptible to numerous events that could have an adverse impact on a gold mining business.
The business of gold mining takes place in underground mines, open pit mines and surface operations for the retreatment of rock
dumps and tailings dams. These operations are exposed to numerous risks and events, the occurrence of which may result in the death of,
or personal injury to, employees, the loss of mining equipment, damage to or destruction of mineral properties or production facilities,
monetary losses, delays in production, environmental damage, loss of the license to mine and potential legal claims. The risks and
events associated with the business of gold mining include, but are not limited to:
•
environmental hazards and pollution, including the discharge of gases, toxic chemicals, pollutants, radioactive materials and
other hazardous material into the air and water;
•
seismic activity which could lead to rock bursts, cave-ins, pit slope failures or, in the event of a significant event, total closure of
sections or an entire underground mine;
•
unexpected geological formations which reduce or prevent mining from taking place;
•
flooding, landslides, sinkhole formation, ground subsidence, ground and surface water pollution, and waterway contamination;
•
underground fires and explosions, including those caused by flammable gas;
•
accidents caused from and related to drilling, blasting, removing, transporting and processing material, and the collapse of pit
walls and tailings dams; and
•
decrease in labor productivity due to labor disruptions, work stoppages, disease, slowdowns or labor strikes.
In addition, deep level underground mines in South Africa, as compared to other gold mining countries, involve significant risks
and hazards not associated with open pit or surface rock dump and tailings dam retreatment operations. The level of seismic activity in a
deep level gold mine varies based on the rock formation and geological structures in the mine. The occurrence of any of these hazards
could delay production, increase production costs and may result in legal claims.
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Underground and opencast mines in Papua New Guinea may experience pit wall failures, landslides and flooding, due to
excessive annual rainfall. The transport of supplies and employees to and from the mine site may be inhibited by incessant rain and
damage to roads. In addition, land movement caused by excessive rain may destabilize existing buildings and plant infrastructure and
restrict access into the mines.
Fiji is fairly isolated in an area that gives rise to severe cyclonic storms which can be very disruptive. As in other island
states, rising sea levels caused by the greenhouse effect are a major concern. Natural disasters of this type could potentially disrupt our
business for an extended period of time and this is of particular concern in Fiji due to the island’s exposure to such disasters in the
past. Tropical cyclone Ami hit Fiji on January 13, 2003, killing at least 15 people and leaving thousands more devastated .
Risks related to doing business in South Africa, Papua New Guinea and Fiji
Political or economic instability in the regions in which we operate may reduce our production and profitability.
We are incorporated and own operations in South Africa. As a result, political and economic risks relating to South Africa could
reduce our production and profitability. Large parts of the South African population are unemployed and do not have access to adequate
education, health care, housing and other services, including water and electricity. Government policies aimed at alleviating and
redressing the disadvantages suffered by the majority of citizens under previous governments may increase our costs and reduce our
profitability. In recent years, South Africa has experienced high levels of crime. These problems have impeded fixed inward investment
into South Africa and have prompted emigration of skilled workers. As a result, we may have difficulties attracting and retaining qualified
employees.
In recent years, the South African economy has been growing at a relatively slow rate, inflation and unemployment have been
high by comparison with developed countries, and foreign currency reserves have been low relative to other emerging market countries.
In the late 1980s and early 1990s, inflation in South Africa reached record highs of 20.6%. This increase in inflation resulted in
considerable year on year increases in operational costs. In recent years, the inflation rate has decreased and as of June 2005, the
Consumer Price Inflation Index, or CPIX, stood at 3.5%, down from 4.8% since June 2004. Analysts expect inflation to increase over the
next few months, partly in response to higher fuel prices. A return to high levels of inflation in South Africa, without a concurrent
devaluation of the Rand or increase in the price of gold, could result in an increase in our costs which could reduce our profitability.
In South Africa and Papua New Guinea there is a greater level of political and economic risk as compared to developed
countries in the world. For example, open pit operations at Porgera were suspended from August 27, 2002 to October 12, 2002, due to
interruptions in the electrical power supply as a result of election-related vandalism in Papua New Guinea. There is also a risk that social
unrest and government intervention could be exacerbated during the mine closure process. Mine infrastructure, including power, water
and fuel, may be at risk of sabotage.
In Papua New Guinea, landowners in the area, whose interests are consolidated with those of the provincial government in a
Papua New Guinea registered entity, Mineral Resources Enga, or MRE, had an expectation of receiving from us a 5% stake in the
Porgera Joint Venture. This expectation arose from an undertaking we gave at the time of acquiring our interest in Porgera, to sell a 5%
stake to MRE on commercial terms, which was subsequently cancelled as MRE failed to meet certain conditions precedent after
renegotiated, extended deadlines. This issue may become the subject of some political campaigning and canvassing in future elections.
The Porgera mine has also on a number of occasions experienced delays receiving operating permits and licenses, necessary for
this mine to conduct its lawful operations. If at any time in the future permits essential to lawful operations are not obtained, or
exemptions not granted, there is a risk that the Porgera mine may not be able to operate for a period of time. Future government actions,
or actions of other quasi-government or landowner groups, cannot be predicted but may impact on the operations and regulation of mines
including the Porgera Joint Venture. Any suspension of operations at the Porgera Joint Venture would decrease our attributable
production and profitability.
Fiji’s economic growth has historically been very volatile. Growth has been restrained by low rates of investment, which has
been deterred by macro-economic instability, prohibitive regulation, and poor human and physical capital. Additionally, Fiji has also
experienced periodic political volatility in recent years. The country experienced a coup d’etat in March 2000, and whilst the country’s
political environment has stabilized since 2000 following the first free and fair general election held in late 2001, potential legislative
reform under the new government could be imminent. The next elections in Fiji are expected to be held in August 2006.Changes to the
country’s constitution or government regulations could affect the political or economic climate in Fiji.
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15
AIDS poses risks to us in terms of productivity and costs.
Acquired Immune Deficiency Syndrome, or AIDS, and tuberculosis which is closely associated with the onset of AIDS and is
exacerbated in the presence of HIV/AIDS, represent very serious health care challenges in the mining industry. Human
Immunodeficiency Virus, or HIV, is the virus that causes AIDS and South Africa has one of the highest HIV infection rates in the world.
It is estimated that approximately 30% - 40% of the mining industry workforce in South Africa are HIV positive. The exact extent to
which our mining workforce both within and outside South Africa is infected with HIV/AIDS is unknown at this stage. Papua New
Guinea has recently been identified as a high risk country for the HIV/AIDS pandemic and this could have a direct impact on our
workforce and productivity in that country. The exact impact of increased mortality rates due to AIDS-related deaths on the costs of our
operations is as yet undefined. The only available treatments for HIV/AIDS are anti-retroviral drugs, which slow down the advancement
of the disease but do not present a complete cure for the disease. The cost and availability of anti-retroviral drugs could inhibit the
introduction of treatment programs at our mines in South Africa and Papua New Guinea to reduce the impact of HIV/AIDS on our
mining workforce and our businesses. The effects of the disease pose a risk to us in terms of the potential reduction in productivity and
increase in medical costs.
Government policies in South Africa may adversely impact our operations and profits
Government Regulation
The mining industry in South Africa is extensively regulated through legislation and regulations issued through government’s
administrative bodies. These involve directives in respect of health and safety, the mining and exploration of minerals, and managing the
impact of mining operations on the environment. A variety of permits and authorities are required to mine lawfully, and government
enforces its regulations through the various government departments.
The Mineral and Petroleum Resources Development Act, 2002
On May 1, 2004, the new Minerals and Petroleum Resources Development Act, or the MPRD Act, was enacted, which places
all mineral and petroleum resources under the custodianship of the state. Private title and ownership in minerals, or the “old order rights,”
are to be converted to “new order rights,” essentially the right to mine. The MPRD Act allows the existing holders of mineral rights a
period of five years to apply for the conversion of used old order rights, and one year for the conversion of unused old order rights. We
have submitted a mining work program, whereby we substantiate the area and period of the new order rights and additionally, we must
be in compliance with the requirements of the Mining Charter as described below. Once these periods have lapsed, the holders may
have to compete to acquire the right to mine minerals previously held under old order rights. To the extent that we are unable to convert
some of our old order rights, we may have a claim for compensation based on expropriation. It is not possible to forecast with any degree
of certainty whether a claim will be enforceable against the state, and the extent to which we may be compensated. Factors that are taken
into account are market value, as well as the history of the acquisition of these rights.
Where new order rights are obtained under the MPRD Act, these rights will not be equivalent to our existing property rights.
The area covered by the new order rights may be reduced by the state if it finds that the prospecting or mining work program
submitted by an applicant does not substantiate the need to retain the area covered by the old order rights. The duration of the new
order rights will no longer be perpetual but rather, in the case of new order mining rights, for a maximum of 30 years with renewals of
up to 30 years each and, in the case of prospecting rights, up to five years with one renewal of up to three years. In addition, the new
order rights will only be transferable subject to the approval of the Minister of Minerals and Energy. Mining or prospecting must
commence within one year or 120 days, respectively, of the mining right or prospecting right becoming effective, and must be
conducted continuously and actively thereafter. The new rights can be suspended or cancelled by the Minister of Minerals and Energy
on breach of or, in the case of mining rights, on non-optimal mining in accordance with the mining work program.
The implementation of the MPRD Act will result in significant adjustments to our property ownership structure. To the extent
that we are unable to convert some of our old order rights to new order rights, and that the exclusive rights to minerals we enjoyed under
the previous statutory regime are diminished, the operations of the MPRD Act may result in significant adjustments to our property
ownership structure, which in turn could have a material adverse effect on the underlying value of our operations.
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Possible taxation reform and mining royalties
The South African government has declared its intention to revisit the taxation regime of South African gold mining companies.
The South African gold mining industry is taxed under the gold taxation formula which recognizes the high level of capital expenditure
required to sustain a mining operation over the life of the mine. This results in an additional tax benefit not afforded to other commercial
companies. In addition, the South African Government has indicated that it is looking at a revenue based royalty for mining companies, as
outlined in the draft Mineral and Petroleum Royalty Bill, 2003, or Royalty Bill, which was released in March 2003 for comment. The
Royalty Bill proposed a three percent royalty on gross revenue for gold mining companies. In conjunction with the South African Mining
Development Association we have made submissions to the government outlining our concerns about a revenue based royalty and
recommended a profit based royalty be introduced instead. In his budget speech in February 2004, the South African Finance Minister
acknowledged that the draft Royalty Bill may need some refinement, but also stated that government’s preference is for a revenue based
royalty, with introduction of the royalty as of 2009. As at October 31, 2005, these issues were still under review. The introduction of the
proposed revenue based royalty would have an adverse effect on the profitability of our South African Operations.
The Broad Based Socio-Economic Empowerment Charter
The Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry, or Mining Charter, establishes
certain numerical goals and timeframes to transform equity participation in the mining industry in South Africa and is effective from May
1, 2004.
The goals set by the Mining Charter include that each mining company must achieve 15 percent ownership by historically
disadvantaged South Africans of its South African mining assets within five years and 26 percent ownership within ten years from May 1,
2004. This is to be achieved by, among other methods, the sale of assets to historically disadvantaged persons on a willing seller/willing
buyer basis at fair market value. When considering applications for the conversion of existing rights, the State will take a "scorecard"
approach, evaluating the commitments of each company to the different facets of promoting the objectives of the Mining Charter.
Failure on our part to comply with the requirements of the Mining Charter and the “scorecard” could result in us losing our mining
rights. We may incur expenses in giving additional effect to the Mining Charter and the “scorecard”, including costs which we may
incur in facilitating the financing of initiatives towards ownership by historically disadvantaged persons. There is also no guarantee
that any steps we might take to comply with the Mining Charter would ensure that we could successfully acquire new order mining
rights in place of our existing rights. In addition, the terms of such new order rights may not be as favorable to us as the terms
applicable to our existing rights.
Land claims
Our privately held land and mineral rights in South Africa could be subject to land restitution claims under the Restitution of
Land Rights Act, 1994 (as amended), or Land Rights Act. Under the Land Rights Act, any person who was dispossessed of rights to land
in South Africa as a result of past racially discriminatory laws or practices is granted certain remedies, including the restoration of the
land. The initial deadline for such claims was December 31, 1998. We have not been notified of any land claims, but it is possible that
administrative delays in the processing of claims could have delayed such notification. Any claims of which we are notified in the future
could have a material adverse effect on our right to the properties to which the claims relate and prevent us using that land and exploiting
any mineral reserves located there.
Since our South African labor force has substantial trade union participation, we face the risk of disruption from labor
disputes and new South African labor laws.
Labor costs constitute 43% of our production costs for fiscal 2005, and 50% and 42% for fiscal 2004 and 2003, respectively. As
of June 30, 2005, we employ and contract approximately 4,300 people. Of these, approximately 3,480 people are in South Africa, of
whom, approximately 73% are members of trade unions or employee associations. This excludes all employees of our associates, CGR
and ERPM. We have entered into various agreements regulating wages and working conditions at our South African mines. For Blyvoor,
we have recently concluded these renegotiations to June 30, 2007. For ERPM and Crown, the current agreements were effective to
September 2005 and new agreements, to be effective from October 2005, are currently being negotiated. Unreasonable wage demands
could increase production costs to levels where our South African Operations are no longer profitable. This could lead to accelerated
mine closures and labor disruptions. We may also experience labor unrest at operations at which we have an equity interest. In particular,
during October and November 2002, ERPM experienced some labor unrest during which several striking contract workers were wounded
and two workers were killed by employees of a private security company. Our business could suffer if such activities are repeated.
In recent years, labor laws in South Africa have changed in ways that significantly affect our operations. In particular, laws that
provide for mandatory compensation in the event of termination of employment for operational reasons and that impose large monetary
penalties for non-compliance with the administrative and reporting requirements of affirmative action policies could result in significant
costs to us. In addition, future South African legislation and regulations relating to labor may further increase our costs or alter our
relationship with our employees.
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Our financial flexibility could be materially constrained by South African currency restrictions.
South African law provides for exchange control regulations, which restrict the export of capital from the Common Monetary
Area, including South Africa. The Exchange Control Department of the South African Reserve Bank, or SARB, is responsible for the
administration of exchange control regulations. In particular, South African companies:
•    are generally not permitted to export capital from South Africa or to hold foreign currency without the approval of SARB;
•    are generally required to repatriate, to South Africa, profits of foreign operations; and
•    are limited in their ability to utilize profits of one foreign business to finance operations of a different foreign business.
These restrictions could hinder our corporate functioning and acquisition strategy, because investments of less than a 50%
plus 1 share interest can only be held subject to exchange approval. As at June 30, 2005, we hold 45.33% of Emperor and accordingly
SARB may require us to divest our interest in Emperor if we do not acquire 50% plus 1 share interest in the future.
While the South African Government has relaxed exchange controls in recent years, it is difficult to predict whether or how it
will further relax or abolish exchange control measures in the future. For further information see Item 10D.: “Exchange Controls.”
Risks related to ownership of our ordinary shares or ADSs
Your ability to sell a substantial number of ordinary shares may be restricted by the limited liquidity of ordinary shares
traded on JSE Limited, or JSE.
The primary listings for our ordinary shares are the JSE and the Australian Stock Exchange, or ASX. The principal trading
market for our ADSs are the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market). On a historical basis, the trading
volumes and liquidity of shares listed on the JSE have been low in comparison with the Nasdaq Capital Market. For the 12 months
ended June 30, 2005, only 16% of our ordinary shares were publicly traded on the JSE. The limited liquidity of our ordinary shares
traded on the JSE could limit your ability to sell a substantial number of our ordinary shares on the JSE in a timely manner, especially
by means of a large block trade.
Sales of large volumes of our ordinary shares or ADSs or the perception that these sales may occur, could adversely affect
the prevailing market price of such securities.
The market price of our ordinary shares or ADSs could fall if substantial amounts of ordinary shares or ADSs are sold by our
stockholders, or there is the perception in the marketplace that such sales could occur. Current holders of our ordinary shares or ADSs
may decide to sell them at any time. Sales of our ordinary shares or ADSs, if substantial, or the perception that these sales may occur
and be substantial, could exert downward pressure on the prevailing market prices for our ordinary shares or ADSs, causing their
market prices to decline. Trading activity of hedge funds and the ability to borrow script in the market place will increase trading
volumes and may place our share price under pressure.
Your rights as a shareholder are governed by South African law, which differs in material respects from the rights of
shareholders under the laws of other jurisdictions.
Our Company is a public limited liability company incorporated under the laws of the Republic of South Africa. The rights of
holders of our ordinary shares, and therefore many of the rights of our ADS holders, are governed by our memorandum and articles of
association and by South African law. These rights differ in material respects from the rights of shareholders in companies
incorporated elsewhere, such as in the United States. In particular, South African law significantly limits the circumstances under
which shareholders of South African companies may institute litigation on behalf of a company.
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It may not be possible for you to effect service of legal process, enforce judgments of courts outside of South Africa or
bring actions based on securities laws of jurisdictions other than South Africa against us or against members of our board.
Our Company, certain members of our board of directors and executive officers are residents of South Africa. In addition, our
cash producing assets are located outside the United States and a major portion of the assets of members of our board of directors and
executive officers are either wholly or substantially located outside the United States. As a result, it may not be possible for you to
effect service of legal process, within the United States or elsewhere outside South Africa, upon most of our directors or officers,
including matters arising under United States federal securities laws or applicable United States state securities laws.
Moreover, it may not be possible for you to enforce against us or the members of our board of directors and executive
officers judgments obtained in courts outside South Africa, including the United States, based on the civil liability provisions of the
securities laws of those countries, including those of the United States. A foreign judgment is not directly enforceable in South Africa,
but constitutes a cause of action which will be enforced by South African courts provided that:
•
the court which pronounced the judgment had jurisdiction to entertain the case according to the principles recognized by South
African law with reference to the jurisdiction of foreign courts;
•
the judgment is final and conclusive (that is, it cannot be altered by the court which pronounced it);
•
the judgment has not lapsed;
•
the recognition and enforcement of the judgment by South African courts would not be contrary to public policy, including
observance of the rules of natural justice which require that no award is enforceable unless the defendant was duly served with
documents initiating proceedings, that he was given a fair opportunity to be heard and that he enjoyed the right to be legally
represented in a free and fair trial before an impartial tribunal;
•
the judgment was not obtained by fraudulent means;
•
the judgment does not involve the enforcement of a penal or revenue law; and
•
the enforcement of the judgment is not otherwise precluded by the provisions of the Protection of Business Act, 1978 (as
amended), of South Africa.
It is the policy of South African courts to award compensation for the loss or damage actually sustained by the person to whom
the compensation is awarded. Although the award of punitive damages is generally unknown to the South African legal system that does
not mean that such awards are necessarily contrary to public policy. Whether a judgment was contrary to public policy depends on the
facts of each case. Exorbitant, unconscionable, or excessive awards will generally be contrary to public policy. South African courts
cannot enter into the merits of a foreign judgment and cannot act as a court of appeal or review over the foreign court. South African
courts will usually implement their own procedural laws and, where an action based on an international contract is brought before a South
African court, the capacity of the parties to the contract will usually be determined in accordance with South African law. It is doubtful
whether an original action based on United States federal securities laws may be brought before South African courts. A plaintiff who is
not resident in South Africa may be required to provide security for costs in the event of proceedings being initiated in South Africa.
Furthermore, the Rules of the High Court of South Africa require that documents executed outside South Africa must be authenticated for
the purpose of use in South African courts. It is not possible therefore for an investor to seek to impose criminal liability on us in a
South African court arising from a violation of United States federal securities laws.
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ITEM 4. INFORMATION ON THE COMPANY
4A. HISTORY AND DEVELOPMENT OF THE COMPANY
Introduction
DRDGOLD Limited is a gold mining company engaged in underground and surface gold mining including exploration,
extraction, processing and smelting. Our South African Operations consist of the deep-level Blyvooruitzicht Section and East Rand
Proprietary Mine Section, in addition to the world’s biggest surface retreatment operation, the Crown Section. Our Australasian
Operations consist of the Tolukuma Section and our 20% interest in the unincorporated Porgera Joint Venture, or Porgera, both of which
are in Papua New Guinea, and a 45.33% interest in Emperor Mines Limited, or Emperor, as of July 30, 2004 (19.78% as of June 30,
2004), which owns the Vatukoula gold mine in Fiji. We also have exploration projects in South Africa, Papua New Guinea and Australia,
though our principal focus is on our operations in South Africa and Papua New Guinea.
We are a public company, incorporated on February 16, 1895, as Durban Roodepoort Deep, Limited, and our shares were listed
on the JSE in that same year. In 1898, our milling operations commenced with 30 stamp mills and we treated 38,728 tons of ore and
produced 22,958 ounces of gold. In South Africa, we have focused our operations on the West Witwatersrand basin which has been a
gold production region for over 100 years. The Blyvoor Section (acquired on September 15, 1997, in exchange for 12,693,279 of our
ordinary shares) and North West Operations (until March 22, 2005 when Buffelsfontein Gold Mines Limited was placed into provisional
liquidation), which comprise of the Buffels Section (acquired on September 15, 1997, in exchange for 14,300,396 of our ordinary shares)
and the Harties Section (acquired on August 16, 1999, in exchange for $7.4 million), are predominantly underground operating mines
located within the Witwatersrand Basin, exploiting gently to moderately dipping gold bearing quartz pebble conglomerates in addition to
certain surface sources. The Crown Section (CGR was acquired on September 14, 1998, in exchange for 5,925,139 of our ordinary
shares) also located within the Witwatersrand Basin, exploits various surface sources, including sand and slime tailings deposited as part
of previous mining operations. Since 1999, our focus has been to expand our operations outside South Africa and increase our production
base from the Pacific Rim region. The Tolukuma Section (acquired from September 1999 to June 2001, in exchange for 8,125,082 shares
and $3.3 million in cash) provided an initial base in that region, and led to the acquisition of a 20% interest in the unincorporated Porgera
Joint Venture (acquired in October 2003, in exchange for 6,643,902 shares and $60.3 million in cash).
To ensure access to global markets our ordinary shares and/or related instruments trade on the JSE, Nasdaq Capital Market
(formerly the Nasdaq SmallCap Market), London Stock Exchange, the Marche Libre on the Paris Bourse, the Brussels Bourse in the
form of International Depository Receipts, the Australian Stock Exchange, or ASX, the Port Moresby Stock Exchange in Papua New
Guinea (as from August 18, 2004), the Over The Counter, or OTC, market in Berlin and Stuttgart and the Regulated Unofficial Market on
the Frankfurt Stock Exchange.
Our registered office and business address is 299 Pendoring Avenue, Blackheath, Randburg, South Africa, 2195. The postal
address is P.O. Box 390, Maraisburg 1700, South Africa. Our telephone number is (+27 11) 219-8700 and our facsimile number is (+27
11) 476-2637. We are registered under the South African Companies Act, 1973 (as amended) under registration number 1895/000926/06.
For our ADSs, The Bank of New York, at 101 Barclay Street, New York, NY 10286, United States, has been appointed as agent.
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Important Events in Our Development Generally and in the Current Year
Crown Gold Recoveries (Pty) Limited and East Rand Proprietary Mines Limited
We own 100% of Crown Consolidated Gold Recoveries Ltd, or CCGR, which in turn owns 40% of Crown Gold Recoveries
(Pty) Limited, or CGR. CCGR was incorporated in South Africa on May 23, 1997. Pursuant to a scheme of arrangement, we acquired
100% of CCGR on September 14, 1998.
On June 12, 2002, we entered into an agreement with the Industrial Development Corporation of South Africa, or IDC, Khumo
Bathong Holdings (Pty) Limited, or KBH, and CCGR whereby, with effect from July 1, 2002, we sold 3% of the entire issued share
capital of and shareholders loans held in CGR to KBH and 57% of the entire issued share capital of and shareholders loans held in CGR
to the IDC, for a total amount of $10.1 million. As part of this transaction, we loaned KBH R5.3 million ($0.7 million) to fund its initial
purchase of 3% interest in CGR. According to the terms of the shareholders agreement entered into between these parties, the parties
agreed that IDC would not remain a shareholder in CGR, but would transfer its shares and claims held in CGR to KBH. Accordingly,
IDC granted an option to KBH to purchase its shares and claims held by it in CGR subject to certain terms and conditions. The option
was exercised by KBH in July 2002 and KBH is currently the owner of 60% of the entire issued share capital of and shareholders loans
held in CGR. CCGR holds 40% of the issued share capital of CGR, which has four wholly-owned subsidiaries, Crown Mines Limited,
City Deep Limited, Consolidated Main Reef Mines and Estate Limited and East Rand Proprietary Mines Limited, or ERPM.
On October 10, 2002, CGR entered into an agreement with third parties to purchase the entire issued share capital and all
shareholders’ claims of ERPM for a purchase price of $11.0 million. CGR’s acquisition of ERPM was approved by the South African
competition authorities. ERPM is predominantly an underground mining operation located near the town of Boksburg on the East Rand,
which is east of Johannesburg and approximately 60 miles (97 kilometers) from the Blyvoor Section. We loaned CGR the sum of
R60.0 million ($8.0 million) to facilitate its acquisition of ERPM. We have subsequently loaned CGR an additional R9.9 million
($1.3 million), which CGR in turn loaned to ERPM as working capital. As of June 30, 2003, the loan had been repaid in full. Surface
mining of the Cason Dump will continue, with treatment through the Knights plant for a further 5 years, based on the current rate of
production of approximately 150,000 tons per month.
CGR has a surface retreatment operation consisting of the Crown Central, City Deep and Knights business units, collectively
referred to as the Crown Section. The ERPM Section consists of an underground section and the Cason Dump surface retreatment
operation. The underground mining operation at ERPM implemented a controlled closure program which was scheduled to close in
March 2005. Following the retrenchment of 806 employees in August 2004 at a cost of $0.6 million (R3.7 million), the mine has achieved
a reduction in costs coupled with improved productivity. As a result the original planned closure of the underground section has been
postponed. The Cason Dump surface re-treatment operation will continue to operate until 2010 under the management of the Crown
Section based on the current rate of production of approximately 150,000 tons per month. The Crown Section undertakes the retreatment
of surface sources deposited as tailing from non-operation mining sites across central Johannesburg.
On July 6, 2005, we signed a Memorandum of Understanding with our black economic empowerment partner, KBH, regarding
the acquisition by KBH of a 15% stake in our South African Operations. The intention of the transaction is to bring us into full
compliance with the 10-year, 26% black economic empowerment equity requirement as stipulated in the Mining Charter.
On July 20, 2005, we acquired from the IDC, all the debt which it holds against CGR and ERPM for a consideration which was
settled through the issue of 4,451,219 of our ordinary shares, which at the date of issue, represented approximately $4.3 million (R28.9
million).
On October 27, 2005, our board of directors approved the extension of our existing black economic empowerment structure with
KBH to cover all of our South African assets. The transaction has been facilitated by the IDC, which agreed to a debt restructuring in
CGR.
The transaction comprises the exchange of 75% of KBH’s 60% stake in CGR, including its wholly-owned subsidiary ERPM, and
a cash payment of $2.0 million (R13.2 million), for an effective 15% interest in our wholly-owned subsidiary, Blyvooruitzicht Gold Mining Company Limited, or Blyvoor. The new structure results in Khumo Gold SPV (Pty) Limited, or Khumo Gold, acquiring initially, a 15% interest in a newly created vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD SA, which holds ERPM, CGR and Blyvoor. We will retain an 85% interest.
In addition, Khumo Gold was granted an option, exercisable over the next three years, to acquire a further 11% interest in DRDGOLD
SA for $1.4 million (R9.3 million). This further equity tranche will include a 6% stake to be placed in a new Employee Trust. The
transaction has been financed by the issuance of $4.8 million (R31.8 million) new Khumo Gold preference shares.
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Dr. M.P. Ncholo, will take over as Executive Chairman of DRDGOLD SA with effect from November 1, 2005. Due to the fact
that Dr. M.P. Ncholo is also KBH’s Chairman, the transaction will meet the definition of a related party transaction. For further details,
see Item 7: “Major Shareholders and Related Party Transactions.”
We have recognized losses generated by CGR and its subsidiaries against the cost of the investment and any advances we have
made to them. CGR is carried at a $nil value at June 30, 2005 (2004: $nil).
Porgera Joint Venture (Papua New Guinea)
Effective October 14, 2003, we acquired all the shares of Orogen Minerals (Porgera) Limited, or OMP, and Mineral Resources
Porgera Limited, or MRP, from Oil Search Limited, or OSL. The transaction was effected through the amalgamation of OML and MRP
and our wholly-owned subsidiary, Dome Resources (PNG) Limited which was subsequently renamed DRD (Porgera) Limited.
The transaction resulted in us acquiring an effective 20% interest in an unincorporated gold mining joint venture, the Porgera
Joint Venture, which has fifteen mineral tenements which form part of the Porgera mine located in Papua New Guinea. The final
purchase price of $77.1 million comprised $60.3 million in cash and 6,643,902 ($16.7 million) of our ordinary shares based on the
prevailing market value on November 22, 2003, being the final settlement date. As at June 30, 2005, the Porgera Joint Venture is owned
by Placer Dome Limited (75%), DRD (Porgera) Limited (20%) and the MRE, on behalf of the Enga Provincial Governments and
landowners in Papua New Guinea (5%). An affiliate of Placer Dome Inc., Placer (PNG) Limited is the operator of the Porgera Joint
Venture and is subject to the control of a management committee made up of representatives of the joint venture partners, including one
of our representatives. The management committee is governed by an operating agreement that prevents the partners from acting
unilaterally.
Review and restructuring of South African Operations
On May 4, 2004, our associate, ERPM, entered into a 60-day review period of its underground section designed to restore the
operations to profitability. A task team comprising of management, union representatives and labor was established to assess the
proposals and make a final recommendation. On July 4, 2004, at the end of the process, ERPM's management and the consultative forum
concluded that continued mining of the underground section was not sustainable, even at a higher Rand gold price of R2,650 per ounce.
As a result, a controlled closure program of the underground section was implemented and was expected to be completed by March 2005.
Following the retrenchment of 806 employees in August 2004 at a cost of $0.6 million (R3.7 million), the mine achieved a reduction in
costs coupled with improved productivity. As a result, the original planned closure of the underground section was postponed indefinitely.
On June 26, 2004, and June 28, 2004, respectively, we entered into a further 60-day review period at the Buffels Section at
our North West Operations and at our Blyvoor Section designed to restore the operations to profitability. Proposals were received into
a consultative forum in which both management and organized labor participated, and was distributed to the Department of Labour
and the Department of Minerals and Energy, for their input. At the Buffels Section, agreement was reached with all the relevant
parties early in August 2004 to close the No. 9 Shaft, but to keep the No. 10 and 12 Shafts in operation on condition that certain
defined sustainability thresholds are met. This agreement resulted in the retrenchment of 120 employees at this mining operation
during fiscal 2005 at a cost of $0.6 million (R3.7 million). At the Blyvoor Section, the 60-day review was extended by two weeks to
conclude on September 13, 2004. By October 5, 2004, 1,619 employees had been retrenched at a cost of $3.1 million, with possible future
restructuring initiatives depending on the economic circumstances. In terms of the agreement organized labor recorded its commitment to
certain production targets, and undertook not to disrupt production for at least six months for reasons relating to restructuring of the
operations.
Emperor Mines Limited (Emperor Mine, Vatukoula, Fiji)
Over the period December 2002 to July 2004, we acquired a 45.33% interest in Emperor Mines Limited, or Emperor, an
Australian listed gold mining company with a single gold mine based in Vatukoula, Fiji.
Our interest in Emperor was acquired through a series of transactions. As of December 31, 2002, we had acquired 14.15% of
Emperor for approximately A$11.9 million ($6.7 million). By April 2003, we had increased our percentage holding in Emperor through
additional purchases on the open market to 19.81% at a total additional cost of A$4.3 million ($2.6 million). At June 30, 2004, our
effective holding had decreased to 19.78% as a result of additional shares issued by Emperor during fiscal 2004. Given the size of our
holding, Emperor appointed two of our representatives to its board of directors in January 2003.
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On March 8, 2004, we announced a conditional takeover offer to acquire all of the outstanding shares in Emperor that were not
already owned by us for a consideration of one of our shares for every five shares in Emperor held. At that time, the offer valued Emperor
at approximately A$105 million ($79.8 million). On June 10, 2004, we announced a revised final offer of five of our shares for every
twenty two shares in Emperor held. The revised offer represented a 14% increase over the previous offer. On July 30, 2004, our offer to
Emperor’s shareholders closed with us having received acceptances from Emperor’s shareholders representing approximately 25.55% of
Emperor’s issued capital, thereby increasing our shareholding in Emperor to 45.33%. Accordingly, we issued 6,612,676 shares in
exchange for the 29,097,269 Emperor shares to the value of $16.6 million, based on the market value of our shares on the date issued,
with share issue and transaction costs associated with the take over offer, amounting to $1.3 million.
With effect from August 3, 2004, Emperor’s board of directors appointed our Executive Chairman, Mr. M.M. Wellesley-Wood
as Managing Director of Emperor and our Divisional Director: Australasian Operations, Mr. R.L. Johnson as a Non-Executive Director of
Emperor. With effect from October 5, 2005, Emperor’s Board appointed our Chief Operating Officer, DRDGOLD Australasia, Mr. M.P.
Marriott, as an Executive Director. On September 9, 2004, Emperor shareholders approved a resolution to remove two independent
directors from the board of Emperor and to confirm Mr. R. Johnson’s appointment as a Non-Executive Director of Emperor. As a result,
we have three of our representatives on the six member Emperor board, with Emperor’s independent Chairman having a casting vote. At
the date of this annual report we did not have control over Emperor.
In May 2005, gold production at Emperor was adversely affected by a combination of factors including flooding of the lower
levels of the Smith Shaft caused by significant water ingress after sustained heavy rainfall; the impact of high fuel prices on operating
costs; and the failure of the Philip Shaft winder which suspended production for 4 weeks. The winder was repaired and production from
Philip Shaft commenced in June 2005. The board and management have reviewed the impact of overall lost production including the
suspension of production from Philip Shaft. As a result, Emperor has finalized a plan to restore the Emperor Gold Mine to a positive cash
flow. The plan involves total capital expenditure of $11.4 million (A$15 million) over the next 12 months which will reduce operating
costs by approximately $7.6 million (A$10 million). The key objective of the plan is to increase development and to reduce dilution by
better control of mining heights and thereby increase recovered grade.
On July 11, 2005, Emperor announced the finalization of a financial and operational restructuring package aimed at returning
them to positive cash flow and creating a sustainable, long-term future for the company and its operations in Fiji. An A$10.0 million
Convertible Loan Facility was negotiated by the independent directors of Emperor. The financing package also includes an agreement
with ANZ Bank, subject to a number of conditions, to a restructuring of Emperor’s debt servicing obligations to assist them with their
restructuring plan. The ANZ Bank has also consented to the Convertible Loan Facility and the related security. The Convertible Loan
Facility was approved by the shareholders of Emperor on August 29, 2005 (we did not participate in the voting). In addition, in July 2005
we entered into an operational support agreement with Emperor negotiated by its independent directors, pursuant to which we will
provide Emperor with management and technical services.
In Emperor’s fiscal 2005 annual report its auditors issued an audit report with an emphasis of matter to the effect that until such
time as Emperor completes its financial and operational restructuring, there remains a significant uncertainty as to whether Emperor will
continue as a going concern and, therefore, whether it will realize its assets and extinguish its liabilities in the normal course of business
and at the amounts stated in the annual report.
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire
our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea assets,
comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of our exploration
tenements in Papua New Guinea. Currently we, through DRD (Isle of Man), hold a 45.33% interest in Emperor.
Implementation of the transaction requires the restructuring of our offshore operations, whereby DRD (Isle of Man) will
transfer the following material assets to our new wholly-owned subsidiary, DRDGOLD (Offshore) Limited, or DRD (Offshore):
•
its 45.33% interest in Emperor; and
•
an A$10.0 million ($7.6 million) convertible loan facility which DRD (Isle of Man) has advanced to Emperor, in terms of
which we can elect to convert such debt facility into additional Emperor shares at A$0.30 ($0.23) per Emperor share.
We will then sell DRD (Isle of Man) to DRD (Offshore) for a purchase consideration of $230.0 million. The restructuring is
subject, inter alia, to the following conditions precedent:
•
our shareholder approval;
•
South African Reserve Bank, or SARB, approval; and
•
other regulatory consents.
BACKGROUND IMAGE
23
DRD (Offshore) will then sell DRD (Isle of Man) to Emperor. The purchase consideration for DRD (Isle of Man) is $230.0
million, which is subject to certain completion adjustments to reflect the change in the capital position of both Emperor and DRD (Isle
of Man) between October 1, 2005, which is the effective date, and completion of the transaction. The purchase consideration will be
settled by:
•
the issue of 751,879,699 new Emperor shares to DRD (Offshore), issued at A$0.35 ($0.26) per share which currently
equates to $200.0 million; and
•
$30.0 million in cash.
We intend to utilize the cash consideration for acquisitions and general working capital purposes.
The transaction is subject, inter alia, to the following conditions precedent:
•
the restructuring becoming unconditional,
•
approval by the Australian Foreign Investment Review Board;
•
SARB approval;
•
Emperor shareholder approval;
•
there being no material adverse change in either Emperor or the gold assets; and
•
a number of regulatory and banking consents and approvals being obtained.
Upon completion of the transaction and the issue of the new Emperor shares, we will hold approximately 90.5% of Emperor
and Emperor will become our subsidiary
We will not exercise our right to compulsorily acquire any of the shares held by non-associated shareholders arising under
Section 664A of the Australian Corporations Act, as a result of the new Emperor shares issued to us pursuant to the transaction.
Emperor has announced its intention to raise approximately $15.0 million through the placement of new shares following
completion of the transaction. The capital raising would take place in early 2006 and would be used for a variety of capital programs
across the three mines and to provide general working capital for Emperor. The capital raising will allow institutions to participate in
Emperor and will dilute our shareholding.
Buffelsfontein Gold Mines Limited
On March 9, 2005, the North West Operations suffered the effects of an earthquake which registered 5.3 on the Richter scale. As
a consequence of the extensive damage caused by the earthquake, the No. 5 Shaft of the North West Operations was closed. There was
continuing seismic activity in the area and on March 16, 2005, we closed the No. 2 Shaft because of concerns for the safety of employees.
On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of Buffelsfontein Gold Mines
Limited, or Buffelsfontein (which owns the North West Operations), which order was granted on the same day.
We committed to pay the wages at Buffelsfontein’s operations until the end of March 2005, amounting to $4.5 million
(R27.9 million), and continued the essential services at the mine until such time as the liquidator took control of the mine, which
amounted to $0.8 million (R5.1 million). We recognized a provision of $1.5 million (R9.0 million) for a social plan for employees, which
includes counseling and reskilling programs, and we incurred legal and other costs of $0.5 million (R3.2 million). An insurance claim has
been submitted for damage caused by the earthquake, which will be paid out to the liquidators when approved.
On October 6, 2005, we concluded an agreement with Simmer and Jack Limited, or S&J, for the sale of our shareholdings in
Buffelsfontein subject to certain conditions. These include indemnifying us against any liabilities or obligations that could arise relating to
environmental rehabilitation and the management and pumping of underground water. The proposed scheme of arrangement was
conditional upon the following:
•
Department of Water Affairs and Forestry, or DWAF, agreeing to substitute us with S&J to the extent that DWAF envisaged
imposing further responsibility on us;
•
the acceptance by the High Court of South Africa and the majority of Buffelsfontein’s creditors of a scheme arrangement
proposed by S&J; and
•
approval by the Competition Commission of South Africa.
BACKGROUND IMAGE
24
On October 21, 2005, the scheme of arrangement for the acquisition of Buffelsfontein proposed by S&J and accepted by the
majority of Buffelsfontein creditors, including us, was approved and sanctioned by the High Court of South Africa. The order for the
provisional liquidation of Buffelsfontein was lifted by the High Court of South Africa on November 1, 2005 and all the conditions of the
scheme have been met.
Other
On July 27, 2004, we established the DRD (Isle of Man) Limited (Singapore Branch), a branch of DRD (Isle of Man) Limited,
registered in Singapore. It is intended that the establishment of the branch will facilitate our further expansion in the Australasian region
in line with our growth strategy.
At our Annual General Meeting held on November 26, 2004, our shareholders approved the changing of our name from Durban
Roodepoort Deep, Limited to DRDGOLD Limited.
We concluded an agreement with M5 Developments (Pty) Ltd, or M5, on July 21, 2005, in terms of which M5, against payment
of a non-refundable fee of R1.5 million ($0.2 million), was granted an option to acquire the Durban Deep Section’s mine village for
R15.0 million ($2.2 million). The option was exercised on November 19, 2005 and the option fee will be deemed part payment of the
purchase consideration.
On November 11, 2005 we acquired a 5% holding in the Australian Stock Exchange listed Allied Gold Limited, or Allied, for
A$3.0 million ($2.3 million). In a separate transaction, we have also undertaken to, pursuant to any existing Allied shareholder electing
not to follow its rights, take up not more than 17,420,000 shares, to be issued by Allied to raise an additional A$7.0 million ($5.3 million)
at an issue price of A$0,40 ($0.30) per share. Both these transactions are subject to South African Reserve Bank approval. The capital
raising, which represents approximately 17.5% of Allied's share capital will also be subject to Allied shareholder approval, which Allied
has undertaken to seek to obtain by no later than January 20, 2006.
For further information on other capital investments, divestures, capital expenditure and capital commitments, see Item 4D.:
“Property, Plant and Equipment,” and Item 5B.: “Liquidity and Capital Resources.”
BACKGROUND IMAGE
25
4B. BUSINESS OVERVIEW
Description of Our Mining Business
Exploration
Exploration activities are focused on the extension of existing ore bodies and identification of new ore bodies both at existing
sites and at undeveloped sites. Once a potential ore body has been discovered, exploration is extended and intensified in order to enable
clearer definition of the ore body and the portions with the potential to be mined. Geological techniques are constantly refined to improve
the economic viability of exploration and exploitation.
Mining
Our South African Operations comprise relatively old assets and the principal mining method is the extraction of previously
abandoned Ore Reserves, which require a high degree of opening up of these previously abandoned Ore Reserves.
The Australasian Operations comprise open-pit mines and decline shafts, with appropriate mining methods.
Our Metallurgical Plants and Processes
A detailed review of the metallurgical plants and processes for each of the mining operations is provided under Item 4D.:
“Property, Plant and Equipment.”
Market
The gold market is relatively liquid compared to other commodity markets, with the price of gold generally quoted in Dollars.
Physical demand for gold is primarily for manufacturing purposes, and gold is traded on a world-wide basis. Refined gold has a variety of
uses, including jewellery, electronics, dentistry, decorations, medals and official coins. In addition, central banks, financial institutions
and private individuals buy, sell and hold gold bullion as an investment and as a store of value (the tendency of gold to retain its value in
relative terms against basic goods and in times of inflation and monetary crises).
The use of gold as a store of value and the large quantities of gold held for this purpose in relation to annual mine production
have meant that historically the potential total supply of gold has been far greater than demand. Thus, while current supply and demand
play some part in determining the price of gold, this does not occur to the same extent as in the case of other commodities. Instead, the
gold price has from time to time been significantly affected by macro-economic factors such as expectations of inflation, interest rates,
exchange rates, changes in reserve policy by central banks, and global or regional political and economic crises. In times of inflation and
currency devaluation, gold is often seen as a safe haven, leading to increased purchases of gold and support for the price of gold.
We believe that the primary mover in gold continues to be strong speculator and investor interest in the metal, driven by a
number of fundamental economic circumstances. While the gold price passed the $400 per ounce mark in the second half of fiscal
2004, the first time since 1996, the rally did not have the momentum it needed to maintain this higher level. However, continued
investor dissatisfaction with the state of the global economy and currency markets finally saw the Dollar gold price breach the $400
per ounce mark, where it has stayed since. While our offshore operations have received the full benefit of the higher Dollar gold price
for the year, our South African Operations suffered due to the continued strength of the South African Rand against major currencies.
Indeed the Rand has been one of the best performing currencies against the Dollar for the last two years. Only towards the end of the
fourth quarter of fiscal 2005, did we see some benefit from a Rand weakened by interest rate cuts in South Africa and interest rate
rises in the US that closed the yield differential.
BACKGROUND IMAGE
26
Our total revenue from continuing operations by geographic market is as follows:
Year ended June 30,
2005
2004
1
2003
1
$’000
$’000
$’000
South Africa.........................................................................................................................
68,370
90,066
86,549
Australasia ...........................................................................................................................
115,239
93,188
22,870
183,609
183,254
109,419
All gold produced by our South African Operations is sold by the Rand Refinery Ltd, or RRL, pursuant to a refining agreement
we entered into in October 2001. At our various operations the gold bars which are produced consist of approximately 85% gold, 7-8%
silver and the balance comprises copper and other common mineral elements. The gold bars are sent to the RRL for assaying and final
refining where the gold is purified to 99.9% and cast into troy ounce bars of varying weights. RRL then sells the gold on the same day as
delivery, for the London afternoon fixed Dollar price on the day the gold is sold, with the proceeds remitted to us in Rand within two
days. In exchange for this service, we pay RRL a variable refining fee plus fixed marketing, loan and administration fees. We currently
own 3% (fiscal 2004: 10.6%) of RRL (which is jointly owned by South African mining companies). Mr. D.J. Pretorius, our Group Legal
Counsel and General Manager Corporate Services, is a director of RRL.
The gold produced in Papua New Guinea by the Tolukuma section is sold directly to N.M. Rothschild under an agreement
signed by us in December 2001. Proceeds for gold sold are received within two days of sale. The selling price is determined by the
previous day's London afternoon close Dollar price and we are paid in Dollars. We do not have an interest in N.M. Rothschild.
The gold produced by Porgera in Papua New Guinea is sold directly to the Bank of Western Australia Limited, or BankWest.
Proceeds for gold sold are received within two days of sale. The selling price is determined by the spot price at the time of sale and we are
paid in Dollars. We do not have an interest in BankWest.
The contractual agreements described above are important to us because in order to sell gold, it needs to be approximately 100%
refined and none of our locations are able to refine gold to this sellable level.
Ore Reserves
The tables below set out the Proven and Probable Ore Reserves that are the Group’s Ore Reserves as of June 30th, 2005 and
2004, in both imperial and metric units. Our Ore Reserves are comprised of the total Ore Reserves of our wholly-owned subsidiaries,
as well as our 20% attributable share of the Ore Reserves of the Porgera Joint Venture. Our attributable 20% share of the Ore Reserves
of the Porgera Joint Venture is based on the information disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera Joint
Venture) in its annual report for the fiscal year ended December 31, 2004, as filed with the SEC on Form 40-F on March 3, 2005. The
Porgera Ore Reserves are estimated as at December 31, 2004, using appropriate cut-off grades associated with an average long-term
gold price of 350 per ounce, and on the Australian Dollar and Kina average long-term exchange rates to the US Dollar of A$1.54 =
$1.00 and K3.33 = $1.00.
Ore Reserve estimates in this Annual Report are reported in accordance with the requirements of the SEC’s Industry Guide 7.
Accordingly, as of the date of reporting, all reserves are planned to be mined out under the life of mine plans within the period of our
existing rights to mine, or within the time period of assured renewal periods of our rights to mine. In addition, as of the date of
reporting, all reserves are covered by required permits and governmental approvals. See Item 4D.: “Property, Plant and Equipment”
for a description of the rights in relation to each mine.
In Australia and South Africa, we are legally required to publicly report Ore Reserves and Mineral Resources in compliance
with the South African Code for the Reporting of Mineral Resources and Ore Reserves, or SAMREC Code, together with the
Australasian Code for Reporting of Mineral Resources and Ore Reserves, or JORC Code, and the National Instrument 43-101
Standards of Disclosure for Mineral Projects dated February 2001. The SAMREC Code is based on, and is comparable with the JORC
Code. The SEC’s Industry Guide 7 does not recognize Mineral Resources. Accordingly, we do not include estimates of Mineral
Resources in this Annual Report.
1
Revenue for fiscal 2004 and 2003 has been restated for the disclosure of Buffelsfontein Gold Mines Limited as a discontinued operation.
BACKGROUND IMAGE
27
Ore Reserve calculations are subject to a review conducted in accordance with SEC Industry Guide 7. Components of the
calculations included in the geological models and input parameters of the reserve estimation procedures, were checked. In addition,
visual inspection of the planning to deliver an individual block to the metallurgical plant, and the recovery, and deposition of the tails,
took place. A check is also made of the financial input into the costs and revenue to affirm that they are within reasonable limits.
The Ore Reserves are inclusive of diluting materials and allow for losses that may occur when the material is mined. Ore
Reserve tons, grade and content are quoted as delivered to the gold plant. There are two types of methods available to select ore for
mining. The first is pay-limit, which includes cash costs, including overhead costs, to calculate the pay-limit grade. The second is the cut-
off grade which includes cash costs, excluding fixed overhead costs, to calculate the cut-off grade, resulting in a lower figure than the full
pay-limit grade. The cut-off grade is based upon direct costs from the mining plan, taking into consideration production levels, production
efficiencies and the expected costs. We use the pay-limit to determine which areas to mine, as an overhead inclusive amount that is
indicative of the break-even position, especially for marginal mining operations.
The pay-limit approach is based on the minimum in-situ grade of ore blocks, for which the production costs, which includes all
overhead costs, including head office charges, are equal to a three year historical average gold price per ounce for that year. This
calculation also considers the previous three year's mining and milling efficiencies, which includes metallurgical and other mining factors
and the production plan for the next twelve months. Only blocks above the pay-limit grade are considered for mining. The pay-limit grade
is higher than the cut-off grade, because this includes overhead costs, which indicates the break-even position of the operation,
specifically significant for marginal mines.
When delineating the economic limits to the ore bodies we adhere to the following guidelines:
•
The potential ore to be mined is well defined by an externally verified and approved geological model created using our mining
software;
•
The potential ore, which is legally allowed to be mined, is also confined by the mine's lease boundaries; and
•
A full life of mine plan (physical 5 year plan) is constructed to mine the ore from existing infrastructure.
Our Ore Reserves figures are estimates, which may not reflect actual reserves or future production. We have prepared these
figures in accordance with industry practice, converting mineral deposits to an Ore Reserve through the preparation of a mining plan. The
Ore Reserve estimates contained herein inherently includes a degree of uncertainty and depends to some extent on statistical inferences
which may ultimately prove to have been unreliable.
Reserve estimates require revisions based on actual production experience or new information. Should we encounter
mineralization or formations different from those predicted by past drilling, sampling and similar examinations, reserve estimates may
have to be adjusted and mining plans may have to be altered in a way that might adversely affect our operations. Moreover, if the price of
gold declines, or stabilizes at a price that is lower than recent levels, or if our production costs increase or recovery rates decrease, it may
become uneconomical to recover Ore Reserves containing relatively lower grades of mineralization.
For fiscal 2005, in respect of our South African assets, Ore Reserves were determined assuming a gold price of
approximately R88,960 per kilogram ($381 per ounce) as determined from the three year historical average. At June 30, 2005, the
Rand gold price was R93,931 per kilogram. In respect of our Australasian assets:
•
Ore Reserves for the Tolukuma Section were determined assuming a gold price of K1,312.50 per ounce ($381 per ounce);
and
•
Ore Reserves in respect of our 20% attributable interest in the Porgera Joint Venture, are as determined by Placer Dome Inc.
and as set forth in its annual report for the fiscal year ended December 31, 2004, and filed with the SEC on Form 40-F on
March 3, 2005, assuming an average long-term gold price of $350 per ounce and exchange rates of A$1.54 = $1.00 and
K3.33 = $1.00.
For fiscal 2004, in respect of our South African assets, Ore Reserves were determined assuming a gold price of
approximately R90,023 per kilogram as determined from the three year historical averages in accordance with SEC Industry Guide 7.
Based on the average exchange rate for fiscal 2004 the assumed Dollar gold price would be approximately $400 per ounce. In respect
of our Australasian assets, Ore Reserves for the Tolukuma Section were determined assuming a gold price of $400 per ounce at an
exchange rate of K3.22 = $1.00 based on the Kina gold price and exchange rate as at June 30, 2004.
The principal reason for the decrease in our Ore Reserves as at June 30, 2005, of 5.6 million ounces, compared with
June 30, 2004, of 11.0 million ounces, other than depletion, is largely due to a decrease of 5.1 million ounces, or 46%, of the Ore
Reserves at the North West Operations as a result of the provisional liquidation of Buffelsfontein Gold Mines Limited.
BACKGROUND IMAGE
28
Based on the revised Ore Reserves set forth below, the revised life of mine for our operations are as follows:
Underground
Surface
Mine
2005
2004
2005
2004
South Africa
Blyvoor Section .........................................
17 years
15 years
7 years
8 years
Crown Section
1
..........................................
N/A
N/A
7 years
7 years
ERPM Section
1
..........................................
5 years
9 months
8 years
6 years
Australasia
Emperor Section
2
......................................
5 years
5 years
N/A
N/A
Tolukuma Section ......................................
2 years
3 years
2 years
2 years
Porgera Section
3
.........................................
3 years
4 years
11 years
11 years
Our Ore Reserves as of June 30, 2005 and 2004 are set forth in the table below.
1
The results of the Crown Section and its subsidiary ERPM are accounted for using the equity method.
2
The results of the Emperor Section are accounted for using the equity method with effect from July 30, 2004. The results for fiscal 2004 and 2003
have been restated for the equity method of accounting for our investment in the Emperor Section.
3
Our 20% interest in the Porgera Joint Venture was only acquired with effect from October 14, 2003.
BACKGROUND IMAGE
29
Ore Reserves: Imperial
At June 30, 2005
At June 30, 2004
Proven Ore Reserves
Probable Ore Reserves
Proven Ore Reserves
Probable Ore Reserves
Tons
Grade
Gold
Content
Tons
Grade
Gold
Content
Tons
Grade
Gold
Content
Tons
Grade
Gold
Content
(mill)
(oz/ton)
('000 ozs)
(mill)
(oz/ton)
('000 ozs)
(mill)
(oz/ton)
('000 ozs.)
(mill)
(oz/ton)
('000 ozs)
South African Operations
Blyvoor Section
Underground ..............................................
12.32
0.22
2,713
4.57
0.18
825
13.56
0.23
3,081
3.78
0.20
743
Surface .......................................................
26.21
0.02
460
-
-
-
29.37
0.02
505
-
-
-
Total Blyvoor Section ..............................
38.53
0.08
3,173
4.57
0.18
825
42.93
0.08
3,586
3.78
0.20
743
Buffels Section
1
Underground .............................................
0.06
0.20
12
-
-
-
Total Buffels Section ................................
0.06
0.20
12
-
-
-
Harties Section
1
Underground ..............................................
15.35
0.22
3,346
8.58
0.20
1,689
Surface .......................................................
-
-
-
-
-
-
Total Harties Section ...............................
15.35
0.22
3,346
8.58
0.20
1,689
Papua New Guinea Operations
Porgera Section
Underground ..............................................
0.41
0.22
89
1.14
0.24
273
0.20
0.24
48
0.54
0.26
139
Open Pit ....................................................
-
-
-
-
-
-
6.98
0.11
738
1.72
0.09
153
Surface .......................................................
9.76
0.09
891
0.91
0.11
98
4.93
0.07
359
-
-
-
Total Porgera Section
2
.............................
10.17
0.10
980
2.05
0.18
371
12.11
0.09
1,145
2.25
0.13
292
Tolukuma Section
Underground ..............................................
0.18
0.52
91
0.26
0.40
105
0.27
0.57
153
0.09
0.43
38
Open Pit .....................................................
-
-
-
-
-
-
0.01
0.50
6
0.01
0.44
6
Surface .......................................................
-
0.71
5
0.02
0.65
17
-
-
-
-
-
-
Total Tolukuma Section ..........................
0.18
0.52
96
0.28
0.18
122
0.28
0.57
159
0.10
0.43
44
Total: Group .............................................
Underground ..............................................
12.91
0.22
2,893
5.97
0.20
1,203
29.44
0.23
6,640
12.99
0.20
2,609
Open Pit .....................................................
-
-
-
-
-
-
6.99
0.11
744
1.73
0.09
159
Total Surface..............................................
35.97
0.04
1,356
0.93
0.12
115
34.3
0.03
864
-
-
-
Total
3
.........................................................
48.88
0.09
4,249
6.90
0.19
1,318
70.73
0.12
8,248
14.72
0.19
2,768
1
The North West Operations were placed into provisional liquidation on March 22, 2005.
2
Total Proven and Probable Ore reserves for 2005 reflect our attributable interest in the Porgera Joint Venture. This is based on the information disclosed by Placer Dome Inc. (which has a 75%
interest in the Porgera Joint Venture) in its Annual Report for the fiscal year ended December 31, 2004, as filed with the SEC on Form 40-F on March 3, 2005.
3
The Ore reserves listed in the above table are estimates of what can be legally and economically recovered from operations, and, as stated, are estimates of mill delivered in tons.
BACKGROUND IMAGE
30
Ore Reserves: Metric
At June 30, 2005
At June 30, 2004
Proven Ore Reserves
Probable Ore Reserves
Proven Ore Reserves
Probable Ore Reserves
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
South African Operations
Blyvoor Section
Underground ...........................
11.175
7.55
84.396
4.144
6.19
25.645
12.301
7.79
95.823
3.432
6.73
23.110
Surface ....................................
23.777
0.60
14.304
-
-
-
26.645
0.59
15.721
-
-
-
Total Blyvoor Section ...........
34.952
2.82
98.700
4.144
6.19
25.645
38.946
2.86
111.544
3.432
6.73
23.110
Buffels Section
1
Underground ............................
0.057
6.82
0.389
-
-
-
Total Buffels Section ...............
0.057
6.82
0.389
-
-
-
Harties Section
1
Underground .............................
13.922
7.47
104.059
7.784
6.75
52.548
Surface ......................................
-
-
-
-
-
-
Total Harties Section ..............
13.922
7.47
104.059
7.784
6.75
52.548
Papua New Guinea Operations
Porgera Section
Underground ...........................
0.371
7.43
2.756
1.034
8.21
8.491
0.180
8.33
1.497
0.489
8.83
4.314
Open pit ..................................
-
-
-
-
-
-
6.330
3.63
22.960
1.556
3.06
4.768
Surface ....................................
8.853
3.13
27.724
0.822
3.70
3.042
4.472
2.50
11.172
-
-
-
Total Porgera Section
2
..........
9.224
3.30
30.480
1.856
6.21
11.533
10.982
3.24
35.629
2.045
4.44
9.082
Tolukuma Section
Underground ...........................
0.160
17.60
2.823
0.237
13.79
3.269
0.244
19.49
4.760
0.081
14.73
1.193
Open pit ..................................
-
-
-
-
-
-
0.012
16.98
0.196
0.012
15.20
0.189
Surface ....................................
0.006
23.58
0.157
0.024
22.36
0.540
-
-
-
-
-
-
Total Tolukuma Section .......
0.166
17.84
2.980
0.261
14.58
3.810
0.256
19.37
4.956
0.093
14.79
1.382
Total
Underground ...........................
11.706
7.69
89.975
5.415
6.91
34.405
26.704
7.73
207
11.786
6.89
81.165
Open pit ..................................
-
-
-
-
-
-
6.342
3.65
23.156
1.568
3.16
4.957
Surface ....................................
32.636
1.29
42.185
0.846
4.23
3.582
31.117
0.86
26.893
-
-
-
Total
3
......................................
44.342
2.98
132.160
6.261
6.55
40.987
64.163
4.00
256.577
13.354
6.45
86.122
1
The North West Operations were placed into provisional liquidation on March 22, 2005.
2
Total Proven and Probable Ore reserves for 2005 reflect our attributable interest in the Porgera Joint Venture. This is based on the information disclosed by Placer Dome Inc. (which has a 75%
interest in the Porgera Joint Venture) in its Annual Report for the fiscal year ended December 31, 2004, as filed with the SEC on Form 40-F on March 3, 2005.
3
The Ore reserves listed in the above table are estimates of what can be legally and economically recovered from operations, and, as stated, are estimates of mill delivered in tons.
BACKGROUND IMAGE
31
The approximate mining recovery factors for the 2005 Ore Reserves shown in the above table are as follows:
Underground
Surface
Mine
Dilution
(Sundries,
Shortfall and
Development)
(%)
Mine Call Factor
(%)
Metallurgical and
recovery factor
(%)
Mine Call Factor
(%)
Metallurgical and
recovery factor
(%)
Blyvoor Section ..........
30.0
85.2
95.8
100.0
45.0
Tolukuma Section .....
29.5
79.7
91.0
95.0
91.0
Porgera Section
1
........
Not available
100.0
86.7
100.0
84.0
The approximate mining recovery factors for the 2004 Ore Reserves shown in the above table are as follows:
Underground
Surface
Mine
Dilution
(Sundries,
Shortfall and
Development)
(%)
Mine Call Factor
(%)
Metallurgical and
recovery factor
(%)
Mine Call Factor
(%)
Metallurgical and
recovery factor
(%)
Blyvoor Section ..........
29.8
83.5
94.5
100.0
55.0
Tolukuma Section .....
19.3
87.0
91.0
95.0
91.0
Porgera Section
1
........
Not available
100.0
86.7
100.0
84.0
The following table shows the average drill/sample spacing (rounded to the nearest foot), as at June 30, 2005, for each category
of Ore Reserves at our mines:
Mine
Proven
Reserves
Probable
Reserves
South Africa
Blyvoor Section .....................................................................................................
16 ft. by 24 ft.
Nil
Australasia
Tolukuma Section ..................................................................................................
3 ft. by 33 ft.
33 ft. by 66 ft.
Porgera Section
1
.....................................................................................................
49 ft. by 49 ft.
98 ft. by 98 ft.
We apply the pay-limit approach to the mineralized material database of our various shafts or business units in order to
determine the tonnage and grade available for mining.
The underground reserves quoted as of June 30, 2005, are sensitive to operating costs and gold price assumptions as shown in
the table below. These sensitivities are presented to give an indication of changes in reserves relative to the gold price assumptions used.
All sensitivities have been calculated at an exchange rate of R7.32 = $1.00 for the South African Operations and K3.36 = $1.00 for Papua
New Guinea Operations. No sensitivities are presented for Porgera as our disclosures are based on the publicly available information as at
December 31, 2004, which did not include these sensitivities. At different gold prices, alternative mining strategies may be pursued to
optimally exploit the ore body. Due to the re-processing nature of our surface operations, those reserves are not sensitive to the price of
gold and are included in our reserve statement provided that the gold price per ounce exceeds the per ounce cost of processing the
materials.
Sensitivities, conducted using the $381 per ounce average gold price in local currencies, where applicable, indicate that there
is material difference to the Ore Reserves as stated below. These sensitivities are presented to give an indication of changes relative to
gold price. These are not supported by life of mine plans and should therefore only be considered as indicative and comparable on a
relative basis. At different gold prices, alternative mining strategies may be pursued to exploit the ore body optimally. The mining
process is dynamic and will thus have a “knock-on-effect” on the operating costs and pay limit grade associated with the change in
scale of operations. The inclusion of large tonnages of surface material will also influence the Ore Reserve sensitivity.
1
This is based on information disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera Joint Venture) in its annual report for the fiscal
year ended December 31, 2004, as filed with the SEC on Form 40-F on March 3, 2005.
BACKGROUND IMAGE
32
$300/oz
$340/oz
$381/oz
$420/oz
$440/oz
Operation
Tonnes Grade
Gold
Gold
Tonnes
Grade
Gold
Gold
Tonnes
Grade
Gold
Gold
Tonnes Grade
Gold
Gold
Tonnes Grade
Gold
Gold
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Blyvoor Section
Proven ..................28.290
2.12
1.970
61.268
31.955
2.59
2.657
82.629
34.952
2.82
3.173
98.700
38.321
3.00
3.695
114.921
39.877
3.06
3.919
121.886
Probable....................
1.206
7.63
0.296
9.199
2.285
6.84
0.503
15.633
4.144
6.19
0.824
25.645
6.403
5.65
1.163
36.159
7.168
5.49
1.265
39.349
Total.....................30.095
2.34
2.266
70.467
34.241
2.87
3.159
98.262
39.096
3.18
3.998
124.344
44.724
3.38
4.857
151.080
47.045
3.43
5.184
161.235
$320/oz
$360/oz
$400/oz
$440/oz
$480/oz
Operation
Tonne
s
Grade
Gold
Gold
Tonnes
Grade
Gold
Gold
Tonnes
Grade
Gold
Gold
Tonne
s
Grade
Gold
Gold
Tonne
s
Grade
Gold
Gold
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Mt
g/t
'000 ozs
Tonnes
Tolukuma Section
Proven ....................
0.148
19.2
91.342
2.841
0.152
19.0
92.829
2.887
0.154
18.9
93.924
2.921
0.167
17.8
95.821
2.980
0.190
16.2
98.814
3.073
Probable..................
0.232
15.7
116.765
3.632
0.237
15.6
118.666
3.691
0.241
15.5
120.067
3.735
0.261
14.6
122.491
3.810
0.297
13.2
126.317
3.929
Total .......................
0.380
17.0
208.107
6.473
0.389
16.3
211.495
6.578
0.396
16.8
213.991
6.656
0.428
15.9
218.312
6.790
0.487
14.4
225.131
7.002
BACKGROUND IMAGE
33
Governmental regulations and its effect on our business
South Africa
Common Law Mineral Rights and Statutory Mining Rights
Prior to the introduction of the MPRD Act in 2002, private ownership in mineral rights and statutory mining rights in South
Africa could be acquired through the common law or by statute. Under the old regime, the term freehold title refers to a right of
ownership of land and the surface thereof and the term “mining title” refers to a right of ownership of the minerals below the surface or
the right to mine such minerals. With effect from May 1, 2004, all minerals have been placed under the custodianship of the South
African government under the provisions of the MPRD Act, and old order proprietary rights need to be converted to new order rights of
use within certain prescribed periods, as dealt with more fully below.
Old Order Rights - Mining Authorizations
Because mining authorizations issued under the previous regime remain valid until May 1, 2009, they are dealt with briefly. No
person or mining entity may prospect or mine for minerals without being granted a prospecting or mining authorization. Prior to granting
a prospecting or mining authorization, two requirements had to be fulfilled. First, the mining entity must either be the registered holder of
the mineral rights or have obtained the written consent of the registered holder of the mineral rights to mine the minerals concerned for its
own account. Second, the Department of Minerals and Energy, or the DME, must be satisfied with the scale, manner and duration of the
intended prospecting or mining operations and must approve an Environmental Management Program, or EMP. A prospecting permit
was issued for a limited period but could be renewed on application. A mining license was generally issued until such time that the
minerals could no longer be mined in an economically viable manner. The rights enjoyed under these authorities will endure until they are
converted within the period of time prescribed in the MPRD Act. Thereafter, such rights will lapse.
Conversion of Rights under the Mineral and Petroleum Resources Development Act, 2002
Existing common law prospecting, mining and mineral rights, or old order rights, need to be converted into new order rights in
order to ensure exclusive access to the mineral for which rights existed at the time of the enactment of the MPRD Act.
In respect of used mineral rights, the DME is obliged to convert the rights if the applicant complies with certain statutory criteria.
These include the submission of a mining plan, demonstrable technical and financial capability to give effect to the plan, provision for
environmental management and rehabilitation, and compliance with certain black empowerment and social-economic guidelines. These
applications need to be submitted within five years after the enactment of the MPRD Act on May 1, 2004. Similar procedures apply
where we hold prospecting rights and a prospecting permit and conduct prospecting operations. Where we hold unused rights however,
the application for conversion to mining or prospecting rights had to be submitted within one year. The requirements for unused rights are
more stringent than for used rights, particularly insofar as participation in benefits from historically disadvantaged groups are concerned.
The DME has, in these instances also a wider discretion to refuse an application for conversion. Under the new MRPD Act, mining rights
are not perpetual, but endure for a maximum of thirty years, after which they may be renewed for a further thirty years. Prospecting rights
are limited to five years, with one renewal of up to three years. All relevant applications have been submitted.
If any of our applications for conversion are refused, rights for damages, based on expropriation will vest with us. The DME
may attach specific conditions and limitations to the exercise of new order rights. It may, for example, reduce the area over which the new
order right applies, if it is of the view that the prospecting or mining work programs submitted by an applicant do not justify the extent of
the area covered by the old order right. They may also be suspended or cancelled by the Minister of Minerals and Energy in the event of
a breach or, in the case of mining rights, of non-optimal mining in accordance with the mining works program.
The South African government has declared its intention to revisit the taxation regime of South African gold mining companies.
The South African gold mining industry is taxed under the gold tax formula which recognizes the high level of capital expenditure
required to sustain a mining operation over the life of mine. This results in an additional tax benefit, not afforded to other commercial
companies. In addition, the South African Government has indicated that it is looking at a revenue based royalty for mining companies, as
outlined in the draft Mineral and Petroleum Royalty Bill, 2003, or Royalty Bill, which was released in March 2003 for comment. The
Royalty Bill proposed a three percent royalty on gross revenue for gold mining companies. In conjunction with the South African Mining
Development Association we have made submissions to the government outlining our concerns about a revenue based royalty and
recommended a profit based royalty be introduced instead. In his budget speech in February 2004, the South African Finance Minister
acknowledged that the draft Royalty Bill may need some refinement, but also stated that government’s preference is for a revenue based
royalty, with introduction of the revenue based royalty as of 2009. As at October 31, 2005, these issues were still under review. The
introduction of the proposed revenue based royalty would have an adverse effect on the profitability of our South African Operations. We
are currently evaluating the impact of the proposed revenue based royalty.
BACKGROUND IMAGE
34
In order to promote broader based participation in mining revenue, the MPRD Act provides for a Broad Based Socio-Economic
Empowerment Charter, or Mining Charter, to be developed by the Minister within five years of commencement of the Act, beginning
May 1, 2004. The mining industry has submitted its proposals on the content of the Mining Charter. In its current format its objectives
include:
•
increased direct and indirect ownership of mining entities;
•
expansion of opportunities for persons disadvantaged by unfair discrimination under the previous political dispensation;
•
expansion of the skills base of such persons, the promotion of employment and advancement of the social and economic welfare
of mining communities; and
•
promotion of beneficiation.
The Mining Charter sets certain numerical and timeframe goals on equity participation by historically disadvantaged South
Africans of South African mining assets. It recommends that these are achieved by, among other methods, the sale of assets by mining
companies to historically disadvantaged persons on a willing seller, willing buyer basis at fair market value. The goals set by the Mining
Charter require each mining company to achieve 15 percent ownership by historically disadvantaged South Africans of its South African
mining assets within five years and 26 percent ownership within ten years from May 1, 2004. It also sets out guidelines and goals in
respect of employment equity at management level with a view to achieving 40 percent participation by historically disadvantaged
persons in management and ten percent participation by women in the mining industry, each within five years. Compliance with these
objectives is measured on the weighted average “scorecard” approach in accordance with a draft scorecard which was published by the
government in February 2003.
We are supportive of addressing the legacies of the past through developing opportunities in accordance with the objects and
parameters of the MPRD Act. We have demonstrated our commitment through our 40% owned associate company, CGR, through which
we facilitated the acquisition of 60% of our interest in CGR by KBH in fiscal 2004. We also plan to enter into a new transaction in fiscal
2006 to provide sustainability to our black empowerment partnership with KBH (See Item 4A: “History and Development of the
Company”). However, it is still too soon for us to be able to set out a definitive timeline of when we will comply with our objectives
before the expiration of the 10 year time limit, as the legislation was only passed in 2004. The provisions of the Mining Charter apply to
each mining company individually. It is not possible for us to meet our obligations under the Mining Charter solely by disposing of our
less profitable operations which would undermine the objectives of the Mining Charter. In order to comply with the Mining Charter,
empowerment transactions must be at fair market value, we do not anticipate incurring any loss in fulfilling our obligations provided that
we are able to identify suitable partners that are able to obtain adequate funding.
Mine and Safety Regulation
The South African Mine Health and Safety Act, 1996 (as amended), or the Mine Health and Safety Act, came into effect in
January 1997. The principal object of the Mine Health and Safety Act is to improve health and safety at South African mines and to this
end, imposes various duties on us at our mines, and grants the authorities broad powers to, among other things, close unsafe mines and
order corrective action relating to health and safety matters. In the event of any future accidents at any of our mines, regulatory authorities
could take steps which could increase our costs or reduce our production capacity.
Under the South African Compensation for Occupational Injuries and Diseases Act, 1993 (as amended), or COID Act,
employers are required to contribute to a fund specifically created for the purpose of compensating employees or their dependants for
disability or death arising in the course of their work. Employees who are incapacitated in the course of their work have no claim for
compensation directly from the employer and must claim compensation from the COID Act fund. Employees are entitled to
compensation without having to prove that the injury or disease was caused by negligence on the part of the employer, although if
negligence is involved, increased compensation may be payable by this fund. The COID Act relieves employers from the prospect of
costly damages, but does not relieve employers from liability for negligent acts caused to third parties outside the scope of employment.
We have contributed approximately $5.6 million over the past three fiscal years under the COID Act, to a multi-employer industry fund
administered by Rand Mutual Assurance Limited.
Under the Occupational Diseases in Mines and Works Act, 1973 (as amended), or the Occupational Diseases Act, the multi-
employer fund pays compensation to employees of mines performing “risk work,” as defined by the Minister for Health, usually in
circumstances where the employee is exposed to dust, gases, vapors, chemical substances or other working conditions which are
potentially harmful, if the employee contracts a “compensatable disease,” which includes pneumoconiosis, tuberculosis, or a permanent
obstruction of the airways. No employee is entitled to benefits under the Occupational Diseases Act for any disease for which
compensation has been received or is still to be received under the COID Act. We are currently in compliance with these payment
requirements, which are based on a combination of the employee costs and claims made during the year.
BACKGROUND IMAGE
35
Uranium and radon are often encountered during the ordinary course of gold mining operations in South Africa, and present
potential risks for radiation exposure of workers at those operations and the public in the nearby vicinity. We monitor our uranium and
radon emissions and believe that we are currently in compliance with all local laws and regulations pertaining to uranium and radon
management and that we are within the current legislative exposure limits prescribed for workers and the public, under the Nuclear
Energy Act, 1999 (as amended) and Regulations from the National Nuclear Regulator.
Environmental Regulation in South Africa
Managing the impact of mining on the environment is extensively regulated by statute in South Africa. Recent statutory
enactments set compliance standards both generally, in the case of the National Environmental Management Act, and in respect of
specific areas of environment impact, as in the case of the Atmospheric Pollution Act (dust pollution), the National Water Act (managing
effluent), the Environmental Conservation Act (waste disposal) and the Nuclear Energy Act (latent radon contamination). Liability for
environmental damage is also extended beyond the corporate veil to impose personal liability on managers and directors of mining
corporations that are found to have violated applicable laws.
Managing the impact on the environment by mining operations is extensively provided for in the MRPD Act. The MRPD Act
has onerous provisions for personal liability of directors of companies whose mining operations have an unacceptable impact on the
environment.
Under the MPRD Act, new order mining licenses are not issued unless a complete environmental impact assessment is
conducted and all potentially affected parties have been given an opportunity to comment on the proposed mining. Mining companies are
also required to demonstrate both the technical and financial ability to sustain an ongoing environmental management program, and
achieve ultimate rehabilitation, the particulars of which are to be incorporated in an environmental management program, or EMP. This
program is required to be submitted and approved by the DME as a prerequisite for the issue of a new order mining license. Financial
provision is made by depositing funds into a rehabilitation trust fund. We have a registered fund for each of the Blyvoor, Durban Deep
and West Wits Sections and our associate, CGR, has registered funds for the Crown and ERPM Sections. These funds are discussed
below.
The MPRD Act imposes specific, ongoing environmental monitoring and financial reporting obligations on the holders of
mining licenses.
Because of the diverse nature of our operations, ranging from underground mining to surface reclamation activities,
environmental risks vary from site to site. These risks have been addressed in EMPs which have been submitted to the DWAF and are
reviewed and updated on an annual basis. As of June 30, 2005, EMPs have been submitted for all operations in South Africa and all have
been approved by the DWAF. Additionally, the key environmental issues have been prioritized and are being addressed through active
management input and support and progress measured in terms of activity schedules and timescales determined for each activity. Two
environmental compliance assessments have been conducted at the Blyvoor Section and the Crown Section, which both show that these
mines are in substantial compliance with the conditions of their EMPs.
Our existing reporting and controls framework is consistent with the additional reporting and assessment requirements of the
MPRD Act.
Financial Provision for Rehabilitation
We are required to make financial provision for the cost of mine closure and post-closure rehabilitation, including monitoring,
once the mining operations cease. In South Africa we have funded these environmental rehabilitation costs by making contributions over
the life of the mine to environmental trust funds established for each operation. Funds are irrevocably contributed to trusts that function
under the authority of trustees that have been appointed by, and who owe a statutory duty of trust, to the Master of the High Court of
South Africa. The funds held in these trusts are invested primarily in interest bearing debt securities and equity-limited unit trusts. As of
June 30, 2005, we held a total of $6.4 million in trust, the balance held in each fund being $1.8 million (2004: $1.8 million) for West Wits
Section, $2.5 million (2004: $2.5 million) for Blyvoor Section and $2.1 million (2004: $2.1 million) for the Durban Deep Section. Trustee
meetings are held as required, and quarterly reports on the financial status of the funds, are submitted to our board of directors.
The financial provisions for the West Wits Section and Durban Deep Section have been consolidated into a single fund. We
address shortfalls in the funds by accruing trust investment income for the benefit of the funds and by replenishing it with the proceeds
from the sale of redundant mining equipment at the end of the life of the mine. If any of the operations are prematurely closed, the
rehabilitation funds may be insufficient to meet all the rehabilitation obligations of those operations.
BACKGROUND IMAGE
36
Whereas the old Minerals Act allowed for the establishment of a fully funded rehabilitation fund over the life of mine, the
MPRD Act assumes a fully compliant fund at any given time in the production life of a mine. The DME has indicated that the traditional
ring fencing of funds may, for investment purposes, be relaxed and that insurance instruments may also be received subject to the DME’s
consent, to make up the shortfall in available cash funds.
The aggregate group rehabilitation, reclamation and closure cost provision was calculated at June 30, 2005 at $22.6 million,
down from $39.1 million on June 30, 2004. The decrease is attributable to the exclusion of Buffelsfontein Gold Mine Limited (which
owns the North West Operations that was placed under provisional liquidation on March 22, 2005).
Papua New Guinea
Mineral exploration and mining operations in Papua New Guinea are principally regulated by the following legislation:
•
Papua New Guinea Mining Act 1992 and Mining Regulations 1992, or the Mining Act and Regulations;
•
Mining Safety Act and Regulations; and
•
Papua New Guinea Environmental Act 2000 and Regulations 2000, or the Environmental Act and Regulations.
Current mining activities at the Tolukuma Section are covered by a mining lease (ML104), granted under the Mining Act. The
initial term of this lease was for a period of 8 years, which was renewed for a further 10 years, expiring 2012. The mining lease may be
renewed for further periods not exceeding 10 years in accordance with applicable laws. Current exploration activities are covered by a
number of exploration licenses. These licenses have been granted for a term not to exceed two years but can be renewed for further two
year periods. In total, there are 11 exploration licenses or applications covering the Tolukuma Section.
The Porgera Joint Venture has approval to mine the Porgera deposit within the agreed development plan under the terms of the
Porgera Mining Development Contract, or the Porgera Contract, between the Government of Papua New Guinea and the members of the
Porgera Joint Venture. The Porgera Contract specifies, among other matters, the annual rents that must be paid for the Special Mining
Lease and the various classes of compensation that are payable to the landowners for the various land uses. The Special Mining Lease,
which expires in 2019, encompasses approximately 5,530 acres (2,240 hectares) including the mine area and the areas in which the
project infrastructure is located. There is no expiration date for the Porgera Contract, but it is tied to the continuation of the Special
Mining Lease. Leases for mining purposes have also been awarded by the Government of Papua New Guinea for land use associated with
the mining operation such as waste dumps, campsite, and an airstrip. Permits are held for water use, including run-off from
unconsolidated surfaces, such as the open pit, the underground mine and the waste dumps. These permits are renewable on a regular basis
and are subject to public hearing before approval.
The Tolukuma and Porgera Sections are operated subject to the requirements of the Mining Act and Regulations and the Mining
Safety Act and Regulations as applied by the Papua New Guinea Government. We believe all requisite licenses and permits are in good
standing.
The Mining Safety Act and Regulations
The Mining Safety Act and Regulations sets out in detail the standards pertaining to safe and responsible mining. It lays down
the conditions a mining operation has to comply with to ensure that the health and safety of all workers is protected. It includes
requirements pertaining to worker training, risk assessment and safe working procedures with regard to all activities associated with
mining.
Environmental Regulations in Papua New Guinea
The Tolukuma and Porgera Sections are subject to the Environmental Act and Regulations which came into effect on January 1,
2004. The Environmental Act and Regulations provide for objective criteria for regulating the impact of activities on the environment, as
well as the regulation of air and water pollution. Both the Tolukuma and Porgera Sections have a number of licenses and permits with
which those respective operations are required to comply.
The activities at the Tolukuma and Porgera Sections are categorized under the Environmental Act and Regulations as Level 3
activities because of the size and complexity of their processes. Level 3 activities are subject to more rigorous regulation as they are
regarded as being more likely to create an adverse impact on the environment. Pursuant to the grandfathering provisions of the
Environmental Act and Regulations, both the Tolukuma and Porgera Sections are able to continue to operate under their existing
environmental plans and permits.
BACKGROUND IMAGE
37
An environmental plan for the mining related activity at the Tolukuma Section was submitted to the Directorate Environment
and Conservation, or DEC, in Papua New Guinea, in November 1993 and was approved, subject to certain conditions, on May 24, 1994.
The three principal conditions are:
•
submission of an environmental management and monitoring program;
•
rehabilitation on a progressive basis throughout the life;
•
progress reports every six months; and
•
development of a final site rehabilitation plan and submission of the plan four years from the date of final plant commissioning.
Tolukuma submitted their environmental management and monitoring program in July 1994 and have adhered to its
requirements.
Similarly an environmental plan for mining related activity at Porgera was submitted in 1989 and was approved by the DEC.
A detailed review of the environmental issues and concerns for the Tolukuma and Porgera Sections are provided under Item 4D.:
“Property, Plant and Equipment – Description of Significant Subsidiaries, Properties and Mining Operations” under “Environmental and
Closure Aspects.”
Fiji
Environmental Regulation in Fiji
Managing the impact of mining on the environment is regulated by various statutes in Fiji, dealing with various mining and
mining-related activities and the effect that they may have upon the environment.
The Fijian Mining Act of 1978 regulates mining activities generally within Fiji. In particular:
•
the Director of Mines grants mining permits and leases under the Fijian Mining Act and has the power to attach conditions to
those permits or leases. Under certain provisions of the Fijian Mining Act, the Director of Mines has power to cancel a lease
or permit where the holder of that lease or permit has failed to comply with certain requirements of the Fijian Mining Act;
•
the Fijian Mining Act places an obligation on the owners of mining leases in Fiji to take all necessary actions to restore land
once mining operations cease. There is also a requirement under the Fijian Mining Act to pay compensation to land owners
for any damage to the surface of land caused by the mining operations; and
•
pollution of a watercourse is an offense under the Fijian Mining Act, although permits can be obtained to authorize the
deposit of sludge and tailings. The Fijian Mining Act requires all areas of subsidence to be clearly marked and fenced off
with warning signs posted. Failure to comply with these provisions is again an offense. The Fijian Mining Act also contains
provisions regulating the storage and protection of chemicals and poisons and accompanying washes and antidotes, dust
abatement requirements and the construction of dams.
The general penalty under the Fijian Mining Act, where the section does not impose a specific penalty, is a fine of 200 Fijian
Dollars or six months imprisonment or both.
In addition to the Fijian Mining Act, the Rivers and Streams Act creates temporary and special water rights. The Water
Supply Act imposes a penalty for polluting a water supply of F$100.
Health and safety legislation also imposes upon employers a duty to take all practicable measures to minimize the risk of
explosions and to render safe hazardous conditions and materials.
As mining and environmental protection legislation in Fiji is still in the early stages of development, penalties for breaching
the existing mining and environmental protection legislation are relatively small compared to international standards . However, the
Fijian Parliament is currently considering an Environment Management Bill introduced on July 28, 2004 which was ready for
enactment on March 17, 2005. When passed, this bill will introduce a number of environment protection measures, many of which
will impact the mining industry. The Bill contains provisions imposing liability upon directors for offenses committed by a company.
BACKGROUND IMAGE
38
4C. ORGANIZATIONAL STRUCTURE
The following chart shows our percentage of ownership and voting rights in our principal subsidiaries, associate, joint venture
and investments as of June 30, 2005. All of our subsidiaries are incorporated in South Africa unless otherwise indicated. We hold the
majority of the investments directly or indirectly as indicated below. Refer to Exhibit 8.1 for a list of our directly held subsidiaries.
South African Operations
100%
100%
100%
100%
100%
100%
100%
40%
100%
Australasian Operations
100%
45.33%
4
100%
20%
100%
1
Buffelsfontein Gold Mines Limited was placed into provisional liquidation on March 22, 2005.
2
All shafts at the Durban Deep Section have been closed.
3
The West Wits Section will be used going forward to extract and dispose of underground water.
4
The Company's investment in Emperor Mines Limited increased to 45.33% at July 30, 2004.
Blyvooruitzicht Gold Mining
Company Limited
Buffelsfontein Gold Mines
Limited
1
Durban Deep Section
2
DRDGOLD Limited
West Witswatersrand Gold
Holdings Limited
Crown Consolidated Gold
Recoveries Limited
Buffels Section
Harties Section
Duff Scott Hospital (Pty)
Limited
West Witwatersrand Gold
Mines Limited
3
Crown Gold Recoveries
(Pty) Limited
East Rand Proprietary
Mines Limited
Blyvoor Section
North West Operations
West Wits Section
Crown Section
ERPM Section
Porgera Section
Tolukuma Section
Tolukuma Gold Mines Ltd
(Papua New Guinea)
DRD (Isle of Man) Limited
(Isle of Man)
Emperor Mines Limited
(Australia)
DRD (Porgera) Limited
(Papua New Guinea)
Vatukoula Mine (Fiji)
Porgera Joint Venture
(Papua New Guinea)
BACKGROUND IMAGE
39
4D. PROPERTY, PLANT AND EQUIPMENT
The following maps set out the location of our mines and projects in South Africa, Papua New Guinea and Fiji.
DRDGOLD’s Global Operations
South African Operations
BACKGROUND IMAGE
40
Tolukuma and Porgera
Vatukoula Gold Mine
BACKGROUND IMAGE
41
Description of Significant Subsidiaries, Properties and Mining Operations
South Africa
West Witwatersrand Basin Geology
The Blyvoor Operation is predominantly an underground operating mine located within a geographical region known as the
Witwatersrand Basin, exploiting gold bearing reefs in addition to certain surface sources. The Crown Section and the ERPM Section are
also located within the Witwatersrand Basin. The Crown Section exploits various surface sources, including sand and slime tailings
deposited as part of historical mining operations. The ERPM Section is predominantly an underground mining operation with a surface
operation for the processing of sand from the Cason Dump. Our underground operations are typical of the many gold mining operations
in the area which together have produced approximately 1.5 billion ounces of gold over a period of more than 100 years.
The Witwatersrand Basin comprises a 4 mile (6 kilometers) vertical thickness of sedimentary rocks situated within the Kaapvaal
Craton, extending laterally for approximately 186 miles (299 kilometers) east-northeast and 62 miles (100 kilometers) south-southeast.
The sedimentary rocks generally dip at shallow angles towards the center of the basin though locally this may vary. The Witwatersrand
Basin is Achaean in age and the sedimentary rocks are considered to be approximately 2.7 to 2.8 billion years old.
Gold mineralization in the Witwatersrand Basin occurs within horizons termed reefs. These occur within seven separate
goldfields located along the eastern, northern and western margins of the basin. These goldfields are known as the Evander Goldfield, the
East Rand Goldfield, the West Rand Goldfield, the Far West Rand Goldfield, the Central Rand Goldfield, the Klerksdorp Goldfield and
the Free State Goldfield. As a result of faulting and other primary controls of mineralization, the goldfields are not continuous and are
characterized by the presence or dominance of different reef units. The reefs are generally less than 6 feet (2 meters) thick but in certain
instances, these deposits form stacked elastic wedges which are hundreds of feet thick.
The gold generally occurs in native form within the various reefs, often associated with pyrite and carbon.
Blyvooruitzicht Mine
Overview
We own 100% of the Blyvooruitzicht Gold Mining Company Limited, which in turn owns 100% of the Doornfontein Gold
Mining Company Limited. The consolidated mining operation, referred to as the Blyvoor Section, consists of the adjacent mines of
Blyvooruitzicht and Doornfontein which are located within the Far West Rand Goldfields on the northwestern edge of the Witwatersrand
Basin. Blyvoor was the first mine in the “West Wits” line. Together, these two operations have produced over 35 million ounces of gold
since inception. The net book value of the mining assets at the Blyvoor Section is $46.1 million at June 30, 2005, with 4.0 million ounces
of Ore Reserves.
On June 28, 2004, we entered into a 60-day review period on the Blyvoor Section designed to restore the operations to
profitability. The 60-day review was extended to September 13, 2004. By October 5, 2004, 1,619 employees had been retrenched at a cost
of $3.1 million, with possible future restructuring initiatives depending on the economic circumstances. In terms of the agreement,
organized labor recorded its commitment to certain production targets, and undertook not to disrupt production for at least six months for
reasons related to restructuring of the operations.
As of June 30, 2005, the mine has 3,445 employees, including contractors.
In August 2005, our Board approved a project to re-establish mining operations from the No. 2 Sub-Shaft in three phases at a
total capital cost of $12.0 million (R80.5 million). In total, the No. 2 Sub-Shaft Project, is expected to yield some 770,491 0z of gold
from 2.4 million tons of ore with an average delivered grade of 8.18 g/t, restoring Blyvoor’s life to 17 years. This project has been
designed in three phases. Phase 1 will include the opening up of and the gaining of access to the No. 2 Sub-shaft to a certain level.
Stoping operations will also commence then. The estimated completion deadline for Phase 1 is April 2006. Phase 2 includes the
commissioning of the winders and the re-equipping of the No. 2 Sub-shaft where we will also attempt to gain access to stoping areas
below the level established during Phase 1. The estimated completion date for Phase 2 is December 2006. Phase 3 will commence in
September 2006 and will be completed by September 2009. This phase will involve the opening up of all other levels for the shaft and
mining will begin by level as each level is opened up.
BACKGROUND IMAGE
42
In August 2005, our Board also approved a $0.3 million (R2.3 million) expansion of the Slimes Dam Project which is scheduled
for completion by the end of December 2005. This expansion involves the installation of an additional pump and wider gauge pipes in
order to ease congestion and further improve plant efficiency, together with the implementation of a number of in-plant process upgrades
to ease maintenance demands. We estimate that this expansion will result in a 24% increase in volume, a 12% increase in gold
production, and a slight reduction in operating costs. The capital cost of the expansion was minimized by acquiring pipes, pumps and
valves second-hand from AngloGold Ashanti’s Ergo surface reclamation operation which closed earlier in the year.
Property
The Blyvoor Section is located on the West Wits line within the Far West Rand Goldfields on the northwestern rim of the
Witwatersrand Basin, near the town of Carletonville, Gauteng Province, about 50.0 miles (80.5 kilometers) south-west of Johannesburg
and is reached via the R528 road to Carletonville on the N12 Johannesburg-Potchefstroom-Kimberly highway.
The climate of the Highveld area (at an elevation of 5,249 feet (1,600 meters) above mean sea level), where the mine is
situated, is humid continental with warm summers and cold winters. Temperatures range from a minimum of 23 degrees Fahrenheit (-
5 degrees Celsius) in June and July to a maximum of 93 degrees Fahrenheit (34 degrees Celsius) in December and January.
The operating facilities are all situated on property belonging to the Blyvoor Section, and include the shaft complexes,
administrative offices for the managerial, administrative, financial and technical disciplines, workshops and consumable stores, the
metallurgical plants, tailings dams and waste rock dumps. Blyvoor also houses the majority of its employees in Blyvoor-owned houses on
the property and in the town of Carletonville. The normal support structures, including training, security, sport and recreational facilities,
schools and churches are situated on the property. Blyvoor has mining title to 16,242 acres (6,573 hectares) and owns 5,138 acres (2,079
hectares) of freehold property.
The Blyvoor Section consists of one mining license, ML46/99, in respect of statutory mining rights and mineral rights held by
Blyvoor. We are in the process of converting these old order property rights to new order rights under the MPRD Act.
History
1937
Blyvooruitzicht Gold Mining Company Limited, or Blyvoor, was incorporated and registered as a public company in South
Africa on June 10, 1937.
1942
Gold production commenced.
1995
Blyvoor acquired the Doornfontein Gold Mining Company Limited in November 1995.
1996
Blyvoor acquired the mineral rights representing the Western Deep Levels tribute area.
1997
We acquired the entire share capital of Blyvoor on September 15, 1997.
2001
Implementation of the Blyvoor expansion project.
2003
Commissioning of 4 and 5 Slimes Dam retreatment facility at a cost of $6.5 million.
2004
On June 28, 2004, we entered into a 60-day review period on the Blyvoor Section. The 60-day review was extended to
September 13, 2004. By October 5, 2004 1,619 employees had been retrenched at a cost of approximately $3.1 million, with
possible future restructuring initiatives depending on the economic circumstances.
2005
In August 2005, our Board of Directors approved No. 2 Sub-Shaft Project and the Slimes Dam Project to establish mining
operations from the No. 2 Shaft and expansion to further improve plant efficiency respectively.
On July 6, 2005 we signed a Memorandum of Understanding with KBH regarding the acquisition by KBH of a 15% stake in
our South African Operations.
On October 27, 2005, our board of directors approved the transaction with KBH. The new structure results in KBH acquiring a
15% interest in a newly created vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD SA, which
includes ERPM, CGR and Blyvoor. We will retain an 85% interest.
Geology and Mineralization
The Blyvoor Section exploits the two gold-bearing pebble horizons in the Central Rand Goldfields, the Carbon Leader, which
is one of the principal ore bodies in the goldfield, and the Middelvlei Reef horizons which occur in discrete channels over parts of the
lease area approximately 246 feet (75.0 meters) vertically above the Carbon Leader Reef horizon. The Carbon Leader Reef is the
principal economic horizon across the lease area and is a planar single sheet conglomerate. The Carbon Leader Reef typically
comprises basal carbon seam, overlain by a thin, small pebble conglomerate, enriched in carbon in the lower portion. The grade of the
Carbon Leader Reef is more variable than the Middelvlei Reef. The Middelvlei Reef consists of a variable number of polymictic
quartz conglomerate bands, interbedded with coarse grain quartzite. The grade of the Middelvlei Reef is more erratic than the Carbon
Leader Reef, with distinctive payshoots forming as southward-orientated linear zones.
BACKGROUND IMAGE
43
The Blyvoor Section was established in 1937 to exploit the rich Carbon Leader Reef but by the late 1980s had reached a position
where continued existence of mining operations was dependent upon the mining of scattered Carbon Leader Reef remnants and limited
sections of the lower grade Middelvlei Reef.
Mining and processing
Access from the surface to the current underground workings of the mines is through a system of vertical and incline shafts
situated at the Blyvoor and Doornfontein mines. Doornfontein was previously a separate mine adjacent to the Blyvoor mine but has since
been merged to form the Blyvoor Section. The shaft system consists of four vertical shafts from the surface, thirteen sub-incline shafts
and two sub-vertical shafts underground. Of these thirteen incline shafts, only nine are in operation and are used for the conveyance of
personnel, pumping and hoisting of mined ore and waste.
Two levels have been holed between the previous Doornfontein mine and workings within the Blyvoor lease extension
(purchased in 1996 from Western Deep Levels Limited) to allow ore from the bottom of the Blyvoor workings to be trammed across and
hoisted up via the Blyvoor No. 5 Shaft, from where, it is trucked to the gold plant. The average mining depth at the Blyvoor Section is
10,541 feet (3,213 meters), 5,292 feet (1,613 meters) below mean sea level.
Mining of the reef takes place in stope panels. Holes are drilled into the solid rock and are charged with explosives and blasted.
The loosened rock is removed from the stope panels and is conveyed to the shaft, tipped into the ore-pass systems, hoisted to the surface
and transported to the metallurgical plant for gold extraction.
Metallurgical processing facilities at the Blyvoor Section are comprised of a single metallurgical plant. The process route is
based on a conventional flowsheet comprising multi-stage crushing, open circuit primary and closed circuit secondary milling with
hydrocyclones, thickening and cyanide leaching in a Carbon-in-Pulp, or CIP, carousel arrangement. The gold is recovered through
electrowinning followed by smelting to doré. The circuit was recently modified by the closure of the filtration system and the
commissioning of a modern carbon Kemix pumpcell plant.
In April 2001, we launched the Blyvoor expansion project. The project, valued at R65.0 million ($10.4 million), was funded
from the Industrial Development Corporation, or IDC, loan granted to Blyvoor, for this purpose. This project was to facilitate the
commissioning of additional infrastructure and the opening up of additional mining areas to further enable the effective mining of
reserves at the Blyvoor Section.
In fiscal 2003, the Blyvoor Section processed an average of approximately 70,000 tpm of ore from the underground section and
135,000 tpm from surface rock dumps. With the depletion of the surface rock dumps, only remnant amounts are available for processing.
Processing of material from the No. 4 and 5 slimes dam project, which was commissioned in December 2003, is building up to the
planned processing capacity of 240,000 tpm and will replace the processing of the surface rock dump material which has been depleted.
Initial processing of material took place from the 4 Slimes Dam and the recovery grades were below expectation. From August 2004, the
processing of material from the 5 Slimes Dam commenced and the recovery grade improved. With the conclusion of the 60-day review
entered into on June 28, 2004, certain shafts were placed on a “care and maintenance” program, resulting in a decrease to a total of seven
vertical and decline shafts.
In fiscal 2005, mining of the lower grade Middelvlei Reef at No. 6 Shaft was cut by 50% in favor of increased mining of the
higher grade Carbon Leader Reef at No. 5 Shaft. Accelerated development, however, has ensured that the mine is well positioned to
restore Main Reef mining to appropriate levels at No. 5 and No. 6 Shafts in response to gold price fluctuations.
Electricity for South Africa is provided by Eskom, which is government owned. Eskom is the largest producer of electricity in
Africa. Eskom operates a national power supply grid consisting of 24 power stations across the country. Electricity to the Blyvoor Section
is provided from the Wes Wits substation outside Carletonville at 44,000 volts. Further substations, located on mine site, transform the
power to 6,600 volts or 22,000 volts for direct supply to the shaft winder and air compressors. The power supply is further reduced to 525
volts for smaller devices and equipment used on the mine. The average annual power consumption is about 432 GWHr and the maximum
demand is about 66 MW.
Several major capital expansion projects were conducted over the period fiscal 2003 to fiscal 2005, including processing and
extension of Slimes Dams 4, 5 and 6 ($7.6 million), underground expansion projects ($2.5 million) and a water project ($0.4 million). In
addition, approximately $0.4 million was spent on the installation of a Knelsen concentrator and Acacia reactor and $0.3 million on an
Overland conveyor.
BACKGROUND IMAGE
44
Exploration and Development
At the beginning of fiscal 2003, the Blyvoor Section began a feasibility study looking at the opportunity to re-mine and treat the
slimes dam material from the 4 and 5 Slimes Dam Project. The project was commissioned during November 2003 and completed at a cost
of $6.9 million including the conversion of leaching tanks, linear screens, pipes and site construction. The No. 6 Slimes Dam has been
extended to provide additional capacity for the tailings from this project at a cost of $0.7 million. The project involves the reclamation of
approximately 24 million tonnes of slime material at a rate of 240,000 tpm by high water monitoring and processed through a CIP circuit.
The project has an estimated life of 8 years and an average recovery grade of 0.02 ounces per ton at a cash cost of $200 per ounce of gold
produced. The project costs were funded from the R65.0 million ($10.4 million) loan facility from the IDC.
Environmental and closure aspects
The predominantly dolomitic geology of the area in and around the Blyvoor Section, and the resultant occasional occurrence of
sinkholes and subsidences, exposes the Blyvoor Section to relatively unique environmental risks and costs associated with the
remediation and filling of these sinkholes.
Blyvoor has to maintain a rate of pumping of fissure water sufficient to keep the rate of rise of underground water below the
level of underground workings. The required rate is in the order of 4 million gallons (14 million liters) per day. Water not used in the
operations is discharged into the Wonderfonteinspruit and the Doorndraai Dam. In order to address the risk of contamination of ground
water, streams and wetlands, water is sampled and the level of contaminants monitored in accordance with Blyvoor’s water management
plan. Fissure water at Blyvoor is generally of a good quality, therefore we believe that the contribution of this water to pollution of water
in the area is minimal.
We have not conducted an assessment of the full scope of pollution to surface water as a result of the discharge from the Blyvoor
Section. This is because the impact of our discharge cannot be addressed without addressing the impact from the discharge of other
neighboring mining operations. The Far West Rand Dolomitic Water Association, of which all mining operations in the area are
members, has undertaken two studies. Apportioned responsibility has been recognized by the DWAF and they have initiated an impact
assessment on the Wonderfonteinspruit in order to assess the cumulative impact from the different mining operations. The first study,
commissioned and completed in January 2003, addressed the methodologies proposed for filling in sinkholes and subsidences. The
second study will address the impact of the flooding on the dolomitic aquifers when mining in the area ceases. This study has been
commissioned and is scheduled to be completed by the end of calendar 2005.
Sinkholes are caused by ground water seeping into the underground dolomitic structures, which dissolve and weaken causing a
collapse in the rock structure. Dolomitic rock could be dissolved, resulting in an increased risk of sinkholes and possible pollution of fresh
water resources stored in the dolomitic formations. The seepage may also cause pollution of fresh water resources stored in dolomitic
formations, which if pumped to surface will result in pollution on the surface. The occurrence of sinkholes is limited to a particular area of
the Blyvoor Section, which requires an active program in the water management plan to continuously divert ground water away from the
affected area and reduce the risk of seepage into the dolomitic structure. Should the pumping apparatus fail and there is an excessive build
up of surface water, this could over a period of time result in a weakening of the underlying dolomitic structure and the occurrence of a
sinkhole in that area. In addition to purifying the water for our own use, we repair all sinkholes that form on our property, in accordance
with industry and government standards. Sinkholes which form outside of our property are repaired by the Far West Rand Dolomitic
Water Association.
Pollution from slime dams is controlled by dust suppression and water management programs. Short-term dust control is
accomplished through ridge ploughing the top surface of dormant tailings dams. Environmentally friendly dust suppressants, such as
molasses, are also applied when deemed necessary. In the long-term, dust suppression and water pollution is managed through a program
of progressive vegetation of the tailings complexes followed by the application of lime, to neutralize the natural acidic conditions, and
fertilizer as the organic growth medium.
During 2004, Blyvoor implemented a new tailings reclamation project, as a result of which amendments to Blyvoor's EMP
were made by the relevant regulator. The environmental management program identified the impacts associated with the reclamation
of the dams and the extension of the No. 6 return water dam and identified remedial measures to minimize the risk. The DWAF visited
the site in August 2004 and was satisfied with our environmental performance.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we have estimated that the total cost
for the Blyvoor Section, in current monetary terms as at June 30, 2005, is $8.2 million. This has been included in the provision for
environmental rehabilitation, restoration and closure costs on our balance sheet. A total of $2.5 million has been contributed to a
Rehabilitation Trust Fund. This is an irrevocable trust, managed by specific responsible people who we nominated and who are appointed
as trustees by the Master of the High Court of South Africa.
BACKGROUND IMAGE
45
Life of Mine
Based upon a gold price of approximately R88,960 per kilogram ($381 per ounce), at June 30, 2005, the Proven and Probable
Ore Reserves of the Blyvoor Section were 4.0 million ounces. In fiscal 2004, based upon a gold price of approximately R90,023 per
kilogram at June 30, 2004, the Proven and Probable Ore Reserves of the Blyvoor Section were 4.3 million ounces. The decrease of 0.3
million ounces is due to mining depletion and an increase in working costs. The increase in the working costs resulted in a larger
percentage of marginal ore being included in the Life of Mine Plan and hence Ore Reserve Statement. A Mineral Resource competent
person is appointed at each operation to review our Ore Reserve calculations for accuracy. For Blyvoor, David Edwin James Whittaker
(SACNASP) is the appointed Mineral Resource competent person.
In light of the No. 2 Shaft project which is expected to yield 770,491 ounces of gold from 2.4 million tons of ore, we are
reassessing the life-of-mine to 17 years, as at June 30, 2005.
Current year production
The Blyvoor Section produced a total of 161,878 ounces of gold in fiscal 2005, with 137,958 ounces from underground areas
and 23,920 ounces from surface areas. This represents 37% of our production from continuing operations of 433,586 ounces based on our
subsidiaries and our attributable 20% interest in Porgera. In fiscal 2004, a total of 233,094 ounces of gold were produced compared to
247,626 ounces in fiscal 2003.
Underground gold production has decreased from 198,211 ounces in fiscal 2004 to 137,958 ounces in fiscal 2005. No shafts
were closed but non-contributing business units such as No. 4 Shaft were placed on care and maintenance. Additionally, mining of the
lower grade Main Reef at No. 6 shaft was cut by 50% in favor of increased mining of the higher grade Carbon Leader Reef at No. 5 Shaft.
Surface gold production decreased from 34,883 ounces in fiscal 2004 to 23,920 ounces in fiscal 2005 due to the depletion of the surface
rock dump material.
Blyvoor ended fiscal 2004 facing considerable restructuring necessitated by the combined effect of a range of issues – the low
Rand gold price, price increases in key consumables, operational difficulties, increased lock-up in the plant due to the ending of surface
rock dump feed to the mill and poor initial recoveries from the Slimes Dam Project. As a result of operational difficulties, we also
announced a 60-day review of the operations on July 28, 2004 in order to restore profitability.
By the end of fiscal 2005, a significant turnaround had been achieved. While gold production from underground continuing
operations declined by approximately 30% to 137,958 ounces year on year, productivity improved by 32% to 125 grams per total
employee costed. Cash costs of $456 per ounce in fiscal 2005 increased from $388 per ounce in fiscal 2004. Total costs for fiscal 2005 of
$498 per ounce in the current year also shows an increase compared to $427 per ounce in fiscal 2004. While the cash operating target of
$400 per ounce remained elusive, it moved within striking distance during the second half of fiscal 2005 at $407 per ounce. This
compares with $498 per ounce in the first half. A Knelsen concentrator and Acacia reactor were installed at a cost of $0.4 million (R2.5
million) in order to prevent lock-ups, improve recoveries by lowering residue grades and reducing costs. While the full benefits have yet
to be realized, performance during commissioning has been very promising.
BACKGROUND IMAGE
46
Cash costs from production were $388 per ounce for fiscal 2004 as a result of the strengthening of the Rand from R7.47 = $1.00
at June 30, 2003 to R6.28 = $1.00 at June 30, 2004. Total costs per ounce of gold produced increased to $427 per ounce in fiscal 2004
from $110 per ounce in fiscal 2003 primarily attributable to operational difficulties and a decrease in the recovered grade.
The following table details the operating and production results from the Blyvoor Section for the past three fiscal years.
Year ended June 30,
2005
2004
2003
Production
- Surface Operations
Ore mined ('000 tons) .................................................................................................................
3,233
2,522
1,838
Recovered grade (oz/ton) ...........................................................................................................
0.007
0.014
0.024
Gold produced (ounces) .............................................................................................................
23,920
34,883
44,626
- Underground Operations
Ore mined ('000 tons) .................................................................................................................
649
916
970
Recovered grade (oz/ton) ...........................................................................................................
0.213
0.216
0.210
Gold produced (ounces) .............................................................................................................
137,958
198,211
203,000
Total ounces produced...................................................................................................................
161,878
233,094
247,626
Results of Operations ($)
Revenues ('000) .............................................................................................................................
68,370
90,066
81,753
Production cost ('000)....................................................................................................................
73,814
90,366
65,240
Non-US GAAP Financial Data
Cash cost per ounce of gold ($)
1
...................................................................................................
456
388
263
Total cost per ounce of gold ($)
1
...................................................................................................
498
427
110
1
Cash cost per ounce and total cost per ounce are non-US GAAP financial measures of performance that we use to determine cash generating
capacities of the mines and to monitor performance of our mining operations. For a reconciliation to production costs see Item 5A: “Operating
Results.”
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47
Crown Gold Recoveries (Pty) Limited (CGR)
Overview
We own 100% of Crown Consolidated Gold Recoveries Ltd, or CCGR, which in turn owns 40% of Crown Gold Recoveries
(Pty) Limited, or CGR. CCGR was incorporated in South Africa on May 23, 1997. Pursuant to a scheme of arrangement, we acquired
100% of CCGR on September 14, 1998. Additionally, in October 2002, we entered into an agreement with third parties to purchase the
entire issued share capital and all shareholders’ claims of East Rand Proprietary Mines Limited, or ERPM, for a purchase price of $11.0
million. For a full description of the transactions associated with our acquisition of CGR, see Item 4A: “History and Development of the
Company.”
CGR has a surface retreatment operation consisting of the Crown Central, City Deep and Knights business units, collectively
referred to as the Crown Section. The ERPM Section consists of an underground section and the Cason Dump surface retreatment
operation. The underground mining operation at ERPM implemented a controlled closure program and was scheduled to close in
March 2005. Following the retrenchment of 806 employees in August 2004 at a cost of $0.6 million (R3.7 million), the mine has achieved
a reduction in costs coupled with improved productivity. As a result, the original planned closure of the underground section was
postponed. The Cason Dump surface re-treatment operation will continue to operate until 2010 under the management of the Crown
Section based on the current rate of production of approximately 150,000 tpm. The Crown Section undertakes the retreatment of surface
sources deposited as tailing from non-operating mining sites across central Johannesburg.
We have accounted for our 40% interest in CGR under the equity method commencing July 1, 2002. We have recognized losses
generated by CGR and its subsidiaries against any advances we have made to them.
At June 30, 2005, CGR had 925 employees, including a small number of contractors, and ERPM had 2,020 employees,
including a small number of contractors.
The ability of CGR and ERPM to continue as a going concern conducting business depends on the support of their stockholders,
secured lenders and creditors.
Current year production
The following table details our 40% attributable share of the production results from the Crown and ERPM Sections for the past
three fiscal years:
Year ended June 30,
2005
2004
2003
Production
Surface and underground operations
Ore mined ('000 tons)............................................................................................................................
4,902
4,772
4,884
Recovered grade (oz/ton) ......................................................................................................................
0.018
0.020
0.016
Gold produced (ounces) ........................................................................................................................
90,024
96,878
77,239
Our 40% share of gold production for CGR, including the Crown Section and ERPM Section, was 90,024 ounces in fiscal 2005
compared to 96,878 ounces in fiscal 2004, and 77,239 ounces for fiscal 2003. The decrease in fiscal 2005 is due to a decrease in the
recovered grade from 0.020 ounces per ton in fiscal 2004 to 0.018 ounces per ton in fiscal 2005.
Our 40% share of gold production from the Crown Section was 45,424 ounces in fiscal 2005, which was lower than our 40%
share of gold production of 51,982 ounces in fiscal 2004. The decrease is due to less reclamation site flexibility and pipeline failures.
Our 40% share of gold production from the ERPM Section was 44,600 ounces in fiscal 2005, which was comparable to our 40%
share of gold production of 44,895 ounces in fiscal 2004. ERPM’s consistent performance, in comparison to prior year, is largely due to
the Knights plant’s absorption of tonnage from ERPM’s Cason surface retreatment operation, which has run smoothly throughout the
current fiscal year.
Separate consolidated financial statements and notes thereto for CGR for its fiscal years ended June 30, 2005, 2004 and 2003 are being
filed pursuant to Rule 3-09 of Regulation S-X.
BACKGROUND IMAGE
48
A discussion follows of the Crown and ERPM Sections:
Crown Section
Property
The Crown Section is situated on the outskirts of Johannesburg, South Africa and consists of three separate locations. It has
mining rights to 5,787 acres (2,342 hectares) and has the right to occupy 1,490 acres (603 hectares) of freehold property. CGR is in the
process of converting these old order property rights to new order rights under the MPRD Act.
The Crown Central operation is located on the West Wits line within the Central Goldfields of the Witwatersrand Basin,
approximately 6 miles (10 kilometers) west of the Johannesburg central business district in the province of Gauteng. Access is via Xavier
Road on the M1 Johannesburg-Kimberley-Bloemfontein highway. The City Deep operation is located on the West Wits line within the
Central Goldfields of the Witwatersrand Basin, approximately 3 miles (5 kilometers) south-east of the Johannesburg central business
district in the province of Gauteng. Access is via the Heidelberg Road on the M2 Johannesburg-Germiston motorway. The Knights
operation is located at Stanley and Knights Road Germiston off the R29 Main Reef Road.
As of June 30, 2005, the net book value of Crown’s mining assets was approximately $8.5 million.
History
1979
Rand Mines Limited directors approved the formation of the company Rand Mines Milling & Mining Limited (RM3) to
treat the surface gold tailings created from the underground section of the original Crown Mines, which had been in
operation since the start of gold mining on the Witwatersrand in the late 1800's.
1982
First plant commissioned at Crown Mines to process surface material.
1986
Second plant commissioned at City Deep to process surface material.
1997
Randgold Exploration Limited and Continental Goldfields of Australia entered into a joint venture with the intention to
establish a company that would acquire dump retreatment operations on the Witwatersrand. This resulted in the
formation of CCGR, which was incorporated as a public company in South Africa in May 1997. CGR is a wholly owned
subsidiary of CCGR and consists of the surface retreatment operations of Crown Central, City Deep and Knights.
1998
We purchased 100% of CCGR.
2002
KBH purchased 60% of CGR. We were appointed as joint manager of the operation with KBH.
2005
On July 6, 2005 we signed a Memorandum of Understanding with KBH regarding the acquisition by KBH of a 15%
stake in our South African Operations.
On October 27, 2005, our board of directors approved the transaction with KBH. The new structure results in KBH
acquiring a 15% interest in a newly created vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD
SA, which includes ERPM, CGR and Blyvoor. We will retain an 85% interest.
Mining and processing
The Crown Section undertakes the re-treatment of surface sources deposited as tailings from non-operational mining sites
across central Johannesburg.
Material processed by the Crown Section is sourced from numerous secondary surface sources namely, sand and slime. The
surface sources have generally undergone a complex depositional history resulting in grade variations associated with improvements
in plant recovery over the period of time the material was deposited. Archive material is a secondary source of gold bearing material.
This material is generally made up of old gold metallurgical plant sites as well as “river bed” material.
The three metallurgical plants, known as the Crown Mines, City Deep and Knights, have an installed capacity to treat
approximately 11.0 million tons of material per year. Up to fiscal 2003, the Crown Section also operated the West Wits gold plant for
the processing of sand and slime. The Crown Section also includes the ERPM plant discussed below. All of the plants have undergone
various modifications during recent years resulting in significant changes to the processing circuits.
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Electricity for South Africa is provided by Eskom, which is government owned. Eskom is the largest producer of electricity
in Africa. Eskom operates a national power supply grid consisting of 24 power stations across the country. Electricity to the Crown
Section is supplied to the Crown Central and City Deep business units from separate substations referred to as Jupiter and No. 15
Shaft Crown Mines, and for the Knights by the Ekhurhuleni Town Council. Electricity is supplied directly from the national power
grid to the substation and town council at 44,000 volts. Substations, located on mine sites, transform the power to 6,600 volts for
direct supply to the plants. The power supply is further reduced to 525 volts for smaller devices and equipment.
For Crown Central and City Deep, the average annual power consumption is about 72 GWHr and the maximum demand is
about 3.7 MW. For Knights the average annual power consumption is about 36 GWHr and the maximum demand is about 1.8 MW.
CGR operates three plants with slight variations in design in each plant, with a processing capacity of approximately 1
million tpm, yielding approximately 0.01 oz/t (0.4 g/t). The feed stock is made up of sand and slime which are reclaimed separately.
Sand is reclaimed using mechanical front-end loaders, re-pulped with water and pumped to the plant. Slime is reclaimed using high
pressure water monitoring guns. The re-pulped slime is pumped to the plant and the reclaimed material is treated using screens,
cyclones, ball mills and CIL technology to extract the gold. As at June 30, 2005, the overall plant utilization was 95%.
City Deep Plant: Commissioned in 1987, this surface/underground plant is comprised of a circuit including screening, primary,
secondary and tertiary cycloning in closed circuit milling, thickening, oxygen preconditioning, CIL, elution and zinc precipitation
followed by calcining and smelting to doré. In 1998, the plant was converted to a slimes only operation. However, due to operational
difficulties caused by the particulate nature of the slimes, the milling circuit has subsequently been recommissioned to facilitate the
treatment of sand.
Crown Mines Plant: Commissioned in 1982, this surface/underground plant has already been modified and is comprised of a
circuit including screening, primary cycloning, open circuit milling, thickening, oxygen preconditioning, CIP and CIL, elution, zinc
precipitation followed by calcining and smelting to doré.
Knights Plant: Commissioned in 1988, this surface/underground plant is comprised of a circuit including screening, primary
cycloning, spiral pre-concentration, milling in closed circuit with hydrocyclones, thickening, oxygen preconditioning, CIL, elution,
electrowinning and smelting to doré.
Exploration and development
Exploration and development activity at the Crown Section involves the drilling of existing surface dumps and evaluating the
potential gold bearing surface material owned by third parties that could be processed on a full treatment basis or purchased outright by
the Crown Section.
Environmental and closure aspects
The Crown Section operates at sites located in close proximity to significant municipal infrastructure, commercial and
residential development. The major environmental risks are associated with dust from various recovery sites, and effective management
of relocated process material on certain tailings dams. Capital expenditure of $1.5 million (R9.6 million) was spent in fiscal 2005, most of
which was directed to upgrading and maintenance of the CGR tailings dams. The impact of windblown dust on the surrounding
environment and community is addressed through a scientific monitoring and evaluation process, with active input from the University of
Witwatersrand and appropriate community involvement. Environmental management programs, addressing a wide range of
environmental issues, have been prepared by specialist environmental consultants and applied specifically to each dust sample recovery
monitoring site and integrated into CGR’s internal environmental assessment process. Although CGR completed a project for thickening
re-processed tailings, there also remains a risk of localized sloughing which can result in that section of the tailings dam being closed
temporarily, with repair work being done to the dam wall. Water pollution is controlled by means of a comprehensive system of return
water dams which allow for used water to be recycled for use in CGR’s metallurgical plant. Overflows of return water dams may,
depending on their location, pollute surrounding streams and wetlands. CGR has an ongoing monitoring program to ensure that its water
balances (in its reticulation system, tailings and return water dams) are maintained at levels that are sensitive to that capacity of return
water dams.
Dust pollution is controlled through an active environmental management program for the residue disposal sites and chemical
and organic dust suppression on recovery sites. Short-term dust control is accomplished through ridge ploughing the top surface of
dormant tailings dams. Additionally, environmentally friendly dust suppressants, such as molasses, are applied. Dust fall-out is also
monitored. In the long-term, dust suppression and water pollution is managed through a program of progressive vegetation of the tailings
followed by the application of lime, to reduce the natural acidic conditions, and fertilizer to assist in the growth of vegetation planted on
the tailings dam.
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A program of environmental restoration that provides for the rehabilitation of areas affected by mining operations during the life
of the mine is in place. The surface reclamation process at the Crown Section has several environmental merits as it has removed a
potential pollution source and opens up land for development. The Crown Section has conducted its environmental management program
performance assessment, which was submitted to and approved by the DME during fiscal 2005.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we estimate that the total cost for the
Crown Section, in current monetary terms as at June 30, 2005, is approximately $15.8 million. A total of $1.0 million has been
contributed to the Crown Rehabilitation Trust Fund. This is an irrevocable trust, managed by specific responsible people who CGR
nominated and who are appointed as trustees by the Master of the High Court of South Africa.
Life of Mine
Based upon a gold price of approximately R88,960 per kilogram ($381 per ounce), at June 30, 2005, our 40% share of the
Proven and Probable Ore Reserves of the Crown Section was 0.3 million ounces. In fiscal 2004, based upon a gold price of approximately
R90,023 per kilogram, our 40% share of Proven and Probable Ore Reserves of the Crown Section was also 0.3 million ounces. CGR’s
Mineral Resources and Ore Reserves have not changed from the previous year. A Mineral Resource competent person is appointed at
each operation to review our Ore Reserve calculations for accuracy. For CGR Surface, William John Laing (PLATO) is the appointed
Mineral Resource competent person. The current life-of-mine is seven years.
ERPM Section
Property
The ERPM Section is situated on the Central Rand Goldfield located within and near the northern margin of the
Witwatersrand Basin in the town of Boksburg, 20 miles (32 kilometers) east of Johannesburg. Access is via Jet Park Road on the N12
Boksburg-Benoni highway. Underground mining and recovery operations comprise relatively shallow remnant pillar mining in the
central area and conventional longwall mining in the south-eastern area. Surface reclamation operations including the treatment of
sand from the Cason Dump, is conducted through the metallurgical plant, tailings deposition facilities and associated facilities.
The mine exploits the conglomeratic South Reef, Main Reef Leader and Main Reef in the central area and the Composite
Reef in the south-eastern area.
A planned controlled closure of the underground operations at ERPM by the end of fiscal 2004 has been postponed due to the
current reduction in costs and improved productivity at the mine.
During fiscal 2005, all mining activity was moved to the Far East Vertical, or FEV, Shaft lease area. The South East Vertical
Shaft was maintained for hoisting and pumping, the Central Shaft was placed on care and maintenance and the Hercules Shaft was
decommissioned resulting in the retrenchment of 806 employees in August 2004. At FEV, there has been a drive on development and
a focus on effective grade control. Improvements in production, efficient cost controls, a better Rand gold price received and the re-
institution of State assistance with pumping have all contributed to restoring the mine’s underground operations to profitability.
At ERPM’s Cason surface retreatment operation, gold production has increased during fiscal 2005 the year, due to a better
head grade.
At June 30, 2005, the net book value of ERPM’s mining assets was approximately $6.7 million.
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History
1895
Formation of East Rand Proprietary Mines Limited.
1991
The FEV shaft was commissioned.
1999
The company was liquidated in August 1999. The mine was run by a small number of employees during liquidation.
Underground flooding continued during liquidation.
2000
KBH took over control of the mine in January 2000. Operating as Enderbrooke Investments (Pty) Limited, or
Enderbrooke, and employing an outside contractor, the mine re-commenced mining operations in February 2000.
2002
CGR purchased 100% of ERPM, from Enderbrooke.
2003
Underground fire at FEV Shaft, in February 2003. There was also a loss of Hercules Shaft in June 2003 and the loss of
secondary outlet at the FEV shaft in November 2003.
2004
In July 2004 it was determined that the underground section would undergo a controlled closure program ending March
2005. The closure program has been postponed due to the current reduction in costs and improved productivity at the
mine.
2005
Central Shaft placed on care and maintenance.
On July 6, 2005 we signed a Memorandum of Understanding with KBH regarding the acquisition by KBH of a 15%
stake in our South African Operations.
On October 27, 2005, our board of directors approved the transaction with KBH. The new structure results in KBH
acquiring a 15% interest in a newly created vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD
SA, which includes ERPM, CGR and Blyvoor. We will retain an 85% interest.
Mining and processing
Underground mining operations at the ERPM Section are comprised of one vertical shaft known as the FEV Shaft. There are
also two additional shafts namely the South East Vertical Shaft, or SEV Shaft, used for the transport of employees and materials and the
hoisting of rock and the SWV Shaft that is used for water pumping only. The Cason Dump Project is used for the retreatment of surface
material mined from the defunct Cason shaft.
An operational reassessment of the underground operations was undertaken in April 2004. Formal notice under the South
African Labour Relations Act was issued on May 4, 2004, which required a review period of no less than 60 days to assess the
operational performance of the ERPM underground operations to consider options to restore the operations to profitability. A task team
comprising management, union representatives and labor was established to assess the proposals and make a final recommendation.
On July 4, 2004, ERPM management announced that the underground mining operation was not sustainable, even at a higher
Rand-gold price of R2,650 per ounce. As a result, a controlled closure program of the underground section was implemented, which was
expected to be completed by March 2005. Following the retrenchment of 806 employees in August 2004 at a cost of $0.6 million
(R3.7 million), the mine achieved a reduction in costs coupled with improved productivity. As a result, the original planned closure of the
underground section was postponed.
Electricity for South Africa is provided by Eskom, which is government owned. Eskom is the largest producer of electricity
in Africa. Eskom operates a national power supply grid consisting of 24 power stations across the country. Electricity to the ERPM
Section is provided to the Cason Dump, SEV and FEV Shafts from the Bremmer substation, located in close proximity to the mine in
Boksburg. Transmission is at the rate of 88,000 volts. The Simmer Pan substation, located approximately 10 miles (16 kilometers)
away from the mine site in Germiston, supplies the SWV and Hercules Shafts. Transmission is at the rate of 44,000 volts. The two
substations, located on the mine site, transform the power to 6,600 volts for direct supply to the shaft winder and air compressors. The
power supply is further reduced to 525 volts for smaller devices and equipment used on the mine. The average annual power
consumption is about 240 GWHr and the maximum demand is about 52 MW.
The on-mine substations are older in nature and undergo annual infrared testing to identify hot connections which are
potential fire hazards and are subject to regular maintenance which includes the inspection of the settings, blades and changing the
transformer oil in the circuit breakers.
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Exploration and development
Exploration and development activity has been curtailed at the ERPM Section with the decision to close the underground section
at a later date depending on prevailing circumstances. Looking ahead, it will be necessary to extend the FEV decline from 75 to 78 level
to replace face length. There is also the prospect of extending ERPM’s Ore Reserves into the neighboring Sallies lease area and
significantly increasing the life of the mine’s underground operations. An application has been made to the DME for a prospecting
license.
Environmental and closure aspects
There is a regular ingress of water into the underground workings of the ERPM Section, which was contained by continuous
pumping from the underground section. On May 31, 2004, ERPM stopped continuous pumping of water from the underground section
for financial reasons due to the withdrawal of the pumping subsidy and the low Rand gold price making the cost of full time pumping
unaffordable, with occasional pumping to surface conducted on weekends. In December 2004 the mine received the pumping subsidy
funds and continuous pumping was reinstated. Studies on the estimates of the probable rate of rise of water have been inconsistent, with
certain theories suggesting that the underground water might reach a natural subterranean equilibrium, whilst other theories maintain that
the water could decant or surface. A program is in place to routinely monitor the rise in water level in the various underground
compartments and there has been a substantial increase in the subsurface water levels. There is a need for further studies to be undertaken
so as to qualify and quantify this risk more analytically.
After the final phase of the planned closure of the underground operations at ERPM which was expected to be completed in
March 2005, but has been postponed, only reclamation of underground equipment will take place.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, ERPM have estimated that the total
cost for the ERPM Section, in current monetary terms as at June 30, 2005, is $7.4 million. A total of $0.2 million has been contributed to
the ERPM Rehabilitation Trust Fund. This is an irrevocable trust, managed by specific responsible people who ERPM nominated and
who are appointed as trustees by the Master of the High Court of South Africa.
Life of mine
Based upon a gold price of approximately R88,960 per kilogram ($381 per ounce ), at June 30, 2005, our 40% share of Proven
and Probable Ore Reserves of the ERPM Section was 0.4 million ounces, of which 0.2 million ounces relate to the underground section
which is scheduled for closure at a later date, depending on prevailing circumstances. The remaining 0.2 million ounces relate to the
Cason Dump surface material which, based on the estimated rate of production, will be processed over a remaining 6 year period ending
in fiscal 2010. Based upon a gold price of approximately R90,023 per kilogram, at June 30, 2004, our 40% share of Proven and Probable
Ore Reserves of the ERPM Section were 0.2 million ounces. The year on year increase is mostly attributable to the continuation of
mining operations which were planned to be suspended in March 2005. A Mineral Resource competent person is appointed at each
operation to review our Ore Reserve calculations for accuracy. For ERPM, Johan Smit (PLATO) is the appointed Mineral Resource
competent person. The current life-of-mine is five years.
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Papua New Guinea
Porgera Mine
Overview
Through our wholly-owned subsidiary, DRD (Porgera) Limited, we own a 20% interest in an unincorporated joint venture, the
Porgera Joint Venture, which holds certain mining leases, easements and exploration licenses which form part of the Porgera gold mine,
or Porgera, in the highlands of Papua New Guinea, or PNG. We purchased this interest in October 2003 for a purchase consideration of
$77.1 million. Placer Dome Inc. is the owner of a 75% interest. The remaining interest of 5% is held by Mineral Resources Enga
Limited, or MRE (on behalf of Enga Provincial Government and landowners in PNG). All of the various mineral tenements making up
Porgera are exploited collectively by the joint venture partners.
An affiliate of Placer Dome Inc., Placer (PNG) Limited, is the operator of Porgera and is subject to the control of a management
committee made up of representatives of the joint venture partners. Decisions regarding the assets which comprise Porgera, including any
sale thereof, are made collectively by the parties through the management committee. The parties also have a right of first refusal with
regard to certain assignments of assets which make up Porgera. Each party has the right to own and to take in kind and dispose of its share
of all ores, concentrates and refined products produced by Porgera. Each party also pays for its proportionate share of the costs associated
with the mining activities.
The net book value of our share of property, plant and equipment, deferred stripping and purchased undeveloped mineral
interests is $66.2 million at June 30, 2005.
As at June 30, 2005, the workforce at Porgera comprised approximately 2,340 employees of whom approximately 2,130
(91%) are PNG nationals. In addition, there are approximately 470 contractors of whom 440 are PNG nationals. Of the total workforce
of approximately 2,340, approximately 75% are local residents, while the remainder work on a “fly-in-fly-out” basis. We understand
that Placer Dome Inc., in conjunction with other primary industry producers, is continuing to work with the PNG Government to
address causes of civil unrest which affected production in 2002.
Our 20% attributable share of production for fiscal 2005 was 195,394 ounces at a cash and total cost of $185 and $273 per
ounce, respectively.
Production from Porgera is subject to a 2% net smelter royalty payable to the National Government Department of Mining
which then distributes it to the Enga Provincial Government, the Porgera District Authority, and local landowners.
Property
The Porgera deposit and the mine is located in the Enga Province in the highlands of PNG, approximately 7,260 feet (2,213
meters) to 8,910 feet (2,716 meters) above mean sea level, about 82 miles (132 kilometers) west of the established town of Mount
Hagen, 275 miles (443 kilometers) northwest of Port Moresby, and about 425 miles (684.0 kilometers) by road from the coastal port
of Lae from which all materials are freighted. The road is partly paved and passes through unstable mountainous terrain with many
major river crossings. Personnel are transported to mine site by bus, fixed wing aircraft and helicopter.
Temperatures range from 50 to 77 degrees Fahrenheit (10 to 25 degrees Celsius) and rainfall averages 3,650mm per year. The
vegetation is largely rainforest below an elevation of 7,920 feet (2,414 meters).
The Porgera Joint Venture has approval to work the Porgera deposit within the agreed development plan under the terms of
the Porgera Mining Development Contract, or the Porgera Contract, between the Government of PNG and the joint venturers. The
Porgera Contract specifies, amongst other matters, the annual rents that must be paid for the Special Mining Lease, and the various
classes of compensation that are payable to the landowners for the various land uses. The Special Mining Lease, which expires in
2019, encompasses approximately 2,240 hectares including the mine area and the areas in which the project infrastructure is located.
There is no expiration date for the Porgera Contract, but it is tied to the continuation of the Special Mining Lease. Leases for Mining
Purposes have also been awarded by the Government for land use associated with the mining operation such as waste dumps,
campsites, water supply, power generation and an airstrip. The Porgera Joint Venture holds a mining lease for the operation of a
limestone quarry for the supply of lime to the process plant. Permits are held for water use, including run-off from unconsolidated
surfaces, such as the open pit, the underground mine and the waste dumps. These water use permits are renewable on a regular basis
and are subject to public hearing before approval. The Porgera Joint Venture runs an environmental monitoring program to ensure
compliance with the requirements of these permits.
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In addition to the Special Mining Lease, the Porgera Joint Venture also holds additional mining tenements for utilities such as
power transmission lines and water supply pipelines and other activities incidental to the main mining activity. Separate from the
mining tenements, there are two Exploration Licenses adjacent to the Porgera Mine, namely EL454 and EL858, which we assert we
have 20% ownership of as joint venture assets. Placer Dome Inc., or Placer, asserts we do not have a 20% interest in these Exploration
Licenses and that the Exploration Licenses are not joint venture property. On August 9, 2004, we placed a caveat on the title register
in order to prevent changes taking place without notification to us. The dispute between us and Placer regarding these Exploration
Licenses is the subject of ongoing discussion and the tenements are the subject of ongoing exploration expenditure.
Porgera has on a number of occasions experienced delays in the granting of operating permits and licenses necessary for
these businesses to conduct their lawful operations. Although there has never been an interruption to operations due to an issue of this
nature, if at any time in the future permits essential to lawful operations are not obtained or exemptions not granted, there is a risk that
Porgera may not be able to operate for a period. Future government actions cannot be predicted, but may impact the operation and
regulation of the Porgera mine.
Porgera is operated subject to the requirements of the PNG Mining Safety Act and Regulations as applied by the Mines
Inspectorate.
History
1938
Alluvial gold was first reported at Porgera.
1975
Placer (PNG) Limited, or Placer (PNG), a wholly owned subsidiary of Placer Dome Inc., became the operator and owner of a
two-third interest in an exploration venture with Mount Isa Mines Limited (now MIM Holdings Ltd.), or MIM.
1979
A Joint Venture Agreement was signed whereby Placer (PNG), MIM and New Guinea Goldfields Ltd. (a subsidiary of
Goldfields Limited) each held a one third interest and the Independent State of Papua New Guinea, or the State, had the right
to acquire at cost up to a 10% interest in the project if developed.
1989
The joint venturers' application for a Special Mining Lease was approved in May and construction began immediately. The
State accepted its full 10% entitlement (inclusive of 5% on behalf of the Enga Provincial Government), thus diluting each of
the other joint ventures down to 30% each. The State took its interest in the name of a corporate nominee, Mineral Resources
Porgera Limited.
1990
Commercial production commenced in August. MIM sold its 30% interest to Highlands Gold Ltd., or Highlands Gold.
1993
Placer (PNG), Goldfields and Highland Gold each sold a further 5% to the State (15%). The additional 15% was taken by the
State in the name of a corporate nominee, Orogen Minerals (Porgera) Limited.
1997
Placer Dome’s joint venture interest was increased from 25% to 50% as of January 1, 1997 following the completion of the
acquisition of Highlands Gold.
1999
The State reorganized the holding of Mineral Resources Porgera Limited by transferring a 5% direct interest in the Joint
Venture to Mineral Resources Enga Limited owned by the Enga Provincial Government and project area landowners.
2002
Placer Dome’s joint venture interest in Porgera was increased from 50% to 75% through the acquisition of AurionGold. The
State reorganized its holdings in the Joint Venture such that Oil Search Limited then held a 20% direct interest in the Joint
Venture through two subsidiaries.
2003
We acquired the shares of Oil Search Limited in Orogen Minerals (Porgera) Limited and Mineral Resources Porgera Limited
through the amalgamation of Mineral Resources Porgera Limited with Orogen Minerals (Porgera) Limited and Dome
Resources (PNG) Limited, our wholly-owned subsidiary.
2004
Porgera concentrated on upgrading East Zone and drilling was carried out on the Lower Central Zone.
2005
Expansion of existing exploration projects continues under the Porgera Deep Minex project.
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire
our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea
assets, comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of
our exploration tenements in Papua New Guinea.
Geology and Mineralization
Mineralization is structurally controlled and occurs within the Porgera diorite intrusive complex, around the margins of, and
within, the intrusive bodies.
The Porgera ore body is an epithermal style ore body hosted within thermally metamorphosed sediments. The known ore
body extends for up to 3,050 feet (930 meters) along strike. The maximum width across strike is 330 feet (100.6 meters), but the width
is commonly no more than 65 to 98 feet (20 to 30 meters). The intrusive diorite complex has many individual stocks and dykes. The
rocks are competent however they tend to be brittle, and in the vicinity of the ore body, are extensively veined and brecciated. The
intrusive bodies tend to be concentrated towards the footwall of the deposit.
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The gold and electrum metal association is the source of the high gold grades found in the deposit. The majority of gold
occurs as submicroscopic gold intimately associated with and disseminated throughout pyrite.
Mining and Processing
The Porgera deposit is currently being extracted using open pit and underground mining methods. Mill feed, on a tonnage
basis, was sourced 88% from open pit and run of mine stockpiled ore, and 12% from underground. Underground ore accounted for
14% of the contained gold in mill feed.
Open pit mining is a typical hard rock operation utilizing 33 feet (10 meter) benches. The current mining fleet of DML blast
hole drills, O&K RH200 hydraulic face shovels and Caterpillar 789 haul trucks, gives a nominal capacity in the order of 80 million
tonnes per annum. Waste stripping requirements will reduce as the open pit mining operation approaches closure in 2006, allowing a
progressive retirement of the mining fleet.
Underground mining was suspended in 1997, and subsequently recommenced in 2002. Underground production is now
expected to continue through to late 2008. Currently, ore is being mined from the 2,210 meter level in Stage 4, and waste is being
mined from the 2,390 meter level in Stage 5. Stage 5 is the final open pit development stage and will be completed in late 2008 at
2,050 meter level. Stockpiled low grade ore will form the basis of ongoing gold production from mid 2008 until 2015. The open pit
plans to deliver 5.3 million tones of ore to the mill by mid fiscal 2006, containing approximately 891,000 ounces of gold for a
recovered production of 787,000 ounces of gold. On completion of the open pit operation, the mill will continue to process
accumulated lower grade ore stockpiles through to 2015, supplemented by the underground ore until 2008. Gold production from the
open pit and underground from 2008 onward will fall, as lower grade stockpile ore replaces the open pit ore feed.
The Porgera plant was completed in 1996. The mill has undergone four stages of improvement and expansion, since it was
first commissioned in September 1990. The last expansion was completed in 1996 with the installation of additional milling, flotation
and leaching capacity increasing the nominal throughput from 10,000 tonnes per day to 17,700 tonnes per day. Further improvements
were made in 1999 with the addition of further flotation capacity and the installation of gravity concentrators to remove free gold and
to improve overall recoveries.
The main water supply for the mine is the Waile Creek Dam, located approximately 7 kilometers (4 miles) from the mine.
Water for the grinding circuit is also extracted from Kogai Creek, which is located adjacent to the grinding circuit. The mine operates
four water treatment plants for potable water and five sewage treatment plants.
The principal source of power for Porgera is supplied by a 73-kilometre (45 mile) transmission line from the gas fired Hides
Power Station. The station has a total output of 62 MW. A back up diesel power station is located at the mine and has an output of
13MW. The average power requirement of the mine is about 60 MW. Average annual power consumption is 518 GWHr.
Our 20% share of Porgera’s most significant capital expenditure during fiscal 2005, related to deferred stripping
($11.1 million), plant and equipment ($1.4 million) and mine development and construction ($3.5 million).
Exploration and Development
Exploration work in calendar 2004 concentrated on upgrading the East Zone to an indicated Mineral Resource for
underground mining exploitation. This zone is an eastward continuation of the North Zone, which is now in production and which
shares the same characteristics. Drilling also was carried out in the later part of 2004 on the Lower Central Zone. Both these zones are
hosted within diorite bodies and surrounding altered sediments and consist of continuous or on echelon quartz roscoelite veins. There
is still further resource potential in these zones, as they are not completely closed off. Drilling will continue to further define these
targets as suitable for development. A small amount of open pit delineation drilling has been carried from underground in order to
upgrade the geological model.
Exploration plans for calendar 2005 have a two pronged approach. The majority of the drilling will be carried out within or
adjacent to the current mine infrastructure. There are a total of seven known targets where at least some previous drilling has taken
place. This drilling is designed to bring these targets ounces to an indicated Mineral Resource status. There are also some targets that
are less well known and more conceptual in nature.
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In addition, during fiscal 2005 a project termed Porgera Deep Minex was initiated and will continue into fiscal 2006. This
project was part of the mine’s ongoing existing exploration projects however was newly termed Project Deep Minex because this
particular part of the exploration process consists of a multi-disciplinary approach to determine targets and test the volume of ground
below the known Porgera deposits. This approach involves the building of an integrated geological and geophysical model, various
geochemistry techniques, and the use of seismics is to be investigated. Much of this will be the “mining” and integrating of existing
data. Drilling will be carried out with a prime target being the intersection of the Roamane Fault and the North Zone shear in depth.
Life of Mine
The Proven and Probable Ore Reserves of the Porgera Joint Venture at December 31, 2004, are estimated at 7.23 million
ounces of gold with a projected life of 10 years. Our 20% attributable share of estimated Proven and Probable Ore Reserves as at
December 31, 2004, before Ore Reserve depletion, is 1.4 million ounces. Our attributable 20% share of the Proven and Probable Ore
Reserves in the Porgera Joint Venture is based on the information disclosed by Placer Dome Inc. (which has a 75% interest in the
Porgera Joint Venture) in its Annual Report for the fiscal year ended December 31, 2004, as filed with the SEC on Form 40-F on
March 3, 2005. The Porgera Ore Reserves are estimated as at December 31, 2004. At June 30, 2005, our attributable Mineral
Resources decreased by 16.7% or 0.5 million ounces, from fiscal 2004 and Ore Reserves decreased by 6.0%, or 0.1 million ounces
from fiscal 2004 mainly due to the open pit mining depletion. For Porgera, the reserves are reviewed for accuracy by Jacobus Du Plessis
(Mining Technical Services Manager, Tolukuma Gold Mine).
Environmental and Closure Aspects
Porgera is located in extremely rugged mountainous terrain, subject to seismic activity, high rainfall and landslides. In such
conditions construction of a tailings impoundment would be very difficult and the risk of an engineering failure high. Therefore the Papua
New Guinea Government approved riverine disposal as the most appropriate method for treated tailing and soft incompetent waste rock.
Competent rock is stored in stable waste dumps. The mine follows a government approved Environmental Management and Monitoring
Program.
In 1996, an independent study was undertaken by the Commonwealth Scientific & Industrial Research Organization, or CSIRO,
an Australian based independent research organization, to assess the mine's impact on the downstream river system and local people. In
its report CSIRO made certain recommendations to the Porgera Joint Venture that have either been implemented or are in the advanced
stages of implementation. An advisory group, called the Porgera Environmental Advisory Komiti, or PEAK, was formed as a result of the
CSIRO recommendations. PEAK comprises representatives from the Papua New Guinea Government, Papua New Guinea and
international non-governmental organization groups, Placer (PNG) Limited and independent technical experts. The primary function of
PEAK is to enhance understanding and provide transparency of Porgera's environmental (physical and social) issues with external
stakeholders and to assist in reviewing its environmental performance and public accountability. In 2002, PEAK had its terms of
reference expanded to include mine closure.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we have estimated that our attributable
20% portion of total costs for Porgera, based on information provided by the operator, Placer (PNG) Limited, in current monetary terms
as at December 31, 2004, is $8.0 million. This has been included in the provision for environmental rehabilitation, reclamation and
closure costs.
Current Production
Our 20% interest in the Porgera Joint Venture was acquired with effect from October 14, 2003. Attributable (20%) production
at June 30, 2005 amounted to 195,394 ounces at a cash cost and total cost per ounce of $185 and $273, respectively. Placer Dome, 75%
owner of the mine, predicted lower production in calendar 2005 due to a shift of operations from Stage 4 to Stage 5 of the open pit, which
has harder ore and lower grades. Performance in the first six months of calendar 2005 has been negatively affected by the impact of heavy
rains on the stability of the pit’s West Wall.
Studies to determine a long-term solution to the stability problems indicate that a cutback of near-surface material in the central
part of the West Wall is necessary. Subject to final design and approvals, the work is expected to be completed by the end of calendar
2006. No impact on the mine’s reserve position is expected.
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57
The following table details our attributable (20%) operating and production results from the Porgera Joint Venture for fiscal
2005.
Year ended June 30,
2005
2004
Production
Surface and underground operations
Ore mined ('000 tons)............................................................................................................................
1,324
1,038
Recovered grade (oz/ton) ......................................................................................................................
0.148
0.142
Gold produced (ounces) ........................................................................................................................
195,394
147,475
Results of Operations ($)
Revenues ('000) ......................................................................................................................................
82,793
60,445
Production cost ('000).............................................................................................................................
36,210
31,650
Non-US GAAP Financial Data
Cash cost per ounce of gold ($)
1
............................................................................................................
185
215
Total cost per ounce of gold ($)
1
............................................................................................................
273
291
1
Cash cost per ounce and total cost per ounce are non-US GAAP financial measures of performance that we use to determine cash generating
capacities of the mines and to monitor performance of our mining operations. For a reconciliation to production costs see Item 5A: “Operating
Results.”
BACKGROUND IMAGE
58
Tolukuma Gold Mine
Overview
Dome Resources (Pty) Limited, or Dome, was incorporated on May 17, 1984, under the name Dome Resources NL. Dome
owned and operated the Tolukuma gold and silver mine in PNG. During September 1999, we purchased 28,693,002 (19.93%) of Dome’s
ordinary shares for A$0.30 ($0.19) per share. In June 2001 we acquired all the shares in Dome which we did not already own.
The Tolukuma gold mine is located approximately 6km east of Fane Mission, 12km west of Woitape and 100km north or
Port Moresby in Central Province, Papua New Guinea. The mine is in an area of steep mountainous terrain in the headwaters of Iwu
Creek, which drains into the Auga River. Elevations in the mine lease area range from 1,100m above sea level at the Auga River to
1,750m above sea level at the top of Tolukuma hill.
As at June 30, 2005, the mine is a low capacity (18,000 tpm capacity), high-grade (0.39 ounces per ton) operation and
employs 824 people, including 186 contractors.
Property
The Tolukuma Section consists of one mining lease, ML104, covering 1,898 acres (768 hectares) and five current exploration
licenses covering an area of approximately 513,962 acres (208,000 hectares), two licenses under renewal covering 125,525 acres (50,800
hectares) and four licenses under application totaling 1,073,884 acres (434,600 hectares).
The total exploration area amounts to
approximately 2,456,144 acres (994,000 hectares). For a summary of our exploration licenses see “Exploration Projects” in Item 4D:
“Property, Plant and Equipment.”
All current mining activities are carried out under the terms of Mining Lease 104 (ML104), granted under Section 38 of the
Papua New Guinea Mining Act of 1992 and Mining Regulations 1992. The lease is granted for a term of 20 years expiring on August 29,
2012, and is renewable for further periods not exceeding 10 years each.
The mine is located about 62 miles (100 kilometers) north of Port Moresby in the Central Province of Papua New Guinea at an
elevation of 5,115 feet (1,560 meters) above mean sea level. The mine is situated in very steep mountainous terrain that is not accessible
by road. All transport of employees, materials and equipment to and from the mine is by helicopter. As a result, approximately 24% of
the production costs of the mine are spent on transportation and logistics, including the cost of jet fuel. The Tolukuma Section is
worked on a “fly-in-fly-out basis,” with all staff being accommodated in quarters when at the mine.
The climate of the Central Province area is temperate with year round rainfall. Temperatures range from 50 to 77 degrees
Fahrenheit (10 to 25 degrees Celsius) and rainfall averages 144 inches (3,650mm) per year. The vegetation is largely rainforest and
thick vegetation associated with high rainfall and mountainous regions.
At the Tolukuma Section, the traditional landowners are the Yulai people who belong to the Auga tribes – Auga being the
main river in the area. There are three clans and at the head of each clan is a chief. The population around the mine is approximately
2,700, with approximately 700 being landowners and the rest made up of outsiders coming into the area to seek employment. There is
a Memorandum of Agreement, or MOA, between National Government, Provincial Government, the landowners and Tolukuma Gold
Mines Limited, or Tolukuma. The MOA is a working document which indicates the responsibilities of each party and their role in the
sustainable development of the community. The MOA is reviewed every two years, with an MOA to be mutually agreed by the parties
if revised. Currently, there is an agreed on MOA in place.
Production from the Tolukuma Section is subject to a 2% net smelter royalty. This royalty is distributed to the Yulai future
generation fund, a landowners’ association, the landowners, and to a Central Provincial Government fund for projects outside the mine
area.
BACKGROUND IMAGE
59
History
1984
Dome Resource (Pty) Limited was incorporated on May 17, 1984, under the name Dome Resources NL, or Dome.
1987
Tolukuma mine was discovered by Newmont Proprietary Limited.
1993
Tolukuma Gold Mines Limited was acquired by Dome from Newmont Second Capital Corporation.
1999
In September, we purchased an initial stake of 19.93% of Dome.
2001
In June, we acquired all outstanding shares of Dome we did not already own, bringing our shareholding to 100%.
2005
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will
acquire our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua
New Guinea assets, comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines
Limited and all of our exploration tenements in Papua New Guinea.
Exploration and development
Exploration within the mining lease, ML104, has recently been expanded with the purchase of two underground diamond
drill rigs, including one with long hole capability, and an additional rig for surface drilling. This brought the number of rigs on site to
five in fiscal 2004, compared to only one in fiscal 2003. An air-driven Kempe rig, commissioned in December 2003, is used for short
holes underground, currently targeting the down dip extension of the Tinabar ore body and an LMA90 drill rig, commissioned in
January 2004, is used for longer exploration holes, initially in the Gulbadi south area and the Milaihamba structural target. Another
manportable DT600P was purchased to support the existing manportable DT250P on surface drilling of ML104 and later the Saki,
Sere Sere, Taula and Taula North prospects in Exploration License 580 followed by other regional targets. The LY44 is also currently
drilling ML104 targets.
Drilling during fiscal 2005 concentrated mainly within ML104, testing the extensions of known mineralized structures such
as the Zine, 120, Gulbadi, Tolukuma, and Tinabar veins, with the aim of delineating and defining additional mineralized materials for
mill feed. Drilling in fiscal 2005 continued at new structures that have been identified for drill testing including the Loch, Tofun, and
Banana vein structures.
In fiscal 2005, exploration expenditure of $2.1 million was incurred.
Geology and Mineralization
The Tolukuma deposit is a narrow epithermal low sulphidation gold/silver/quartz/adularia vein system noted for its high-
grade “bonanza” style mineralization. The primary structures extend 4.4 miles (7 kilometers) on strike with economic mineralization
usually occurring in well-defined zones on dip and along strike.
The Tolukuma deposit is comprised of two sub-parallel structures that are connected by a series of linked structures trending
generally from north west to south east. Individual quartz veins average 0.6 feet to 6.6 feet (0.2 meters to 2.0 meters) in width over a
strike length of more than 0.9 mile (1.4 kilometers). Likewise, the Zine and 120 veins located approximately 250 meters to the east,
have similar geological features. These are connected by a series of linked structures tending generally in a south east to north west
direction.
All the current Ore Reserves are located within these veins in five sections that have different geological characteristics.
These zones include from north to south, Tolukuma, Tolimi, Tinabar and Gulbadi. The Gulbadi zone includes the Gulbadi and Gulbadi
X-veins. Clay zones of variable width are located in the intersections on two or more structures. Minor loops off the main veins, minor
splay veins and minor cross veins are excluded from the potential reserves, although they are mined at times. Infill diamond drilling of the
Zine and 120 veins is continuing and an underground diamond drilling program has commenced.
Mining and processing
In 1995, the Tolukuma plant was built and at June 30, 2005, the current production is approximately 93% from underground
mining and 7% from open pit mining. All open pit and underground mining is conducted using mining plant and equipment owned by
the Tolukuma Section. The average mining depth at the Tolukuma Section is 490 feet (150 meters) below surface or approximately 4,760
feet (1,450 meters) above mean sea level. Access to underground workings is via decline shafts. Mining methods vary according to local
ground conditions and are generally mechanized cut and fill shrinkage methods.
The metallurgical plant is compact and is located on a steep ridge in very mountainous terrain. Ore is trucked to the plant, then
milled and treated through a conventional gravity and CIL circuit. The plant consists of a closed circuit semi-autogenous mill that at June
30, 2005 is capable of processing 18,000 tpm. Cyanide in the residue is neutralized in a detoxification plant prior to riverine discharge.
BACKGROUND IMAGE
60
Tolukuma is situated in a remote area, and as a result is forced to be self sufficient with regard to the generation of power.
Power is generated through a combination of diesel driven generator sets and hydro-turbine driven generator sets. Three hydro units
are installed, capable of generating 1.8 MW of power. These units are dependant on the supply of adequate water. These generators
supply 32,000 volts via overhead lines to the mine, where it is transformed down to either 6,600 volts, 1,000 volts or 525 volts,
depending on the requirement. On average the mine consumes 30 MW of power. Any shortfall from the hydro units is made up by the
diesel units (a total of 3.2 MW of diesel generating power is installed).
Several capital projects were conducted over the period fiscal 2003 to fiscal 2005, including expansion of the mobile plant and
additions to plant, and equipment of approximately $5.8 million, and $2.9 million on underground exploration.
Environmental and closure aspects
The Tolukuma Section has been developed in accordance with an environmental plan approved by the Papua New Guinea
authorities in July 1994. The Tolukuma Section is compliant with the Papua New Guinea Government’s regulatory requirements. To
ensure continuing compliance with the government’s regulatory requirements, Tolukuma has implemented a broad-based Environmental
Management and Monitoring Program, or EMMP. The measures we have taken to implement this program include addressing water
quality, population dietary surveys and aquatic fauna and metals-in-tissue surveys. These surveys were conducted during July and
September of calendar 2003. During March 2003, an environmental audit was concluded at the Tolukuma Section which found the
operations to be in substantial compliance with applicable Papua New Guinea legislation and the EMMP environmental plan. The studies
conducted in 2003 confirmed existing trends that had been established over recent years. The water quality meets legal requirements, as
per the criteria set by the water license.
Tailings are routinely discharged into the Auga/Angabanga river system. The discharging of tailings into riverine and marine
systems in Papua New Guinea is an acceptable practice due to the seismic instability of the area and the dangers this poses for the stability
of conventional tailings dams. Due to the fact that ore mined at the Tolukuma Mine, and the surrounding land in general is high in
mercury, the potential does exist that levels of mercury discharged into the river system might expose us to criminal liability under Papua
New Guinea legislation. As result of an internal study of the Tolukuma Mine in 2000, in order to ensure that mercury discharges remain
within allowable limits, the following program is being followed:
•
daily monitoring of mercury levels at the tailings discharge point and approximately 1500 feet downstream (grab sampling);
•
monthly monitoring of mercury and other heavy metals at government mandated water quality inspection points; and
•
biennial monitoring of stream sediments.
Lead, mercury, and arsenic occur naturally in the ore processed at the Tolukuma Section. The concentration of these metals is
reduced when the ore is processed and there is strict monitoring of these metals. Cyanide is used in the gold recovery process and the
Tolukuma Section has a detoxification plant which reduces the levels of cyanide discharged to permissible levels. The Tolukuma Section
has a water permit, issued by the Papua New Guinea Government, to permit discharge into the local river system at acceptable monitored
limits.
Through visits with local communities by mine staff members, we have been informed that communities located downstream from
the Tolukuma Mine do not generally use water from the Auga/Angabanga river system for consumption as these communities rely on
water from creeks, tributaries and strategically placed wells, many of which we have provided, and we are not aware of any adverse
health effects on communities associated with the Tolukuma Mine.
Furthermore, we are not aware of any scientific or engineering report that states that the level of mercury discharges from the
Tolukuma Mine into the Auga/Angabanga river system is harmful to human life. In November 2002, Oxfam Community Aid Abroad
released their “Mining Ombudsman Annual Report 2001-2002” which we believe made inaccurate and unsubstantiated references to
mercury output and other findings contained in an internally prepared study on the Tolukuma Section done in 2000. This study was not
conclusive on the mercury output at the Tolukuma Section and the results of this study were not scientifically tested. As discussed above,
we increased our environmental management systems in response to this study.
Two water quality and geochemical investigations were conducted by an independent consultant in July 2000 and June 2002. These
investigations concluded that there were was little difference between mercury concentrations in mining sediment from the Tolukuma
Mine being dumped into the Auga/Angabanga river system and the naturally occurring sediments in the area. Although mercury is
detectable in the mining derived sediments immediately adjacent to the discharge point, these levels are immediately diluted to levels
below detectable limits upon meeting with the Alabule River. This area consists of steep gorges and fast, turbid currents. The result is a
high dilution of mining sediments and, therefore, negligible impact on the lower Angabanga floodplain and oxbow lakes which are
located downstream from the Tolukuma Mine. An additional study took place during June 2003, reinforcing earlier findings. While the
ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we have estimated that the total cost for the Tolukuma
Section, in current monetary terms as at June 30, 2005, is $1.2 million. This has been included in the provision for environmental
rehabilitation, reclamation and closure costs on our balance sheet.
BACKGROUND IMAGE
61
Life of Mine
Proven and Probable Ore Reserves for the Tolukuma Section, as at June 30, 2005, were 0.22 million ounces, assuming a gold
price of K1,313 per ounce ($381 per ounce). Based on a gold price of $400 per ounce and an exchange rate of K3.22 = $1.00, at June 30,
2004, the Proven and Probable Ore Reserves of the Tolukuma Section were 0.2 million ounces. The 0.02 million ounces increase is
primarily due to the focus on development at the Tolukuma mine.
A Mineral Resource competent person is appointed at each operation to review our Ore Reserves calculations for accuracy. For
Tolukuma, Joe Sine (AusIMM) is the appointed Mineral Resource competent person. As at June 30, 2005, the Tolukuma gold mine has
been assessed with a two year life of mine for both its underground and surface operations .
Current Production
Total gold production for fiscal 2005 was 76,314 ounces compared to 85,715 ounces for fiscal 2004 and 68,096 ounces for fiscal
2003. The Tolukuma Section also produced 168,314 ounces of silver in fiscal 2005 compared to 180,252 ounces of silver in fiscal 2004
and 157,844 ounces of silver in fiscal 2003. Cash costs increased to $331 per ounce of gold in fiscal 2005 from $231 per ounce of gold in
fiscal 2004, primarily due to lower grades, the higher cost of fuel and the logistics involved in keeping the mine supplied with
consumables and services. Total cost per ounce increased to $434 per ounce in fiscal 2005 from $355 per ounce in fiscal 2004 and
decreased to $355 per ounce in fiscal 2004 from $441 per ounce in fiscal 2003.
The following table details the operating and production results from the Tolukuma Section for the past three fiscal years.
Year ended June 30,
2005
2004
2003
Production
Underground Operations
Ore mined (`000 tons) ........................................................................................................................
235
218
177
Recovered grade (oz/ton) ...................................................................................................................
0.33
0.39
0.38
Gold produced (ounces) .....................................................................................................................
76,314
85,715
68,096
Results of Operations ($)
Revenues ('000) ...................................................................................................................................
32,446
32,743
22,870
Production cost ('000)..........................................................................................................................
25,278
19,821
19,105
Non US GAAP Financial Data
Cash cost per ounce of gold ($)
1
.........................................................................................................
331
231
281
Total cost per ounce of gold ($)
1
.........................................................................................................
434
355
441
1
Cash cost per ounce and total cost per ounce are non-US GAAP financial measures of performance that we use to determine cash generating
capacities of the mines and to monitor performance of our mining operations. For a reconciliation to production costs see Item 5A: “Operating
Results.”
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62
Fiji
Emperor Mines Limited
Overview
As of July 30, 2004, we own, through DRD (Isle of Man), 45.33% of Emperor Mines Limited, the owner of the Vatukoula mine.
The mine located at Vatukoula on the South Pacific island nation of Fiji, has been in operation since 1933 with 6.8 million
ounces of gold produced since operations commenced. The Emperor mine is a multi-shaft underground mine. Our 45.33% attributable
share of Emperor’s gold production for the year ended June 30, 2005 was 45,426 ounces. The Vatukoula mine is Fiji's second largest
private employer with approximately 1,990 employees at June 30, 2005, and accounts for approximately 8.0% of Fiji's national foreign
income on that date.
On September 13, 2004, Emperor announced an A$20.4 million ($14.6 million) non-renounceable rights issue. See Item 4A.:
“History and Development of the Company.” Emperor’s rights offering closed on November 12, 2004, and we subscribed for our
entitlement under the rights offering. We did not participate in any shortfall to the rights offer.
Subsequent to June 30, 2005, we initiated a financing and operating assistance package to Emperor. This follows a complete
review by us of Emperor’s operations. To assist Emperor with its restructuring plan, we have agreed to provide an A$10.0 million ($7.6
million) Convertible Loan Facility to Emperor as part of a re-financing package, which includes an agreement with ANZ Bank to
restructure Emperor’s existing debt servicing obligations.
ANZ Bank has given its consent to the granting of the Convertible Loan Facility and the related security to us. In addition the
Australian Stock Exchange has also granted Emperor a waiver of certain listing rules required to permit Emperor to grant such security to
us on the terms incorporated in the Convertible Loan Facility. The Convertible Loan Facility, which was negotiated on behalf of Emperor
by its independent directors, carries an interest rate of 9% per annum and is secured by a first ranking charge over Emperor’s 100%
interest in the Tuvatu Gold Prospect in Fiji.
The Convertible Loan Facility is repayable upon either the receipt of the proceeds expected from the sale of Emperor’s interest
in the Tuvatu Gold Prospect, or by December 31, 2007. Emperor has previously announced a conditional sale agreement in relation to the
Tuvatu Gold Prospect and expects to receive consideration of approximately A$10.0 million ($7.6 million) on completion of that
transaction.
The Convertible Loan Facility is convertible, at our election, into ordinary fully paid shares of Emperor at a conversion price
equal to the lower of A$0.30 ($0.23) per Emperor share or the 45 day volume weighted average price of Emperor shares on the Australian
Stock Exchange prior to the date of conversion.
The Convertible Loan Facility was approved by the shareholders of Emperor on August 29, 2005. We did not participate in the
voting.
Pursuant to the terms of an operational support agreement, also negotiated on behalf of Emperor by its independent directors, we
will provide Emperor with management and technical services.
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire
our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea assets,
comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of our exploration
tenements in Papua New Guinea. Currently we, through DRD (Isle of Man), hold a 45.33% interest in Emperor.
The purchase consideration will be settled by the issue of new Emperor shares and a portion in cash. Upon completion of the
transaction and the issue of the new Emperor shares, we will hold approximately 90.5% of Emperor and Emperor will become our
subsidiary.
Separate consolidated financial statements and notes thereto for Emperor for its fiscal years ended June 30, 2005, 2004 and 2003
are being filed pursuant to Rule 3-09 of Regulation S-X.
BACKGROUND IMAGE
63
Property
The mine is situated 60km on the north east of the city of Nadi, off the coast of the island of Viti Levu, the main island of
Fiji. Gold mineralization is associated with a volcanic caldera, and occurs in both flat-lying and steeply-dipping structures, typically
less than a meter in width, principally on the western fringe of the caldera. The mine can be accessed via the highway from Nadi to the
Vatukoula Mine. Mining is conducted underground from four main shafts exploiting the ore bodies in the southwest portion of the
volcanic margin to the Tavua Caldera, a large shield volcano about 9 miles (15 kilometers) in diameter and the recently accessed R1
ore bodies situated within the caldera. The main mining licenses include Special Mining Lease 54, 55 and 56.
History
1930
Discovery of alluvial gold in the Nasivi river in Vatukoula.
1933
Commencement of mining activities at the Vatukoula mine.
1950s
Emperor secures ownership of the Vatukoula mining field.
1992
Western Mining Corporation relinquishes its joint venture with respect to the Emperor Gold Mine.
2003
We acquired a 19.81% interest in Emperor.
2004
In July 2004, we increased our shareholding in Emperor to 45.33% through a conditional takeover offer. Emperor appointed
our Executive Chairman, Mark Wellesley-Wood as Managing Director and our Divisional Director: Australasia, Richard
Johnson as Non-Executive Director, both with effect from August 3, 2004.
In November 2004, Emperor’s rights offer closed and we subscribed for our entitlement under the rights offer
2005
In August 2005, the shareholders approved a convertible loan facility to assist with Emperor’s restructuring plan. An
operational and support agreement was also signed pursuant to which we will provide Emperor with management and
technical services.
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will
acquire our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua
New Guinea assets, comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines
Limited and all of our exploration tenements in Papua New Guinea.
Geology and Mineralization
Vatukoula is a low-sulphidation epithermal gold deposit associated with alkaline type igneous rocks in a volcanic setting. This
volcanic setting and rock type is typical of several major gold mines in the southwest Pacific region, such as Porgera. The ore deposits lie
along the margin of Tavua volcanic caldera and consist of various types of quartz-adularia-telluride-auriferous-pyrite fillings deposited in
fractured, faulted and shattered volcanic rocks.
The majority of the Vatukoula mine's ore bodies are situated in the southwest portion of the volcanic margin of the Tavua
volcanic caldera, a large shield volcano about 9.3 miles (15.0 kilometers) in diameter.
Volcanism commenced about 5 million years ago and ceased about 3.5 million years ago. The ore bodies were the last major
geological event and mineralized fractures persist throughout the very late stage sediments that filled in the central part of the caldera. The
gold is found as native gold, auriferous pyrite, and as gold tellurides.
Mining and Processing
Most of the known ore bodies at Vatukoula are relatively narrow, flat dipping structures previously mined by room and pillar
methods. They are now mined predominantly by longwall stoping, although throughout the mine a number of other mining methods, such
as sub-level stoping and caving, cut-and-fill, shrinkage stoping and up-dip mining, are also practiced. The remnants of 50 years of room
and pillar mining are also currently being successfully exploited.
Current production at the Vatukoula mine comes from four mining sections that are named according to the shaft or drive
access: Smith Shaft, Philip Shaft, R1-Cayzer Shaft and the Emperor Decline Shaft.
The Emperor plant, built in 1997, consists of two parallel grinding mills, namely a Smith grinding mill and a larger
Morgardshammer mill. There are also two flotation circuits, one for slimes washed from the ore, and a conventional sulphide circuit for
the grinding circuit product. Both circuits are combined in a thickener and roasted before passing through a CIP circuit. Loaded carbon is
stripped and the gold-rich solution is combined with the calcine rich solution for zinc precipitation before being smelt into bars. As at
June 30, 2005, the plant utilizes approximately 75% of its capacity.
BACKGROUND IMAGE
64
Exploration and development
Emperor holds three mining tenements. Special Mining Lease:
•
S54 – covers an area of approximately 610 m
2
and expires on March 21, 2025;
•
S55 - covers an area of approximately 400 m
2
and expires on March 21, 2025; and
•
S56 – covers an area of approximately 250 m
2
and expires on March 21, 2025.
Additionally, Emperor holds 100% of Special Prospecting Licenses, or SPLs, for tenements 1201, 1283, 1296, 1344, 1360 and
1411. Emperor has also submitted applications for Special Prospecting License CX626 situated south of and adjacent to SPL 1411 on the
island of Vanua Levu.
Environmental and closure aspects
The Emperor Section is subject to Fiji environmental regulations in respect of its exploration and mining activities. The Emperor
board’s policy is to work with Government environmental protection agencies to ensure compliance with all relevant regulations. In
addition, the Emperor Section undertakes environmental projects which it considers appropriate.
The Emperor Section has an internal reporting system with regard to environmental activities, and operational managers are
required to provide monthly updates on performance to the Managing Director who brings, and allows, operational managers to bring,
major issues to the attention of the Emperor board of directors. We are not aware of any environmental issues in the Emperor Section that
could have a material adverse impact on the Group’s business.
Life of Mine
Based on a gold price of approximately $420 per ounce (A$551 per ounce) at an exchange rate of A$1.31 = $1 at June 30, 2005,
our 45.33% share of the Proven and Probable Ore Reserves of the Emperor Section has increased by 40.6% or 0.1 million ounces, mainly
due to the additional 25.5% interest acquired in July 2004. Emperor’s current life-of-mine plan is based on a projected life of 5 years. A
Mineral Resource competent person is appointed at each operation to review our Ore Reserves calculations for accuracy. For Emperor,
Greg MacDonald (AusIMM) is the appointed Mineral Resource competent person.
Current production
Emperor’s production or related revenue and costs are not consolidated into our results, as we account for the associate’s results
using the equity method. Total gold production decreased in fiscal 2005 to 113,892 from 118,581 in fiscal 2004. The decrease in
production resulted primarily from delays in the Philip Shaft Deepening Project; poor heavy vehicle availability due to delays in the re-
build program and ageing fleet; lower than expected mining grades; high levels of absenteeism in the workforce; and flooding on the
lower levels of the Smith Shaft in April 2005.
The following table details our 45.33% attributable share of the production results from the Emperor Section for fiscal 2005:
Period ended June 30
2005
1
Production
Surface and underground operations
Ore mined ('000 tons)..................................................................................................................................................
234
Recovered grade (oz/ton) ............................................................................................................................................
0.19
Gold produced (ounces) ..............................................................................................................................................
45,426
1
We increased our ownership in Emperor to 45.33% with effect from July 30, 2004 and Emperor is now accounted for using the equity method. As a
result we have not disclosed the attributable portion of Emperor’s production results for fiscal 2004 and fiscal 2003.
BACKGROUND IMAGE
65
Exploration Projects
Our exploration and project development activities during fiscal 2005 continued to enhance our growth strategy by growing
the Tolukuma Section (through both brownfields and greenfields exploration). Total exploration and project expenditure for fiscal
2005 was $2.1 million for the Tolukuma Section. During fiscal 2005, we lodged an application for a prospecting right in respect of the
Argonaut area in South Africa. ERPM also lodged an application for a prospecting right over the Sallies area in South Africa. Both
these applications are pending at the Department of Minerals and Energy.
South Africa
Argonaut Project
The Argonaut Project represents the southern down-dip extension of the Central Rand Goldfield. The strike length of the area
covered by the mineral rights covers approximately 19 miles (30 kilometers) from Durban Deep in the west to ERPM in the east with the
possible exploitation of part of the potential mineralized material striking 3 miles (5 kilometers) east/west from City Deep Mine to
Robinson Deep Mine and extending from 9,900 feet to 13,200 feet (3,018 meters to 4,023 meters) below surface. Most of the main
exploration target area incorporated by our 42 square kilometers of mineral rights above the 5,000 meter depth contour of the Main
Reef Leader is covered by urban residential development. The mining activity may, as a result, give rise to an increase in seismicity and
associated environmental pollution in the immediate proximity of the mine. If operated, this would be the first mine in the world to
operate at such depths and the seismicity associated with the mining activity and the impact on the health and safety of the mine
employees working in the underground section is unknown at this stage. The environmental risks could result in public opposition to the
project and delay our application for the necessary permits, or prevent the implementation of the project.
In utilizing a comprehensive computerized database of historical underground sample and borehole core assay values of the
Main Reef and Main Reef Leader, sedimentological and structural interpretations of these major gold-bearing ore bodies across the
former Central Rand have been undertaken with the objective of defining sedimentological facies trends and delineating geozones for
statistical and geostatistical estimation purposes and predictive analysis. A log-linear extrapolation technique was applied to the trend
directions exhibited within the data for each geodomain, enabling the calculation of the likely distances over which the gold
accumulation decreases within the respective geodomains down the palaeoslope. The end product is a grade block model for the Main
Reef Leader showing the rapid downdip decrease in the gold accumulation in all of the defined geodomains.
Renewed focus had been placed on progressing the Argonaut Project by reviewing the geological modeling in the project
target area and valuation model. The results were a substantial downgrading of the estimated mineralized material from that previously
reported. Due to unreliable data, no estimate of mineralized material was deduced for the Main Reef. Future work will include the
drilling of three additional boreholes to test the model and extrapolations and estimates, and upgrade and increase the mineralized
material estimate within our mineral rights area.
At June 30, 2005, no Ore Reserves have been included in the Proven and Probable Ore Reserve statement. The lead time to
mining any reserves is estimated to be in excess of 10 years.
During fiscal 2004, progress on advancing the Argonaut Project towards a bankable feasibility study was hampered by the
low Rand gold price and the enactment of the MPRD Act which delayed the issuing of a prospecting permit by the DME. Under the
MPRD Act, the prospecting permit is classified as a pending application and, as a result, only geological modeling and resource
estimation took place.
During fiscal 2005, the Argonaut mineral rights reverted to the South African Government. We lodged an application for a
prospecting right in respect of the Argonaut area, which is pending at the Department of Minerals and Energy. The Argonaut Project
still represents a promising, yet challenging deep-level mining development opportunity which is dependent on significant increases in
the Rand gold price before becoming viable.
BACKGROUND IMAGE
66
Papua New Guinea
Tolukuma Section
Tolukuma has ten Exploration Licenses, or ELs, as well as one new EL application and a Mining Lease 104, or ML104. The
ML104 covers an area of 7.68 square kilometers and has extensive exploration tenements in the vicinity of the mine covering
approximately 9,937 square kilometers and within 40 minutes flying radius of the mine site. The Tolukuma Section is being explored
using geophysical surveys, interpretation of satellite images, mapping and sampling of streams. This is followed up by detailed
mapping, trenching and drilling of prospective target areas.
Exploration within the mining lease was expanded with the purchase of two underground diamond drill rigs, including one
with long hole capability, and an additional rig for surface drilling. This brings the number of rigs on site to five in fiscal 2004,
compared to only one in fiscal 2003. No new drills were added during fiscal 2005. The short-term focus will continue to be on
increasing the resource base at and around the Tolukuma Section.
In fiscal 2005, exploration was focused on finding resources for mill feed. Much of this work involved diamond drilling
concentrated mostly within ML104. Some regional exploration was also carried out in a few of the outer ELs. An intensive diamond-
drilling program with associated fieldwork is planned for the coming year. This work is aimed at testing more than sixteen drill targets
identified and classified within ML104. More regional exploration work is also being planned for other ELs outside of EL580 and
ML104.
Much of the ML104 exploration involved diamond drill testing of mostly known structures both on surface and underground.
Tolukuma’s five diamond drill rigs which includes three surface (DT250P, DT600O, LY 44) and two underground (LMA 90,
KEMPE) were all utilized. All rigs except the DT250P stayed within ML104. The DT250P also drilled 3 holes at the Mt. Sen prospect
with EL580. During the year, a total of 68 holes have been drilled for a total of 23,487 meters.
Diamond drilling underground led to the discovery of several new structures. The more significant structure is the
Degot/Fundoot with over 70,000 ounces contained gold potential. This structure has already been accessed from underground and is
likely to be mined in the near future. The southern extension of this structure is currently being tested.
Another structure with about a 200 meter strike length and thought to be the fault-displaced portion of the Zine and Gulbadi
(converged) has also been drill tested. A couple of high grade intersections have been obtained within this structure including one
1.5 meters at 42.9 g/t. The southern extension is also being tested with the LMA 90 rig in the process of testing the Degot/Fundoot. All
results from this structure will be reviewed to further assess the resource potential.
Follow-up exploration work in fiscal 2005 continued at the Gulbadi Red Structure, Zine/120, Sawmill and the Banana-Snake
Creek. Additionally, limited surface mapping and sampling resulted in the discovery of a number of new structures within the
southern portion of the lease. The first two are the Tolukuma South and Tolukuma Southeast structures which returned highest trench
results of 0.8 meters at 7.4 g/t and 1.0 meters at 3.9 g/t respectively. Further work is required in these areas. Exploration work was also
undertaken in the following areas: Gira (under EL 1297), Aikora (under EL 1327) and Minaru (under EL 1264).
Exploration tenements remain in good standing and our mine lease ML104, expires on August 29, 2012. Below is a summary of
exploration licenses:
EL No
No of Sub blocks
Area under EL (sq km)
Status
Expiry date
683
30
102
under renewal
April 3, 2005
580
68
230
under renewal
April 4, 2005
1264
75
254
under renewal
April 29, 2005
1327
146
494
under renewal
June 23, 2005
894
75
254
under renewal
April 3, 2005
1284
58
196
current
April 18, 2006
1297
75
254
current
August 30, 2006
1271
564
1,909
current
January 4, 2007
1352
550
1,862
current
October 18, 2006
1366
403
1,364
current
January 4, 2007
1379
648
2,194
current
May 3, 2007
Totals
2,692
9,114
BACKGROUND IMAGE
67
Closed Operations
North West Operations
Overview
Until March 22, 2005, we owned 100% of the North West Operations through our wholly owned subsidiary, Buffelsfontein
Gold Mines Limited, which in turn owns 100% of Hartebeestfontein Gold Mining Company Limited and Duff Scott Hospital (Pty)
Limited. The consolidated mining operations of the North West Operations consisted of the Buffels Section and the Harties Section,
which lie adjacent to each other within the Klerksdorp Goldfield on the northwestern rim of the Witwatersrand Basin.
Since its inception in 1949, Buffelsfontein Gold Mines Limited has produced over 32 million ounces of gold, with 20,100 tons
of uranium as a by-product.
Mining activity at the Harties Section, including exploration, development and production dates back to 1949 with gold
production from the area totaling over 38 million ounces, with uranium oxide, sulfuric acid, pyrite and silver being recovered as by-
products.
On July 21, 2003, we entered into a 60-day review period on our North West Operations designed to restore the operations to
profitability. An agreement was reached with all labor organizations and the process was completed on September 21, 2003, with
approximately 3,000 employees retrenched and the placing of No. 6 Shaft of the Harties Section on a “care and maintenance” program,
effectively suspending the use of the asset. On March 16, 2004, we reopened the No. 6 Shaft at the Harties Section to mine high grade
areas on a selective basis. We recalled approximately 800 employees previously retrenched from the North West Operations to man this
shaft. On February 18, 2004, we announced the closure of the No. 11 Shaft in the Buffels Section after the revised work practices
implemented based on the operational review proved to be unsustainable. As a result, approximately 1,000 employees were retrenched.
The total cost of the July 21, 2003 and March 16, 2004 retrenchments was $7.1 million.
With the continuing strength of the Rand and the decline in the Rand gold price, we entered into a 60-day review period at the
Buffels Section at our North West Operations on June 26, 2004, in order to restore profitability. An agreement was reached with all the
relevant parties early in August 2004 to close the No. 9 Shaft, but to keep the No. 10 and 12 Shafts in operation, on the condition that
certain defined sustainability thresholds are met. This agreement resulted in the retrenchment of 120 employees at this mining operation
during fiscal 2005, at a cost of R 3.7 million ($0.6 million). At October 31, 2004, approximately 600 employees were employed at No. 10
and 12 Shafts.
On March 9, 2005, the North West Operations suffered the effects of an earthquake of 5.3 on the Richter scale. As a
consequence of the extensive damage caused by the earthquake, the No. 5 Shaft of the North West Operations was closed. There was
continuing seismic activity in the area and on March 16, 2005, we closed the No. 2 Shaft because of concerns for the safety of employees.
On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of Buffelsfontein Gold Mines
Limited, which order was granted on the same day. For further details, see the “Legal Proceedings” section of Item 4D: “Property Plant
and Equipment.”
Property
The North West Operations were located in the Klerksdorp Goldfield of the Witwatersrand Basin approximately 100 miles (161
kilometers) southwest of Johannesburg near the towns of Stilfontein and Klerksdorp, North West Province, and are reached via the R12
Johannesburg-Potchefstroom-Kimberley highway.
The climate of the Highveld area (at an elevation of 5,249 feet (1,600 meters) above mean sea level), where the mine is
situated, is humid continental with warm summers and cold winters. Temperatures range from a minimum of 23 degrees Fahrenheit (-
5 degrees Celsius) in June and July to a maximum of 93 degrees Fahrenheit (34 degrees Celsius) in December and January.
The mines’ infrastructure included the shaft complexes, metallurgical plants, engineering workshops and its associated tailings
dams. Buffels had mining title to 17,575 acres (7,113 hectares) and freehold title to 4,893 acres (1,980 hectares). The Harties Section had
mining title to 15,560 acres (6,297 hectares) and freehold title to 375 acres (152 hectares), all held in the name of Buffels. The Buffels
Section consisted of one mining license, ML4/2001 in respect of statutory mining rights, and one prospecting permit, RP54/2002 in
respect of statutory mining rights and mineral rights held by the Buffels Section.
Accommodation for staff was situated on the property as well as in the neighboring towns of Stilfontein and Klerksdorp. In
addition to mining its lease area, the Buffels Section operated and mined the adjoining Harties Section mineral rights areas and another
area pursuant to royalty-based tribute agreements with Lucas Block Minerals Limited, a South African company, and the Harties Section.
BACKGROUND IMAGE
68
The average mining depth at the Harties Section is 5,322 feet (1,622.1 meters), 961 feet (292.9 meters) below mean sea level and
at the Buffels Section is 6,099 feet (1,859 meters), 1,790 feet (545.6 meters) below mean sea level.
History
1949
Hartebeestfontein Gold Mining Company Limited, or Hartebeestfontein, was incorporated as a public company in South
Africa on June 20, 1949. The company is dormant and no longer trades.
1995
Buffelsfontein Gold Mines Limited, or Buffels, was incorporated and registered as a public company in South Africa on
September 20, 1995, under the name Camelian Investments (Pty) Ltd. Camelian Investments changed its name to
Buffelsfontein Gold Mines Ltd on December 29, 1995. As of December 31, 1995, Buffels acquired the assets and liabilities
of the Buffelsfontein mine division of Buffelsfontein Gold Mines Company Limited previously managed by Gencor
Limited, a South African mining company.
1997
We acquired Buffels on September 15, 1997.
1999
On August 16, 1999, Buffels acquired both the Harties business assets and Hartebeestfontein from Avgold Limited.
2003
On July 21, 2003, we entered into a 60-day review period of our North West Operations. The process was completed on
September 21, 2003, with approximately 3,000 employees retrenched at a cost of $6.5 million and the placing of certain
infrastructure (No. 6 Shaft at the Harties Section) on a “care and maintenance” program.
2004
In March 2004, the No. 6 Shaft at the Harties Section was reopened to mine high grade areas on a selective basis. We recruited
800 staff previously retrenched to man this shaft.
In April 2004, the No. 11 Shaft at the Buffels Section was closed as the shaft reached the end of its economic life.
Approximately 1,000 employees were retrenched at a cost of $0.6 million.
In September 2004, the No. 9 Shaft at the Buffels Section was closed as the shaft reached the end of its economic life.
2005
On March 9, 2005, the North West Operations suffered the effects of an earthquake of 5.3 on the Richter scale.
On March 16, 2005, further seismic activity in the area occurred and we closed the No. 2 Shaft because of concerns for the
employees’ safety.
On March 22, 2005, an application was made to the High Court of South Africa for the provisional liquidation of
Buffelsfontein Gold Mines Limited, which order was granted on the same day.
On October 6, 2005, we concluded an agreement with Simmer and Jack Limited, or S&J for the sale of its shareholding in
Buffelsfontein Gold Mines Limited subject to certain conditions.
On October 21, 2005, the scheme of arrangement for the acquisition of Buffelsfontein Gold Mines Limited proposed by S&J
and accepted by the majority of Buffelsfontein creditors, including us, was approved and sanctioned by the High Court of
South Africa.
All the conditions of the scheme have been met, and the order for the provisional liquidation of Buffelsfontein was lifted by the
High Court of South Africa on November 1, 2005.
Geology and Mineralization
The Buffels Section and Harties Section, were predominantly underground operating mines located within a geographical region
known as the Witwatersrand Basin, that exploit gold bearing reefs consisting of Vaal Reef ore and surface sources from previously
discarded low-grade rock dumps. The Vaal Reef is an oligomictic, quartz-pebble conglomerate no more than 20 inches (50
centimeters) thick. Gold is present throughout the reef horizon, but is concentrated on the bottom contact, where carbon commonly
forms as a thin seam.
The Buffels Section exploited the Vaal Reef, occurring within the Central Rand Group of the Witwatersrand Supergroup, at
the base of the Strathmore formation. The bulk of the Buffels Section Ore Reserves had been mined-out but the infrastructure was being
used to access remnant reserves and blocks originally bypassed because of structural complexity. Access from the surface to the
underground workings of the mine was through vertical and underground incline shafts. Mining of the reef took place in stope panels.
Holes were drilled into the solid rock and were charged with explosives and blasted. The loosened rock was removed from the stope
panels and was conveyed to the shaft, tipped into the ore-pass systems, hoisted to the surface and conveyed to the metallurgical plant for
gold extraction.
Similar to the Buffels Section, the Harties Section exploited the Vaal Reef within the Central Rand Group of the
Witwatersrand Supergroup. Gold production at the Harties Section started in 1955 on the Vaal Reef. By the late 1990s the mine had
reached a position where its life was dependent on the mining of shaft pillars and scattered remnants. The Harties Section had been
converted from a high-grade mine with a short life to a medium-grade mine with a longer life. This has been achieved in three stages,
firstly, by the conversion of the previous owners' mine plan and operating method, secondly, by dropping the pay limits and putting in
place a medium-term operational plan including the opening up of old mining areas for remnant mining, and thirdly, developing a
sustainable life of mine plan that would have been supported by areas not included in the previous owners' mining plan due to high pay
limits.
BACKGROUND IMAGE
69
Mining and processing
Metallurgical processing facilities at the North West Operations included two operating plants. All the underground ore was
processed by the Buffels or South Plant. All the surface material was processed in the North Plant previously known as the Low Grade
Gold Plant, or LGGP, with limited underground material. These plants had a combined operating capacity of 260,000 tpm.
Electricity for South Africa is provided by Eskom, which is government owned. Eskom is the largest producer of electricity in
Africa. In South Africa, Eskom operates a national power supply grid consisting of 24 power stations across the country. Electricity to the
North West Operations is provided from the Kardell and Hermies substation located between Stilfontein and Orkney in the Buffels area.
Electricity is supplied directly from the national power grid to these substations at 88,000 volts. Further substations, located on mine site,
transform the power to 6,600 volts for direct supply to the shaft winder and air compressors. The power supply is further reduced to 525
volts for smaller devices and equipment used on the mine. The average annual power consumption is about 852 gigawatt hours, or GWHr
and the maximum demand is about 92 megawatts.
Environmental and closure aspects
Dust pollution was addressed through an active vegetation program and selective ridge plowing in areas marked for
rehabilitation. The vegetation program for the tailings dams was preceded by a detailed scientific and site-specific evaluation of the
tailings complex. Based on the results of geo-chemical analyses performed, the tailings medium was prepared for vegetation by the
addition of lime to neutralize the natural acidic conditions and fertilizer. Vegetation was then established and care is taken to select
species endemic to the area. A variety of species selected were then planted to ensure species diversity using either the leaching
(irrigation) or dry land method. Regular monitoring was conducted. To address dust pollution in unvegetated areas, in the short-term, the
open surface areas on top of the tailings dam are ridge ploughed mechanically. This method significantly reduces dust re-suspension. As
an additional measure in inaccessible areas, environmentally friendly chemical and organic dust suppressants are employed, where
necessary.
With the sale of Buffelsfontein to S&J, any liabilities or obligations in connection with the environmental rehabilitation of
Buffelsfontein, as well as the management and pumping of underground water are the responsibility of S&J. S&J will have the benefit,
however, of drawing down against the rehabilitation trust fund which was transferred to the Department of Minerals and Energy upon the
provisional liquidation of Buffelsfontein.
Current Year Production
The following table details the operating and production results from the North West Operations for the past three fiscal years
noting that the fiscal 2005 results are represented up until March 22, 2005, the date that Buffelsfontein was placed into provisional
liquidation:
Year ended June 30,
2005
1
2004
2003
Production
- Surface Operations
Ore mined ('000 tons)...............................................................................................................
976
1,647
5,519
Recovered grade (oz/ton) .........................................................................................................
0.028
0.026
0.014
Gold produced (ounces) ...........................................................................................................
27,328
43,180
78,447
- Underground Operations
Ore mined ('000 tons)...............................................................................................................
1,088
1,834
2,774
Recovered grade (oz/ton) .........................................................................................................
0.159
0.163
0.139
Gold produced (ounces) ...........................................................................................................
172,522
298,681
384,296
Total ounces produced ..............................................................................................................
199,850
341,861
462,743
Results of Operations ($)
Revenues ('000) ...........................................................................................................................
81,538
130,036
151,923
Production cost ('000)..................................................................................................................
100,695
134,465
144,568
Non-US GAAP Financial Data
Cash cost per ounce of gold ($)
2
.................................................................................................
504
393
312
Total cost per ounce of gold ($)
2
.................................................................................................
630
441
321
1
These operating and production results for the Buffels and Harties sections are for the period ending March 22, 2005, which is the date that
Buffelsfontein Gold Mine Limited was placed under provisional liquidation.
2
Cash cost per ounce and total cost per ounce are non-US GAAP financial measures of performance that we use to determine cash generating
capacities of the mines and to monitor performance of our mining operations. For a reconciliation to production costs see Item 5A: “Operating
Results.”
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70
Durban Deep Section
Overview
The Durban Roodepoort Deep Gold Mine, or Durban Deep Section, was the original gold mine of the Group. The section is
situated on the northern edge of the Witwatersrand Basin immediately to the west of Johannesburg. Mining had been taking place within
the lease area since the discovery of the Witwatersrand Goldfield in 1886 at nearby Langlaagte.
As of August 2000, we ceased all underground and open pit mining operations at the Durban Deep Section. Following the
withdrawal of our underground pumping subsidy, the deeper sections of the mine were flooded. On a combined basis, the Durban Deep
Section produced more than 37 million ounces of gold prior to the cessation of operations.
We concluded an agreement with M5 Developments (Pty) Ltd, or M5, on July 21, 2005, in terms of which M5, against payment
of a non-refundable fee of R1.5 million ($0.2 million), was granted an option to acquire the Durban Deep Section’s mine village for
R15.0 million ($2.2 million). The option was exercised on November 19, 2005 and the option fee will be deemed part payment of the
purchase consideration.
Property
The Durban Deep Section is located within the Central Witwatersrand Basin which stretches from the Durban Deep Section in
the west to the ERPM Section in the east. The Durban Deep Section is situated 9.3 miles (15 kilometers) west of Johannesburg and
contains mining title to 14,262 acres (5,772 hectares) and owns 3,667 acres (1,484 hectares) of freehold property. These include
administrative buildings, hospital, recreation complexes, housing in both hostel and free-standing houses and a security complex. We
have title to substantial land tracts on the outskirts of the City of Roodepoort, which is located in this section. We do not intend to convert
our old order rights under the MPRD Act.
Mining and processing
Five different ore bodies have been mined at the Durban Deep Section. Ore was mined from outcrops at the surface down to a
maximum depth of 9,200 feet (2,804 meters) and the reefs are known to persist to 13,000 feet (3,962.4 meters) below the surface within
the lease area.
Environmental and closure aspects
Underground mining at the Durban Deep Section ceased in August 2000. A detailed closure program was prepared and
submitted to the DME in December 2000. The drafting of the program was preceded by a comprehensive risk assessment process, during
which both residual and latent environmental risks and impacts were identified and prioritized. The risks identified are currently being
addressed in accordance with the closure program.
In order to mitigate the impact of windblown dust from dormant tailings dams in proximity to surrounding communities, short-
term dust suppression methods are currently being employed. In addition to dust suppression, amelioration and vegetation of the tailings
dams, the closure program is also focused on the sealing of shafts and openings to the surface, the demolition and rehabilitation of shaft
infrastructure and the rehabilitation of open surface areas.
The Durban Deep Section is located in the geographical area known as the Western Basin. There is no hydraulic continuity
between the Western Basin and the Central Basin. Water has already begun to flood to the surface in this area from other neighboring
mining operations. This water is of poor quality, containing heavy metals, sulphates and other pollutants. However, there has been no
flooding of water to the surface on any of our properties located in the Western Basin.
We developed a program to progressively seal all potential ingress points at the Durban Deep Section. During fiscal 2005, our
rehabilitation and environmental closure efforts continued in pursuit of the objectives of the mine’s Environmental Management Program.
A total of 39 hectares of additional vegetation was established on 2L24 Dump and, with the exception of Circular Shaft, all previously
operational shafts have now been closed and capped. All plugs used have been approved by the DME which also performs periodic
inspections during the sealing phase to monitor progress. However, despite these sealing programs, naturally occurring water conduits and
other geological features which are not mine-related and may not be located on mine property will allow surface water, especially storm
runoff, to reach underground aquifers. This will eventually cause water levels to rise. The costs associated with sealing off all potential
water ingress points at the Durban Deep Section have been included in our provision for environmental rehabilitation, restoration and
closure costs. The Company will continue to rehabilitate this land by breaking down the shaft heads and plugging holes.
BACKGROUND IMAGE
71
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we have estimated that the remaining
cost for the Durban Deep Section, in current monetary terms as at June 30, 2005, is $5.9 million. This has been included in the provision
for environmental rehabilitation, restoration and closure costs on our balance sheet. A total of $2.1 million has been contributed to the
Environmental Trust Fund. This is an irrevocable trust, managed by specific responsible people who we nominated and who are
appointed as trustees by the Master of the High Court of South Africa.
West Wits Section
Overview
We own 100% of West Witwatersrand Gold Mines Limited, or West Wits, which held the West Wits Section. We acquired the
entire share capital of West Witwatersrand Gold Holdings Limited, which was the parent company of West Wits, as well as Consolidated
Mining Corporation Limited's loan to West Witwatersrand Gold Holdings Limited, on April 1, 1996. We also acquired the entire issued
capital and the shareholders' claim and loan account of East Champ d'Or Gold Mine Ltd, a gold mining company with mining title in the
West Rand. The mining assets were sold to Bophelo Trading (Pty) Limited, subsequently renamed, Mogale Gold (Pty) Limited, or
Mogale, during fiscal 2004, effectively leading to the closure of the mining operation.
The West Wits Section is situated on the northern edge of the Witwatersrand Basin near the town of Krugersdorp to the west of
Johannesburg.
Property
The West Wits Section was formed out of the northern section of Randfontein Estates located in the West Rand Goldfields,
about 22.0 miles (35.4 kilometers) west of Johannesburg, Gauteng Province. The mine is reached via the R28 Johannesburg-Krugersdorp
highway.
West Wits also had rights to mine on three adjacent mining leases, namely, East Champ d'Or, West Rand Consolidated and
Luipaardsvlei. West Wits had mining title to 8,364 acres (3,790 hectares) and owns 72 acres (29 hectares) of freehold property on which
all of its mining operations are situated. These rights were sold to Mogale during fiscal 2004.
The climate of the Highveld area (at an elevation of 5,249 feet (1,600 meters) above mean sea level), where the mine is
situated, is humid continental with warm summers and cold winters. Temperatures range from a minimum of 23 degrees Fahrenheit (-
5 degrees Celsius) in June and July to a maximum of 93 degrees Fahrenheit (34 degrees Celsius) in December and January.
West Wits Section has entered into an agreement with Randfontein Estates Gold Mines Limited (represented by Harmony Gold)
and Atomaer (Pty) Limited, for the establishment of a regional underground water management vehicle. The ultimate objective of this
initiative is to collectively collect, process and report environmentally sensitive information relating to the impact of underground water
seepage on to surface, to the Department of Water Affairs and Forestry, or DWAF. It has set itself the objective of putting in place the
requisite infrastructure and technology to establish a commercially self-sustainable entity to extract underground water, treat the same and
to dispose of it either for commercial or agricultural use. Representations to DWAF to allow the treatment and disposal of water on
commercial terms were favorably received.
An integrated water management process for this area is important, both from the perspective of optimizing natural water
resources, considering the predominantly dry climate of South Africa, and also from an environmental perspective – a program that
captures and treats underground water before it decants into the Tweelopiesspruit area and the Krugersdorp Game Reserve (which is just
upstream from the Sterkfontein Caves system) is in place. If the above initiatives fail and the ingress of water and the subsequent flooding
into sensitive areas occur, and to the extent that liability is attributed to us, and not only to West Witwatersrand Gold Mines Limited, the
amounts involved could be significant.
BACKGROUND IMAGE
72
History
1967
West Witwatersrand Gold Mines Ltd, or West Wits, was incorporated and registered as a public company in South Africa
on December 21, 1967.
1996
We acquired the entire share capital of West Wits on April 1, 1996.
2000
All mining ceased at the West Wits Section in August 2000.
2002
We entered into an agreement with Bophelo Trading (Pty) Limited, subsequently renamed Mogale Gold (Pty) Limited, or
Mogale, for the sale of the West Wits gold plant, freehold areas, surface rights permits and certain related assets.
2003
The agreement with Mogale was subsequently amended by a Memorandum of Agreement on June 6, 2003. The effective
date of this sale was July 21, 2003.
2004
Mogale was placed under judicial management on April 13, 2004. As a result, the remaining balance on the purchase price
was impaired for $1.1 million.
2005
West Wits enters into an agreement with Randfontein Estates Gold Mines Limited and Atomaer (Pty) Limited, for the
establishment of a regional underground water management vehicle.
Mining and processing
In August 2000, we decided to cease all operations at both the underground and open pit operations at the West Wits Section.
This decision was taken after the South African government withdrew the water pumping subsidy. Without the subsidy, mining at the
West Wits Section became prohibitively expensive. The mining operation is an agglomeration of old mines on the Randfontein Basin
separated from the main part of the Witwatersrand Basin by a geological structure known as the Witpoortjie Horst. Over fifteen different
gold-bearing pebble horizons have been mined. Ore has been mined from outcrops at the surface down to a maximum depth of
approximately 5,900 feet (approximately 1,800 meters).
West Wits mined the Livingston Reef package, locally known as the East Reef. It comprises a 100-foot thick package of
conglomerates and quartzites dipping at an average of 18 degrees. The combined West Wits Section produced more than 1.0 million
ounces of gold since inception, before the cessation of underground and open-pit operations at the end of August 2000. Subsequent to the
cessation of mining operations, the metallurgical plant at the West Wits Section was taken over by the Crown Section for the processing
of sand dumps only.
Environmental and closure aspects
Underground mining at the West Wits Section ceased as of August 2000. We are required to affect environmental closure at the
West Wits Section although certain aspects of this have been assumed by Mogale. Commensurate with the decision to close these
operations, a detailed closure program was prepared and submitted to the DME in December 2000. The drafting of the program was
preceded by a comprehensive risk assessment process, during which both residual and latent environmental risks and impacts were
identified and prioritized. The risks identified are currently being addressed by the West Wits Section, in accordance with the closure
program submitted to the DME. In order to mitigate the impact of windblown dust from dormant tailings dams in proximity to
surrounding communities, short-term dust suppression methods are currently being employed. Although this is to continue until 2006, the
program is being run along with a vegetation program, currently focusing on the main tailings impoundments in question, namely the
main mine complex. During fiscal 2004, and as part of the rehabilitation program, a total of 17,000 trees were planted on the complex and
key surface areas were rehabilitated and grassed. Preliminary indications are that the tree species have established well.
Shaft rehabilitation has been scheduled to run concurrently with the rehabilitation of the slimes dam project. This will in effect
reduce the ingress of surface water to the groundwater system.
Similar to the Durban Deep Section, the company has developed a program to progressively seal all potential ingress points
at the West Wits Section. In addition, DWAF has authorized the Council of Geoscience to rehabilitate the sources outside of the
mining area. Further to this, rehabilitation of the main tailings dam was started during fiscal 2004, with ridge-ploughing and the
establishment of dry land vegetation on the top surface of the dam.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, we have estimated that the remaining
cost for the West Wits Section, in current monetary terms as at June 30, 2005, is $1.7 million. This has been included in the provision for
environmental rehabilitation, restoration and closure costs on our balance sheet. A total of $1.8 million has been contributed to the
Environmental Trust Fund. This is an irrevocable trust, managed by specific responsible people who we nominated and who are
appointed as trustees by the Master of the High Court of South Africa.
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73
Current year production
In fiscal 2004 these mining assets were sold to Mogale and accordingly, there was no production or related costs for fiscal 2005
and 2004. However, the following table details the operating and production results from the West Wits Section for the past three fiscal
years:
Year ended June 30,
2005
2004
2003
Production
Surface Operations
Ore mined ('000 tons)..................................................................................................................
-
-
1,606
Recovered grade (oz/ton) ............................................................................................................
-
-
0.009
Gold produced (ounces) ..............................................................................................................
-
-
14,531
Results of Operations ($)
Revenues ('000) ............................................................................................................................
-
-
4,796
Production cost ('000)...................................................................................................................
-
-
4,859
Non US GAAP Financial Data
Cash cost per ounce of gold ($)
1
..................................................................................................
-
-
334
Total cost per ounce of gold ($)
1
..................................................................................................
-
-
319
1
Cash cost per ounce and total cost per ounce are non-US GAAP financial measures of performance that we use to determine cash generating
capacities of the mines and to monitor performance of our mining operations. For reconciliation to production costs see Item 5A: “Operating
Results.”
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74
Legal Proceedings
Securities class action
On June 13, 2005, a securities class action was filed in the United States District Court for the Southern District of New York
against us and two of our officers. Since then, four nearly identical securities class action complaints have been filed against us and the
same officers. The cases have been consolidated in the Southern District of New York. We expect that a consolidated amended complaint
will be filed on behalf of a group of lead plaintiffs selected by the Court to represent the putative class of plaintiffs alleged in the
complaints. We anticipate that a response to such a complaint will be required some time in early 2006. To date, neither us, nor the
individual defendants have been formally served with a statement of claim regarding these matters.
The actions are allegedly filed on behalf of purchasers of our shares during two purported class periods spanning from October
23, 2003 to February 25, 2005. The complaints allege generally that we and the individual defendants made false and misleading public
statements regarding, among other things:
•
the restructuring of our North West Operations in South Africa;
•
our ability to reduce the negative impact of the increasing value of the South African Rand; and
•
the strength of our balance sheet.
Based on our review of the complaints, we believe the lawsuits are without merit and intend to vigorously defend ourselves and
our officers named in the complaints. We are not currently in a position to estimate the extent of any losses that may result from the
securities class action.
Invalid Issuance of Ordinary Shares in Connection with the Rawas Acquisition
During the months of July and October of 1999, we issued and allotted a total of 8,282,056 ordinary shares to Rothschild
Nominees Pty Ltd, Maxidrill Pty Ltd, PT Petrosea TBK, Repadre International Corporation, Minproc Engineering Pty Ltd, Rio Tinto
Rawas Holdings Ltd, Continental Goldfields Ltd, Consolidated African Mines Ltd, JCI (Isle of Man) Ltd, Weston Inv. Ltd and
Consolidated African Mines Australia Pty Ltd, all of which were creditors of Laverton or its subsidiaries, below the average stated capital
price. At the time, our then executive chairman, Mr. R.A.R. Kebble, was a director of Laverton Gold NL and JCI Gold Limited. These
ordinary shares were ostensibly issued pursuant to the planned acquisition of Rawas, a gold mine located in Indonesia, in consideration
for, or in anticipation of receiving, shares in and claims against various companies with ownership interests in Rawas and its mining
rights. Evidence came to light revealing that the ordinary shares were issued without our legal authority and suggesting that this occurred
as a result of a transaction entered into for the benefit of certain third parties. However, because of subsequent trades, splits and
consolidations, it was no longer possible to distinguish the affected shares from all of the other ordinary shares resulting in their identity
being lost. This meant that it was no longer possible to identify the invalidly issued shares or their holders. Accordingly, it was not
possible to remove these invalidly issued shares from our members' register. Under the South African Companies Act, 1973 (as
amended), the High Court of South Africa is permitted to validate an invalid share issuance. During a shareholders' meeting in 2002, our
shareholders, by special resolution, resolved to ratify the share issuance. We subsequently made an application to the High Court of South
Africa to validate the invalid issuance. This application was successful and the High Court validated the issuance in July 2002.
Internal investigations, which began in 2000 after we became aware of certain irregularities in the transaction, continued and
considered the potential for recovery through the pursuit of legal claims.
We have not instituted any actions against the recipients of our shares in this transaction as each of these entities had ceded to us
their claims against the companies in the Rawas group in exchange for those shares. However, legal action has begun both in South
Africa and Australia.
In July 2003, DRDGOLD Limited, Australasia (Pty) Limited and DRD Australasia Aps instituted action in the High Court of
South Africa, against Messrs. R.A.R. Kebble, M. Prinsloo, J. Stratton and H. C. Buitendag and JCI Limited. The following claims are
being pursued:
•
R69.6 million ($11.2 million) for the 7,644,944 ordinary shares issued on July 9, 1999, at a price per share of R9.10; and
•
R7.6 million ($1.2 million) for the 637,062 ordinary shares issued on October 8, 1999, at a price per share of R11.90.
BACKGROUND IMAGE
75
We instituted a separate action in Australia on December 12, 2003 against Mr. C. Mostert, Mr. J. Stratton, Continental Gold
Fields Limited, CAM Australia, (Pty) Ltd, Weston Investments (Pty) Ltd, CAM Jersey Ltd, and JCI (Isle of Man) Ltd for:
•
R67,942 ($10,827) being the costs of issuing our shares;
•
R77.0 million ($12.3 million) being profits made by third parties who were issued our shares at the time; and
•
R4.7 million (0.8 million) being costs incurred to validate the shares invalidly issued.
Pleadings in these matters have closed and we are currently awaiting the allocation of a trial date by the High Court of South
Africa.
Liquidation of Buffelsfontein Gold Mine Limited
On March 22, 2005, Buffelsfontein Gold Mines Limited (which owns the North West Operations), or Buffelsfontein, was placed
under provisional liquidation after an earthquake damaged its No. 5 Shaft. Buffelsfontein had up until the date of provisional liquidation,
maintained the underground water levels in the area by pumping water from underground to surface at three of its own shafts, as well as
the Margaret Shaft of the neighboring Stilfontein Gold Mines Limited, or Stilfontein. The latter arrangement occurred in terms of an
agreement entered into in 1992 between Stilfontein and Hartebeestfontein Gold Mines Limited, or Hartebeestfontein. Hartebeestfontein
became a wholly-owned subsidiary of Buffelsfontein when Buffelsfontein subsequently acquired Hartebeestfontein.
In April 2005, AngloGold Ashanti Limited, or AngloGold Ashanti, brought urgent proceedings before the High Court of South
Africa for an order to compel us to continue with the pumping operations after it was announced that Buffelsfontein had been placed into
provisional liquidation. Relief was also sought against the relevant government departments to either assume responsibility for, or
contribute to the pumping of underground water. These proceedings were postponed after the DWAF issued various directives under
Section 19 of the Water Affairs Act against us, the provisional liquidators of Buffelsfontein, Harmony Gold, AngloGold Ashanti and
Stilfontein to continue with pumping operations and to contribute to pumping costs in equal shares. A total of three directives have been
issued, the last of which expired on October 21, 2005.
On October 6, 2005, we entered into an agreement with S&J for the sale of our shareholding in Buffelsfontein subject to certain
conditions and approval by the High Court of South Africa. These conditions included indemnifying us against any liabilities or
obligations related to environmental rehabilitation and the management and pumping of underground water. The proposed scheme of
arrangement was conditional upon DWAF agreeing to substitute us with S&J to the extent that DWAF envisaged imposing further
responsibility on us. On October 21, 2005, the scheme of arrangement for the acquisition of Buffelsfontein proposed by S&J and accepted
by the majority of Buffelsfontein creditors, including us, was approved and sanctioned by the High Court of South Africa. All the
conditions of the scheme have been met, and the order for the provisional liquidation of Buffelsfontein was lifted by the High Court of
South Africa on November 1, 2005.
AngloGold Ashanti has, pursuant to the implementation of the scheme and the release by DWAF, notified us that it no longer
intends to seek any substantive relief against us.
In terms of the DWAF directives, subsequent to the provisional liquidation of Buffelsfontein, we incurred pumping costs of
approximately R8.2 million ($1.3 million).
Other Proceedings
On June 12, 2002, DRD Australia Aps and DRD Australia Pty Limited instituted proceedings against Mr. J. Stratton in the
Supreme Court of Western Australia for payment of A$2,794,318 ($1.9 million) plus interest in respect of dishonestly assisting Mr. C.
Mostert in making payments referred to below and receiving part of the proceeds of these wrongful actions. No trial date has been set as
yet.
In 2003, DRD Australasia Aps instituted three separate proceedings against Mr. C. Mostert, Newshore Nominees (Pty) Ltd and
Mr. R. Bryer in the Supreme Court of Western Australia for payment of A$902,000 ($622,650) in respect of unauthorized and undue
payments made to Cartier Management (Pty) Ltd, and overpayment to Goldspark Ltd and Transit Securities Inc. It is alleged that payment
was made to facilitate the intended acquisition of Dome Resources NL by favoring Mr. J.P. Boyer, a director of Dome Resources NL at
the time, as well as other reasons.
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76
Mr. M. Silver and Fairchoice Ltd have brought an action against us and Dome in the Supreme Court of New South Wales,
Australia seeking to enforce a contract under which Dome agreed to pay, and we agreed to guarantee, a payment of $475,000 to Mr. M.
Silver upon his retirement from the board of directors of Dome. Mr. M. Silver retired from Dome's board of directors in May 2000. The
contract was also entered into in May 2000. However, we believe that this contract is not enforceable as it was not authorized by our
directors or shareholders nor was it authorized by Dome's directors or shareholders. Therefore, we and Dome have not made any payment
to Mr. M. Silver. We believe that this action is without merit and will continue to vigorously defend against it.
Newshore Nominees Pty Ltd, or Newshore, has brought an action against us in the District Court of Western Australia claiming
that they are owed $148,000 as payment under an invoice issued in August 2000 for financial services. The Court ruled in favor of
Newshore on March 31, 2004, ordering us to pay the amount claimed. We have since instituted appeal proceedings. Our claim against
Newshore is still pending.
On May 20, 2003, a summons was issued by our former chairman, Mr. R.A.R. Kebble and his son, Mr. B. Kebble, against us,
our executive chairman, Mr. M.M. Wellesley-Wood and Associated Intelligence Network (Pty) Limited, or AIN. AIN is a private
investigator firm. Their claim is based on allegations that we hired AIN to invade their privacy by obtaining personal information about
them and to cause them embarrassment and commercial harm. They seek compensation for damages suffered as a result of these alleged
actions in an amount of R1.0 million ($0.2 million) each from us, Mr. M.M. Wellesley-Wood and AIN jointly and severally. In addition,
they seek punitive damages in a total amount of R10 million ($1.6 million) from us and AIN jointly and severally. The punitive damages
claim is unique under South African law. Initial hearings have taken place to decide a preliminary point raised by us that no such claim
exists in South African law. The court has ruled against us on a technicality, making a ruling to the effect that the trial court will hear and
adjudicate this issue. Mr. B Kebble has since passed on, and it is uncertain whether the executors of his estate intend to pursue this matter.
Should they proceed, we will continue to defend against these claims. We are currently awaiting the allocation of a trial date.
On May 22, 2003, we issued a summons in the High Court of Johannesburg against Mr. R.A.R. Kebble in which we seek
payment of R3.2 million ($0.5 million) plus interest. This amount represents a sum paid to Mr. R.A.R. Kebble by us during the period
beginning in September 1999, and ending in April 2000, under a restraint of trade agreement entered into between us and Mr. R.A.R.
Kebble. We believe that Mr. R.A.R. Kebble has repudiated and/or materially breached the provisions of this agreement. We have,
accordingly, cancelled the agreement and we seek restitution of the amounts paid. Mr. R.A.R. Kebble has lodged a counterclaim,
claiming cancellation of an agreement providing for the payment of retirement benefits ($0.3 million), and challenging the cancellation of
share-options that he held at the time of his resignation from our board. Both these claims are being defended.
On April 22, 2002, we issued a summons in the High Court of Johannesburg against JCI Ltd and CAM Ltd for payment of
R21.6 million ($3.4 million) plus interest for option fees on shares that we held in Randgold & Exploration Ltd, and in respect of which
we extended an option to purchase to JCI Ltd and CAM Ltd against payment of an agreed option fee, plus a further claim for the
reimbursement of costs, totaling R3.0 million ($0.5 million) which we had incurred on behalf of the defendants in the attempted corporate
reconstruction of Western Areas Ltd and Randfontein Estates Gold Mine Ltd. The matter was heard on August 30, 2004. At this date
partial settlement of certain small claims related to the larger JCI Ltd and CAM Ltd claim, to the value of R2.4 million ($0.4 million), was
awarded to us by the High Court of Johannesburg. On October 21, 2004, the High Court of Johannesburg ordered JCI Ltd and CAM Ltd
to pay us an amount of R35.7 million ($5.5 million), plus interest and costs, including the costs of two of our legal counsel. JCI Limited’s
and CAM Limited’s counterclaim to recover the earlier part-payment was also dismissed with costs. JCI Ltd and CAM Ltd made an
application to the High Court of Johannesburg for leave to appeal, which was rejected. In fiscal 2005, we received full payment of this
claim.
On September 23, 2002, we and Harmony Gold Mining Company Limited, another South African gold mining company, filed a
complaint with the South African Competition Commission against Iscor, a South African steel producer. The complaint alleges that Iscor
is abusing its dominant position by charging excessive prices for its local flat steel products and providing inducements for steel
purchasers to refrain from importing competing steel products. The Competition Commission dismissed our claim, and the matter has
since been referred to the Competition Tribunal, who has the authority to overrule the determination of the commission. Pleadings in the
matter have closed and we await the allocation of a hearing date.
We are not a party to any other material legal proceedings, nor to our knowledge is any of our property the subject of any other
material pending legal proceedings.
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77
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following Operating and Financial Review and Prospects section is intended to help the reader understand the factors
that have affected the Company's financial condition and results of operations for the historical period covered by the financial
statements and management's assessment of factors and trends which are anticipated to have a material effect on the Company's
financial condition and results in future periods. This section is provided as a supplement to, and should be read in conjunction with,
our audited financial statements and the other financial information contained elsewhere in this Annual Report. Our financial
statements have been prepared in accordance with US GAAP. Our discussion contains forward looking information based on current
expectations that involve risks and uncertainties, such as our plans, objectives and intentions. Our actual results may differ from those
indicated in such forward looking statements.
The Operating and Financial Review and Prospects include the following sections:
•
Operating results:
o       Business overview , a general description of our business.
o       Key drivers of our operating results and principal factors affecting our operating results , a general description of
the principal uncertainties and variables facing our business and the primary factors that have a significant impact on
our operating performance.
o       Recent acquisitions and dispositions , a description of the recent acquisitions and other transactions that have
impacted, or will impact, our performance.
o       Key financial and operating indicators , a presentation of the key financial measures we use to track our operating
performance.
o       Application of critical accounting policies, a discussion of accounting policies that require critical judgments and
estimates.
o       Operating results , an analysis of our consolidated results of operations during the three fiscal years presented in our
financial statements. The analysis is presented both on a consolidated basis, and by geographic segment.
•
Liquidity and capital resources, an analysis of our cash flows, borrowings and our anticipated funding requirements and
sources.
•
Trend information, a review of the outlook for, and trends affecting, our business.
•
Off-balance sheet arrangements.
•
Tabular disclosure of contractual obligations, being the numerical review of our contractual future cash obligations.
BACKGROUND IMAGE
78
5A. OPERATING RESULTS
Business overview
We are a gold mining company engaged in underground and surface gold mining, including exploration, extraction,
processing and smelting. We have operations comprising underground and open-pit mining and surface retreatment operations,
including the requisite infrastructure and metallurgical processing plants. Our operations are located in South Africa and Papua New
Guinea. In addition, we hold a 45.33% equity interest in Emperor Mines Limited, or Emperor, in Fiji. We divide our worldwide
operations into two geographic regions, based on revenue generated from the location of the seller, as follows:
•
South Africa comprises the Blyvoor Section. We also hold a 40% equity interest in Crown Gold Recoveries (Pty)
Limited which includes the Crown and ERPM Sections. On March 22, 2005, the North West Operations (Harties
and Buffels Sections) were placed under provisional liquidation after an earthquake damaged its No. 5 Shaft. As a
result we report the 2005, 2004 and 2003 information relating to the North West Operations as a discontinued
operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods
accordingly.
•
Australasia is comprised of the Tolukuma Section, a 20% interest in the Porgera Joint Venture, or Porgera, and a
45.33% interest in Emperor.
In fiscal 2005, the continuing South African Operations accounted for 37% of our continuing production, 72% of our Ore
Reserves, a $33.5 million net loss after tax and 32% of our total assets. The Australasian Operations accounted for 63% of our
continuing production, 28% of our Ore Reserves, a net loss after tax of $3.9 million and 68% of our total assets.
Exploration activities are undertaken in South Africa, Papua New Guinea, Fiji and Australia.
From 1895 to 1997 our principal mining operation was the Durban Deep Section. Up to 1999, our general growth strategy
was to acquire existing under-performing mines in South Africa at relatively low acquisition costs, and attempting to turn them into
profitable business units by introducing low-cost mining methods and reducing costs through employing our experience in managing
marginal gold mines to more efficiently utilize existing infrastructures. Since 1999 our focus has been to expand our operations
outside of South Africa by acquiring lower cash cost and higher margin mines than those in South Africa, through the acquisition of
Dome Resources NL (Tolukuma Section), our 20% interest in Porgera and our 45.33% interest in Emperor (Vatukoula Section).
The North West Operations recorded significant losses of $62.5 million, compounded by the collective negative impact of a
series of events that culminated in a devastating earthquake. As a result, these operations were placed under provisional liquidation on
March 22, 2005. This, as well as the continued weakness of the Dollar, price increases in key consumables in South Africa and
operational difficulties ultimately resulted in a decrease in our results for fiscal 2005 in comparison to fiscal 2004 and fiscal 2003. Our
balance sheet has strengthened as a result of the liquidation of the North West Operations, which had a negative $17.8 million net
asset value, as at March 22, 2005.
As at June 30, 2005, we had Ore Reserves of approximately 5.6 million ounces, compared to 6.0 million ounces as at
June 30, 2004, excluding reserves at our discontinued operations.
BACKGROUND IMAGE
79
Key drivers of our operating results and principal factors affecting our operating results
The principal uncertainties and variables facing our business and, therefore, the key drivers of our operating results are:
•
The price of gold, which fluctuates widely in local currencies;
•
The tonnages produced and gold content thereof, impacting on the amount of gold we produce at our operations;
•
The cost of producing that gold as a result of mining efficiencies; and
•
General economic factors, such as exchange rate fluctuations and inflation, and factors affecting mining operations in the
developing countries in which we operate.
Gold price
Our revenues are derived primarily from the sale of gold produced at our mines. As a result, our operating results are directly
related to the price of gold which can fluctuate widely and is affected by numerous factors beyond our control, including industrial and
jewellery demand, expectations with respect to the rate of inflation, the strength of the Dollar (the currency in which the price of gold
is generally quoted) and of other currencies, interest rates, actual or expected gold sales by central banks, forward sales by producers,
global or regional political or economic events, and production and cost levels in major gold-producing regions such as South Africa.
In addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities. The demand for and
supply of gold may affect gold prices, but not necessarily in the same manner that supply and demand affect the prices of other
commodities. The supply of gold consists of a combination of new production from mining and existing stocks of bullion and
fabricated gold held by governments, public and private financial institutions, industrial organizations and private individuals. As a
general rule we sell the gold produced at market prices to obtain the maximum benefit from prevailing gold prices, although we have
previously entered into hedging arrangements, such as forward sales or other derivative instruments, which established a price in
advance for the sale of our future gold production. During fiscal 2002, we undertook a major restructuring of our hedge book,
designed to close out our hedge positions.
The following table indicates the movement in the Dollar gold spot price for the 2005, 2004 and 2003 fiscal years:
2005 fiscal year
2004 fiscal year
% increase
Opening gold spot price on July 1, ..................................
$396 per ounce
$346 per ounce
14%
Closing gold spot price on June 30, .................................
$437 per ounce
$396 per ounce
10%
Lowest gold spot price during the fiscal year ...................
$387 per ounce
$343 per ounce
13%
Highest gold spot price during the fiscal year...................
$454 per ounce
$427 per ounce
6%
Average gold spot price for the fiscal year .......................
$421 per ounce
$389 per ounce
8%
2004 fiscal year
2003 fiscal year
% increase
Opening gold spot price on July 1, ..................................
$346 per ounce
$315 per ounce
10%
Closing gold spot price on June 30, .................................
$396 per ounce
$346 per ounce
14%
Lowest gold spot price during the fiscal year ...................
$343 per ounce
$302 per ounce
14%
Highest gold spot price during the fiscal year...................
$427 per ounce
$382 per ounce
12%
Average gold spot price for the fiscal year .......................
$389 per ounce
$334 per ounce
16%
2003 fiscal year
2002 fiscal year
% increase
Opening gold spot price on July 1, ..................................
$315 per ounce
$271 per ounce
16%
Closing gold spot price on June 30, .................................
$346 per ounce
$315 per ounce
10%
Lowest gold spot price during the fiscal year ...................
$302 per ounce
$265 per ounce
14%
Highest gold spot price during the fiscal year...................
$382 per ounce
$327 per ounce
17%
Average gold spot price for the fiscal year .......................
$334 per ounce
$296 per ounce
13%
A significant upward trend in the Dollar gold price has been noted over the past few years, however, as the majority of our
production has been sourced from our South African Operations during those three fiscal years, the impact of the Rand/Dollar
exchange rate has been significant on our operating results. Whereas the Dollar gold price has shown consistent growth over the last
three fiscal years, the Rand gold price (based on average prices for the year) has decreased from R3,023 per ounce, in fiscal 2003, to
R2,619 per ounce in fiscal 2005.
BACKGROUND IMAGE
80
Gold production and production costs
Gold production from our continuing operations, including our 20% attributable share of Porgera, totaled 433,586 ounces
during fiscal 2005, in comparison to 466,284 ounces in fiscal 2004, and 330,253 ounces in fiscal 2003. The North West Operations
(our discontinued operation) recorded production of 199,850 in fiscal 2005, 341,861 in fiscal 2004 and 462,743 in fiscal 2003.
Our costs and expenses consist primarily of production costs, royalties and depreciation and amortization. Production costs
include labor, contractor services, stores, electricity and other related costs, incurred in the production of gold. Labor is the largest
component of production costs, constituting 51% of production costs for fiscal 2005, as the majority of our mining operations are deep
level underground mines which are more labor intensive.
At our continuing South African Operations, production decreased from 262,157 ounces in fiscal 2003, produced from 4.6
million tonnes milled at an average yield of 2.24g/t, to 233,094 ounces in fiscal 2004, produced from 3.1 million tonnes milled at an
average yield of 2.33g/t, to 161,878 ounces produced from 3.5 million tonnes milled at an average yield of 1.43g/t in fiscal 2005. Due
to the decline in the Rand gold price over the last three fiscal years, our South African Operations have increasingly focused on
mining higher grade ore panels, to achieve an increased yield from the tonnages milled. During fiscal 2005, however, the benefits of
mining higher grade ore were negated as a result of poor initial recoveries from the Slimes Dam project at Blyvoor.
At our Australasian Operations production increased from 68,096 ounces in fiscal 2003, produced from 0.2 million tonnes
milled at an average yield of 13.07g/t, to 233,190 ounces, produced from 1.1 million tonnes milled at an average yield of 6.38g/t in
fiscal 2004, to 271,708 ounces, produced from 1.4 million tonnes milled at an average yield of 5.99g/t in fiscal 2005. Our 20% interest
in Porgera contributed 195,394 ounces in fiscal 2005, produced from 1.2 million tonnes milled at an average yield of 5.06g/t, in
comparison with 147,475 ounces, produced from 0.9 million tonnes milled at an average yield of 4.87g/t in fiscal 2004 (acquired
October 14, 2003). The Tolukuma Section has been a consistent producer at a high grade of 11.25g/t in fiscal 2005, 13.60g/t in fiscal
2004 and 13.07g/t in fiscal 2003.
Due to the accessibility of the Ore Reserves at our Australasian Operations and the high yield per tonne milled, these operations
produced at a cash cost
1
of $226 per ounce and a total cost
2
of $343 per ounce in fiscal 2005, compared with our continuing South African
Operations that produced at a cash cost of $464 per ounce and a total cost of $628 per ounce in fiscal 2005.
General economic factors
As at October 31, 2005, we have three operations in two countries (South Africa and Papua New Guinea), and we are exposed
to a number of factors, which could impact on our profitability, resulting from exchange rate fluctuations, inflation and other risks
relating to these specific countries (refer to Item 3D.: “Risk factors”). In conducting mining operations, we recognize the inherent risks
and uncertainties of the industry, and the wasting nature of the assets.
Effect of exchange rate fluctuations
As of June 30, 2005, approximately 57% of our total revenues (including revenue of our discontinued operation) are
generated in South Africa, and approximately 43% of our total revenues are generated from operations in Papua New Guinea. Most of
our production costs, therefore, are denominated in local currencies, such as the South African Rand and the Papua New Guinean
Kina. In fiscal 2005, we derived 100% of our revenues in Dollars and incurred 83% of our production costs in these local currencies.
Although fiscal 2005 was marked by a stabilization of the trend noted in the prior year of the weakening of the Dollar against the
Rand, this currency movement still accounted for approximately $4 per ounce, or 6%, of the total increase in cash costs per ounce for
our South African Operations from fiscal 2004. The weakening of the Dollar against the Rand accounted for $121 per ounce, or a
101%, increase in cash costs per ounce for our South African Operations from fiscal 2003 to fiscal 2004. As the price of gold is
denominated in Dollars and we realize our revenues in Dollars, the depreciation of the Dollar against these local currencies reduces
our profitability. Based upon average rates during the respective years, the Rand strengthened by 10% against the Dollar in fiscal 2005
compared to fiscal 2004 and 24% from fiscal 2003 to fiscal 2004. This has led to an effective decrease of 8.5% in the average Rand
gold price in comparison to fiscal 2004 and 11.2% in fiscal 2004, compared to fiscal 2003. The Kina, based on average rates in the
respective fiscal years, strengthened by 4% against the Dollar in fiscal 2005 compared to fiscal 2004 and 16% in fiscal 2004 compared
to fiscal 2003.
1
Cash costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs see Item 5A:. “Operating Results – Reconciliation of cash
costs per ounce, total costs and total costs per ounce.”
2
Total costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs see Item 5A:. “Operating Results– Reconciliation of cash
costs per ounce, total costs and total costs per ounce.”
BACKGROUND IMAGE
81
As an unhedged gold producer we do not enter into forward gold sales contracts to reduce our exposure to market
fluctuations in the Dollar gold price or the exchange rate movements of the Rand and Kina. If revenue from gold sales falls for a
substantial period below our cost of production at our operations, we could determine that it is not economically feasible to continue
commercial production at any or all of our operations or to continue the development of some or all of our projects. Our weighted
average total costs per ounce for the continuing operations of our wholly-owned subsidiaries, as well as Porgera, was $449 per ounce
of gold produced in the fiscal 2005 year, $418 per ounce in the 2004 fiscal year and $151 per ounce in the 2003 fiscal year. The
average gold price received, from continuing operations, was $423 per ounce in fiscal 2005, $393 per ounce in fiscal 2004 and $331
per ounce in fiscal 2003.
In addition, to fund local operations and comply with South African exchange controls, we hold funds in local currencies,
such as the Rand, Kina and Australian Dollar. The Dollar value of these currencies may be affected by exchange rate fluctuations and,
as a result, our cash and cash equivalents reported in Dollars could change. At June 30, 2005, approximately 64% of our cash and cash
equivalents, being $23.2 million, were held in such currencies in comparison to 66%, or $14.8 million, at June 30, 2004 and 100%, or
$44.4 million, at June 30, 2003.
Effect of inflation
In the past, our operations have been materially adversely affected by inflation. As we are unable to control the prices at
which our gold is sold, if there is a significant increase in inflation in South Africa and in Papua New Guinea, without a concurrent
devaluation of the local currency or an increase in the price of gold, our costs will increase, negatively affecting our operating results.
The movement in the Rand/Dollar exchange rate, based upon average rates during the respective years, and the local annual
inflation rate, as measured by the South African Consumer Price Index, or CPIX, are set out in the table below:
Year ended June 30,
2005
(%)
2004
(%)
2003
(%)
The average Rand/Dollar exchange rate strengthened
(9.8)
(23.9)
(11.0)
Less: CPIX (inflation rate).............................................................................................................
3.5
4.8
9.6
Net effect ......................................................................................................................................
(13.3)
(28.7)
(20.6)
The South African CPIX inflation rate has decreased in fiscal 2005 from fiscal 2004 and has decreased significantly in
comparison to historical trends. However, historically the effect of the movements in the exchange rate has exacerbated the effect on
profitability experienced as a result of the movement in the CPIX inflation rate, as illustrated above.
The movement in the Kina/Dollar exchange rate, based upon average rates during the respective years, and the local annual
inflation rate, as measured by the Papua New Guinea CPIX, are set out in the table below:
Year ended June 30,
2005
(%)
2004
(%)
2003
(%)
The average Kina/Dollar exchange rate (strengthened)/weakened by
(3.9)
(13.7)
5.9
Less: CPIX (inflation rate).............................................................................................................
0.9
1.9
19.0
Net effect ......................................................................................................................................
(4.8)
(15.6)
(13.1)
The Papua New Guinea CPIX inflation rate has decreased in fiscal 2005 from fiscal 2004. The decrease in the inflation rate
in Papua New Guinea has also been exacerbated by the strengthening of the Kina against the Dollar, as illustrated above.
South African political, economic and other factors
We are a South African company with a large portion of our operations situated in South Africa. As a result, we are subject to
various economic, fiscal, monetary and political factors that affect South African companies generally. South African companies are
subject to exchange control regulations. Governmental officials have from time to time stated their intentions to lift South Africa’s
exchange control regulations when economic conditions permit such action. Over the last few years, certain aspects of exchange
controls for financial institutions and individuals have been incrementally relaxed. It is, however, impossible to predict when the
South African Government will remove exchange controls in their entirety. South African companies remain subject to restrictions on
their ability to export and deploy capital outside of the Southern African Common Monetary Area, unless dispensation has been
granted by the South African Reserve Bank. For a detailed discussion of exchange controls, see Item 10D.: “Exchange controls.”
BACKGROUND IMAGE
82
On May 1, 2004, the Mineral and Petroleum Resources Development Act, or MPRD Act, became effective. Prior to the
introduction of the MPRD Act, private ownership in mineral rights and statutory mining rights in South Africa could be acquired
through the common law or by statute. Now, all mineral rights have been placed under the custodianship of the South African
government under the provisions of the MPRD Act, and old order proprietary rights need to be converted to new order rights of use
within certain prescribed periods. We have submitted certain applications in this regard. This process is described more fully under
Item 4B.: “Business Overview – Governmental regulations and its effect on our business - South Africa – Common Law Mineral
Rights and Statutory Mining Rights.”
Papua New Guinea political, economic and other factors
Our operations based in Papua New Guinea are also subject to political and economical uncertainties, including the risk of
civil rebellion, expropriation, nationalization, renegotiation of existing contracts, mining licenses and permits, changes in laws or
taxation policies, currency exchange restrictions and international monetary fluctuations.
Recent acquisitions and dispositions
In June 2002, we entered into an agreement with Bophelo Trading (Pty) Limited, subsequently renamed Mogale Gold (Pty)
Limited, or Mogale, for the sale of the West Wits gold plant and certain related assets for R25.0 million ($2.4 million) to process certain
sand dumps, surface materials, freehold areas and surface right permits located at the West Wits Section. We retain the right to mine
underground by virtue of certain mining titles and mining authorizations on the property, subject to the conversion of these rights in terms
of the MPRD Act. As part of the agreement, we agreed to indemnify Mogale against any loss, damage or expense which Mogale might
incur as a result of any liability in connection with the transferred assets, the cause of which arose prior to this sale. The effective date of
this sale was July 21, 2003, when all of the conditions precedent were fulfilled and Mogale was granted a mining license.
Beginning in July 2002, we entered into a series of transactions, consistent with our black economic empowerment strategy (see
Item 4B.: "Business Overview"), resulting in the sale of 60% of our interest in Crown Gold Recoveries (Pty) Limited, or CGR, to Khumo
Bathong Holdings (Pty) Limited, or KBH, for R105.0 million ($11.6 million). In October 2002, CGR acquired 100% of the outstanding
share capital of, and loan accounts in, East Rand Proprietary Mines Limited, or ERPM, for R100.0 million ($11.0 million) from Daun et
Cie AG, Courthiel Holdings (Pty) Ltd, KBH, Claas Edmond Daun, Paul Cornelis Thomas Schouten, Moltin Paseka Ncholo, Masechaba
Palesa Moletsane Ncholo, Michelle Patience Baird, Derek Sean Webbstock.
With effect from October 14, 2003, we acquired the shares in Orogen Minerals (Porgera) Limited, or OMP, and Mineral
Resources Porgera Limited, or MRP. The transaction was affected through the amalgamation of OMP, MRP and our wholly-owned
subsidiary, Dome Resources (PNG) Limited. OMP changed its name to DRD (Porgera) Limited. This resulted in us acquiring a 20%
interest in the Porgera Joint Venture in Papua New Guinea for $77.1 million, comprising $16.7 million in shares and $59.2 million in
cash, net of cash acquired. The Porgera mine's main business focus is the extraction of gold.
The global gold mining industry has experienced active consolidation and rationalization activities in recent years.
Accordingly, we have been, and expect to continue to be, involved in a number of acquisitions and dispositions as part of this global
trend and to identify value-adding business combinations and acquisition opportunities. To ensure that our Ore Reserve base is
maintained, or increased, we are currently focusing on acquiring low cost, high margin mines in other global regions. Our recent
acquisitions, over the last fiscal year, include an increase in our interest in Emperor from 19.78% as at June 30, 2004, to 45.33%
through a takeover offer completed on July 30, 2004. We acquired 29,097,269 Emperor shares in exchange for 6,612,676 of our
ordinary shares, valued at $16.6 million, based on the market value of our shares on the date of issue.
On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of Buffelsfontein
Gold Mines Limited, our subsidiary that owns the North West Operations, which order was granted on the same day. On
October 6, 2005, we concluded an agreement with Simmer and Jack Limited, or S&J, for the sale of our shareholdings in Buffelsfontein
subject to certain conditions. These include indemnifying us against any liabilities or obligations that could arise relating to environmental
rehabilitation and the management and pumping of underground water. The proposed scheme of arrangement was conditional upon the
following:
•
Department of Water Affairs and Forestry, or DWAF, agreeing to substitute us with S&J to the extent that DWAF envisaged
imposing further responsibility on us;
•
the acceptance by the High Court of South Africa and the majority of Buffelsfontein’s creditors of a scheme arrangement
proposed by S&J; and
•
approval by the Competition Commission of South Africa.
BACKGROUND IMAGE
83
On October 21, 2005, the scheme of arrangement for the acquisition of Buffelsfontein proposed by S&J and accepted by the
majority of Buffelsfontein creditors, including us, was approved and sanctioned by the High Court of South Africa. The order for the
provisional liquidation of Buffelsfontein was lifted by the High Court of South Africa on November 1, 2005 and all the conditions of the
scheme have been met.
On July 6, 2005, we signed a Memorandum of Understanding with our black economic empowerment partner, KBH, regarding
the acquisition by KBH of a 15% stake in our South African Operations. The intention of the transaction is to bring us into full
compliance with the 10-year, 26% black economic empowerment equity requirement as stipulated in the Mining Charter. On October 27,
2005, our board of directors approved the black economic empowerment transaction. The transaction has been facilitated by the IDC,
which agreed to a debt restructuring in CGR. The transaction comprises the exchange of 75% of KBH’s 60% stake in CGR, including its
wholly-owned subsidiary ERPM, and a cash payment of $2.0 million (R13.2 million) for an effective 15% interest in our wholly-owned subsidiary, Blyvooruitzicht Gold Mining Company Limited, or Blyvoor. The new structure results in Khumo Gold SPV (Pty) Limited, or Khumo Gold, which is an affiliate of KBH, acquiring initially, a 15% interest in a newly created vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD SA, which includes ERPM, CGR and Blyvoor. We will retain an 85% interest. In addition, Khumo Gold was granted an option, exercisable over the next three years, to acquire a further 11% interest in DRDGOLD SA for $1.4 million (R9.3 million). Khumo Gold will place a portion of the further 11% interest in a new Employee Trust. DRDGOLD Limited will subscribe for $4.8 million (R31.8 million) new Khumo Gold preference shares. The proceeds from these preference shares will be used by Khumo Gold to settle an existing loan to KBH of $1.2 million (R7.9 million), subscribe for $0.6 million (R4.1 million) new preference shares in ERPM, subscribe for $0.4 million (R2.7 million) new preference shares in CGR, subscribe for $0.6 million (R3.9 million) new preference shares in Blyvoor and subscribe for an initial 15% of the issued ordinary shares in DRDGOLD SA for $2.0 million (R13.2 million). Dr. Paseka Ncholo, our Non-Executive Chairman, will take over as Executive Chairman of DRDGOLD SA with effect from November 1, 2005.
We concluded an agreement with M5 Developments (Pty) Ltd, or M5, on July 21, 2005, in terms of which M5, against payment
of a non-refundable monthly fee of R0.5 million ($0.1 million) payable until the exercise of the option, was granted an option to acquire
the Durban Deep Section’s mine village for R15.0 million ($2.2 million). The option was exercised on November 19, 2005 and the option
fee will be deemed part payment of the purchase consideration.
On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire
our wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea assets,
comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of our exploration
tenements in Papua New Guinea. Currently we, through DRD (Isle of Man), hold a 45.33% interest in Emperor. Implementation of the
transaction requires the restructuring of our offshore operations, whereby DRD (Isle of Man) will transfer the following material
assets to our new wholly-owned subsidiary, DRDGOLD (Offshore) Limited, or DRD (Offshore):
•
its 45.33% interest in Emperor; and
•
an A$10.0 million ($7.6 million) convertible loan facility which DRD (Isle of Man) has advanced to Emperor, in terms of
which we can elect to convert such debt facility into additional Emperor shares at A$0.30 ($0.23) per Emperor share.
We will then sell DRD (Isle of Man) to DRD (Offshore) for a purchase consideration of $230.0 million. The restructuring is
subject, inter alia, to the following conditions precedent:
•
our shareholder approval;
•
South African Reserve Bank, or SARB, approval; and
•
other regulatory consents.
DRD (Offshore) will then sell DRD (Isle of Man) to Emperor. The purchase consideration for DRD (Isle of Man) is $230.0
million, which is subject to certain completion adjustments to reflect the change in the capital position of both Emperor and DRD (Isle
of Man) between October 1, 2005, which is the effective date, and completion of the transaction. The purchase consideration will be
settled by:
•
the issue of 751,879,699 new Emperor shares to DRD (Offshore), issued at A$0.35 ($0.26) per share which currently
equates to $200.0 million; and
•
$30.0 million in cash.
The transaction is subject, inter alia, to the following conditions precedent:
•
the restructuring becoming unconditional,
•
approval by the Australian Foreign Investment Review Board;
•
SARB approval;
•
Emperor shareholder approval;
•
there being no material adverse change in either Emperor or the gold assets; and
•
a number of regulatory and banking consents and approvals being obtained.
BACKGROUND IMAGE
84
Upon completion of the transaction and the issue of the new Emperor shares, we will hold approximately 90.5% of Emperor
and Emperor will become our subsidiary
On November 11, 2005 we acquired a 5% holding in the Australian Stock Exchange listed Allied Gold Limited, or Allied, for
A$3.0 million ($2.3 million). In a separate transaction, we have also undertaken to, pursuant to any existing Allied shareholder electing
not to follow its rights, take up not more than 17,420,000 shares, to be issued by Allied to raise an additional A$7.0 million ($5.3 million)
at an issue price of A$0,40 ($0.30) per share. Both these transactions are subject to South African Reserve Bank approval. The capital
raising, which represents approximately 17.5% of Allied's share capital will also be subject to Allied shareholder approval, which Allied
has undertaken to seek to obtain by no later than January 20, 2006.
For further details on these transactions refer to Item 4A.: “History and Development of the Company.”
Key financial and operating indicators
We consider the key performance measures for the growth of our business and its profitability to be gold revenue, production,
production costs, cash costs per ounce and total costs per ounce, capital expenditure and Ore Reserves. The following table presents
the key performance measurement data for the past three fiscal years:
Operating data
Continuing operations
1
Year ended June 30,
2005
2004
2003
Revenues ($'000) ...................................................................................................
183,609
183,254
109,419
Gold production (ounces) ......................................................................................
433,586
466,284
330,253
Production costs ($'000) ........................................................................................
136,520
143,026
90,761
Revenue ($/oz).......................................................................................................
423
393
331
Cash costs ($/oz)....................................................................................................
315
307
275
Total costs ($/oz) ...................................................................................................
449
418
151
Capital expenditure ($'000)....................................................................................
21,339
21,406
7,039
Ore Reserves (ounces) ...........................................................................................
5,567,000
5,969,000
5,925,000
Discontinued operation
1
Year ended June 30,
2005
2004
2003
Revenues ($'000) ...................................................................................................
81,538
130,036
151,923
Gold production (ounces) ......................................................................................
199,850
341,861
462,743
Production costs ($'000) ........................................................................................
100,695
134,465
144,598
Revenue ($/oz).......................................................................................................
408
380
328
Cash costs ($/oz)....................................................................................................
504
393
312
Total costs ($/oz) ...................................................................................................
630
441
321
Capital expenditure ($'000)....................................................................................
3,524
5,511
6,375
Ore Reserves (ounces) ...........................................................................................
-
5,047,000
8,483,000
1
For fiscal 2005, 2004 and 2003 the operating data excludes our 40% share of our equity accounted associate, CGR, including the Crown and ERPM
Sections, and our 45.33% (2004: 19.78% and 2003: 19.81%) investment in Emperor, but includes our 20% attributable interest in the proportionately
consolidated Porgera Joint Venture. On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report
the 2005, 2004 and 2003 information relating to the North West Operations, as a discontinued operation and all other operations as continuing
operations. We have adjusted the results for prior reporting periods accordingly.
BACKGROUND IMAGE
85
Revenue
Revenue is derived from the sale of gold. The following table analyzes the revenue per operation:
Year ended June 30,
Continuing operations
2005
$'000
2004
$'000
2003
$'000
Blyvoor Section .....................................................................................................
68,370
90,066
81,753
West Wits Section
1
...............................................................................................
-
-
4,796
Total South African Operations ..................................................................
68,370
90,066
86,549
Tolukuma Section ..................................................................................................
32,446
32,743
22,870
Porgera Joint Venture
2
..........................................................................................
82,793
60,445
-
Total Australasian Operations ......................................................................
115,239
93,188
22,870
Total ................................................................................................................
183,609
183,254
109,419
Discontinued operation
North West Operations
3
........................................................................................
81,538
130,036
151,923
For fiscal 2005, revenue from continuing operations increased marginally from $183.3 million in fiscal 2004 to $183.6
million, with the average gold price received by us increasing to $423 per ounce, compared to $393 per ounce in fiscal 2004. The
effect on revenue of the increased gold price was offset by the decrease in production of 32,698 ounces from fiscal 2004. On March
22, 2005 we announced the provisional liquidation of the North West Operations. Revenues from the North West Operations for the
period ended March 22, 2005 were $81.5 million compared to $130.0 million in fiscal 2004. These operations have been treated as a
discontinued operation.
For fiscal 2004, revenue from continuing operations increased from $109.4 million in fiscal 2003 to $183.3 million, with the
average gold price received by us increasing to $393 per ounce in fiscal 2004, compared to $331 per ounce in fiscal 2003. The
acquisition of our 20% interest in Porgera contributed $60.4 million to revenue for fiscal 2004. Other movements in revenue are
attributable to changes in production volumes, from a total of 330,253 ounces in fiscal 2003 to 466,284 ounces in fiscal 2004, from
continuing operations. The North West Operations recorded revenue of $151.9 million in fiscal 2003 and $130.0 million in fiscal
2004.
1
With effect from July 21, 2003, we disposed of the West Wits operating mining assets in a black economic empowerment deal to Mogale, for $2.4
million.
2
With effect from October 14, 2004, we acquired a 20% interest in the unincorporated Porgera Joint Venture. This interest is proportionately
consolidated from that date.
3
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003
information as a discontinued operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods
accordingly.
BACKGROUND IMAGE
86
Gold production
The following table analyzes the production per operation:
Year ended June 30,
Production in ounces
Continuing operations
2005
2004
2003
Blyvoor Section ...................................................................................................................
161,878
233,094
247,626
Surface operations ..............................................................................................................
23,920
34,883
44,626
Underground operations .....................................................................................................
137,958
198,211
203,000
West Wits Section
1
............................................................................................................
-
-
14,531
Total South African Operations ................................................................................
161,878
233,094
262,157
Porgera
2
...............................................................................................................................
195,394
147,475
-
Tolukuma Section ................................................................................................................
76,314
85,715
68,096
Total Australasian Operations ..................................................................................
271,708
233,190
68,096
Total ..............................................................................................................................
433,586
466,284
330,253
North West Operations
3
......................................................................................................
199,850
341,861
462,743
Surface operations ..............................................................................................................
27,328
43,180
78,447
Underground operations .....................................................................................................
172,522
298,681
384,296
For fiscal 2005, our total gold production from continuing operations decreased by 32,698 ounces, or 7%, to 433,586 ounces
from 466,284 ounces produced in fiscal 2004. Gold production from our continuing South African Operations decreased by 31% from
233,094 ounces produced in fiscal 2004 to 161,878 ounces in fiscal 2005. This was as a result of the poor recoveries at the Slimes
Dam Project and the restructuring, which impacted productivity, completed in the second quarter of fiscal 2005 at Blyvoor. Gold
production at the Australasian Operations increased by 17%, from 233,190 ounces in fiscal 2004, to 271,708 ounces in fiscal 2005.
This is as a result of improved production at Porgera in the first two quarters of our financial year, reflecting higher grades and the
installation of a secondary crusher. The North West Operations were placed under provisional liquidation on March 22, 2005,
following a series of events culminating in a devastating earthquake, and have therefore been treated as a discontinued operation.
For fiscal 2004, our total gold production from continuing operations increased by 136,031 ounces, or 41%, to 466,284
ounces from 330,253 ounces produced in fiscal 2003. Gold production from our South African Operations decreased by 11% from
262,157 ounces produced in fiscal 2003 to 233,094 ounces in fiscal 2004. This is attributable to us ceasing mining unprofitable gold
reserves as a result of the lower Rand per kilogram gold price. Gold production at the Australasian Operations increased by 242%
from 68,096 ounces in fiscal 2003 to 233,190 ounces in fiscal 2004, mainly due to the acquisition of our 20% attributable interest in
the Porgera Joint Venture and improved gold recovery at the Tolukuma Section.
A more detailed review of gold production at each of our operations is provided under Item 4D.: “Property, Plant and
Equipment.”
1
With effect from July 21, 2003, we disposed of the West Wits operating mining assets in a black economic empowerment transaction to Mogale, for
$2.4 million.
2
With effect from October 14, 2004, we acquired a 20% interest in the unincorporated Porgera Joint Venture. This interest is proportionately
consolidated from that date.
3
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003
information as a discontinued operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods
accordingly.
BACKGROUND IMAGE
87
Cash costs
1
and total costs
2
per ounce
Our operational focus is to increase production, improve productivity and reduce costs. For fiscal 2005, cash costs from our
continuing operations increased to $315 per ounce of gold from $307 per ounce of gold in fiscal 2004. Total costs from our continuing
operations increased to $449 per ounce of gold from $418 per ounce of gold in fiscal 2004.
In fiscal 2005, the cash costs per ounce from our continuing South African Operations increased by 18%, from $393 per
ounce to $464 per ounce, compared to fiscal 2004. Cash costs per ounce from our Australasian Operations increased by 2%, from $221
per ounce to $226 per ounce compared to fiscal 2004. The increase in cash costs per ounce at our South African Operations was mainly
due to the strengthening of the Rand against the Dollar, price increases in key consumables (labor, inventories and electricity), a
decrease in production due to the poor recoveries at the Slimes Dam Project and the restructuring completed in the second quarter of
fiscal 2005 at Blyvoor. The increase in cash costs per ounce at our Australasian Operations was due to less efficient mining and
increased costs associated with consumables and services, especially the cost of fuel.
In fiscal 2004, the cash costs per ounce from our continuing South African Operations increased by 44% whereas the cash
costs per ounce for the Australasian Operations decreased by 21%, compared to fiscal 2003. The increase in cash costs per ounce at
our South African Operations was mainly due to the strengthening of the Rand against the Dollar and operational difficulties due to
the mining of below pay-limit panels, poor advances per blast, lower than expected mine call factors, increased lock-up in the plant
due to the ending of surface rock dump feed to the mill and poor recoveries from the Slimes Dam Project. The decrease in cash costs
per ounce at our Australasian Operations was primarily due to our acquisition of Porgera which operated at a cash cost of $215 per
ounce in fiscal 2004.
Our total cost per ounce from continuing operations, increased from $418 per ounce in fiscal 2004 to $449 per ounce in fiscal
2005. This increase was mainly due to employment termination costs of $4.2 million ($10 per ounce) at the Blyvoor Section and our
head office in South Africa in fiscal 2005, unrealized foreign exchange losses of $9.3 million ($15 per ounce) recorded in fiscal 2005,
compared to unrealized foreign exchange gains of $10.7 million ($26 per ounce) recorded in fiscal 2004.
Our total cost per ounce from continuing operations, increased from $151 per ounce in fiscal 2003 to $418 per ounce in fiscal
2004. This increase was mainly due to the weakening of the Dollar against the local operating currencies. The total cost per ounce of
$151 recorded in fiscal 2003 included a profit on financial instruments of $42.4 million ($128 per ounce) as a result of the closing out
of put and call options. In addition, the total cost per ounce of $418 recorded in fiscal 2004 included additional depreciation of
$19.5 million ($41 per ounce), primarily due to the acquisition of Porgera.
1
Cash costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs see Item 5A:. “Operating Results.”
2
Total costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs see Item 5A:. “Operating Results.”
BACKGROUND IMAGE
88
Reconciliation of cash costs per ounce, total costs and total costs per ounce
Cash costs per ounce, total costs and total costs per ounce are not US GAAP financial measures.
Cash costs of production include costs for all mining, processing, administration, royalties and production taxes, but exclude
depreciation, depletion and amortization, rehabilitation, employment termination costs, corporate administration costs, capital costs
and exploration costs. Cash costs per ounce are calculated by dividing production costs by ounces of gold produced. Cash costs per
ounce have been calculated on a consistent basis for all periods presented.
Total production costs include cash costs of production, depreciation, depletion and amortization and the accretion of
rehabilitation, reclamation and closure costs.
Total costs, as calculated and reported by us, include total production costs, plus other operating and non-operating income,
finance charges and other operating and non-operating costs, but excludes taxation, minority interest, equity in loss from associates
and the cumulative effect of accounting changes. These costs are excluded as the mines do not have control over these costs and they
have little or no impact on the day-to-day operating performance of the mines. Total costs per ounce are calculated by dividing total
costs by attributable ounces of gold produced. Total costs and total costs per ounce have been calculated on a consistent basis for all
periods presented.
Cash costs per ounce, total costs and total costs per ounce are non-US GAAP financial measures that should not be
considered by investors in isolation or as alternatives to production costs, net (loss)/profit applicable to common stockholders,
(loss)/profit before tax and other items or any other measure of financial performance presented in accordance with US GAAP or as an
indicator of our performance. While the Gold Institute has provided definitions for the calculation of cash costs, the calculation of cash
costs per ounce, total costs and total costs per ounce may vary significantly among gold mining companies, and these definitions by
themselves do not necessarily provide a basis for comparison with other gold mining companies. However, we believe that cash costs
per ounce, total costs and total costs per ounce are useful indicators to investors and management of an individual mine's performance
and of the performance of our operations as a whole as they provide:
•
an indication of a mine’s profitability and efficiency;
•
the trend in costs;
•
a measure of a mine's margin per ounce, by comparison of the cash costs per ounce by mine to the price of gold; and
•
a benchmark of performance to allow for comparison against other mines and mining companies.
A reconciliation of production costs to total costs, cash costs per ounce and total costs per ounce, for each of the three years in
the period ending June 30, 2005, is presented below. In addition, we have also provided below detail of the ounces of gold produced
by mine for each of those periods.
BACKGROUND IMAGE
89
For the year ended June 30, 2005
(in $'000, except as otherwise noted)
Continuing operations
Discontinued
operation
Blyvoor
West Wits
1
Other
2
Total South
African
Operations
Porgera
3
Tolukuma
Other
Total
Australasian
Operations
Total
North West
4
Production costs .........................................
73,814
-
1,218
75,032
36,210
25,278
-
61,488
136,520
100,695
Plus:
Depreciation and amortization ....................
2,716
-
(2,773)
(57)
11,613
3,336
(1,095)
13,854
13,797
971
Movement in rehabilitation provision,
reclamation and closure costs ...................
(1,353)
299
1,368
314
2,424
(1)
-
2,423
2,737
1,023
Total production costs ...............................
75,177
299
(187)
75,289
50,247
28,613
(1,095)
77,765
153,054
102,689
Plus:
Employment termination costs....................
3,050
-
1,151
4,201
-
-
-
-
4,201
224
Movement in gold in process ......................
(421)
-
-
(421)
(1,182)
(114)
-
(1,296)
(1,717)
383
Non-operating income ................................
(220)
(132)
2,445
2,093
265
955
3,074
4,294
6,387
(320)
Interest expense...........................................
607
1
9,926
10,534
-
-
831
831
11,365
70
Impairment of assets ...................................
-
-
664
664
-
-
-
-
664
39,451
Management and consulting fees ................
307
-
5,599
5,906
493
-
252
745
6,651
-
Loss/(profit) on derivative instruments .......
388
-
(4,004)
(3,616)
-
-
-
-
(3,616)
-
Loss/(profit) on sale of mining assets .........
-
-
(2)
(2)
-
-
-
-
(2)
-
Profit on disposal of subsidiary...................
-
-
-
-
-
-
-
-
-
(18,105)
Selling, administration and general
charges ......................................................
1,786
187
4,982
6,955
3,427
3,702
3,693
10,822
17,777
1,505
Total costs ...................................................
80,674
355
20,574
101,603
53,250
33,156
6,755
93,161
194,764
125,897
Gold produced (ounces)
5
..............................
161,878
-
-
161,878
195,394
76,314
-
271,708
433,586
199,850
Cash costs per ounce ($ per ounce)..............
456
-
-
464
185
331
-
226
315
504
Total costs per ounce ($ per ounce) .............
498
-
-
628
273
434
-
343
449
630
1
With effect from July 21, 2003, we disposed of the West Wits operating mining assets in a black economic empowerment deal, to Mogale Gold Limited.
2
Relates to other non-core operating entities within the Group.
3
With effect from October 14, 2004, we acquired a 20% interest in the Porgera Joint Venture.
4
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003 North West Operations’ information as a discontinued
operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods accordingly.
5
The gold production numbers exclude production from our 40% held associate, Crown Gold Recoveries (Pty) Limited, which holds the Crown and ERPM Sections, and our 45.33% investment in
Emperor, but include our 20% attributable interest in the Porgera Joint Venture.
BACKGROUND IMAGE
90
For the year ended June 30, 2004
(in $'000, except as otherwise noted)
Continuing operations
Discontinued
operation
Blyvoor
West Wits
1
Other
2
Total South
African
Operations
Porgera
3
Tolukuma
Other
Total
Australasian
Operations
Total
North West
4
Production costs .........................................
90,366
-
1,189
91,555
31,650
19,821
-
51,471
143,026
134,465
Plus:
Depreciation and amortization ....................
2,643
-
(1,199)
1,444
9,260
7,340
7,931
24,531
25,975
4,160
Movement in rehabilitation provision,
reclamation and closure costs ...................
779
109
(30)
858
180
148
63
391
1,249
2,206
Total production costs ...............................
93,788
109
(40)
93,857
41,090
27,309
7,994
76,393
170,250
140,831
Plus:
Employment termination costs....................
899
-
-
899
-
-
-
-
899
7,064
Movement in gold in process ......................
579
-
-
579
(1,499)
-
-
(1,499)
(920)
(80)
Non-operating income ................................
(192)
(136)
(23,125)
(23,453)
(9)
(118)
11,602
11,475
(11,978)
(881)
Interest expense...........................................
906
-
6,800
7,706
1,103
226
(1,285)
44
7,750
162
Impairment of assets ...................................
-
-
2,990
2,990
-
-
-
-
2,990
1,276
Management and consulting fees ................
198
-
1,850
2,048
244
-
156
400
2,448
-
Loss/(profit) on derivative instruments .......
1,376
-
(334)
1,042
-
-
-
-
1,042
124
Loss/(profit) on sale of mining assets .........
56
-
(1)
55
-
-
-
-
55
-
Selling, administration and general
charges ......................................................
2,037
1,430
23,303
26,770
1,979
3,032
(9,181)
(4,170)
22,600
2,344
Total costs ...................................................
99,647
1,403
11,443
112,493
42,908
30,449
9,286
82,643
195,136
150,840
Gold produced (ounces)
5
.............................
233,094
-
-
233,094
147,475
85,715
-
233,190
466,284
341,861
Cash costs per ounce ($ per ounce)..............
388
-
-
393
215
231
-
221
307
393
Total costs per ounce ($ per ounce) .............
427
-
-
483
291
355
-
354
418
441
1
With effect from July 21, 2003, we disposed of the West Wits operating mining assets in a black economic empowerment deal, to Mogale Gold Limited.
2
Relates to other non-core operating entities within the Group.
3
With effect from October 14, 2004, we acquired a 20% interest in the Porgera Joint Venture.
4
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003 North West Operations’ information as a discontinued
operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods accordingly.
5
The gold production numbers exclude production from our 40% held associate, Crown Gold Recoveries (Pty) Limited, which holds the Crown and ERPM Sections, and our 19.78% investment in
Emperor, but include our 20% attributable interest in the Porgera Joint Venture.
BACKGROUND IMAGE
91
For the year ended June 30, 2003
(in $'000, except as otherwise noted)
Continuing operations
Discontinued
operation
Blyvoor
West Wits
1
Other
2
Total South
African
Operations
Total
Australasian
Operations
Total
North West
3
Production costs ..........................................
65,240
4,859
1,557
71,656
19,105
90,761
144,598
Plus:
Depreciation and amortization ......................
1,509
402
369
2,280
6,561
8,841
1,761
Movement in rehabilitation provision,
reclamation and closure costs .....................
130
71
306
507
(27)
480
934
Total production costs ................................
66,879
5,332
2,232
74,443
25,639
100,082
147,293
Plus:
Employment termination costs......................
85
53
542
680
-
680
821
Movement in gold in process ........................
(160)
131
-
(29)
593
564
687
Non-operating income ...................................
(391)
(251)
(19,745)
(20,387)
1,519
(18,868)
(1,216)
Interest expense.............................................
530
10
5,544
6,084
615
6,699
210
Impairment of assets .....................................
-
-
-
-
-
-
-
Management and consulting fees ..................
149
11
1,360
1,520
130
1,650
-
Loss/(profit) on derivative instruments .........
(41,719)
-
(665)
(42,384)
-
(42,384)
(1,437)
Loss/(profit) on sale of mining assets ...........
-
(652)
(1,077)
(1,729)
-
(1,729)
-
Profit on disposal of subsidiary.....................
-
-
(5,302)
(5,302)
-
(5,302)
-
Selling, administration and general
charges ........................................................
1,806
1
5,313
7,120
1,501
8,621
2,207
Total costs .....................................................
27,179
4,635
(11,798)
20,016
29,997
50,013
148,565
Gold produced (ounces)
4
..............................
247,626
14,531
-
262,157
68,096
330,253
462,743
Cash costs per ounce ($ per ounce)................
263
334
-
273
281
275
312
Total costs per ounce ($ per ounce) ...............
110
319
-
76
441
151
321
1
With effect from July 21, 2003, we disposed of the West Wits operating mining assets in a black economic empowerment deal, to Mogale Gold Limited.
2
Relates to other non-core operating entities within the Group.
3
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003 North West Operations’ information as a discontinued
operation and all other operations as continuing operations. We have adjusted the results for prior reporting periods accordingly.
4
The gold production numbers exclude production from our 40% held associate, Crown Gold Recoveries (Pty) Limited, which holds the Crown and ERPM Sections, and our 19.81% investment in
Emperor, but include our 20% attributable interest in the Porgera Joint Venture.
BACKGROUND IMAGE
92
Capital expenditure
Total capital expenditure relating to continuing operations during fiscal 2005 was $21.3 million, compared to $21.4 million in
fiscal 2004. At our continuing South African Operations, capital expenditure decreased from $9.2 million in fiscal 2004, to $0.8 million in
fiscal 2005, due to an increased focus on efficient utilization of existing assets. This expenditure included the installation of a Knelsen
concentrator and Acacia reactor at the Blyvoor plant. Capital expenditure in the Australasian Operations, increased from $12.2 million in
fiscal 2004, to $20.6 million in fiscal 2005. Of this expenditure $17.2 million relates to Porgera, mostly as a result of capitalized deferred
stripping costs of $11.1 million, and $3.4 million relates to the Tolukuma Section, as a result of additions to plant, and equipment.
Total capital expenditure relating to continuing operations, during fiscal 2004 was $21.4 million, compared to $7.0 million in
fiscal 2003, which represents a $14.4 million, or 206%, increase in capital expenditure on a Group level. At our continuing South
African Operations, capital expenditure increased from $4.3 million in fiscal 2003 to $9.2 million in fiscal 2004, mainly due to the
inclusion of new capital development projects, that included the completion of the No. 4 and 5 slimes dam project at Blyvoor
amounting to $6.9 million, and the effects of the strengthening of the South African Rand against the Dollar by 16% during fiscal
2004. Capital expenditure in the Australasian Operations, increased from $2.7 million in fiscal 2003, to $12.2 million in fiscal 2004.
The increase partly related to the strengthening of the local currencies against the Dollar, and the inclusion of $8.7 million of capital
expenditure at Porgera, which included capitalized deferred stripping costs of $4.1 million.
Ore Reserves
As at June 30, 2005, our Ore Reserves, attributable to our continuing operations, were estimated at 5.6 million ounces, as
compared to approximately 6.0 million ounces at June 30, 2004, representing a 7% decrease – mostly due to depletion during the year.
The reduction was offset in part by continued efforts to explore and prove up Ore Reserves at the Tolukuma Section. Our Ore Reserves
attributable to our continuing operations increased from 5.9 million ounces of gold in fiscal 2003 to 6.0 million ounces in fiscal 2004. As
at June 30, 2004, 5.0 million ounces of Ore Reserves, in addition to those reflected above, were attributable to the North West Operations.
These have been lost following the provisional liquidation of the North West Operations announced on March 22, 2005.
We seek to increase our Ore Reserves through development and to acquire new Ore Reserves through acquisitions.
Year ended June 30,
('000 ounces)
2005
2004
2003
Continuing operations
Blyvoor Section ...............................................................................
3,998
4,329
5,780
Total South African Operations .............................................
3,998
4,329
5,780
Porgera
1
...........................................................................................
1,351
1,437
-
Tolukuma Section ............................................................................
218
203
145
Total Australasian Operations ...............................................
1,569
1,640
145
Total ..........................................................................................
5,567
5,969
5,925
Associates
2
......................................................................................
986
505
1,211
Discontinued operation
North West Operations
3
...................................................................
-
5,047
8,483
1
Our attributable 20% share of the Proven and Probable Ore Reserves in the Porgera Joint Venture is based on the information disclosed by Placer Dome Inc. (which
has a 75% interest in the Porgera Joint Venture) in its Annual Report for the fiscal year ended December 31, 2004, as filed with the SEC on Form 40-F on March 5,
2004. The Porgera Ore Reserves are estimated as at December 31, 2004.
2
Comprise our 40% interest in CGR, which owns the Crown and ERPM Sections, as well as, for fiscal 2005, our 45.33% interest in Emperor.
3
On March 22, 2005, the North West Operations were placed under provisional liquidation. As a result we report the 2005, 2004 and 2003 information as a
discontinued operation.
BACKGROUND IMAGE
93
Application of critical accounting policies
Some of our critical accounting policies require the application of significant judgment by management in selecting the
appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of
uncertainty and are based on our historical experience, terms of existing contracts, management's view on trends in the gold mining
industry and information from outside sources.
Management believes the following critical accounting policies involve the more significant judgments and estimates used in the
preparation of our consolidated financial statements and could potentially impact our financial results and future financial performance:
•
Mining assets
•
Deferred stripping costs
•
Impairment of mining assets
•
Deferred income and mining taxes
•
Reclamation and closure costs
•
Environmental rehabilitation costs
•
Collectability of receivables
Management has discussed the development and selection of each of these critical accounting policies with the Board of
Directors and the Audit Committee, both of which have approved and reviewed the disclosure of these policies.
Mining assets
Actual expenditures incurred for mineral property interests, mine development costs, mine plant facilities and equipment are
capitalized to the specific mine to which the cost relates. Amortization is calculated on a mine-by-mine basis (i.e. the cost pools are the
individual mines) using the units of production method. Under the units of production method, we estimate the amortization rate based on
actual production over total Proven and Probable Ore Reserves of the particular mine. This rate is then applied to actual costs capitalized
to date to arrive at the amortization expense for the period. Proven and Probable Ore Reserves of the particular mine reflect estimated
quantities of economically and legally recoverable reserves, as determined in accordance with the SEC's Industry Guide 7 under the US
Securities Exchange Act of 1934, as amended. The estimate of the total reserves of our mines could be materially different from the actual
gold mined due to changes in the factors used in determining our Ore Reserves, such as the gold price, foreign currency exchange rates,
labor costs, engineering evaluations of assay values derived from sampling of drill holes and other openings. Any change in
management’s estimate of the total Proven and Probable Ore Reserves, would impact the amortization charges recorded in our
consolidated financial statements.
Deferred stripping costs
We have only one significant open-pit operation, at Porgera, where stripping costs incurred during the production phase to
remove additional waste are charged to operating costs on the basis of the average life of mine stripping ratio. For other open-pit
operations stripping costs are expensed in the period in which they are incurred. Stripping costs included in mining assets as at
June 30, 2005, for Porgera are $12.5 million (June 30, 2004: $3.5 million; June 30, 2003: $nil) with $11.1 million capitalized to mining
assets during fiscal 2005 (fiscal 2004: $4.1 million; fiscal 2003: $nil). During fiscal 2005, the average stripping ratio was 7.1 in
comparison with the Life of Mine stripping ratio of 3.5. Wedge and mudstone failure on the West Wall of the Stage 5 pit at Porgera
created unplanned waste material which is in the process of being removed and negatively affected the stripping ratio. The stripping
ratio is determined based on the life of mine plan. The estimate of the total reserves of a mine could be materially different from the
actual gold mined and from the actual usage of a mine due to changes in the factors used in determining the economic value of our
mineral reserves and deferred stripping costs, such as the gold price and foreign currency exchange rates. Any change in management’s
estimate of the total expected future life of a mine would impact the amortization charge recorded and deferred stripping capitalized in our
consolidated financial statements.

Impairment of mining assets
The impairment of long-lived assets is accounted for in accordance with the Statement of Financial Accounting Standards, or
SFAS No. 144, “ Accounting for the Impairment or Disposal of Long-Lived Assets ,” or SFAS 144.
Under SFAS 144, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset or group of assets may not be recoverable, including a reduction in the extent to which a gold plant is used, a
dramatic change in the amount of the Ore Reserves, a substantial drop in the gold price, a change in the law or environment in the country
in which the Ore Reserves are based or gold is sold, forecasts showing lack of long-term profitability or production costs are in excess of
an amount originally expected when the asset was acquired or constructed. Recoverability of an asset or asset group is assessed by
BACKGROUND IMAGE
94
comparing the carrying amount of an asset or group of assets to the estimated future undiscounted net cash flows of the asset or group of
assets. Estimates of future cash flows include estimates of future gold prices and foreign exchange rates. Therefore, changes could occur
which may affect the recoverability of our mining assets. If an asset or asset group is considered to be impaired, the impairment which is
recognized is measured as the amount by which the carrying amount of the asset or group of assets exceeds the discounted future cash
flows expected to be derived from that asset or group of assets. The asset or asset group is the lowest level for which there are identifiable
cash flows that are largely independent of other cash flows. In carrying out the economic valuations, an assessment is made of the future
cash flows expected to be generated by these assets, taking into account current market conditions and the expected lives of our assets.
The lowest level for which there are identifiable cash flows that are largely independent of other cash flows is calculated on a mine-by-
mine basis. We make the analysis periodically on a mine-by-mine basis or when indicators of impairment exist. During fiscal 2005,
$0.7 million was recorded as an impairment and during fiscal 2004, $1.4 million (attributable to our discontinued operation) was recorded
as an impairment through applying these principles. No impairments were recognized during fiscal 2003.
Deferred income and mining taxes
We follow the liability method of accounting for deferred income and mining tax whereby we recognize the tax consequences of
temporary differences by applying current statutory tax rates applicable to future years to differences between financial statement
amounts and the tax bases of certain assets and liabilities. Changes in deferred tax assets and liabilities include the impact of any tax rate
changes enacted during the year.
A valuation allowance is raised against deferred tax assets which are not considered more likely than not to be realizable. These
determinations are based on the projected realization of tax allowances and tax loss carry forwards. Assessing the recoverability of
deferred tax assets requires management to make significant estimates related to expectations of future taxable income. If these tax assets
are not more likely than not to be realized, an adjustment to the valuation allowance would be required, which would be charged to
income in the period that the determination was made. If we determine that it is more likely than not that we would be able to realize the
tax assets in the future, in excess of the recorded amount thereof, an adjustment to reduce the valuation allowance would be recorded.
Management considers historical taxable positions in determining if a tax asset will be utilized, specifically with reference to the
immediately preceding three fiscal years. As a result of these determinations, additional valuation allowances of $10.1 million, $16.9
million and $nil were recorded during fiscal 2005, 2004 and 2003, respectively. The bulk of these related to the continuing South African
Operations. In addition, valuation allowances relating to our discontinued operation, the North West Operations, amounted to $nil,
$70.2 million and $50.3 million in fiscal 2005, 2004 and 2003, respectively.
Reclamation and closure costs
In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 143, “ Accounting
for Asset Retirement Obligations, ” or SFAS 143. SFAS 143 came into effect for fiscal years beginning after June 15, 2002 and we
adopted it on July 1, 2002. SFAS 143 requires that the fair value of liabilities for asset retirement obligations be recognized in the period
in which they are incurred. A corresponding increase to the carrying amount of the related asset, where one is identifiable, is recorded and
is depreciated over the life of the asset. Prior to the adoption of SFAS 143, we accrued for the estimated reclamation and closure liability
through annual charges to earnings over the estimated life of the mine.
The provision for asset retirement obligations relates to expected costs associated with the demolition of gold plants, shaft
headgear and shaft infrastructure. Estimates of these costs are based on our knowledge at the time of creating the provision. Determining
these costs is complex and requires management to make estimates and judgments because most of the removal obligations will be
fulfilled in the future and contracts and regulations often have vague descriptions of what constitutes removal. These estimates are subject
to changes in regulations and unexpected movements in inflation rates and are, therefore, subject to annual review to ensure that the asset
and liability is a fair reflection of the expected reclamation and closure costs as at June 30 of every year. The actual liability for
rehabilitation costs can vary significantly from our estimate, if our assessment of these costs changes. As we use the expected cash flow
technique to determine our future liability, the liability is determined by discounting the estimated cash flows using a credit-adjusted risk-
free rate. Thus, the effect of our credit standing is reflected in the discount rate rather than in the estimated cash flows. As at
June 30, 2005, the discount rate was determined to be 7.26%. As a result of changes in estimates, additional liabilities of $0.1 million,
$2.0 million and $0.6 million were raised in fiscal 2005, 2004 and 2003, respectively, including movements related to the discontinued
operation.
BACKGROUND IMAGE
95
Environmental rehabilitation costs
Where a related asset is not easily identifiable, other estimated rehabilitation costs associated with the revegetation of tailings
dams, revegetation of rock dumps and the rehabilitation of open cast areas are accrued as tailings are deposited. The estimated costs of
rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Based on
current environmental regulations and known rehabilitation requirements, our management has included its best estimate of these
obligations in our Provision for Rehabilitation. However, it is reasonably possible that these estimates of our ultimate rehabilitation
liabilities could change as a result of changes in regulations or cost estimates. As a result of changes in estimates, additional liabilities of
$3.7 million, $1.5 million and $0.8 million were raised in fiscal 2005, 2004 and 2003, respectively, including the discontinued operation.
In South Africa, annual contributions are made to dedicated Rehabilitation Trust Funds, to fund the estimated cost of
rehabilitation during and at the end of the life of the relevant mine.
Collectability of receivables
In determining the collectability of receivables, management judgment is required in instances where uncertainty exists over the
period and amount of cash flows which will be received. In determining this expectation, operational and economical circumstances
affecting the receivable are considered. These principles were applied in evaluating the collectability of the receivables owed by CGR,
ERPM, KBH and Mogale. Advances to the value of $1.9 million and $5.2 million were provided for in fiscal 2004 and 2003,
respectively. No further advances were made during fiscal 2005, however we provided for $0.6 million against the receivable owed by
Mogale.
BACKGROUND IMAGE
96
Operating results
Comparison of financial performance for fiscal year ended June 30, 2005 with fiscal year ended June 30, 2004
Revenue
The following table illustrates the year-on-year change in revenue from continuing operations by evaluating the contribution
of each segment to the total change on a consolidated basis for fiscal 2005 in comparison to fiscal 2004:
Impact of change in volume
$’000
Total
revenue
2004
Acquisitions/
(dispositions)
Internal
growth/
(decline)
Impact of
change in
price
Net change
Total
revenue
2005
Blyvoor Section..................................
90,066
-
(27,989)
6,293
(21,696)
68,370
Total South African Operations ......
90,066
-
(27,989)
6,293
(21,696)
68,370
Porgera Joint Venture.........................
60,445
-
18,833
3,515
22,348
82,793
Tolukuma Section ..............................
32,743
-
(3,695)
3,398
(297)
32,446
Total Australasian Operations ........
93,188
-
15,138
6,913
22,051
115,239
Total ..................................................
183,254
-
(12,851)
13,206
355
183,609
Revenue from continuing operations, for fiscal 2005, was consistent at $183.6 million compared to $183.3 million in fiscal
2004, as a result of revenue from the Australasian Operations, negating the effect of a significant decrease in production volumes at
the continuing South African Operations, because of poor recoveries at the Slimes Dam Project, the restructuring completed in the
second quarter of our financial year at Blyvoor and the yield at these operations decreasing in fiscal 2005. The decrease in production
in fiscal 2005 was partially offset by a stronger Dollar gold price received during the year. The average gold price received by us was
$423 per ounce in fiscal 2005, compared to $393 per ounce in fiscal 2004.
Production costs
The following table illustrates the year-on-year change in production costs from continuing operations by evaluating the
contribution of each segment to the total change on a consolidated basis for fiscal 2005 in comparison to fiscal 2004:
Impact of change in volume
$’000
Total
production
costs
2004
Acquisitions/
(dispositions)
Internal
growth/
(decline)
Impact of
change in
costs
Foreign
exchange
Net change
Total
production
costs
2005
Blyvoor Section ...........................
90,366
-
(21,844)
(3,664)
8,956
(16,552)
73,814
Other
1
..........................................
1,189
-
-
29
-
29
1,218
Total South African Operations .
91,555
-
(21,844)
(3,635)
8,956
(16,523)
75,032
Porgera Joint Venture ..................
31,650
-
14,698
(11,374)
1,236
4,560
36,210
Tolukuma Section........................
19,821
-
(2,884)
7,567
774
5,457
25,278
Other
1
.........................................
-
-
-
-
-
-
-
Total Australasian Operations ...
51,471
-
11,815
(3,808)
2,010
10,017
61,488
Total ...........................................
143,026
-
(10,030)
(7,443)
10,966
(6,506)
136,520
1
Relates to non-operating entities within the Group.
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97
The following table lists the components of production costs for each of the years set forth below:
Years ended June 30,
Costs
2005
2004
Labor.....................................................................................................................
51%
50%
Contractor Services ...............................................................................................
19%
19%
Supplies.................................................................................................................
19%
20%
Electricity...............................................................................................................
11%
11%
As gold mining in South Africa is very labor intensive, labor costs and contractor services are the largest components of our
production costs in that region. Production costs are linked directly to the level of production of a specific fiscal year. We incurred
production costs of $136.5 million in fiscal 2005, compared to $143.0 million in fiscal 2004. The decrease of 5% is mostly as a result
of a decrease in production volumes at the continuing South African Operations which have been partially offset by an increase in
production at the Australasian Operations. The majority of our production costs are incurred in local currencies and foreign exchange
movements on these costs also contributed to the increase in production costs.
Rehabilitation provision
As of June 30, 2005, we estimate our total rehabilitation provision being the discounted estimate of future costs, to be $22.6
million ($nil of this balance relating to the discontinued North West Operations) as opposed to $39.1 million at June 30, 2004 ($18.5
million of this balance relating to the discontinued North West Operations). Accretion of $2.7 million was recorded in fiscal 2005 and
$1.2 million was recorded in fiscal 2004, relating to the continuing operations. The total rehabilitation provision of $19.6 million on
March 22, 2005, relating to the North West Operations, was transferred to the liquidators.
A total of $6.4 million was invested in our various environmental trust funds at the end of fiscal 2005, as compared to $22.8
million for fiscal 2004. Growth in the environmental trust funds amounted to $0.8 million during fiscal 2005, with $16.9 million of the
fiscal 2004 balance having been transferred to the liquidators of Buffelsfontein Gold Mine Limited (the North West Operations). The
shortfall relating to the continuing operations is expected to be financed by ongoing financial contributions to the Environmental
Rehabilitation Trust Funds of the respective mining operations.
Depreciation and amortization
Depreciation and amortization charges were $13.8 million for fiscal 2005 as compared to $26.0 million for fiscal 2004. This
decrease relates to a reduction in depreciation on mine development at the Tolukuma Section, due to a decrease in the life of mine for
underground operations and non-recurring amortization charges during fiscal 2004, which were associated with the restructuring of
the Tolukuma Section.
Employment termination costs
Employment termination costs increased to $4.2 million for fiscal 2005 as compared to $0.9 million for fiscal 2004. For fiscal
2005, these costs mostly relate to a retrenchment process following a 60-day review at the Blyvoor Section, where 1,619 employees
were retrenched at a cost of $3.1 million, by October 5, 2004. In addition, retrenchments at our head office, to improve corporate
efficiencies and minimize corporate expenditure, gave rise to an expense of $1.2 million in fiscal 2005.
Impairment of assets
During fiscal 2005, mining properties at the Durban Deep Section were written down by $0.7 million to $2.2 million, being
the estimated fair value of these assets. We have negotiated the sale of these mining properties and the estimated fair value was
determined during these negotiations.
Management and consulting fees
Management and consulting fees in fiscal 2005 increased by $4.3 million to $6.7 million compared to $2.4 million in fiscal
2004. These expenses mostly related to consulting fees for the evaluation of possible acquisitions in fiscal 2005, preparatory work for
complying with the Sarbanes-Oxley Act of 2002 and capital raisings.
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98
Profit/(loss) on derivative instruments
The profit/(loss) on derivative instruments in fiscal 2005 was a gain of $3.6 million, as compared with a loss of $1.0 million
in fiscal 2004. In fiscal 2004, 265,000 ounces were closed out on the Eskom gold for electricity contract, realizing a loss of
$1.4 million compared to the remaining 50,000 ounces which were closed out in fiscal 2005, realizing a loss of $0.4 million. Due to
higher interest rates in fiscal 2005, the fair value adjustment on the interest rate swap was a profit of $0.2 million compared to a loss of
$1.6 million in fiscal 2004. The fair value adjustment on the derivative portion of the senior convertible notes was a profit of
$3.8 million in fiscal 2005 (2004: $2.0 million).
Selling, administration and general charges
In fiscal 2005, the selling, administration and general charges decreased by $4.8 million to $17.8 million from $22.6 million
in fiscal 2004. In fiscal 2005, management instituted tighter cost controls together with retrenchments at corporate level, which
contributed to the reduction of these expenses.
Interest and dividends
Interest and dividends increased by $1.2 million, or 100%, from $1.2 million during fiscal 2004 to $2.4 million during fiscal
2005. This was mainly as a result of investing excess cash from borrowings and capital raising, in high interest bearing accounts held
at financial institutions.
Unrealized foreign exchange gains
Our functional currency is the Rand for our South African Operations and the Kina for the Papua New Guinea Operations.
The unrealized foreign exchange loss of $9.3 million for fiscal 2005, compared to a gain of $10.7 million for fiscal 2004, represented
the effect of the translation of monetary items, primarily external debt, which is denominated in currencies other than our functional
currencies.
Interest expense
Our interest expense increased to $11.4 million for fiscal 2005 as compared to $7.8 million for fiscal 2004. The increase was
primarily as a result of obtaining new borrowing facilities from Investec Bank Limited and Investec Bank (Mauritius) Limited during
fiscal 2005.
Income and mining tax expense
The net tax expense for fiscal 2005 comprises a deferred tax benefit of $6.8 million and a current tax charge of $12.6 million.
This compares to a deferred tax charge of $6.8 million and a current tax charge of $7.4 million in fiscal 2004. In fiscal 2005, the
increase in the current tax charge mostly relates to the inclusion of the Porgera Section for a full year compared to nine months in
fiscal 2004. In fiscal 2004, $5.5 million of the deferred tax charge related to the South African Operations and $1.3 million related to
the Australasian Operations. Valuation allowances of $30.5 million have been raised against the deferred tax assets of the South
African Operations in fiscal 2005, compared to $96.4 million in fiscal 2004. The decrease is primarily as a result of the liquidation of
the North West Operations in fiscal 2005.
Equity in loss from associates
A loss of $20.5 million was recorded during fiscal 2005 in relation to our associate, Emperor, $13.3 million relating to an
impairment of the carrying amount of the investment and $7.2 million relating to losses recognized against our equity investment. No
amount was recorded for CGR, as no further advances were made to this associate during fiscal 2005 and the investment is carried at
nil value in fiscal 2005 (2004: $nil). An impairment of $8.8 million was recognized in fiscal 2004 relating to advances made during
that fiscal year to CGR, which were seen by management to be irrecoverable.
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99
Loss from discontinued operation, net of taxes
On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of Buffelsfontein
Gold Mines Limited, our subsidiary which owns the North West Operations, which order was granted on the same day. As a result of
the liquidation, a profit of $18.1 million was recorded in fiscal 2005. Included in the calculation of this profit is expenditure of $7.3
relating to the liquidation. This expenditure includes additional wages of $4.5 million, $1.5 million set aside for a social plan, $0.8
million relating to essential services, such as pumping, and $0.5 million relating to legal and other costs.
Revenue from the sale of gold from our discontinued operation, for fiscal 2005, was $81.5 million and for fiscal 2004 was
$130.0 million.
During fiscal 2004, the production focus at the North West Operations shifted towards the mining of high-grade ore panels.
This continued during fiscal 2005, with the production of 199,850 ounces of gold from 1.9 million tonnes of ore mined, resulting in a
yield of 3.32 g/t. During fiscal 2004, 341,861 ounces of gold were produced from 3.2 million tonnes of ore milled, with a yield of
3.37 g/t.
On June 26, 2004, we entered into a further 60−day review period at the Buffels Section at our North West Operations
designed to restore the operations to profitability. Proposals were received in a consultative forum in which both management and
organized labor participated, and were distributed to the Department of Labour and the Department of Minerals and Energy, for their
input. Agreement was reached with all the relevant parties early in August 2004 to close the No. 9 Shaft, but to keep the No. 10 and 12
Shafts in operation on condition that certain defined sustainability thresholds were met. This agreement resulted in the retrenchment of
120 employees at this mining operation during fiscal 2005 at a cost of R3.7 million ($0.6 million).
At December 31, 2004, due to the poor operational results at the North West Operations, we evaluated the carrying amount of
these mining assets and determined that the carrying value was not recoverable. The difference between the carrying amount and fair
value of the North West Operations’ mining assets was recognized as an impairment loss of $39.5 million for the year ended June 30,
2005. The fair value was determined by calculating the present value of future cash flows of the North West Operations’ mining assets
discounted at the credit adjusted rate.
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100
Comparison of financial performance for the fiscal year ended June 30, 2004 with fiscal year ended June 30, 2003
On March 22, 2005, the North West Operations were placed under provisional liquidation. We have adjusted our consolidated
statement of operations for all periods presented to reflect the North West Operations as a discontinued operation.
Revenue
The following table illustrates the year-on-year change in revenue from continuing operations by evaluating the contribution
of each segment to the total change on a consolidated basis for fiscal 2004 in comparison to fiscal 2003:
Impact of change in volume
$’000
Total
revenue
2003
Acquisitions/
(dispositions)
Internal
growth/
(decline)
Impact of
change in
price
Net change
Total
revenue
2004
Blyvoor Section................................
81,753
-
(4,798)
13,111
8,313
90,066
West Wits Section ............................
4,796
(4,796)
-
-
(4,796)
-
Total South African Operations ......
86,549
(4,796)
(4,798)
13,111
3,517
90,066
Porgera Joint Venture.......................
-
60,445
-
-
60,445
60,445
Tolukuma Section ............................
22,870
-
5,917
3,956
9,873
32,743
Total Australasian Operations ......
22,870
60,445
5,917
3,956
70,318
93,188
Total ................................................
109,419
55,649
1,119
17,067
73,835
183,254
Revenue for fiscal 2004 increased by $73.8 million, or 67%, to $183.3 million, primarily due to the increase in revenue from
the Australasian Operations of $70.3 million. The acquisition of a 20% interest in Porgera on October 14, 2003, contributed to
$60.4 million of the increase in revenue from Australasian Operations. The remainder of the increase in revenue from the Australasian
Operations consisted of $5.9 million from improved output and an increase in the Dollar price of gold which contributed $4.0 million
at the Tolukuma Section. Despite production difficulties at the Blyvoor Section and the continued strengthening of the South African
Rand against the Dollar, an increase in the Dollar gold price negated the effect of lower production volumes at the Blyvoor Section.
Production costs
The following table illustrates the year-on-year change in production costs from continuing operations by evaluating the
contribution of each segment to the total change on a consolidated basis for fiscal 2004 in comparison to fiscal 2003:
Impact of change in volume
$’000
Total
production
costs
2003
Acquisitions/
(dispositions)
Internal
growth/
(decline)
Impact of
change in
costs
Foreign
exchange
Net
change
Total
production
costs
2004
Blyvoor Section ........................
65,240
-
(3,829)
7,486
21,469
25,126
90,366
West Wits Section ....................
4,859
(4,859)
-
-
-
(4,859)
-
Other
1
.......................................
1,557
-
-
(680)
312
(368)
1,189
Total South African Operations
71,656
(4,859)
(3,829)
6,806
21,781
19,899
91,555
Porgera Joint Venture ...............
-
31,650
-
-
-
31,650
31,650
Tolukuma Section.....................
17,498
-
4,527
(4,963)
2,759
2,323
19,821
Other
1
.......................................
1,607
-
(1,607)
-
-
(1,607)
-
Total Australasian Operations
19,105
31,650
2,920
(4,963)
2,759
32,366
51,471
Total .........................................
90,761
26,791
(909)
1,843
24,540
52,265
143,026
1
Relates to non-operating entities within the Group.
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101
The following table lists the components of production costs for each of the years set forth below:
Years ended June 30,
Costs
2004
2003
Labor.................................................................................................................
50%
42%
Contractor Services ...........................................................................................
19%
22%
Supplies.............................................................................................................
20%
25%
Electricity...........................................................................................................
11%
11%
As gold mining in South Africa is very labor intensive, labor costs and contractor services are the largest components of
production costs in that region. Production costs are linked directly to the level of production of a specific fiscal year. Production costs
in fiscal 2004 increased by 58% to $143.0 million compared to production costs of $90.8 million in fiscal 2003. This increase was
primarily attributable to the significant appreciation of the Rand against the Dollar during fiscal 2004 and the acquisition of Porgera. A
23.9% strengthening in the average Rand/US Dollar exchange rate was noted during fiscal 2004, with a 13.7% strengthening of the
average Kina/US Dollar exchange rate. In addition, operational difficulties at our South African Operations due to the mining of
below pay-limit panels, poor advances per blast, lower than expected mine call factors, increased lock-up in the plant due to the
ending of surface rock dump feed to the mill and poor recoveries from the Slimes Dam Project led to an increase in production costs.
At the Blyvoor Section production costs increased from $65.2 million in fiscal 2003 to $90.3 million in fiscal 2004, with a
decrease in volume from 247,626 to 233,094 – due to operational difficulties giving rise to a 60-day review.
Production costs at Porgera, acquired during fiscal 2004, amounted to $31.7 million. The Tolukuma Section contributed
$19.8 million to production costs and 85,715 ounces to gold production.
Rehabilitation provision and amounts contributed to environmental trust funds
As of June 30, 2004, we estimate our total rehabilitation provision, being the discounted estimate of future costs, to be $39.1
million, $31.6 million relating to the South African Operations (of this $18.5 million related to the North West Operations) and $7.5
million relating to the Australasian Operations, as compared to $24.6 million at June 30, 2003, with $16.0 million relating to the South
African Operations (of this $13.5 million related to the North West Operations which has been disclosed as a discontinued operation)
and $8.6 million relating to the Australasian Operations. Accretion of $3.4 million was recorded in fiscal 2004, and $1.4 million was
recorded in fiscal 2003.
A total of $22.8 million (of this $15.7 million related to the North West Operations which has been treated as a discontinued
operation) was invested in our various environmental trust funds as at the end of fiscal 2004, as compared to $17.9 million (of this
$13.8 million related to the North West Operations which has been treated as a discontinued operation) for fiscal 2003. The increase is
mostly attributable to the strengthening of the Rand against the Dollar in fiscal 2004. Additional contributions were also made during
fiscal 2004, due to under funding of the liability. The shortfall between the funds in the trust and the estimated provisions, in South
Africa, is expected to be financed by ongoing financial contributions over the remaining production life of the mine.
Depreciation and amortization
Depreciation and amortization charges relating to the continuing operations were $26.0 million for fiscal 2004 compared to
$8.8 million for fiscal 2003. This increase is mainly due to our increase in the asset base for our Australasian Operations, as a result of
our acquisition of a 20% interest in Porgera ($9.3 million) and the continued weakening of the Dollar against the local functional
currencies ($1.3 million). The remainder of the increase ($6.8 million) is as a result of an increase in the amortization rate due to
decreased Ore Reserves of 6.0 million ounces.
Employment termination costs
Employment termination costs increased to $0.9 million for fiscal 2004 as compared to $0.7 million for fiscal 2003. These
costs relate to voluntary retrenchments at Blyvoor.
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102
Impairment of assets
During fiscal 2004 impairments of $3.0 million were recorded. These impairments relate to the following:
•
Loans made that were seen to be irrecoverable, which amounted to $1.9 million. $1.1 million of loans were advanced to
enable the West Wits mine to be sold as part of black economic empowerment to Mogale. This balance is seen to be
irrecoverable due to Mogale having been placed under judicial management during fiscal 2004. $0.8 million relates to funds
advanced to KBH, which we impaired as KBH's main asset is a 60% interest in CGR and ERPM which are incurring losses.
•
Goodwill in Net-Gold Services Limited, acquired during fiscal 2004, impaired as a result of losses recorded in this entity,
which amounted to $1.0 million.
No impairments were recorded in fiscal 2003.
Management and consulting fees
Management and consulting fees in fiscal 2004 increased by $0.7 million to $2.4 million compared to $1.7 million in fiscal
2003. These expenses relate to the evaluation of possible acquisitions.
Loss/(profit) on derivative instruments
Changes in the loss/(profit) on derivative instruments in fiscal 2004 resulted in a loss of $1.0 million, as compared with a
profit of $42.4 million in fiscal 2003. The decrease mostly relates to the closing out of a major portion of the Eskom gold for
electricity contract during fiscal 2004. During fiscal 2004, a total amount of $25.1 million was used to close out 265,000 ounces under
the Eskom gold for electricity contract. As at June 30, 2004, the remaining portion on the contract was 50,000 ounces. The appreciation of
the Rand during fiscal 2003 and the resulting positive effect that these changes had on the fair value of our derivative instruments
contributed to the profit on derivative financial instruments in that period.
Selling, administration and general charges
The selling, administration and general charges increased in fiscal 2004 to $22.6 million as compared to $8.6 million in fiscal
2003. The increase of $14.0 million comprised realized foreign exchange movements of $8.1 million, additional head office salary
expenses of $2.2 million, expenses in respect of Porgera of $2.2 million, additional DRD (Isle of Man) office costs of $1.1 million and
costs associated with preparatory work for complying with the Sarbanes-Oxley Act of 2002 of $0.2 million. As most of the
administrative charges are incurred in South Africa, where our head office is based, the strengthening of the Rand against the Dollar
by 24% had a significant impact on the administrative costs incurred.
Interest and dividends
Interest and dividend income decreased by $6.3 million, or 84%, from $7.5 million during fiscal 2003 to $1.2 million during
fiscal 2004. The decrease was mostly attributable to a decrease in our cash and cash equivalents from $44.4 million as at June 30,
2003 to $22.5 million as at June 30, 2004, and interest income of $3.2 million accrued to us in respect of interest on amounts owed by
associates, during fiscal 2003.
Unrealized foreign exchange gains
Our functional currency is the Rand for our South African Operations and the Kina for our Papua New Guinean Operations.
The unrealized foreign exchange non-cash gain of $10.7 million for fiscal 2004, compared to $11.2 million for fiscal 2003, represents
the effect of the translation of monetary items, primarily external debt, which is denominated in currencies other than our functional
currencies.
Interest expense
Interest expense increased to $7.8 million for fiscal 2004 as compared to $6.7 million for fiscal 2003. The increase was due
primarily to the inclusion of a full year of interest for our 6% Senior Convertible Notes due 2006, which were issued on November 12,
2002, increasing the interest charge from $4.7 million in fiscal 2003 to $5.9 million in fiscal 2004.
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103
Income and mining tax expense
The net tax expense of $14.2 million for fiscal 2004 comprises a current taxation charge of $7.4 million mainly relating to
Porgera and a deferred tax charge of $6.8 million mainly comprising of valuation allowances raised against deferred tax assets at
Blyvoor. During fiscal 2003, a deferred tax charge of $34.3 million was recorded and a deferred tax credit of $18.4 million was
recorded as a result of changing the tax rate from 30% in fiscal 2002 to the maximum mining tax rate applicable to our South African
mining operations of either 37% or 46% for fiscal 2003.
Equity in loss from associate
Losses amounting to $8.8 million were recorded against advances of the same amount made to our associates, CGR and ERPM
during fiscal 2004. Following the retroactive restatement for the change to the equity method in accounting for the investment in
Emperor, a loss of $3.1 million was recorded against our equity investment for fiscal 2004. During fiscal 2003 our attributable portion
of our associate’s losses amounted to $1.7 million which were recorded against our equity investment in our associate. In addition,
advances of $5.2 million were impaired in fiscal 2003.
Loss from discontinued operation, net of tax
On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of our wholly-
owned subsidiary, Buffelsfontein Gold Mines Limited, which owns the North West Operations, which order was granted on the same
day. During fiscal 2004 a net loss after taxation of $20.8 million was recorded, versus a net loss after taxation of $22.6 million in fiscal
2003.
Revenue contributed from the sale of gold from our discontinued operation, amounted to $130.0 million in fiscal 2004 and
$151.9 million in fiscal 2003.
During fiscal 2004, the production focus shifted towards the mining of high-grade ore panels. This resulted in the production
of 341,861 ounces of gold from 3.2 million tonnes of ore mined, resulting in a yield of 3.37 g/t. During fiscal 2003 463,743 ounces of
gold were produced from 8.3 million tonnes of ore milled, with a yield of 1.74 g/t. The shift towards high-grade ore panels was
prompted by a series of 60-day operation reviews. On July 21, 2003, we entered into a 60−day review period on our North West
Operations designed to restore the operations to profitability. The time period of the review coincides with statutory limitations
imposed by the Labour Relations Act to implement strategic changes involving a substantial reduction in labor force. This proposal
was submitted to all stakeholders, including organized labor, the Department of Labour and the Department of Minerals and Energy
for their input. An agreement was reached with all labor organizations and the process was completed on September 21, 2003, with
approximately 2,400 employees retrenched at a cost of $6.5 million and the placing of certain infrastructure (No. 6 Shaft at the Harties
Section) on a “care and maintenance” program. On March 16, 2004, we reopened the No. 6 Shaft in the Harties Section of the North
West Operations, to mine higher-grade areas on a selective basis. We recalled 400 staff previously retrenched from the North West
Operations to man this shaft. On February 18, 2004, we announced that the No. 11 Shaft at the Buffels Section of the North West
Operations was to be closed after the revised work practices, implemented based on the operational review, proved to be
unsustainable. As a result, 600 employees were retrenched, at a cost of $0.6 million. As a result of these reviews an impairment charge
of $1.3 million was recorded in fiscal 2004. The implementation of the recommendations of the 60-day reviews were, however, unable
to curb the increase in cash cost per ounce
1
, as this increased to $389 per ounce in fiscal 2004 from $312 per ounce in fiscal 2003.
1
Cash costs per ounce is a non-US GAAP financial measure of performance that we use to determine cash generating capacities of the mines and to
monitor performance of our mining operations. For a reconciliation to production costs see Item 5A:. “Operating Results.”
BACKGROUND IMAGE
104
5B. LIQUIDITY AND CAPITAL RESOURCES
Net cash utilized by operating activities
Net cash of $23.8 million was utilized by operating activities for fiscal 2005 as compared to cash utilized by operating activities
of $25.1 million for fiscal 2004 and cash utilized by operating activities of $23.9 million for fiscal 2003. During fiscal 2005, the net
working capital movement represented an inflow of cash of $7.1 million, compared to an inflow of $9.1 million in fiscal 2004. In line
with our hedging policy which precludes forward selling of gold, the amount of derivative instruments have decreased resulting in a
decrease in the cash outflow associated with these instruments. In fiscal 2004, $25.1 million was used to close out 265,000 ounces under
the Eskom gold for electricity contract, followed by another $3.6 million in fiscal 2005 to close out the remaining balance of the Eskom
gold for electricity contract. The decrease in cash utilized in fiscal 2005 compared with fiscal 2004 was primarily due to improved
profitability from our operating activities. For the last three fiscal years, our operating activities consistently utilized cash. This is mainly
attributable to the marginal nature of the South African Operations and the pressures experienced as a result of a decline in the Rand gold
price without a corresponding decrease in production costs.
Net cash utilized in investing activities
Net cash utilized in investing activities decreased to $31.6 million in fiscal 2005 from $94.1 million in fiscal 2004 and $9.8
million in fiscal 2003. Investing activities during fiscal 2005 included $6.9 million with regards to taking up our share of the Emperor
Rights offering, $1.7 million relating to costs of the Emperor share offer and capital expenditure of $21.4 million relating to our
continuing operations and $3.5 million relating to our discontinued operation (North West Operations). The increase in cash utilized in
investing in fiscal 2004, compared to fiscal 2003, was a result of funds advanced to CGR and ERPM of $8.8 million, our acquisition of a
20% interest in the Porgera Joint Venture for $59.2 million, net of cash acquired, our acquisition of a 50.25% interest in Net-Gold
Services Limited for $0.6 million, net of cash acquired, and increased capital expenditure at our continuing operations of $21.4 million
(2003: $7.0 million) and $5.5 million (2003: $6.4 million) at our discontinued operation. The cash outflow in fiscal 2003 was a result of
our acquisition of a 19.81% stake in Emperor for $9.6 million and capital expenditure at our continuing operations of $7.0 million and
discontinued operation of $6.4 million, which was partially offset by cash inflows from the disposal of mining assets and CGR.
Total capital expenditure for fiscal 2003 was $13.4 million. Capital expenditures were predominantly on Ore Reserve
development and new underground mining equipment at all operations. Significant capital projects for fiscal 2003 included:
•
Ore Reserve development at the North West Operations at a cost of $2.7 million;
•
Acquisition of new mining equipment at the North West Operations at a cost of $1.2 million;
•
Ore Reserve development at the Blyvoor Section at a cost of $2.1 million; and
•
Expansion of and additions to the mobile plant and equipment at the Tolukuma Section at a cost of $1.0 million.
Total capital expenditure for fiscal 2004 was $26.9 million. In fiscal 2004, capital expenditures were predominantly on Ore
Reserve development, building a slimes dam reclamation facility at the Blyvoor Section and the inclusion of our 20% share of the capital
expenditure of Porgera. Redundant capital equipment was sold during the year, the proceeds of which amounted to $3.4 million.
Significant capital projects for fiscal 2004 included:
•
Ore Reserve development at the North West Operations at a cost of $2.2 million;
•
Construction of the processing facilities at No. 4 and 5 Slimes Dams at the Blyvoor Section at a cost of $6.9 million;
•
Extensions to the No. 6 Slimes Dam at the Blyvoor Section at a cost of $0.7 million;
•
Expansion of and additions to the mobile plant and equipment at the Tolukuma Section at a cost of $2.5 million; and
•
Capital expenditure of $8.7 million with respect to our 20% interest in Porgera, which includes the capitalization of deferred
stripping costs of $4.1 million.
Total capital expenditure for fiscal 2005 was $24.9 million. In fiscal 2005, capital expenditures were predominantly on mining
equipment and development, upgrading existing underground operations and upgrading metallurgical plants. Redundant capital
equipment was sold during the year, the proceeds of which amounted to $2.2 million. Significant capital projects for fiscal 2005
included:
•
Ore Reserve development at the North West Operations at a cost of $3.5 million;
•
Investment in mobile motor vehicle equipment at Tolukuma of $1.5 million;
•
Improvements to the plant and equipment at Porgera of $1.4 million; and
•
Capitalization of $11.1 million of deferred stripping costs at Porgera.
BACKGROUND IMAGE
105
We anticipate decreasing our capital expenditure in fiscal 2006 by approximately 39.7% from our capital expenditure for
fiscal 2005. We expect to incur $15.0 million of capital expenditure on mining equipment and development, upgrading existing
underground operations and upgrading current metallurgical plants as follows:
•
the Blyvoor Section - $4.2 million;
•
Porgera - $4.4 million (our 20% attributable share); and
•
the Tolukuma Section - $6.4 million.
Net cash generated in financing activities
Net cash generated from financing activities was $67.4 million in fiscal 2005 compared to $88.6 million in fiscal 2004 and
$55.4 million in fiscal 2003.
During fiscal 2005, we issued a total of 56,230,705 shares to raise $65.9 million. On October 14, 2004, DRD (Isle of Man)
entered into a facility of $15.0 million with Investec (Mauritius), of which $10.0 million had been drawn down at June 30, 2005. The
facility may be used to finance future acquisitions or rights offers by companies in which we wish to acquire shares, or with prior written
consent of Investec (Mauritius), it may be used for any other purpose. Of the total shares issued in fiscal 2005, we issued 17,000,000
shares to Baker Steel by way of a specific issue raising $14.4 million, 15,804,116 shares through a claw-back rights offer raising
$13.3 million and 23,348,465 shares to Investec raising $38.2 million, in settlement of financing facilities acquired in the fourth quarter of
fiscal 2004 and the first and second quarters of fiscal 2005.
On March 8, 2004, we announced a conditional takeover offer to acquire all of the outstanding shares in Emperor that were not
already owned by us for a consideration of one of our shares for every five shares in Emperor held. On June 10, 2004, we announced a
revised final offer of five of our shares for every twenty two shares in Emperor held. The revised offer represented a 14% increase over
the previous offer. On July 30, 2004, our offer to Emperor’s shareholders closed with us having received acceptances from Emperor’s
shareholders representing approximately 25.55% of Emperor’s issued capital, thereby increasing our shareholding in Emperor to 45.33%.
Accordingly, we issued 6,612,676 shares in exchange for the 29,097,269 Emperor shares to the value of $16.6 million, based on the
market value of our shares on the date issued, with share issue and transaction costs associated with the take over offer, amounting to $1.7
million.
During fiscal 2004, we raised $108.7 million principally through the issue of 41,463,639 ordinary shares to Investec and
Investec (Mauritius) under various agreements (for more details refer to Item 10C.: “Material Contracts”). We repaid $19.1 million of the
short-term portion of our long-term loans and we drew down $2.8 million from our R100.0 million ($15.9 million) Investec facility
entered into on June 24, 2004.
Borrowings and funding
Our external sources of capital include the issuance of debt, bank borrowings and the issuance of equity securities.
Senior Convertible Notes
On November 12, 2002, we issued $66,000,000 aggregate principal amount of 6% Senior Convertible Notes due November
2006, in a private placement to qualified institutional buyers and to non-US persons. As of October 31, 2004, no notes have been
converted. We issued the notes at a purchase price of 100% of the principal amount thereof. If not converted or previously redeemed, the
notes will be repaid at 102.5% of their principal amount plus accrued interest on the fifth business day following their maturity date in
November 2006. The notes are convertible into our ordinary shares, or, under certain conditions, ADSs, at a conversion price of $3.75 per
share or ADS, subject to adjustment in certain events. We are entitled to redeem the notes at their accreted value plus accrued interest, if
any, subject to certain prescribed conditions being fulfilled, after November 12, 2005. As of June 30, 2005, the effective interest rate on
the convertible notes was 16.08% per annum and the outstanding balance was $64.9 million. As of October 31, 2005, the effective
interest rate on the convertible notes was 16.08% per annum and the outstanding balance was $65.8 million.
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106
Industrial Development Corporation Loan
On July 18, 2002, Blyvoor entered into a loan agreement with IDC for R65.0 million ($10.4 million) to finance capital
expenditures incurred by Blyvoor in completing the Blyvoor expansion project. The loan bears interest at 1% below the prime rate of
First National Bank of Southern Africa Limited on overdraft. The loan is repayable in 48 monthly installments. Repayments were
suspended in January 2005 until January 2006. The loan is secured by means of a general notarial bond over the Blyvoor metallurgical
plant.
The loan agreement prohibits us from disposing of or further encumbering the secured assets and places restrictions over our
ability to change the business of Blyvoor. Current restructuring changes have not impacted on the terms of the loan agreement.
As of June 30, 2005, we have drawn down R26.9 million ($4.0 million) under this facility. As of June 30, 2005, the interest rate
on this loan was 9.5%. At October 31, 2005, the outstanding balance was R27.7 million ($4.1 million) with an applicable interest rate of
9.5%.
Investec Bank Limited and Investec Bank (Mauritius) Limited
We have entered into five separate funding facilities with Investec Bank Limited, or Investec, or its affiliates:
On June 24, 2004, we entered into the first facility of R100.0 million ($15.9 million) with Investec. The facility bore interest
at the three-month Johannesburg Inter-bank Acceptance Rate, or JIBAR, plus 300 basis points. As at September 30, 2004, this facility
had been fully utilized and settled by us issuing 7,850,657 ordinary shares to the value of $15.4 million, based on the market value on
the date of issue. This facility was a general funding facility and was not renewable.
On September 15, 2004, we entered into the second facility of R100.0 million ($15.9 million) with Investec. The facility bore
interest at the three-month JIBAR plus 300 basis points. As at January 11, 2005, this facility had been fully utilized and settled by us
issuing 8,700,800 ordinary shares to the value of $15.9 million, based on the market value at the date of issue. This facility was a
general funding facility and was not renewable.
On October 14, 2004, our subsidiary, DRD (Isle of Man) entered into the third facility of $15.0 million with Investec Bank
(Mauritius) Limited, or Investec (Mauritius). The facility may be used to finance future acquisitions or rights offers by companies in
which we wish to acquire shares, or with prior written consent of Investec (Mauritius), it may be used for any other purpose. The
facility bears interest at the three-month London Inter-bank Offered Rate, or LIBOR, plus 300 basis points. Funds advanced and
interest on this facility must be repaid in cash in equal installments every three months from the date of the relevant advance so that
the amount of the advance is paid in full to Investec (Mauritius) on or before November 12, 2007. The facility is secured by DRD (Isle
of Man)’s shares in Emperor Mines Limited, DRD (Porgera) Limited and Tolukuma Gold Mines Limited. The loan agreement
prohibits us from disposing of or further encumbering the secured assets. The facility restricts the flow of payments from DRD (Isle of
Man) to the Company through requiring that all net operating cash or cash distributions received by DRD (Isle of Man) in respect of
the secured assets must be used to first service our interest and principal payment obligations under the facility by requiring that we
hold, in a debt servicing account, sufficient cash to cover our quarterly principal payments. Any funds in excess of these repayment
requirements may be transferred to the Company. Investec (Mauritius) has the option to require DRD (Isle of Man) to pay 50% of any
payments, which are a distribution, by or on behalf of DRD (Isle of Man) to or for the account of the Company as a prepayment of the
facility. The facility agreement contains a number of additional customary restrictive covenants. At June 30, 2005, $10.0 million had
been drawn under this facility. As at October 31, 2005, this amount had been fully settled in cash and $15.0 million was available to
be drawn under this facility.
On December 10, 2004, we entered into the fourth facility of R100.0 million ($15.0 million) with Investec. The facility bears
interest at the three-month JIBAR plus 300 basis points. As at June 30, 2005, we had drawn down R60.0 million ($9.0 million) under
this facility, and settled this amount by issuing 8,060,647 ordinary shares to the value of $10.0 million, based on the market value at
the date of issue. This facility is a general funding facility and is not renewable. As at October 31, 2005, R40.0 million ($6.0 million)
is still available under this facility.
On March 3, 2005, an additional acquisition facility of $35.0 million was entered into with Investec (Mauritius). The
acquisition facility of $35.0 million was on similar terms as the $15.0 million facility entered into on October 14, 2004, and has
similar restrictions on the flow of funds and will be settled through the issue of shares. As at June 30, 2005 this facility had not been
utilized. As at October 31, 2005, we had drawn down $10.0 million under this facility, which was partially settled by us issuing
5,187,080 ordinary shares to the value of $7.4 million, based on the market value at the date of issue, reducing the amount outstanding
at October 31, 2005 to $2.6 million.
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Baker Steel Capital Managers LLP
On April 5, 2005, we entered into a subscription agreement and an underwriting agreement pursuant to which we would
raise, in aggregate, R180.4 million ($27.7 million) through the issue of new shares by way of:
•
a specific issue of 17 million new shares at a cash price of R5.50 each to Baker Steel Capital Managers LLP, or BSCM,
clients to raise R93.5 million ($14.4 million); and
•
a claw-back offer of 15,804,116 shares at an issue price of R5.50 each to our shareholders to raise R86.9 million ($13.3
million) in accordance with the terms of a separate offering circular to our shareholders. The funds from the claw-back offer
were received on April 12, 2005.
In terms of the subscription agreement, BSCM clients subscribed for 17 million new shares at a subscription price of R5.50
per share, which was equivalent to the volume weighted average price of our shares on the JSE for the ten trading days immediately
prior to April 5, 2005. The specific issue shares rank pari passu with our shares already in issue. At a general meeting of our
shareholders held on May 20, 2005, a specific resolution was passed to authorize our directors to allot and issue these shares. The
funds from the specific issue were received on June 1, 2005.
In addition to the provision of working capital, we have used the proceeds from the specific issue and claw-back offer to
restructure our local operations and fund necessary capital expenditure.
Compliance with Loan Covenants
We have been in compliance with all material covenants contained in the above mentioned convertible notes indenture and
loan agreements during the periods covered by our financial statements included in this Annual Report.
Anticipated funding requirements and sources
At June 30, 2005, we had cash and cash equivalents of $36.1 million, and positive working capital (defined as current assets
less current liabilities) of $11.6 million, compared to cash and cash equivalents of $22.5 million and negative working capital of $25.0
million at June 30, 2004 and cash and cash equivalents of $44.4 million and positive working capital of $2.4 million at June 30, 2003.
At October 31, 2005, our cash and cash equivalents were $25.1 million.
As at June 30, 2005, we estimated that our anticipated commitments for fiscal 2006 will be between $35.0 million and $40.0
million, which includes capital expenditure of $15.0 million as discussed above, interest payments on our convertible notes of
$4.0 million, the current portion of long-term loans of $5.7 million and working capital of approximately $14.7 million. As at June 30,
2005, we expected to finance these commitments from cash resources of $36.1 million at that date, net cash generated by operations
and undrawn borrowing facilities of $11.0 million.
Our management believes that existing cash resources, net cash generated from operations and additional funding will be
sufficient to meet our anticipated commitments for fiscal 2006 as described above. In making this statement, management has
assumed that there will be an increase in production from our continuing South African Operations and a decrease in production from
our Australasian Operations, mainly as a result of the cutback of near-surface material in the central part of the West Wall at the Porgera
Joint Venture. Management has assumed a current gold price and exchange rate.
Our estimated working capital, capital expenditure and other funding commitments, as well as our sources of liquidity, would
be adversely affected if:
•
our operations fail to generate forecasted net cash flows from operations;
•
there is an adverse variation in the price of gold or foreign currency exchange rates in relation to the US Dollar, particularly
with respect to the Rand;
•
we default on our borrowing arrangements, including the Investec (Mauritius) facility of $35.0 million or the Senior
Convertible Notes, and we are therefore required to accelerate the repayment of funds;
•
Investec (Mauritius) exercises it discretion under the third and fifth Investec (Mauritius) facilities to require us to make a
prepayment of 50% of any payments made by the intermediate holding companies of our offshore operations to the Company
using cash flows generated from our offshore operations; or
•
our operating results or financial condition are adversely affected by the uncertainties and variables facing our business
discussed under Item 5A in the section entitled “Operating Results” or the risk factors described in Item 3D.: “Risk Factors.”
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In such circumstances, we could have insufficient capital to meet our current obligations in the normal course of business,
which would have an adverse impact on our financial position and our ability to continue operating as a going concern. We would
need to reassess our operations, consider further restructuring and/or obtain additional debt or equity funding. There can be no
assurance that we will obtain this additional or any other funding on acceptable terms or at all.
5C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We are not involved in any research and development and have no registered patents or licenses.
5D. TREND INFORMATION
The marginal nature of our South African Operations and the ageing infrastructure at these mines has reduced the operational
flexibility of the Group. The importance of these operations, in terms of our total production ounces from continuing operations, has
reduced from 79% in fiscal 2003 to 37% in fiscal 2005. We expect that the overall proportion of the Group’s production from our
South African Operations will continue to diminish over time.
Our South African mines have undergone significant changes over the past three fiscal years as a result of the continued
strengthening of the Rand, resulting in a lower Rand gold price, and inflationary increases in costs. Accordingly, our South African
Operations incurred a net loss after tax, from continuing operations, of $33.5 million in fiscal 2005 and the Group may incur a net loss
in fiscal 2006. A net loss after tax of $48.9 million for the six months ended December 31, 2004, compounded by the collective impact
of a series of events that culminated in an earthquake, prompted the provisional liquidation of Buffelsfontein Gold Mines Limited, a
wholly owned subsidiary of the Company and owner of the North West Operations, on March 22, 2005. On June 28, 2004, the
Company entered into a 60-day review period at the Blyvoor Section designed to restore the operation to profitability. The 60-day
review was extended to September 13, 2004. By October 5, 2004, 1,619 employees were retrenched at a cost of $3.1 million. In an
effort to reduce corporate costs, retrenchments were made at the Company’s corporate head office during fiscal 2005. These
retrenchment costs amounted to $1.2 million. Whether we will need to engage in any further restructuring, and consequentially incur
further restructuring costs, depends on several variables which are discussed under Item 5B.: “Liquidity and Capital Resources —
Anticipated Funding Requirements and Sources,” including the strength of the South African Rand.
If the South African Rand strengthens further or if our restructuring efforts are unsuccessful in restoring profitability to our
South African Operations, we would review and consider various alternative approaches for our South African business. We are aware
that currently we would be unable to sell any of our South African Operations, as there are very few buyers interested in marginal
South African gold mines.
Our strategy to increase the production from operations outside South Africa has provided diversification to counter the poor
performance from the South African Operations. For the year ended June 30, 2005, we produced 76,314 ounces from the Tolukuma
Section and 195,394 ounces from our 20% interest in the Porgera Joint Venture. Production from the Australasian region amounted to
63% of total production from continuing operations in 2005.
As part of our strategic growth objective we plan to diversify our production base outside South Africa through organic
growth at existing mines and acquisitions of gold mining operations that meet our strategic criteria. As discussed in Item 3D.: “Risk
Factors” there are inherent risks involved in acquisitions. In addition, we would need to find financing for these acquisitions through
additional borrowings which may not be available on favorable terms, or at all. We could also seek to use our shares as consideration
for acquisitions as we have done in the past, but this will be dependent on market conditions, such as our share price and our ability to
satisfy listing requirements for any such share issues.
5E. OFF-BALANCE SHEET ITEMS
The Company does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt
obligations, special purposes entities or unconsolidated affiliates.
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5F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Payments due by period
Total
Less than
1 year
Between
1-3 years
Between
3-5 years
More than
5 years
$’000
$’000
$’000
$’000
$’000
Long-term loans............................................................................
78,992
9,678
69,314
-
-
Derivative instruments
1
...............................................................
550
-
550
-
-
Purchase obligations – contracted capital expenditure
2
..............
274
274
-
-
-
Environmental rehabilitation, reclamation and closure costs
3
....
25,840
-
-
5,905
19,935
Total contractual cash obligations ............................................
105,656
9,952
69,864
5,905
19,935
5G.
SAFE HARBOR
See “Special Note regarding Forward-Looking Statements.”
1
This amount represents the fair value at June 30, 2005, of our obligation under the interest rate swap.
2
Represents planned capital expenditure for which contractual obligations exist.
3
Operations of gold mining companies are subject to extensive environmental regulations in the various jurisdictions in which they operate. These
regulations establish certain conditions on the conduct of our operations. Pursuant to environmental regulations, we are also obliged to close our
operations and reclaim and rehabilitate the lands upon which we have conducted our mining and gold recovery operations. The gross estimated closure
costs at existing operating mines and mines in various stages of closure are reflected in this table. For more information on environmental rehabilitation
obligations, see Item 4D.:“Property, Plant and Equipment” and Note 19 “Provision for environmental rehabilitation, reclamation and closure costs” to our
financial statements.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6A. DIRECTORS AND SENIOR MANAGEMENT
Directors and Executive Officers
Our board of directors may consist of not less than four and not more than twenty directors. As of June 30, 2005, our board
consisted of seven directors, while as of June 30, 2004, our board consisted of seven directors and two alternate directors.
In accordance with JSE listing requirements and our Articles of Association, one third of the directors comprising the board of
directors, on a rotating basis, are subject to re-election at each annual general shareholders’ meeting. Additionally, all directors are subject
to re-election at the first annual general meeting following their appointment. Retiring directors normally make themselves available for
re-election.
The address of each of our executive directors and Non-Executive Directors is the address of our principal executive offices.
Executive Directors
Mark Michael Wellesley-Wood (54) Chief Executive Officer. Mr. M.M. Wellesley-Wood was appointed Non-Executive
Chairman in May 2000 and appointed Chairman and Chief Executive Officer in November 2000. Mr. M.M. Wellesley-Wood was
appointed Executive Chairman on December 19, 2003. In February 2005, Dr Ncholo was appointed as Non-Executive Chairman and Mr.
Wellesley-Wood resumed his role as Chief Executive Officer. He holds a degree in Mining Engineering from the Royal School of Mines,
Imperial College, London and a Post Graduate Business Studies from London Metropolitan University. He is a Chartered Engineer, a
Member of the Institution of Mining and Metallurgy, a former Member of the Stock Exchange in London, a Fellow of the Securities
Institute and a Member of the Society of Investment Professionals. Mr. M.M. Wellesley-Wood has been involved in all aspects of raising
finance and financial advice for mining companies since 1977. Mr. M.M. Wellesley-Wood is also a director of WCS Limited and
Emperor Mines Limited. He was Chairman of the Unwins Wine Group Limited from December 2001 to December 2003. On August 3,
2004, he was appointed as the Managing Director of Emperor Mines Limited.
Ian Louis Murray (39) Chief Financial and Corporate Development Officer. Mr. I.L. Murray was appointed Manager Corporate
Finance in 1997, alternate director in July 1999, Chief Financial Officer in November 2000 and Deputy Chief Executive Officer in
January 2003. Mr. I.L. Murray resigned as Chief Financial Officer in January 2003 but re-assumed that position on June 30, 2003 upon
the resignation of Mr. J.H. Dissel. Mr. I.L. Murray was appointed Chief Executive Officer and Chief Financial Officer on December 19,
2003. In January 2005 Mr. I.L. Murray relinquished his position as Chief Financial Officer to Mr. D.N. Campbell and in February 2005
relinquished his position as Chief Executive Officer to Mr. M.M. Wellesley-Wood. Mr. I.L. Murray resumed his position as Chief
Financial Officer upon the resignation of Mr. D.N. Campbell. Mr. I.L. Murray obtained his B.Comm degree from the University of Cape
Town and is a member of the South African Institute of Chartered Accountants, and the Chartered Institute of Management Accountants.
He also has an Advanced Taxation Certificate from the University of South Africa. Prior to joining us, Mr. I.L. Murray was group
financial and administration manager of Bioclones (Pty) Limited, a subsidiary of S A Breweries Limited from August 1995 to
January 1997. Mr. I.L. Murray is also a director of Net-Gold Services Limited and G.M. Network Limited (GoldMoney.com) and he was
a director of Emperor Mines Limited, but resigned from this position on October 6, 2005. On September 5, 2005, Mr. I.L. Murray
relinquished his position as Chief Financial Officer to Mr. J.W.C. Sayers. On November 30, 2005, Mr. I.L. Murray resigned as an
Executive Director.
John William Cornelius Sayers (59). Mr. J.W.C. Sayers was appointed as Chief Financial Officer on September 5, 2005.
Mr. J.W.C. Sayers has almost 40 years’ financial experience, most recently as Financial Director of Nampak Limited, from 1996 to 2004,
and immediately prior to that, as Financial Director of Altron Limited, from 1989 to 1996.
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Non-Executive Directors
Geoffrey Charles Campbell (44). Mr. G.C. Campbell was appointed as Non-Executive Director in 2002 and as Senior
Independent Non-Executive Director on December 19, 2003. Mr. G.C. Campbell is a qualified geologist and started his professional
career working on gold mines in Wales and Canada. In 1986 he joined Sheppards Stockbrokers in London as a mining analyst. In 1988 he
joined the Australian stockbrokers, Ord Minnett, and spent some time working for its sister company, Fleming Martin, in New York, as a
senior research analyst. In 1995 Mr. G.C. Campbell joined Merrill Lynch Investment Managers to run the Gold and General Fund, one of
the largest gold mining investment funds. He was also Research Director for Merrill Lynch Investment Managers, responsible for
coordinating investment research across the entire group. Mr. G.C. Campbell is currently the managing director of Boatlaunch Limited
and also a director of Oxford Abstracts. Mr. G.C. Campbell was appointed as Non-Executive Chairman with effect from October 25,
2005.
Robert Peter Hume (65). Mr. R.P. Hume was appointed as a Non-Executive Director in 2001. Mr. R.P. Hume has forty one
years' experience in the auditing field of which the last eighteen years were as a partner in the firm KPMG at its East London office. Since
retirement in 1999, he spent five years as an investment manager at Sasfin Frankel Pollak in East London. Mr. R.P. Hume is also a
director of King Consolidated Holdings Limited.
Moltin Paseka Ncholo (42). Non-Executive Chairman. Dr. M.P. Ncholo was appointed as a Non-Executive Director in 2002 and
as Non-Executive Chairman in February 2005. Dr. M.P. Ncholo was awarded his doctorate in Philosophy in 1992 and became an
advocate of the High Court of South African in 1994. Prior to becoming the chairman of KBH and ERPM in 1999, he was
director-general of the Department of Public Service and Administration. Dr. M.P. Ncholo is also a director of CGR and Mvelaphanda
Resources Limited. Dr. M.P. Ncholo resigned as Non-Executive Chairman with effect from October 25, 2005 and as a Non-Executive
Director on November 1, 2005. Dr. M.P. Ncholo was appointed as Executive Chairman of DRDGOLD South African Operations (Pty)
Limited on November 1, 2005.
Douglas John Meldrum Blackmur (61). Professor D.J.M. Blackmur was appointed as a Non-Executive Director in October 2003
and as Senior Independent Non-Executive Director on October 25, 2005. Professor D.J.M. Blackmur holds a doctorate in industrial
relations from the University of Queensland and has a career which spans more than 35 years, primarily in management, regulation,
industrial relations and universities, including positions held at Shell Australia, the University of Queensland, the Queensland University
of Technology, the Canberra Institute of Technology, New Zealand Qualifications Authority and the University of the Western Cape. He
currently holds the position of Standard Bank Professor of Management at the University of the Western Cape.
James Turk (58). Mr. J. Turk was appointed as a Non-Executive Director on October 27, 2004. Mr. J. Turk is the founder and a
director of G.M. Network Limited (GoldMoney.com), the operator of a digital gold currency payment system. He has specialized in
international banking, finance and investments since graduating in 1969 from George Washington University with a B.A. degree in
International Economics. He began his business career with The Chase Manhattan Bank (now J.P. Morgan Chase). In 1980 he joined
RTB, Inc., the private investment and trading company of a prominent precious metals trader. He moved to the United Arab Emirates in
1983 to be appointed Manager of the Commodity Department of the Abu Dhabi Investment Authority. In this position he was responsible
for developing and implementing the investment strategies for the Authority’s portfolio of precious metals. Since resigning from this
position in 1987, he has written “The Freemarket Gold and Money Report”, an investment newsletter and has been the author of several
books on money and banking.
Senior Management - Corporate
Craig Clinton Barnes (35) Group Financial Accountant. Mr. C.C. Barnes joined the Company in his current position in August
2004. A Chartered Accountant, he has a B.Comm degree from the University of the Witwatersrand, and a B.Compt Honors degree and
post graduate diploma in auditing, both from the University of South Africa. Prior to joining the Company, he was Head of Financial
Reporting for the Liberty Group.
Jacob Hendrik Dissel (47 ) Group Financial Manager. Mr. J.H. Dissel holds a B.Comm Honors degree and joined the Company
as Group Financial Manager in October 1999 from Anglogold. Mr. J.H. Dissel has 22 years’ experience in the mining industry.
Ilja David Graulich (33 ) General Manager Investor Relations. Mr. I.D. Graulich was appointed General Manager Investor
Relations in February 2003. Mr. I.D. Graulich is a former financial journalist and has 6 years’ experience across a number of media
sectors including mining editor of a pre-eminent South African financial newspaper. Mr. I.D. Graulich is an alternate director of Rand
Refinery Limited, G. M. Network Limited (GoldMoney.com) and Net-Gold Services Limited.
Themba John Gwebu (41) Group Company Secretary. Mr. T.J. Gwebu (B Juris, LLB, LLM) is a qualified attorney who worked
as a magistrate prior to joining the Company in April 2004 as Assistant Legal Advisor. He was appointed to his current position of
Company Secretary in April 2005.
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Amanda Roxanne Hoosen (27) Manager Internal Audit and Compliance. Ms. A.R. Hoosen joined the Company in her current
position in October 2004. She is a graduate in accounting and international business from Drexel University in the United States, and is
Certified Public Accountant. She was previously employed in the US by Cox Enterprises Incorporated and Ernst and Young.
Daniel Johannes Pretorius (38) Legal Advisor. Mr. D.J. Pretorius (B.Proc, LLB) was appointed Legal Advisor in May 2003 and
as Group Legal Counsel in February 2004. Mr. D.J. Pretorius is an attorney admitted in the High Court of South Africa, and has 12 years’
legal experience in the mining industry, 9 years of which were in private practice. Mr. D.J. Pretorius is a director of Rand Refinery
Limited.
Andrew Norman Weir (41) General Manager Human Resources. Mr. A.N. Weir, holds a B.Soc.Sci degree and diploma in
advanced labor law. Mr. A.N. Weir was appointed General Manager Human Resources in April 2005 and has 17 years’ experience in the
mining industry.
Senior Management – South Africa
William Thomas Beer (53) Regional General Manager Assets and Commercial. Mr. W.T. Beer was appointed Regional General
Manager Assets and Commercial in April 2005. Appointed Chief Administration Officer in January 2002, he has 23 years’ management
experience.
Manual Jorge Monteiro Da Silva (35) General Manager ERPM. Mr. M.J.M da Silva is a B.Sc Mining Engineering graduate
from the University of the Witwatersrand and obtained his Mine Manager’s Certificate in 1995. He joined the Company as Production
Manager at Blyvoor in 2002 and was appointed to his current position in August 2005. He has 13 years’ experience in the mining
industry.
Kevin Peter Kruger (37) Regional Engineering Manager and Environmental Manager. Mr. K.P. Kruger holds a BSc degree in
mechanical engineering from the University of the Witwatersrand, and joined the Company in 1994. Previously Engineering Manager at
the Company’s North West Operations, he was appointed to his current position in April 2005.
Louis Charles Lamsley (57) Regional General Manager. Mr. L.C. Lamsley who has a National Diploma in Metalliferous Mining
and Mine Manager’s Certificate of Competency, was appointed Regional general Manager in April 2005. He has 32 years’ experience in
the gold mining industry, 25 years of which have been spent in management.
Mark Craig Munroe (37) General Manager Blyvooruitzicht. Mr. M.C. Munroe joined the Company in 2002 and was appointed
General Manager at Blyvoor in September 2004. Previously, he was Manager New Business and Growth Projects. A B.Comm graduate,
Mr. M.C. Munroe holds a National Diploma and a National Higher Diploma in Metalliferous Mining. He obtained his Mine Manager’s
Certificate of Competency in 1999. He has 19 years’ experience in the mining industry.
Charles Methley Symons (51) General Manager Crown Gold Recoveries. Mr. C.M. Symons was appointed to his current
position in 1997. He holds a Masters degree in Business Leadership and a B.Comm degree from the University of South Africa, and a
National Diploma in Extractive Metallurgy.
David Edwin Whittaker (49) Regional Geologist. Mr. D.E. Whittaker joined the Company in 1996 and took up his current
position in April 2005. He has a BSc Honors degree from Luton College of Higher Education, a diploma in mining engineering from the
Camborne School of Mines and a graduate diploma in engineering from the University of the Witwatersrand. He has 23 years’ experience
in the mining industry.
Senior Management- Australasia
Fergus Hart (43) General Manager Tolukuma. Mr. F. Hart, who holds a BSc degree in Mining Engineering, took up his current
position in July 2005. Previously, he was at Emperor Mines Limited in Fiji for four years. He has some 20 years’ gold mining experience,
obtained primarily in South Africa in both operational and project roles with the Gencor, Goldfields and Harmony groups.
Richard Lewis Johnson (53) Divisional Director Australasia. Mr. R.L. Johnson was appointed Divisional Director Australia in
February 2003. Mr. R.L. Johnson has a BSc degree in mining engineering. Mr. R.L. Johnson was appointed as a Non-Executive Director
of Emperor Mines Limited in August 2004.
Willie Andre Labuschagne (38) Divisional Financial Manager. Mr. W.A. Labuschagne has a B.Comm degree and 15 years’
experience in financial and general management in the mining sector. He joined the Company in 2002 and moved to Brisbane in February
2004 to establish a regional office there.
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113
Terry Sean O’Connor (54) General Manager Vatukoula. Mr. T.S. O’Connor joined the Company in May 2005. A B.Comm
graduate from the University of South Africa, he holds a National Higher Diploma in Metalliferous Mining and South African Mine
Manager’s Certificate. He was previously a mine manager with Anglo Platinum.
Sandra Christine Spencer (40) General Manager Human Resources. Ms. S.C. Spencer was appointed in June 2005 as General
Manager Human Resources in Australasia. She has more than 16 years’ professional human resources experience in the finance,
management consultancy and IT sectors. She has a Certificate in Personnel Practice.
Michael Patrick Marriott (49) Chief Operating Officer Australasia. Mr. M.P. Marriott, who holds a National Diploma in
Metalliferous Mining and a South African Mine Manager’s Certificate of Competency, was appointed as General Manager Projects in
March 2004, and as Divisional Director SA Operations in August 2004. He became Chief Operating Officer in Australasia in June 2005.
He has 31 years’ experience in the gold mining industry, including positions held at Anglo American Gold Division, Cluff Resources,
Ashanti Goldfields Zimbabwe, Independence Gold Mining Zimbabwe and Highland African Mining Company Limited.
Mr. M.P. Marriott is a director of Emperor Mines Limited.
Changes in our Board of Directors and Executive Officers
The following changes occurred in our board of directors and executive officers from July 1, 2004 to November 30, 2005.
Appointments
Title
Date
D.N. Campbell
Chief Financial Officer
January 17, 2005
T.J. Gwebu
Group Company Secretary
April 1, 2005
M.P. Ncholo
Non-Executive Chairman
February 15, 2005
J.W.C. Sayers
Chief Financial Officer
September 5, 2005
J. Turk
Non-Executive Director
October 27, 2004
G.C. Campbell
Non-Executive Chairman
October 25, 2005
Resignations
Title
Date
D.C. Baker
Non-Executive Director
October 27, 2004
D.N. Campbell
Chief Financial Officer
February 12, 2005
W.G. Koonin
Divisional Director Group Finance
January 17, 2005
A. Lubbe
Divisional Director Growth and Technical Services and
Alternate Director
March 23, 2005
A.I. Townsend
Group Company Secretary
March 31, 2005
D.T. van der Mescht
Divisional Director South African Operations and Alternate
Director
August 5, 2004
M.P. Ncholo
Non-Executive Chairman
October 25, 2005
I.L. Murray
Corporate Development Officer
November 30, 2005
Directors' Terms of Service
The following table shows the date of appointment, expiration of term and number of years of service with us of each of the
directors:
Director
Title
Year first
Appointed
Term of
current
office
M.M. Wellesley-Wood
Chief Executive Officer
2000*
2 years
I.L. Murray
Corporate Development Officer
2000*##
2 years
J.W.C. Sayers
Chief Financial Officer
2005
2 years
M.P. Ncholo
Non-Executive Chairman
2002*#
2 years
G.C. Campbell
Non-Executive Director
2002*
3 years
R.P. Hume
Non-Executive Director
2001*
3 years
D.J.M. Blackmur
Non-Executive Director
2003
2 years
J. Turk
Non-Executive Director
2004
2 years
* Reappointed in 2005
# Resigned October 25, 2005
## Resigned November 30, 2005
There are no family relationships between any of our executive officers or directors. There are no arrangements or
understandings between any of our directors or executive officers and any other person by which any of our directors or executive officers
have been so elected or appointed.
BACKGROUND IMAGE
114
6B. COMPENSATION
Our Articles of Association provide that the directors' fees should be determined from time to time in a general meeting or by a
quorum of Non-Executive Directors. The total amount of directors' remuneration paid for the year ended June 30, 2005 was R17.2 million
($2.8 million). Non-Executive Directors receive a basic fee of $20,000 per annum, subcommittee fees of $2,000 per annum for each
subcommittee of which they are a member and $4,000 per annum for each subcommittee of which they are chairperson. During the year
ended June 30, 2005, we contributed R0.5 million ($0.1 million) to our defined contribution plans for our officers and directors.
The following table sets forth the compensation for our directors for the year ended June 30, 2005:
Directors
Basic
salary/fees
($'000)
Change in terms of
employment
payment
($'000)
Retirement fund
contributions/
bonus/restraint of
trade/expenses
($'000)
Total
($'000)
Share option
scheme gains
($'000)
Executive
M.M. Wellesley-Wood
1
.......................................
542
21
265
828
-
I.L. Murray
2
.........................................................
D.N. Campbell
3
…………………………..
591
53
229
-
251
-
1,071
53
-
-
A. Lubbe (Alternate director)
4
............................
164
-
135
299
14
D.T. van der Mescht (Alternate director)
5
...........
19
-
236
255
-
Subtotal ..............................................................
1,369
250
887
2,506
14
Non-Executive
M.P. Ncholo
6
........................................................
38
-
11
49
-
G.C. Campbell......................................................
51
-
14
65
-
R. Hume ...............................................................
33
-
14
47
-
D. Baker
7
.............................................................
13
-
19
32
-
D.J.M. Blackmur..................................................
J Turk
8
..................................................................
33
18
-
-
15
-
48
18
-
-
Subtotal ...............................................................
186
-
73
259
-
Total
1,555
250
960
2,765
14
Refer to Item 6E “Share Ownership” for details of share options held by directors.
1
Under the terms of Mr. M.M. Wellesley-Wood’s agreement of employment effective from December 1, 2003, he was entitled to a change in terms
of employment payment by virtue of his relinquishing the post of Chief Executive Officer of the Company, equal to 92% of his South African
remuneration package calculated on the basis of the remuneration package received on December 1, 2003. This payment accrued during May 2004,
but was deferred for six months, at Mr. M.M. Wellesley-Wood’s request. The role of Chairman and Chief Executive Officer was split in accordance
with the rules prescribed by the JSE Limited, which came into effect from January 1, 2004 and not as a result of any internal operating requirement
of the Company. No other payment of this nature was made to any officer of the Company in fiscal 2004. The Remuneration and Nominations
Committee approved the payment which amounted to R1.7 million ($0.3 million) plus interest of R0.1 million ($0.02 million).
2
Under the terms of Mr. I.L. Murray’s agreement of employment dated effective of December 1, 2003, he was entitled to receive a change in terms
of employment payment by virtue of his relinquishing the post of Chief Financial Officer. Mr. I.L. Murray was previously the Deputy Chief
Executive Officer and Chief Financial Officer until December 2003 at which time the role of Chairman and Chief Executive Officer were split and
Mr. M.M. Wellesley-Wood was appointed as Executive Chairman and Mr. I.L. Murray was appointed as Chief Executive Officer and Chief Financial
Officer. By virtue of him relinquishing the post of Chief Financial Officer and appointing a replacement Chief Financial Officer, he became entitled
to an amount equal to 93% of his South African remuneration package calculated on the basis of the remuneration package received on December 1,
2003. Such payment amounted to R1.1 million ($0.2 million) plus interest of R0.3 million ($0.05 million) and was approved by the Remuneration
and Nominations Committee which approved the agreement of employment. Mr. I.L. Murray resigned as an Executive Director with effect from
November 30, 2005.
3
Appointed January 17, 2005; resigned February 12, 2005.
4
Resigned March 23, 2005.
5
Resigned August 5, 2004.
6
Resigned November 1, 2005.
7
Retired October 27, 2004.
8
Appointed October 27, 2004.
BACKGROUND IMAGE
115
Compensation of senior management
Our senior management is comprised of executive directors and executive officers. Under the JSE Listing Rules we are not
required to, and we do not otherwise, disclose compensation paid to individual senior managers other than Executive and Non-
Executive Directors. However, the aggregate compensation paid to executive officers, excluding compensation paid to Executive
Directors, in fiscal 2005 was $1.8 million (fiscal 2004: $2.4 million), representing 12 executive officers in fiscal 2005 and 20
executive officers in fiscal 2004.
Bonuses or incentives are paid based upon performance against predetermined key performance indicators. Should an executive
director meet all the targets set in terms of such predetermined key performance indicators, he will be entitled to a bonus of 40% or 50%
of his remuneration package, depending on his particular agreement. Should an Executive Director not meet all the targets set in terms of
the predetermined key performance indicators, he will be entitled to a lesser bonus as determined by the Remuneration and Nominations
Committee.
Service Agreements
Service contracts negotiated with each executive and Non-Executive Director incorporate their terms and conditions of
employment and are approved by our Remuneration and Nominations Committee.
The Company’s executive directors, Mr. M.M. Wellesley-Wood and Mr. I.L. Murray, entered into agreements of
employment with us and DRD (Isle of Man) Limited, or DRD (Isle of Man), on May 7, 2004. These agreements regulate the
employment relationship with Messrs. M.M. Wellesley-Wood and I.L. Murray for the period that commenced on December 1, 2003
and ending on November 30, 2005. Separate agreements of employment were entered into with us and DRD (Isle of Man) to reflect
the proportionate distribution of time and effort which they apply between our South African and Australasian operations. Mr. J.W.C.
Sayers entered into an agreement of employment with the Company for the period that commenced on September 5, 2005 and ending
September 4, 2007.
Mr. M.M. Wellesley-Wood receives from us an all-inclusive remuneration package of R1.9 million ($0.3 million), and from
DRD (Isle of Man) $250,000 per annum (payable in pounds sterling in accordance with the exchange rate in effect on December 1,
2003, in an amount of £145,000 per annum). He is also eligible, under both agreements, to receive an incentive bonus of up to 40% of
his annual remuneration package in respect of each of four bonus cycles of 6 months each, over the duration of his appointment, on
condition that he achieves certain agreed key performance indicators. Mr. M.M. Wellesley-Wood’s agreements also provide that he
will receive a total of up to 460,000 of our ordinary shares in four equal tranches at intervals of 12 months over the duration of his
agreements of employment and beyond. In terms of a JSE listing requirement, these allotments were subject to approval by
shareholders. We have since decided, and Mr. M.M. Wellesley-Wood has agreed, that we will not seek the consent of our shareholders
and that he will not be issued these shares. An alternate means of achieving the objective of the retention incentive has been
implemented through the payment of a bonus. Mr. M.M. Wellesley-Wood became entitled to an amount equal to 92% of his
remuneration package from us, by virtue of his relinquishing the position of Chief Executive Officer and Deputy Chairman of the
Company.
Mr. I.L. Murray receives from us an all-inclusive remuneration package of R1.5 million ($0.2 million) and from DRD (Isle of
Man) $200,000 per annum. Mr. I.L. Murray is eligible, under both agreements, for an incentive bonus in respect of up to 50% of his
annual remuneration package in respect of each of four bonus cycles of 6 months each over the duration of his appointment, on
condition that he achieves certain key performance indicators. Mr. I.L. Murray’s agreements also provide that he will receive a total of
up to 366,000 of our ordinary shares in four equal tranches at intervals of 12 months over the duration of his agreements of
employment and beyond. In terms of a JSE listing requirement these allotments were subject to approval by shareholders. We have
since decided, and Mr. I.L. Murray has agreed, that we will not seek the consent of our shareholders and that he will not be issued
these shares. An alternate means of achieving the objective of the retention incentive has been implemented through the payment of a
bonus. Our agreement further provides that Mr. I.L. Murray became entitled to an amount equal to 93% of his South African
remuneration package calculated on the basis of the remuneration package as determined on December 1, 2003, by virtue of his
relinquishing the position as Chief Financial Officer.
Mr. J.W.C. Sayers, appointed as Chief Financial Officer on September 5, 2005, receives from us an all-inclusive
remuneration package of R2.0 million ($0.3 million) per annum. Mr. J.W.C. Sayers is eligible under his employment agreement, for
an incentive bonus of up to 50% of his annual remuneration package in respect of each of four bonus cycles of 6 months each over the
duration his appointment, on condition that he achieves certain key performance indicators.
BACKGROUND IMAGE
116
Each service agreement with our directors provides for the provision of benefits to the director where the agreement is
terminated by us, or DRD (Isle of Man) in the case of our executive officers, except where terminated as a result of certain action on the
part of the director, or upon the director reaching a certain age, or by the director upon the occurrence of a change of control of us. A
termination of a director's employment upon the occurrence of a change of control of us is referred to as an “eligible termination.” Upon
an eligible termination, the director is entitled to receive a payment equal to at least one year's salary or fees, but not more than four years
salary or fees, depending on the period of time that the director has been employed. Upon an eligible termination, all options held by the
director under our share option scheme become exercisable by the director at any time prior to the closing of the transaction involving a
change of control or, in certain circumstances in the case of executive directors, during the thirty day period following the closing of such
a transaction. Additionally, upon an eligible termination, the executive directors become entitled to any of the shares granted to such
executive director that have not yet vested, subject to shareholder approval. Moreover, the Board of Directors may, at its discretion,
accelerate the issuance of shares granted to the executive directors that are scheduled to vest following the expiration of the agreement in
the event that the agreement automatically terminates and is not extended or replaced by another agreement with the executive director.
Messrs. M.P. Ncholo, G.C. Campbell, R.P. Hume, D.J.M. Blackmur and J. Turk each have service agreements which run for
fixed periods until February 13, 2007, October 31, 2007, September 30, 2006, October 31, 2007 and October 31, 2006, respectively.
Mr. D.C. Baker resigned from our board of directors on October 27, 2004, and his service agreement was terminated. Dr. M.P. Ncholo
resigned from our board of directors on November 1, 2005, and his service agreement was terminated. After their respective two and
three year periods, the agreements continue indefinitely until terminated by either party on not less than three months prior written notice.
6C. BOARD PRACTICE
Board of Directors
As at October 31, 2005, the board of directors comprises three Executive Directors (Messrs. M.M. Wellesley-Wood,
I.L. Murray and J.W.C. Sayers) and five Non-Executive Directors (Messrs. G.C. Campbell, D.J.M. Blackmur, R.P. Hume,
M.P. Ncholo and J. Turk). The Non-Executive Directors are independent under the Nasdaq requirements and the South African King
II Report, with the exception of Dr. M.P. Ncholo, by virtue of his shareholding in KBH, the 60% shareholder of CGR, and Mr. J.
Turk, by virtue of his directorship of G.M. Network Limited (GoldMoney.com), the holding company of Net-Gold Services Limited
in which we have a 50.25% interest.
In accordance with the King II Report on corporate governance, as encompassed in the JSE Listing Rules, and in accordance
with the South African Combined Code, the responsibilities of Chairman and Chief Executive Officer were separated during January
2004. Dr M.P. Ncholo is now the Non-Executive Chairman, Mr. M.M. Wellesley-Wood is now the Chief Executive Officer and Mr.
J.W.C. Sayers is appointed as Chief Financial Officer. Mr. I.L. Murray has taken up the position of Corporate Development Officer. In
December 2004, Mr. G.C. Campbell was appointed senior independent Non-Executive Director. In future, the evaluation of the
Chairman’s performance will be considered by the Non-Executive Directors led by the senior independent Non-Executive Director.
Mr. D.C. Baker resigned from our board of directors on October 27, 2004, and Mr. J. Turk a Non-Executive Director was appointed on
October 27, 2004. Mr. D.T. van der Mescht, an alternate director, resigned on August 5, 2004 and Mr. A. Lubbe, an alternate director,
resigned on March 30, 2005, and no replacements have been appointed as yet. The board has established a nominations committee,
and it is our policy for details of a prospective candidate to be distributed to all directors for formal consideration at a full meeting of
the board. A prospective candidate would be invited to attend a meeting and be interviewed before any decision is taken. In
compliance with the Nasdaq rules a majority of independent directors will select or recommend director nominees.
The board’s main roles are to create value for shareholders, to provide leadership of the Company, to approve the Company’s
strategic objectives and to ensure that the necessary financial and other resources are made available to the management to enable
them to meet those objectives. The board retains full and effective control over the Company, meeting on a quarterly basis with
additional ad hoc meetings being arranged when necessary, to review strategy and planning and operational and financial
performance. The board further authorizes acquisitions and disposals, major capital expenditure, stakeholder communication and
other material matters reserved for its consideration and decision under its terms of reference. The board also approves the annual
budgets for the various operational units.
The board is responsible for monitoring the activities of executive management within the Company and ensuring that
decisions on material matters are referred to the board. The board approves all the terms of reference for the various subcommittees of
the board, including special committees tasked to deal with specific issues. Only the executive directors are involved with the day-to-
day management of the Company.
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117
To assist new directors, an induction program has been established by the Company, which includes background materials,
meetings with senior management, presentations by the Company’s advisors and site visits. The directors are assessed annually, both
individually and as a board, as part of an evaluation process, which is driven by an independent consultant. addition, the
Remuneration and Nominations Committee formally evaluates the executive directors and the alternate directors on an annual basis,
based on objective criteria.
All directors, in accordance with the Company’s Articles of Association, are subject to retirement by rotation and re-election
by shareholders. In addition, all directors are subject to re-election by shareholders at the first annual general meeting following their
appointment. The appointment of new directors is approved by the board as a whole. The names of the directors submitted for re-
election are accompanied by sufficient biographical details in the notice of the forthcoming annual general meeting to enable
shareholders to make an informed decision in respect of their re-election.
All directors have access to the advice and services of the Company Secretary, who is responsible to the board for ensuring
compliance with procedures and regulations of a statutory nature. Directors are entitled to seek independent professional advice
concerning the affairs of the Company at the Company’s expense, should they believe that course of action would be in the best
interest of the Company.
A majority of the Non-Executive Directors have share options under the Company’s share option scheme, but do not believe
that this interferes with their independence. See Item 6A.: “Directors, Senior Management and Employees” and Item 6E.: “Share
ownership”.
Board meetings are held quarterly in South Africa or internationally. The structure and timing of the Company’s board
meetings, which are scheduled over 2 or 3 days, allows adequate time for the Non-Executive Directors to interact without the presence
of the executive directors. The board meetings include the meeting of the Risk Committee, Audit Committee and Remuneration and
Nominations Committee which act as subcommittees to the main Board. Each subcommittee is chaired by one of the Independent
Non-Executive Directors who provide a formal report back to the main Board, as part of the quarterly reporting process. Each
subcommittee meets for approximately half a day. Certain senior members of staff are invited to attend the subcommittee meetings.
The board sets the standards and values of the Company and much of this has been embodied in the Company’s Code of
Ethics and Conduct, a copy of which is available on our website at www.drdgold.com. The Code of Ethics and Conduct applies to all
directors, officers and employees, including the principal executive, financial and accounting officers, in accordance with Section 406
of the US Sarbanes-Oxley Act of 2002, the related US securities laws and the Nasdaq rules. The Code contains provisions under
which employees can report violations of Company policy or any applicable law, rule or regulation, including US securities laws.
The Company has a wholly owned subsidiary, DRD (Isle of Man) Limited, and has established a subsidiary board on the Isle
of Man. This board comprises of three Non-Executive Directors, Mr. M.G. Gisborne, Mr. P.F. Matthews and Mr. G.C. Campbell.
Mr. M.M. Wellesley-Wood is an executive director, with Mr. J.W.C. Sayers acting as his alternate.
Board Committees
The board has established a number of standing committees to enable it to properly discharge its duties and responsibilities
and to effectively fulfill its decision-making process. Each committee acts within written terms of reference which have been
approved by the Board and under which specific functions of the board are delegated. The terms of reference for all committees can be
obtained by application to the Company Secretary at the Company’s registered office. Each committee has defined purposes,
membership requirements, duties and reporting procedures. Minutes of the meetings of these committees are circulated to the
members of the committees and made available to the board. Remuneration for Non-Executive Directors for their services on the
committees concerned is determined by the board. Currently this is in the case of each committee: chairperson $4,000 per annum;
members $2,000 per annum. The committees are subject to regular evaluation by the board with respect to performance and
effectiveness.
The following information reflects the composition and activities of these committees.
Executive Committees
Two Executive Committees have been established. An Executive Committee for the Australasian operations and an Executive
Committee for the South African operations. As at June 30, 2005, the Australasian Executive Committees consisted of Mr. M.M.
Wellesley-Wood (Chairman), Mr. I.L. Murray, Mr. J.W.C. Sayers, Mr. T.S. O’Connor, Mr. F. Hart, Mr. R.L. Johnson, Mr. M.P. Marriott,
Mr. W.A. Labuschagne and Ms. S.C. Spencer. The South African operations Executive Committee consisted of Mr. M.M. Wellesley-
Wood (Chairman), Mr. I.L. Murray, Mr. W.T. Beer, Mr. J.H. Dissel, Mr. L.C. Lamsley, Mr. D.J. Pretorius, Mr. J.W.C. Sayers, Mr. A.N.
Weir and Mr. I.D. Graulich.
BACKGROUND IMAGE
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The Executive Committees meet on a weekly basis to review current operations in detail, develop strategy and policy proposals
for consideration by the Board of Directors, implement its directives and consider disclosure controls and procedures. Members of the
Executive Committees, who are unable to attend the meetings in person, are able to participate via teleconference facilities, to allow
participation in the discussion and conclusions reached.
Committees of the Board of Directors
Remuneration and Nominations Committee
The Remuneration and Nominations Committee consists of Professor D.J.M. Blackmur (Chairman) and Mr. G.C. Campbell.
The Remuneration and Nominations Committee, which is comprised of Non-Executive Directors, has been appointed by the
board of directors. The committee meets quarterly, but may meet more often on an ad hoc basis if required. The Remuneration and
Nominations Committee is governed by its terms of reference and is responsible for approving the remuneration policies of the
Company, the terms and conditions of employment, and the eligibility and performance measures of the DRDGOLD (1996) Share
Option Scheme applicable to directors and senior management.
The committee’s objective is to evaluate and recommend to the board competitive packages which will attract and retain
executives of the highest caliber and encourage and reward superior performance. The committee also aims to ensure that criteria are
in place to measure individual performance. The committee approves the performance-based bonuses of the executive directors based
on such criteria. The General Manager Human Resources provides the committee with access to comparative industry surveys, which
assist in formulating remuneration policies. As and when required the committee may also engage the services of independent
consultants to evaluate and review remuneration policies and related issues and brief members on pertinent issues. The committee has
in the past year engaged the services of such consultants to review the employment contracts of the executive directors.
The remuneration policy, relating to the remuneration of directors and senior executives, is based on a reward system
comprising of four principal elements:
1.
Basic remuneration, as benchmarked against industry norms;
2.
Bonuses or incentives, which are measured against agreed outcomes or Key Performance Indicators, or KPIs;
3.
Short-term rewards for exceptional performance; and
4.
Long-term retention of key employees based on scarcity of skill and strategic value, using share options granted under the
DRDGOLD (1996) Share Option Scheme or shares for the Executive Directors.
A copy of the policy is available by application to the Company Secretary at the Company’s registered office.
Audit and Risk Committee
On February 11, 2005, the Audit and Risk Committees were merged into one committee (the Audit / Risk Committee) made
up of the Audit and Risk sections. The two sections sit together one after the other (chaired by their respective Chairmen) and engage
in joint deliberations. The Audit section is chaired by Mr. R.P. Hume and the Risk section is chaired by Professor D.J.M. Blackmur.
The reason for the merger is that there was a great deal of overlap between the financial risks discussed at Audit Committee level and
at Risk Committee level. The Company believes that the merging of these committees will provide better disclosure and aligns the
Company with the US Sarbanes-Oxley Act of 2002 process. For the sake of convenience the Audit Section of the Committee will be
referred to as the Audit Committee and the Risk Section as Risk Committee in this part of the report.

Audit section of the Audit and Risk Committee
As at June 30, 2005, the Audit Committee consisted of Mr. R.P. Hume (Chairman), Mr. G.C. Campbell and Professor D.J.M.
Blackmur who was appointed to the Audit Committee on November 2, 2004. Mr. D.C. Baker resigned on October 27, 2004.
The Audit Committee comprises solely of Non-Executive Directors, all of whom are independent. The primary
responsibilities of the Audit Committee, as set out in the Audit Committee charter, is to assist the board in carrying out its duties
relating to accounting policies, internal financial control, financial reporting practices and the preparation of accurate financial
reporting and financial statements in compliance with all applicable legal requirements and accounting standards. A copy of the
charter is available by application to the Company Secretary at the Company’s registered office.
BACKGROUND IMAGE
119
The Audit Committee meets quarterly with the external auditors, the Company’s internal audit practitioner, the Chief
Financial Officer and the Internal Audit and Compliance Manager to review the audit plans of the internal auditors, to ascertain the
extent to which the scope of the internal audits can be relied upon to detect weaknesses in the internal controls and to review the
annual and interim financial statements prior to approval by the board. The Audit Committee reviews our annual results, the
effectiveness of our system of internal financial controls, internal audit procedures and legal and regulatory compliance. The committee
also reviews the scope of work carried out by our internal auditors and holds regular discussions with the external auditors and internal
auditors.
The committee appoints, re-appoints and removes the external auditors and approves the remuneration and terms of
engagement of the external auditors. The committee is required to pre-approve, and has pre-approved, non-audit services provided by
our external auditors. The Company’s external audit function is currently being undertaken by KPMG Inc.
The Company’s internal and external auditors have unrestricted access to the chairman of the Audit Committee and, where
necessary, to the Chairman of the board and Chief Executive Officer. All important findings arising from audit procedures are
brought to the attention of the committee and, if necessary, to the board.
Risk section of the Audit and Risk Committee
As at June 30, 2005, the Risk Committee consisted of Professor D.J.M Blackmur (Chairman), Mr. M.M. Wellesley-Wood and
Mr. J. Turk. Mr. D.C. Baker resigned on October 27, 2004.
The Risk Committee was established in January 2004, with a non-executive chairman. Its overall objective is to assist the
Board in its duties relating to risk management and control responsibilities, assurance issues, health, safety and environmental
compliance, and the monitoring and reporting of all these matters. The Risk Committee facilitates communication between the board,
the Audit Committee, internal auditors and other parties engaged in risk management activities. The terms of reference of the Risk
Committee can be obtained by application to the Company Secretary at the Company’s registered office.
The Risk Committee’s role is to ensure that:
•
an effective risk management program is implemented and maintained;
•
risk management awareness is promoted amongst all employees;
•
risk programs (financing/insurance) adequately protect the Company against catastrophic risks;
•
regular risk assessments are conducted;
•
total cost of risk in the long term is reduced;
•
the protection of the Group's assets is promoted throughout the Group;
•
the health and safety and well being of all stakeholders is improved; and
•
the Company’s activities are carried out in such a way so as to ensure the safety and health of employees.
The Risk Committee meets quarterly and reports to the board. Additional ad hoc meetings may be arranged as and when
required. Certain members of executive management are invited to attend Risk Committee meetings on a regular basis, such as the
Chief Financial Officer, Internal Audit and Compliance Manager, the Group Risk Manager, the Group Financial Manager, the
Operational Managers, the Group Legal Counsel, the manager responsible for safety, health and environment and the General
Manager Assets and Commercial.
Following the release of the King II Report, in South Africa, containing minimum practices to be adopted, we have
formulated a risk corporate governance structure, which has been approved by the board.
The system to manage risk involves all significant business and operational risks which could undermine the achievement of
business objectives and undermine the preservation of shareholders values. The significant risks facing the Group including those at
operations have been identified and have been included in Item 3D.: “Risk factors.” Individuals have been appointed to address each
risk and the results thereof, are reviewed by senior management through regular risk meetings. The aim of the internal control
systems is for management to provide reasonable assurance that the objectives will be met. In addition to the above initiatives the
Group also employs third party consultants to benchmark our operations against other mining operations throughout South Africa and
more than 300 different mining companies worldwide.
BACKGROUND IMAGE
120
An important aspect of risk management is the transfer of risk to third parties to protect the Company from any major
disaster. We have embarked on a program to ensure that our major assets and potential business interruption and liability claims are
covered by group insurance policies that encompass our operations world-wide. The majority of the cover is through reputable
insurance companies in London and Europe and the insurance programs are renewed on an annual basis. Insurance premiums for the
Group have been reduced by more than 30% in fiscal 2004, due to the risk initiatives undertaken in the Group. A cell captive has been
established to enable further reduction in annual insurance premiums. An insurance company, Fortis Limited, has been established to
provide workers compensation insurance to the Tolukuma Section in Papua New Guinea.
6D. EMPLOYEES
Employees
The geographic breakdown of our employees (including contractors who are contracted employees employed by third parties),
was as follows at the end of each of the past three fiscal years:
Year ended June 30
2005
2004
2003
South Africa …………………………………………………………..
3,481
12,986
18,766
Australasia ...........................................................................................................
824
751
472
Total.....................................................................................................................
4,305
13,737
19,238
The total number of employees at June 30, 2005, of 4,305 comprises 676 contractors and 3,629 employees who are directly
employed by us and our wholly-owned Group companies. As of October 31, 2005, we had 4,324 employees. The decrease in the number
of employees in fiscal 2005 is due to the provisional liquidation of the North West Operations which included 7,614 employees in March
2005. The decrease in the number of employees in fiscal 2004, was due to the restructuring at the North West Operations which included
the retrenchment of approximately 2,200 employees in September 2003 and 1,000 employees in April 2004, and the reduction of
contractors.
As of June 30, 2005, 2004 and 2003, the breakdown of our employees (excluding Porgera, Emperor, CGR and ERPM) by main
categories of activity was as follows:
Year ended June 30,
Category of Activity
2005
2004
2003
Mining - Our Employees............................................................................................
2,317
7,507
9,877
Mining – Contractors .................................................................................................
676
2,372
4,426
Engineering ................................................................................................................
586
2,183
2,871
Metallurgy ..................................................................................................................
322
728
960
Mineral Resources......................................................................................................
162
256
361
Administration............................................................................................................
124
240
243
Environmental ............................................................................................................
36
105
155
Human Resources.......................................................................................................
43
204
185
Medical .......................................................................................................................
9
116
129
Safety ..........................................................................................................................
30
26
31
Total............................................................................................................................
4,305
13,737
19,238
Labor Relations
As at June 30, 2005, we employed and contracted 3,481 people in South Africa and 824 in Papua New Guinea. Approximately
70% of South African employees are members of trade unions or employee associations. This excludes all employees of the Crown
Section and ERPM Section, and all employees from our 20% interest in the Porgera Joint Venture and our 45.33% interest in the Emperor
Section. There were no material incidents of industrial action or labor unrest at our operations during fiscal 2005.
South Africa's labor relations environment remains a platform for social reform, while the political transitions that have taken
place in the country have reduced the impact of organized labor on political transformation. The National Union of Mineworkers, or
NUM, the main South African mining industry union, is influential in the tripartite alliance between the ruling African National Congress,
the Congress of South African Trade Unions, or COSATU, and the South African Communist Party as it is the biggest affiliate of
COSATU. The relationship between management and labor unions remains cordial. The DRDGOLD/National Union of Mineworkers co-
coordinating forum meets regularly to discuss matters pertinent to both parties at Group level, while operations level forums continue to
deal with local matters. The wage agreements for the period 2005 to 2007 provided for wage increases of 6% for the first year and 6.5%
increase for the second year. This agreement took effect from July 1, 2005. Wage agreements were also signed with the other recognized
unions and associations.
BACKGROUND IMAGE
121
By statute we are required to pay each employee who is dismissed for reasons based on the operational requirements of our
operations, a severance package of not less than one week’s remuneration for every completed year of service. In the aforementioned
agreements with organized labor we undertook, as in the past, to pay packages equal to two weeks basic pay for every completed year
of service as part of a balancing compromise with the labor unions between the high additional costs of non-financial items and
incentive payments (which are deemed part of remuneration), and an additional one week benefit based on basic pay.
The Tolukuma Section in Papua New Guinea is not unionized, however, labor relations and the relationship with the
surrounding communities are maintained by way of worker consultative committees and a community forum lead by the Community
Relations Manager.
AIDS represents a very serious threat to us and the gold mining industry as a whole in terms of the potential reduced
productivity and increased medical costs. The exact extent of infection in our workforce is not known at present, although it is roughly
estimated by the industry that the prevalence of HIV, the virus that causes AIDS, in the South African industry is currently approximately
30% to 40%. We have several AIDS awareness campaigns in place at our operations.
Blyvoor has contracted AngloGold Health Services to provide all health care services, including a wellness program, which
treats AIDS related illnesses, provides counseling on healthy life styles and monitors the progression of the HIV virus.
Safety statistics
Due to the importance of our labor force, we continuously strive to create a safe and healthy working environment. The
following overall statistics for our managed mines (including the Crown and ERPM Sections, but excluding Porgera and Emperor Mines
Limited) are reflected below.
(Per million man hours)
Year ended June 30,
2005
2004
Lost time injury frequency rate (LTIFR)
1
......................................................
9.55
8.63
Reportable incidence
1
.....................................................................................
3.44
3.49
Fatalities...........................................................................................................
0.25
0.25
Number of fatalities (average per month).........................................................
0.83
0.92
1
Calculated as follows: Actual number of instances divided by the total number of man hours worked multiplied by one million.
BACKGROUND IMAGE
122
6E. SHARE OWNERSHIP
As of October 31, 2005, options to purchase ordinary shares held by directors were as follows:
Directors
Options at
June 30,
2004
Options
granted
during the
period
Average
Exercise
price (R)
Options
exercised
during the
year
Average
Exercise
Price (R)
Options
lapsed
during the
year
Options at
Oct 31,
2005
Expiration
Dates
1
Executive
M.M. Wellesley Wood...
1,023,912
57,710
5.50
-
-
-
1,081,622
4/30/12-
10/27/13
I.L. Murray
2
....................
793,371
44,716
5.50
-
-
-
838,087
8/21/10-
10/27/13
Alternate Directors
A. Lubbe
3
......................
252,458
106,500
10.93
25,000
7.26
-
333,958
10/1/11-
11/1/17
D.T. van der Mescht
4
.....
307,795
-
-
-
-
-
307,795
10/1/11-
4/26/14
Non-Executive
M.P. Ncholo
5
..................
47,800
2,694
5.50
-
-
-
50,494
3/20/12-
10/27/13
G.C. Campbell................
54,900
3,094
5.50
-
-
-
57,994
3/20/12-
10/27/13
R.P. Hume ......................
73,750
4,157
5.50
-
-
-
77,907
10/1/11-
10/27/13
D.C. Baker
6
....................
49,600
-
-
-
-
-
49,600
9/26/11-
10/27/13
Each option is representative of a right to acquire one ordinary share at a predetermined exercise price.
Closed periods apply to share trading by directors and other employees, whenever certain employees of the Company become
or could potentially become aware of material price sensitive information, such as information relating to an acquisition, quarterly
results etc., which is not in the public domain. When these employees have access to this information an embargo is placed on share
trading for those individuals concerned. The embargo need not involve the entire Company in the case of an acquisition and may
apply only to the board of directors, executive committee, and the financial and new business teams, but in the case of quarterly results
the embargo is group-wide.
Under the listings requirements of the JSE, we are not required to disclose, and we do not otherwise disclose or ascertain, share
ownership of individual executive officers in our share capital.
However, to the best of our knowledge, we believe that our ordinary shares held by executive officers, in aggregate, do not exceed 1
percent of the Company’s issued ordinary share capital. For details of share ownership of directors see Item 7A.: “Major Shareholders.”
1
Certain Directors hold options which expire at various times. For those directors, a range is provided indicating the earliest and latest expiration
dates.
2
Mr. I.L. Murray resigned as an Executive Director on November 30, 2005.
3
Mr. A. Lubbe was appointed to our Board of Directors as an Alternate Director on July 1, 2003. He subsequently resigned from his position and as
an Alternate Director of the Board on March 23, 2005.
4
Mr. D.T. van der Mescht was appointed to our Board of Directors as an Alternate Director on July 1, 2003. He subsequently resigned from his
position of Divisional Director: South African Operations and as an alternate member of the board on August 5, 2004.
5
Mr. M.P. Ncholo resigned as Non-Executive Chairman on October 25, 2005.
6
Mr. D.C. Baker retired from the Board on October 27, 2004.
BACKGROUND IMAGE
123
DRDGOLD (1996) Share Option Scheme, or the Scheme
We operate a securities option plan as an incentive tool for our executive directors, Non-Executive Directors and senior
employees whose skills and experience are recognized as being essential to the Company’s performance. In terms of the Scheme rules, a
maximum of 15% of the issued ordinary shares is reserved for issuance thereunder and no participant may hold options at any time, which
if exercised in full, would exceed 2% of our issued share capital at that time. As at October 31, 2005, the number of issued and
exercisable share options is approximately 4.4% of the issued ordinary share capital, which is within the National Association of
Pension Funds (United Kingdom) international accepted guideline of 3 to 5% for such schemes. In addition, the participants in the
Scheme are fully taxed at their maximum marginal tax rate on any gains realized on the exercise of their options.
The price at which an option may be exercised is the lowest seven day trading average of the closing market prices of an
ordinary share on the JSE, as confirmed by our directors, during the three months preceding the day on which the employee is granted the
option. Each option remains in force for ten years after the date of grant, subject to the terms of the option plan. Options granted under the
plan vest at the discretion of our directors, but primarily according to the following schedule over a maximum of a three year period:
Percentage vested in each period
Period after the original date of the option grant
25%
6 months
25%
1 year
25%
2 years
25%
3 years
Any options not exercised within ten years from the original date of the option grant will expire and may not thereafter be
exercised.
Options to purchase a total of 13,051,786 ordinary shares were outstanding on June 30, 2005, of which options to purchase
6,507,374 ordinary shares were currently exercisable. In fiscal 2005, a total of 125 employees participated in the Scheme including
Executive Directors, Non-Executive Directors and other senior employees. The outstanding options are exercisable at purchase prices that
range from R3.11 to R36.08 per share and expire ten years from the date of issue to the participants.
BACKGROUND IMAGE
124
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A. MAJOR SHAREHOLDERS
As of October 31, 2005, our issued capital consisted of:
•
305,844,347 ordinary shares of no par value; and
•
5,000,000 cumulative preference shares.
To our knowledge, we are not directly or indirectly owned or controlled by another corporation or any person or foreign
government and there are no arrangements, the operation of which may at a subsequent date result in a change in control of us.
Based on information available to us, as of October 31, 2005:
•
there were 6,185 record holders of our ordinary shares in South Africa, who held approximately 9,826,233 or approximately
3.2% of our ordinary shares;
•
there was one record holder of our cumulative preference shares in South Africa, who held 5,000,000 or 100% of our cumulative
preference shares;
•
there were no record holders of our ordinary shares or ADSs underlying the 6% Senior Convertible Notes due 2006;
•
there were no US record holders of our ordinary shares, excluding those shares which are held as part of our ADS program; and
•
there were 3,501 record holders of our ADSs in the United States, who held approximately 243,467,791or approximately
79.61% of our ordinary shares.
The following table set forth information regarding the beneficial ownership of our ordinary shares as of October 31, 2005 by:
•
each of our directors; and
•
any person whom the directors are aware of as at October 31, 2005 who is interested directly or indirectly in 5% or more of our
ordinary shares.
Shares Beneficially Owned
Holder
Number
Percent
M. M. Wellesley-Wood..................................................................................................
*
I.L. Murray ....................................................................................................................
*
A. Lubbe ........................................................................................................................
*
M.P. Ncholo...................................................................................................................
*
G.C. Campbell ...............................................................................................................
*
R.P. Hume .....................................................................................................................
*
D.C. Baker .....................................................................................................................
*
Bank of New York ADRs
101 Barclay Street
New York, NY 10011
243,467,791
79.61%
* Indicates share ownership of less than 1% of our outstanding ordinary shares.
BACKGROUND IMAGE
125
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power
with respect to securities. Ordinary shares issuable pursuant to options, to the extent the options are currently exercisable or convertible
within 60 days of October 31, 2005, are treated as outstanding for computing the percentage of any other person. As of October 31, 2005,
we are not aware of anyone owning 5% or more of our ordinary shares other than the Bank of New York which holds 79.61% of our
issued ordinary shares through our ADR program. Unless otherwise noted, each person or group identified possesses sole voting and
investment power with respect to the shares, subject to community property laws where applicable. Unless indicated otherwise, the
business address of the beneficial owner is: DRDGOLD Limited, EBSCO House 4, 299 Pendoring Avenue, Blackheath, Randburg, South
Africa.
Cumulative Preference Shares
Randgold and Exploration Company Limited, or Randgold, owns 5,000,000 (100%) of our cumulative preference shares.
Randgold's address is 28 Harrison Street, Johannesburg, South Africa.
The holders of cumulative preference shares do not have voting rights unless any preference dividend is in arrears for more than
six months. The terms of issue of the cumulative preference shares are that they carry the right, in priority to the Company's ordinary
shares, to receive a dividend equal to 3% of the gross future revenue generated by the exploitation or the disposal of the Argonaut mineral
rights acquired from Randgold & Exploration Company Limited in September 1997. They will obtain their potential voting rights only
once the Argonaut Project becomes an operational gold mine, and dividends accrue to them. Additionally, holders of cumulative
preference shares may vote on resolutions which adversely affect their interests and on the disposal of all or substantially all of our assets
or mineral rights. There is currently no active trading market for our cumulative preference shares. No shareholder has voting rights
which differ from the voting rights of any other shareholder. On May 1, 2005, the Argonaut mineral rights reverted to the South African
State, in terms of the MPRD Act. An application to be issued with prospecting rights in respect of our former holdings is currently
pending before the Department of Minerals and Energy. If we do not acquire new rights under the MPRD Act, we would be entitled to
claim compensation from the South African Government if we can prove that thereby our property has been expropriated as provided for
under the Constitution of South Africa. Whether mineral rights constitute property and whether the MPRD Act does bring about an
expropriation, are both aspects which are the subject of legal debate which is likely to be settled ultimately by litigation. The factors in
determining compensation include not only fair market value but also history of acquisition and use and aspects of redress and reform
which could have the effect of reducing the compensation.
7B. RELATED PARTY TRANSACTIONS
Rand Refinery Agreement
On October 12, 2001, we entered into an agreement with Rand Refinery Limited, or RRL, for the refining and sale of all of our
gold produced in South Africa. Under the agreement, RRL performs the final refining of our gold and casts it into troy ounce bars. RRL
then sells the gold on the same day as delivery, at the London afternoon close price on the day the gold is sold. In exchange for this
service, we pay RRL a variable refining fee plus fixed marketing, loan and administration fees. For fiscal 2005 this amounted to $0.4
million and $0.9 million for fiscal 2004. Mr. D.J. Pretorius, our Legal Advisor, is also a director of RRL and has been appointed as a
member of their audit committee. Also, Mr. I.D. Graulich, our General Manager: Investor Relations, is an alternate director to Mr. D.J.
Pretorius. With the provisional liquidation of Buffelsfontein Gold Mines Limited on March 22, 2005, our 10.6% interest in RRL
decreased to our current ownership of 3%. RRL is jointly owned by South African gold mining companies.
R.A.R. Kebble
We entered into an agreement with Mr. R.A.R. Kebble in March 2002 whereby Mr. R.A.R. Kebble retired from employment
with us with effect from March 19, 2002 and ceased to be a director of our board with effect from June 30, 2002. Pursuant to that
agreement we undertook to pay an amount of R3.1 million ($0.3 million) to Mr. R.A.R. Kebble on June 30, 2002. We believe that we are
not required to pay this amount and we have not done so. One of the reasons for this is that we believe we have a counterclaim against
Mr. R.A.R. Kebble in excess of this claim.
C. Press Loan
During fiscal 2003, Mr. C. Press, a director of Net-Gold Services (Pty) Limited, or Net-Gold, a consolidated subsidiary
company, loaned an amount of $24,946 to Net-Gold. This loan is interest free, unsecured and has no fixed terms of repayment. The funds
were used for short-term working capital advances. As at October 31, 2005, the full balance was still outstanding.
BACKGROUND IMAGE
126
iProp Loan Note
On June 12, 2002, we entered into a loan agreement with Crown Gold Recoveries (Pty) Limited, or CGR, in terms of which an
amount of R37.7 million ($3.6 million) is recorded as owing by CGR to us. At the time, CGR was an indirect wholly-owned subsidiary of
Crown Consolidated Gold Recoveries (Pty) Limited, or CCGR. We sold 60% of our interest in CGR to Khumo Bathong Holdings (Pty)
Limited, or KBH. This amount was originally owed by CGR to iProp Ltd (previously known as RMP Properties SA Limited), or iProp, in
terms of a secured loan note. In an arrangement in which JCI Gold Limited, or JCI, paid iProp R38.0 million ($3.7 million) in exchange
for an issue by us to JCI of 8,000,000 ordinary shares, the loan note was ceded to us. The loan note has now been cancelled and restated
in terms of the loan agreement entered into on June 12, 2002. The total amount outstanding on this loan as of October 31, 2005, is
R54.2 million ($8.1 million). The loan bears interest at the prime rate of The Standard Bank of South Africa Limited. As of June 30,
2005, the interest rate was 10.5% per annum and as of October 31, 2005, the interest rate on this loan stood at 10.5%. The loan is
repayable on demand within seven years. During fiscal 2005 we agreed to suspend our right to demand repayment of this balance
indefinitely. Interest is payable annually in arrears. The loan is unsecured. In terms of the loan agreement the principal amount will be
repaid in equal annual installments. As at October 31, 2005, this balance was still owing to us, however, we have recognized losses
generated by CGR and its subsidiary against this loan and it is carried at a nil value.
Crown Gold Recoveries (Pty) Ltd, or CGR
In connection with the sale by us of 60% of our interest in CGR we agreed to lend KBH R5.3 million ($0.7 million) under a loan
agreement entered into on June 12, 2002. Prior to this, CGR was an indirect wholly-owned subsidiary of ours. The loan bears interest at
the prime rate of The Standard Bank of South Africa Limited. As of October 31, 2005, the outstanding balance was R7.9 million
($1.2 million). The loan is repayable on demand within five years from such a demand having been made. During fiscal 2005 we reached
an agreement with CGR that we would suspend our right to demand repayment of this balance indefinitely, due to the loss making
position of CGR. Interest is payable annually in arrears. The loan was secured by KBH's pledge to us of 49,928,824 shares in ERPM.
However, since the acquisition of ERPM by CGR, the loan is no longer secured. The strategic value of this transaction was that it has
enabled us to introduce a black empowerment entity, KBH, which is necessary in terms of the new Mining Charter.
On June 12, 2002, we entered into two loan agreements with CGR, the first being for R0.9 million ($0.09 million) and the
second being for R37.7 million ($3.6 million). The first loan is payable on demand within three years from such a demand having been
made and interest is payable annually in arrears and the second loan is payable on demand within seven years from such a demand having
been made and interest is payable annually in arrears. During fiscal 2005 we reached an agreement with and CGR that we would suspend
our right to demand repayment of this balance indefinitely, due to the loss making position of CGR. The total amount outstanding on
these loans, as at October 31, 2005, is R54.8 million ($8.2 million), however, we have recognized losses generated by CGR and its
subsidiary against this loan and it is carried at a nil value.
At the same date, we entered into a shareholders' agreement with KBH, the Industrial Development Corporation, or IDC, CCGR
and CGR. This agreement provides that the board of CGR shall comprise two directors appointed by CCGR and three directors appointed
by KBH. The agreement also provides that certain business matters such as amending the memorandum and articles of association of
CGR, canceling the services agreement with us or incurring certain indebtedness requires the approval of CCGR, in the case of
shareholder matters, or a director appointed by CCGR in the case of directors matters. Additionally, the agreement places restrictions on
our ability to dispose of shares of CGR without the prior written consent of the other shareholders. The shareholder agreement also
provides that unless its board of directors determines otherwise, CGR shall declare an annual dividend of a minimum of 30% of the net
profits of CGR after taxes and interest. As of October 31, 2005, no dividends have been declared.
This shareholders' agreement also documents three previously interest free loans from CCGR to CGR totaling R190.0 million
($30.3 million). Under the terms of the share purchase agreement, 57% (R108.0 million ($17.2 million)) of the principal amount of these
loans were sold to IDC and 3% (R5.7 million ($0.9 million)) to KBH. However, upon KBH exercising its option to purchase IDC's
interest in CGR, IDC's portion of this loan was ceded to KBH. These balances are still outstanding as at October 31, 2005, however, we
have recognized losses generated by CGR and its subsidiaries against this loan and it is carried at a nil value.
On July 20, 2005, we acquired from the IDC all the remaining balances owing by CGR and ERPM through the issue of
4,451,219 of our shares, representing a cost of R28.9 million ($4.3 million). These balances are still outstanding as at October 31, 2005.
These loans currently bear interest at the prime rate charged by The Standard Bank of South Africa Limited on overdraft which
as of October 31, 2005, stood at 10.5%. It is the intention of the parties to amend the terms of the shareholders' loans. It is expected that
the shareholders' loans will continue to bear interest at the prime rate and the interest will be repayable in equal monthly payments over
the period of the loans.
BACKGROUND IMAGE
127
Dr. M.P. Ncholo, one of our non-executive directors, is also the chairman of KBH. The 4,794,889 shares originally issued to
KBH were subject to a put and call option instrument between KBH and Investec, with the shares held as security. The option was
exercised and Investec took possession of the shares in three equal tranches in June, July and August 2004.
East Rand Proprietary Mines Limited
On October 10, 2002, Daun et Cie AG, Courthiel Holdings (Pty) Ltd, KBH, Claas Edmond Daun, Paul Cornelis Thomas
Schouten, Moltin Paseka Ncholo, Masechaba Palesa Moletsane Ncholo, Michelle Patience Baird, Derek Sean Webbstock, or collectively
the Sellers, and CGR, entered into an agreement in terms of which CGR agreed to purchase from the Sellers the entire issued share capital
and shareholders' claims of ERPM. Dr. M.P. Ncholo is one of our non-executive directors and we own a 40% interest in CGR. The
purchase price for the acquisition of the shares and the claims was R100.0 million ($9.5 million). CGR loaned an amount of
R60.0 million ($5.7 million) to the Sellers as an interest free loan, and CGR received from the Sellers, as security for the loan, a pledge of
the entire issued share capital of ERPM and a cession of the Sellers' claims to CGR. The conditions of the sale were fulfilled and the
amount was deemed to be paid to the Sellers on account of the purchase price. An existing mortgage bond registered by ERPM in favor
of Courthiel Holdings (Pty) Ltd securing shareholder loans in the sum of R10.0 million ($1.9 million) was also ceded to CGR as security
on October 11, 2002. The full amount is still owing under the bond.
The competition authorities' approval for the acquisition of ERPM by CGR was obtained and the R60.0 million ($5.7 million)
loan was deemed to be part payment of the purchase price. As to the balance of the purchase price of R40.0 million ($3.8 million), KBH,
a 40% shareholder in CGR, agreed to use its best endeavors to obtain a loan of R40.0 million ($3.8 million) from the IDC which was paid
to the Sellers as final part payment of the purchase price of the ERPM acquisition. CGR procured the release of the Sellers from all
statutory environmental obligations, including obligations to furnish guarantees and the like to the Department of Minerals and Energy, or
DME, and ERPM will assume the Sellers' responsibilities in this regard. CGR acquired ERPM as is, without indemnification for any
disclosed or undisclosed liabilities, which could require CGR to incur significant financial obligations to satisfy any liability.
Additionally, on September 18, 2002, in connection with CGR's acquisition of ERPM, we provided a working capital facility of
R10.0 million ($1.6 million) to ERPM. The loan bears interest at the prime rate charged by The Standard Bank of South Africa Limited
on overdraft and as of October 31, 2005, the interest rate on the loan stood at 10.5%. The loan is secured by a pledge of certain movable
assets of ERPM.
On January 1, 2003 and April 7, 2003, we advanced to CGR R9.8 million ($1.6 million) and R2.1 million ($0.3 million),
respectively, on the same terms. These amounts were advanced for ERPM acquisition costs and working capital requirements
respectively.
Furthermore, from July 1, 2003 to April 30, 2004, funds were advanced to ERPM by way of a capital expansion loan of R32.2
million ($5.1 million) and on September 1, 2003, by way of debentures of R16.0 million ($2.6 million). These funds were utilized to fund
infrastructure upgrades and the purchase of mining equipment. The loan facility is repayable in equal installments over the 5 years, and
bears interest at prime less 0.5%. The debentures are repayable in 78 months from issue date and bear interest at prime less 2.5%. In
addition the debentures attract a royalty of 0.267% of the gross revenue received from net smelter revenue.
As a result of the low Rand gold price coupled with a number of unforeseen operational setbacks, the structured capital
expansion and underground resource development plan at ERPM was abandoned. All project finance loans advanced to CGR and
ERPM, and included above, totaling $8.8 million were included in the investment in our associate, against which losses recorded by the
associate, were recognized against these advances in fiscal 2004. In fiscal 2005, no further advances were made. No repayment has been
received on either the loan or the debentures and management have agreed to suspend repayments indefinitely.
Management Service Agreements
We provide management services for CGR and ERPM under management service agreements entered into with each of them.
These services include financial management, gold administration and hedging, technical and engineering services, mineral resource
services and other management related services. We own a 40% interest in CGR. ERPM is a wholly-owned subsidiary of CGR. These
arrangements allow us to monitor and provide input on the management of these companies in which we have an investment.
For CGR we provide management services with KBH. The management services at ERPM are provided exclusively by us. Our
management fee for services performed at the Crown Section was R0.7 million ($0.07 million) per month and our management fee for
services performed at the ERPM Section is approximately R1.5 million ($0.1 million) per month. The agreement with CGR entered on
July 1, 2002, was for one year and was renewable annually. The agreement with the ERPM Section entered on July 1, 2002, was for a
fixed two year period with an option to renew. In April 2004, the management fees were revised to R0.3 million ($ 0.04 million) per
month for both the Crown Section and the ERPM Section. Subject to the annual renewal clauses of these management contracts the
management fees were further revised to R1.0 million ($0.1 million) per month for the Crown Section and the ERPM Section, during
fiscal 2006.
BACKGROUND IMAGE
128
Assistance with regards to funeral expenses
During fiscal 2004, financial assistance was provided by ERPM, our 40% associate company with KBH, to the family of Dr.
M.P. Ncholo, a non-executive director of our Company, and executive director of KBH, with regards to funeral expenses relating to
the death of a family member who was a temporary employee of ERPM. In terms of ERPM’s practice, the funds were advanced on
compassionate grounds to assist the family with costs associated with the funeral. This amounted to R90,447 ($14,414). At October
31, 2005 this amount was still outstanding in the accounts of ERPM.
Black Economic Empowerment, or BEE, transaction with Khumo Bathong Holdings (Pty) Limited, or KBH
On July 6, 2005, we signed a Memorandum of Understanding with our black economic empowerment partner, KBH, regarding
the acquisition by KBH of a 15% stake in our South African Operations. The intention of the transaction is to bring us into full
compliance with the 10-year, 26% black economic empowerment equity requirement as stipulated in the Mining Charter.
On July 20, 2005, we acquired from the IDC, all the debt which it holds against CGR and ERPM for a consideration which was
settled through the issue of 4,451,219 of our ordinary shares, which at the date of issue, represented approximately $4.3 million (R28.9
million).
On October 27, 2005, our board of directors approved the extension of our existing black economic empowerment structure with
KBH to cover all of our South African assets. The transaction has been facilitated by the IDC, which agreed to a debt restructuring in
CGR.
The new structure results in Khumo Gold SPV (Pty) Limited, or Khumo Gold, acquiring initially, a 15% interest in a newly created 
vehicle, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD SA, which holds ERPM, CGR and Blyvoor. We will retain an 85% interest.
In addition, Khumo Gold was granted an option, exercisable over the next three years, to acquire a further 11% interest in DRDGOLD
SA for $1.4 million (R9.3 million). This further equity tranche will include a 6% stake to be placed in a new Employee Trust. The
transaction has been financed by the issuance of $4.8 million (R31.8 million) new Khumo Gold preference shares.
Emperor Mines Limited, or Emperor
In August 2005, we initiated a financing and operating assistance package to Emperor. This follows a complete review of
Emperor’s operations.
To assist Emperor with its restructuring plan, we have agreed to provide a A$10.0 million ($7.6 million) Convertible Loan
Facility to Emperor as part of a re-financing package, which includes an agreement with ANZ Bank to restructure Emperor’s existing
debt servicing obligations.
ANZ Bank has given its consent to our granting of the Convertible Loan Facility and the related security. Further the Australian
Stock Exchange has also granted a waiver of listing rules to permit Emperor to grant such security to us on the terms incorporated in the
Convertible Loan Facility.
The Convertible Loan Facility is repayable upon the first of the receipt of the proceeds expected from the sale of Emperor’s
interest in the Tuvatu Gold Prospect, or by December 31, 2007. Emperor has previously announced a conditional sale agreement in
relation to the Tuvatu Gold Prospect and expects to receive consideration of approximately A$10.0 million ($7.6 million) on completion
of that transaction.
The Convertible Loan Facility is convertible, at our election, into ordinary fully paid shares of Emperor at a conversion price
equal to the lower of A$0.30 per Emperor share or the 45 day volume weighted average price of Emperor shares on the Australian Stock
Exchange prior to the date of conversion.
On August 29, 2005, the shareholders of Emperor approved the Convertible Loan Facility. We did not participate in the voting.
In terms of an operational support agreement, also negotiated on behalf of Emperor by its independent directors, we will provide
Emperor with management and technical services going forward. As at October 31, 2005, $0.1 million had been received for services
rendered.
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On November 16, 2005, we concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire our
wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea assets,
comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of our exploration
tenements in Papua New Guinea. Refer to Item 4A.: “History and Development of the Company.”
Employment agreements with executive directors
Mr. M.M. Wellesley-Wood receives from the Company an all-inclusive remuneration package of R1.9 million ($0.3 million),
and from DRD (Isle of Man) $250,000 per annum. He is also eligible, under his agreement with us and his agreement with DRD (Isle
of Man), to receive an incentive bonus of up to 40% of his annual remuneration package in respect of each of four bonus cycles of 6
months each, over the duration of his appointments, on condition that he achieves certain agreed key performance indicators.
Mr. M.M. Wellesley-Wood’s agreements also provide that he will receive a total of up to 460,000 of our ordinary shares in four equal
tranches at intervals of 6 months over the duration of his agreements of employment. In terms of a JSE listing requirement these
allotments were subject to approval by shareholders. We have since decided, and Mr. M.M. Wellesley-Wood has agreed, that we will
not seek the consent of our shareholders and that he will not be issued these shares. An alternative means of achieving the objective of
the retention inventive has been implemented through payment of a bonus. In addition, pursuant to his employment agreement, Mr.
M.M. Wellesley-Wood became entitled to an amount equal to 92% of his annual remuneration package, plus interest, by relinquishing
the position of Chief Executive Officer and Deputy Chairman of the Company. These agreements were entered into on May 7, 2004,
and regulate the employment relationship with Mr. M.M. Wellesley-Wood that commenced on December 1, 2003 and ending on
November 30, 2005.
Mr. I.L. Murray receives from the Company an all-inclusive remuneration package of R1.5 million ($0.2 million) and from
DRD (Isle of Man) $200,000 per annum. Mr. I.L. Murray is eligible, under his agreement with us and his agreement with DRD (Isle
of Man), to receive an incentive bonus in respect of up to 50% of his annual remuneration package in respect of each of four bonus
cycles of 6 months each over the duration of his appointments, on condition that he achieves certain key performance indicators.
Mr. I.L. Murray’s agreements also provide that he will receive a total of up to 366,000 of our ordinary shares in four equal tranches at
intervals of 6 months over the duration of his agreements of employment. In terms of a JSE listing requirements these allotments were
subject to approval by shareholders. We have since decided, and Mr. I.L. Murray has agreed, that we will not seek the consent of our
shareholders and that he will not be issued these shares. An alternative means of achieving the objective of the retention inventive has
been implemented through payment of a bonus. Mr. I.L. Murray became entitled to an amount equal to 93% of his annual South African
remuneration package as determined on December 1, 2003, plus interest, by relinquishing the position of Chief Financial Officer. These
agreements were entered into on May 7, 2004 and regulate the employment relationship with Mr. I.L. Murray that commenced on
December 1, 2003 and ending on November 30, 2005.
Mr. J.W.C. Sayers, who commenced his employment as Chief Financial Officer on September 5, 2005, receives from the
Company an all-inclusive remuneration package or R2.0 million (0.3 million) per annum. Mr. J.W.C. Sayers is eligible under his
employment agreement, for an incentive bonus of up to 50% of his annual remuneration package in respect of each of four bonus cycles
of 6 months each over the duration of his appointment, on condition that he achieves certain key performance indicators. This service
contract expires on September 4, 2007.
Appointment of J. Turk as Non-Executive Director
Mr. J. Turk was appointed as a non-executive director on October 27, 2004. Mr. J. Turk is the founder and a director of G.M.
Network Limited (GoldMoney.com). In April 2004, we acquired 50.25% of the shares in Net-Gold Services Limited, a subsidiary of
G.M. Network Limited (GoldMoney.com).
7C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
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ITEM 8. FINANCIAL INFORMATION
8A. CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION
See Item 18.: "Financial Statements."
Legal Proceedings
See “Legal proceedings” under Item 4D.: "Property, plant and equipment."
Dividend Policy
See Item 10B.: "Memorandum and Articles of Association."
8B. SIGNIFICANT CHANGES
See Note 27 “Subsequent Events” under Item 18.: "Financial Statements."
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ITEM 9. THE OFFER AND LISTING
9A. OFFER AND LISTING DETAILS
The following tables set forth, for the periods indicated, the high and low market sales prices and average daily trading volumes
of our ordinary shares on the JSE and ADSs on the Nasdaq Capital Market (formerly Nasdaq SmallCap Market).
Price Per
Ordinary Share
R
Price Per
ADS
$
Average Daily
Trading
Volume
Year Ended
High
Low
High
Low
Ordinary
Share
ADSs
June 30, 2001 ...............................................
10.70
4.40
1.40
0.59
141,868
593,520
June 30, 2002 ...............................................
55.00
6.50
5.59
0.79
246,934
2,085,179
June 30, 2003 ...............................................
49.20
15.60
4.72
2.11
245,634
2,809,445
June 30, 2004 ...............................................
27.75
15.00
4.10
2.20
118,454
4,084,794
June 30, 2005 ...............................................
15.80
4.15
2.66
0.30
136,947
2,440,765
Price Per
Ordinary Share
R
Price Per ADS
$
Average Daily
Trading Volume
Month Ended
High
Low
High
Low
Ordinary
Share
ADSs
May 31, 2005.........................................
7.81
4.15
1.18
0.62
149,204
1,855,206
June 30, 2005.........................................
8.09
5.69
1.16
0.88
130,762
2,737,937
July 31, 2005 .........................................
6.80
5.60
1.09
0.87
84,019
1,793,120
August 31, 2005 ....................................
7.50
5.70
1.06
0.85
59,960
1,445,521
September 30, 2005...............................             10.25
6.60
1.66
1.03
412,403
4,384,106
October 31, 2005 ...................................
9.40
8.20
1.48
1.21
486,580
2,226,405
9B. PLAN OF DISTRIBUTION
Not applicable.
9C. MARKETS
Nature of Trading Markets
The principal trading market for our equity securities is the JSE and the Australian Stock Exchange, or ASX, and our ADSs that
trade on the Nasdaq Capital Market (formerly Nasdaq SmallCap Market) in the form of ADRs under the symbol “DROOY.” Our
ordinary shares trade on the JSE under the symbol “DUR.” Our ordinary shares also trade on the LSE (symbol: DBNR), the Marche Libre
on the Paris Bourse (symbol: DUR), Brussels Bourse (symbol: DUR) in the form of International Depository Receipts, Port Moresby
Stock Exchange (symbol: DUR) and ASX (symbol: DRD). The ordinary shares also trade on the over the counter markets in Berlin,
Stuttgart and the Regulated Unofficial Market on the Frankfurt Stock Exchange. The ADRs are issued by The Bank of New York, as
depositary. Each ADR represents one ADS. Each ADS represents one of our ordinary shares. Prior to February 2001, our ADSs traded on
the Nasdaq National Market.
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132
Nasdaq Exemption
Exemption from the shareholder approval requirements
Between August and December 2003, the Company entered into a series of discounted issuances with several different
investors resulting in the issuance of ordinary shares, and securities convertible into ordinary shares, totaling 46,843,902, or 25.43% of
the total shares outstanding on a pre-issuance basis. Included within those issuances, on December 12, 2003, the Company entered
into an agreement granting Investec the option to acquire 10.2 million ordinary shares. The Company requested an exemption from
Nasdaq Marketplace Rule 4350(i)(1)(D) in reliance upon Nasdaq Marketplace Rule 4350(a). Rule 4350(i)(1)(D) provides that
shareholder approval is required upon issuing 20% or more of the common stock or 20% or more of the voting power outstanding
before the issuance for less than the greater of book or market value of the stock. Nasdaq granted this exemption on the basis that the
shareholder approval requirements of Rule 4350(i)(1)(D) are contrary to generally accepted business practices of companies located in
South Africa.
The South African Companies Act of 1973 (as amended) requires issuers to obtain shareholder approval before the issuance
of any shares or rights to shares, which approval can be provided by specific authority or a general authority granted by means of a
resolution passed by shareholders in a general meeting. JSE Listing Requirements require 75% shareholder approval for any issuance
of shares for cash. JSE Listing Requirements do, however, permit an issuer to issue shares for cash under a general authority granted
by its shareholders, but not in excess of 15% of the company’s total issued share capital during any financial year under that authority,
or the general authority. In terms of the specific issuances for which the Company received the exemption from Nasdaq described
above, there was no JSE requirement that would mandate specific shareholder approval for these transactions. The JSE Listing
Requirements accept a general authority by our shareholders under certain circumstances. The shareholders had approved a general
authority which covered the relevant transactions by resolutions passed at the Company's annual general meetings in November 2003.
In addition, included in the shares issued for cash were approximately 24.4 million shares to the value of R435.5 million
($63.1 million) which were used for the acquisition of the Porgera Joint Venture. Approval was obtained from the JSE to deem these
shares to be a vendor placing.
Exemption from the quorum requirements
Nasdaq’s Marketplace Rules, which apply to all companies listed on the Nasdaq Stock Market and Nasdaq Capital Market, state
in Rule 4350(f) that the minimum quorum for any meeting of holders of the company’s common stock must be no less than 33 1/3 % of
the issuer’s outstanding shares. Consistent with the practice of companies incorporated in South Africa, our articles of association only
require a quorum of three members. As a result, and in connection with the listing of our ADSs on the Nasdaq National Market in July
1996, we requested, and Nasdaq granted us in October 1996, an exemption from compliance with the Rule 4350(f) quorum requirement.
9D. SELLING SHAREHOLDERS
Not applicable.
9E. DILUTION
Not applicable.
9F. EXPENSES OF THE ISSUE
Not applicable.
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ITEM 10. ADDITIONAL INFORMATION
10A. SHARE CAPITAL
Not applicable.
10B. MEMORANDUM AND ARTICLES OF ASSOCIATION
Description of Our Memorandum and Articles of Association and Ordinary Shares
On June 30, 2005, we had 600,000,000 ordinary shares, no par value, and 5,000,000 cumulative preference shares, R0.10 par
value, authorized for issuance. On that date, we had issued 296,206,048 ordinary shares and 5,000,000 cumulative preference shares.
On October 31, 2005, we had 600,000,000 ordinary shares, no par value, and 5,000,000 cumulative preference shares, R0.10 par
value, authorized for issuance. On that date, we had issued 305,844,347 ordinary shares and 5,000,000 cumulative preference shares.
Set out below are brief summaries of certain provisions of our Articles of Association, or our Articles, the South African
Companies Act, 1973 (as amended), or the Companies Act, and the requirements of the JSE, all as in effect on October 31, 2005. The
summary does not purport to be complete and is subject to and qualified in its entirety by reference to the full text of the Articles, the
Companies Act, and the requirements of the JSE.
We are registered under the Companies Act under registration number 1895/000926/06. As set forth in Section 4-Objects of our
Memorandum of Association, our purpose is to explore and exploit mineral rights and establish and own mining enterprises.
Borrowing Powers
Our directors may, at their discretion, raise or borrow or secure the payment of any sum or sums of money for our use as they
see fit. For so long as we are a listed company, the directors shall so restrict our borrowings and exercise all voting and other rights or
powers of control exercisable by us in relation to our subsidiary companies so that the aggregate principal amount outstanding in respect
of us and any of our subsidiary companies, as the case may be, exclusive of inter-company borrowings, shall not, except with the consent
of our shareholders at a general meeting, exceed R30 million or the aggregate from time to time of our issued and paid up capital, together
with the aggregate of the amounts standing to the credit of all distributable and non-distributable reserves, any of our share premium
accounts and our subsidiaries' share premium accounts certified by our auditors and which form part of our and our subsidiaries' financial
statements, whichever is higher.
Share Ownership Requirements
Our directors are not required to hold any shares to qualify or be appointed as a director.
Voting by Directors
A director may authorize any other director to vote for him at any meeting at which neither he nor his alternate director
appointed by him is present. Any director so authorized shall, in addition to his own vote, have a vote for each director by whom he is
authorized.
The quorum necessary for the transaction of the business of the directors may be fixed by the directors and unless so fixed shall
be not less than two.
Directors are required to notify our board of directors of interests in companies and contracts. If a director's interest is under
discussion, depending on the nature of the interest, he shall not be allowed to vote and shall not be counted, for the purpose of any
resolution regarding his interest, in the quorum present at the meeting.
The Code of Corporate Practices and Conduct of the King II Report on Corporate Governance for South Africa, 2002, sets out
guidelines to promote the highest standards of corporate governance among South African companies. The board of directors believes
that our business should be conducted according to the highest legal and ethical standards. In accordance with their practice, all
remuneration of directors is approved by the Remuneration and Nominations Committee.
Under South African common law, directors are required to comply with certain fiduciary duties to the company and to exercise
proper care and skill in discharging their responsibilities.
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Age Restrictions
There is no age limit for directors.
Election of Directors
Directors may be appointed at a general meeting from time to time. The directors may appoint any eligible person as a director
but he shall only hold office until the next annual general meeting when the relevant director shall be eligible for election. One third of
our directors, on a rotating basis, are subject to re-election at each annual general shareholders’ meeting. Retiring directors usually make
themselves available for re-election.
General Meetings
On the request of 100 shareholders or shareholders holding not less than one-twentieth of our share capital which carries the
right of voting at general meetings, we shall within 14 days of the lodging of a request by such shareholders issue a notice to shareholders
convening a general meeting for a date not less than 21 days and not more than 35 days from the date of the notice. Directors may
convene general meetings at any time.
Our annual general meeting and a meeting of our shareholders for the purpose of passing a special resolution may be called by
giving 21 days advance written notice of that meeting. For any other general meeting of our shareholders, 14 days advance written notice
is required.
Our Articles provide that if at a meeting convened upon request by our shareholders a quorum is not present within one half hour
after the time selected for the meeting, such meeting shall be dissolved. The necessary quorum is three members present in person or
represented by proxy.
Voting Rights
The holders of our ordinary shares are generally entitled to vote at general meetings and on a show of hands have one vote per
person and on a poll have one for every share held. The holders of our cumulative preference shares are not entitled to vote at a general
meeting unless any preference dividend is in arrears for more than six months at the date on which the notice convening the general
meeting is posted to the shareholders.
Dividends
We may, in a general meeting, or our directors may, from time to time, declare a dividend to be paid to the shareholders in
proportion to the number of shares they each hold. No dividend shall be declared except out of our profits. Dividends may be declared
either free or subject to the deduction of income tax or duty in respect of which we may be charged. Holders of ordinary shares are
entitled to receive dividends as and when declared by the directors. Holders of cumulative preference shares are entitled to receive
cumulative preferential dividends in priority to the holders of our ordinary shares equal to the prescribed portion of 3% of our future
revenue generated by the exploitation or other application of the mineral rights represented by the Argonaut Project. All unclaimed
dividends are forfeited back to us after a period of twelve years.
Ownership Limitations
There are no limitations imposed by our Articles or South African law on the rights of shareholders to hold or vote on our
ordinary shares or securities convertible into our ordinary shares.
Winding-up
If we are wound-up, then the assets remaining after payment of all of our debts and liabilities, including the costs of liquidation,
shall be applied to repay to the shareholders the amount paid up on our issued capital and thereafter the balance shall be distributed to the
shareholders in proportion to their respective shareholdings. On a winding up, our cumulative preference shares rank, in regard to all
arrears of preference dividends, prior to the holders of ordinary shares. As of October 31, 2005, no such dividends have been declared.
Except for the preference dividend and as described in this paragraph our cumulative preference shares are not entitled to any other
participation in the distribution of our surplus assets on winding-up.
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Reduction of Capital
We may, by special resolution, reduce the share capital authorized by our Memorandum of Association, or reduce our issued
share capital including, without limitation, any stated capital, capital redemption reserve fund and share premium account by making
distributions and buying back our shares.
Amendment of the Articles of Association
Our Articles may only be altered by the passing of a special resolution. A special resolution is passed when the shareholders
holding at least 25% of the total votes of all the members entitled to vote are present or represented by proxy at a meeting and, if the
resolution was passed on a show of hands, at least 75% of those shareholders voted in favor of the resolution and, if a poll was demanded,
at least 75% of the total votes to which those shareholders are entitled were cast in favor of the resolution.
Consent of the Holders of Cumulative Preference Shares
The rights and conditions attaching to the cumulative preference shares may not be cancelled, varied or added, nor may we issue
shares ranking, regarding rights to dividends or on winding up, in priority to or equal with our cumulative preference shares, or dispose of
all or part of our mineral rights without the consent in writing of the registered holders of our cumulative preference shares or the prior
sanction of a resolution passed at a separate class meeting of the holders of our cumulative preference shares.
Distributions
Under an amendment to the Articles on October 21, 2002, we are authorized to make payments in cash or in specie to our
shareholders in accordance with the provisions of the Companies Act and other consents required by law from time to time. We may, for
example, in a general meeting, upon recommendation of our directors, resolve that any surplus funds representing capital profits arising
from the sale of any capital assets and not required for the payment of any fixed preferential dividend, be distributed among our ordinary
shareholders. However, no such profit shall be distributed unless we have sufficient other assets to satisfy our liabilities and to cover our
paid up share capital.
10C. MATERIAL CONTRACTS
Below is a brief summary of material contracts entered into by us, other than in the ordinary course of business, during the two
years immediately preceding the date of this Annual report.
Agreement of Employment between Durban Roodepoort Deep, Limited and Mr. M.M. Wellesley Wood, dated as of December 1, 2003.
The agreement states the employment terms and basis of remuneration for this executive director, with regards to duties for
Durban Roodepoort Deep, Limited. The term of the contract is from December 1, 2003 to November 30, 2005. Mr. M.M.
Wellesley-Wood receives an all-inclusive remuneration package of R1.9 million ($0.3 million), from us. He is also eligible to
receive an incentive bonus of up to 40% of his annual remuneration package in respect of each of four bonus cycles of 6
months each, over the duration of his appointments, on condition that he achieves certain agreed key performance indicators.
Mr. M.M. Wellesley-Wood’s agreement also provides that he will receive a total of up to 250,000 of our ordinary shares in
four equal tranches at intervals of 6 months over the duration of his agreement of employment. In terms of a JSE listing
requirement these allotments were subject to approval by shareholders. We have since decided, and Mr. M.M. Wellesley-
Wood has agreed, that we will not seek the consent of our shareholders and that he will not be issued these shares.
Service Agreement between DRD (Isle of Man) Limited and Mr. M.M. Wellesley-Wood, dated as of December 1, 2003.
The agreement states the employment terms and basis of remuneration for this executive director, with regards to duties for DRD
(Isle of Man) Limited. Mr. M.M. Wellesley-Wood receives an all-inclusive remuneration package of $250,000 per annum,
from DRD (Isle of Man). The term of the contract is from December 1, 2003 to November 30, 2005. He is also eligible to
receive an incentive bonus of up to 40% of his annual remuneration package in respect of each of four bonus cycles of six
months each, over the duration of his appointment, on condition that he achieves certain agreed key performance indicators.
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Agreement of Employment between Durban Roodepoort Deep, Limited and Mr. I.L. Murray, dated as of December 1, 2003.
The agreement states the employment terms and basis of remuneration for this executive director, with regards to duties for
Durban Roodepoort Deep, Limited. Mr. I.L. Murray receives an all-inclusive remuneration package of R1.5 million ($0.2
million) from us. Mr. I.L. Murray is eligible for an incentive bonus in respect of up to 50% of his annual remuneration
package in respect of each of four bonus cycles of 6 months each over the duration his appointments, on condition that he
achieves certain key performance indicators. Mr. I.L. Murray’s agreement also provides that he will receive a total of up to
198,000 of our ordinary shares in four equal tranches at intervals of 6 months over the duration of his agreement of
employment. In terms of a JSE listing requirement these allotments were subject to approval by shareholders. We have since
decided, and Mr. I.L. Murray has agreed, that we will not seek the consent of our shareholders and that he will not be issued
these shares. The term of the contract is from December 1, 2003 to November 30, 2005.
Service Agreement between DRD (Isle of Man) Limited and Mr. I.L. Murray, dated as of December 1, 2003.
The agreement states the employment terms and basis of remuneration for this executive director, with regards to duties for DRD
(Isle of Man) Limited. Mr. I.L. Murray receives an all-inclusive remuneration package of $200,000 per annum, from DRD
(Isle of Man). The term of the contract is from December 1, 2003 to November 30, 2005. He is also eligible to receive an
incentive bonus of up to 50% of his annual remuneration package in respect of each of four bonus cycles of six months each,
over the duration of his appointment, on condition that he achieves certain agreed key performance indicators.
Confirmation, between Durban Roodepoort Deep, Limited and Investec Bank (Mauritius) Limited, dated December 17, 2003.
On December 17, 2003, we entered into an option agreement with Investec (Mauritius) granting Investec (Mauritius) the option
to acquire 10.2 million ordinary shares. The strike price per share of the option is 95.5% of the trade-weighted average price of
our ADSs for the 10 days prior to exercise. The option had an expiry date of March 15, 2004. The option was exercised on
February 19, 2004 at a price of $3.21 per share for a total consideration of $32.3 million. Of this $19.3 million was used to close
out 180,000 ounces or 57.1% of the then committed 315,000 ounces under the Eskom gold for electricity contract.
Subscription and Option Agreement made and entered between DRD (Isle of Man) Limited, Net Gold Services Limited and G.M. Network
Limited, dated January 26, 2004.
Under this agreement we subscribed for 50.25% of Net-Gold Services Limited’s shares in issue. In addition a put and call
option was awarded with regards to the exchange of the shares that we acquired in Net-Gold Services Limited for 523.26 shares
in G.M. Network Limited. The options expire on December 31, 2007.
Forward Bullion Transaction Agreements made and entered between Durban Roodepoort Deep, Limited and Investec Bank Limited,
dated February 4, 2004, February 6, 2004, February 11, 2004 and February 12, 2004.
These agreements constitute forward bullion sales transactions whereby a total of 90,000 ounces of gold bullion was forward
purchased from Investec Bank Limited.
Loan Agreement made and entered between Durban Roodepoort Deep, Limited and Investec Bank Limited, dated June 24, 2004.
The agreement makes available to the Company a loan facility of R100.0 million ($15.9 million). The facility bears interest at
the three-month Johannesburg Interbank Acceptance Rate, or JIBAR, plus 300 interest basis points. Investec calls for payment
by delivering a repayment notice. Upon receipt of the notice we may elect to repay the facility in cash or by the issue of our
shares.
Termination Agreement made and entered between Durban Roodepoort Deep, Limited, Eskom Holdings Limited and Investec Bank
Limited, dated June 24, 2004.
During fiscal 2004, we entered into a series of agreements with Investec to close out a significant portion of the remaining hedge
position held with Eskom Holdings Limited. This agreement terminates the previous forward bullion transaction agreements in
place with Investec and Eskom Holdings Limited, through affecting the Novation Agreement made and entered between J Aron
& Company, Eskom Holdings Limited and Investec, dated June 24, 2004.
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Novation Agreement made and entered between J Aron & Company, Eskom Holdings Limited and Investec Bank Limited, dated June 24,
2004.
This agreement transfers the rights, liabilities, duties and obligations that Eskom Holdings Limited were bound to under the
Eskom gold for electricity hedge contract, to Investec, thereby creating a counterparty relationship between Investec and J Aron
& Company.
Memorandum of Understanding made and entered between Buffelsfontein Gold Mines Limited, Buffels Division and The National Union
of Mineworkers, The United Association of South Africa, The Mine Workers Union (Solidarity) and The South African Electrical Workers
Association regarding retrenchments associated with Number 9, 10 and 12 Shafts of Buffelsfontein Division, dated August 6, 2004.
This agreement states the effect of the 60-day operational review under Section 189A of the South African Labour Relations
Act, on the retrenchment of employees, based on the condition that the proposals and measures that are introduced as a result
of the 60-day review prove to be effective in restoring the Buffels Section, North West Operations, to profitability, and on the
Buffels Section attaining a sustainable gold price to cost ratio, that is budgeted tonnage, grade, kilograms and working costs.
CCMA Settlement Agreement made and entered between Blyvooruitzicht Gold Mining Company Limited and The United Association of
South Africa, South African Equity Workers’ Association, Solidarity and The National Union of Mineworkers regarding the retrenchment
of up to 2,000 employees of the Blyvooruitzicht Gold Mining Company, dated September 2, 2004.
This agreement outlines the sustainability thresholds of the Blyvoor Section’s business plan and the acknowledgements of
these thresholds by the participants. Furthermore, the agreement outlines the retrenchment of up to 2,000 employees to return
the Blyvoor Section to initially break-even point, then to work towards operating profitably over the next six months.
Loan Agreement made and entered between Durban Roodepoort Deep, Limited and Investec Bank Limited, dated September 15, 2004.
The agreement makes available to the Company a second loan facility of R100.0 million ($15.9 million). The facility bears
interest at the three-month JIBAR plus 300 interest basis points. Investec calls for payment by delivering a repayment notice.
Upon receipt of the notice we may elect to repay the facility in cash or by the issue of our shares.
Subscription Agreement made and entered between DRD (Isle of Man) Limited and Durban Roodepoort Deep, Limited, dated September
21, 2004.
The agreement indicates the Company’s intention to subscribe for 135 ordinary shares in DRD (Isle of Man) Limited at a
subscription price of $100,000 per shares, being a total subscription price of $13.5 million.
Loan Agreement made and entered between DRD (Isle of Man) Limited and Investec Bank (Mauritius) Limited, dated October 14, 2004.
This agreement makes available to our subsidiary, DRD (Isle of Man) a third loan facility of $15.0 million with Investec Bank
(Mauritius) Limited, or Investec (Mauritius). Subject to the terms of the agreement the facility may be used to finance future
acquisitions or rights offers by companies in which we wish to acquire shares, or it may be used for any other purpose with prior
written consent of Investec (Mauritius). The facility bears interest at the three-month London Interbank Offered Rate, or LIBOR,
plus 300 basis points. Funds advance and interest on this facility shall be repaid in cash in equal installments every three months
from the date of that advance so that the amount of the advance is paid in full to Investec (Mauritius) within 36 months. The
facility is secured by DRD (Isle of Man)'s shares in Emperor Mines Limited, DRD (Porgera) Limited and Tolukuma Gold Mines
Limited. The loan agreement prohibits us from disposing of or further encumbering the secured assets. The facility restricts the
flow of payments from DRD (Isle of Man) to the Company through requiring that all net operating cash or cash distributions
received by DRD (Isle of Man) in respect of the secured assets must be used to first service our interest and principal payment
obligations under the facility in accordance with the terms of the facility agreement. The agreement requires that we hold, in a
debt servicing account, sufficient cash to cover our quarterly principal payments. Any funds in excess of these repayment
requirements may be utilized by the Company. In addition, if DRD (Isle of Man) intends to make any payment, which is a
distribution, by or on behalf of it to or for the Company, Investec (Mauritius) has the option to require DRD (Isle of Man) to pay
50% of the distributed funds as a prepayment of the facility. The facility agreement contains a
number of additional customary restrictive covenants. On November 12, 2004, $7.0 million was drawn under this facility to fund
our portion of the Emperor rights offering.
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Loan Agreement made and entered between DRDGOLD Limited and Investec Bank Limited, dated December 10, 2004.
The agreement makes available to the Company a loan facility of R100.0 million ($15.0 million). The facility bears interest at
the three-month Johannesburg Interbank Acceptance Rate, or JIBAR, plus 300 interest basis points. Investec calls for
payment by delivering a repayment notice. Upon receipt of the notice we may elect to repay the facility in cash or by the
issue of our shares.
Underwriting Agreement between DRDGOLD Limited and certain underwriters, dated April 5, 2005.
Under this agreement the underwriters agreed to subscribe for the offer of an aggregate of 15,804,116 ordinary no par value
shares at a subscription price of R5.50 per share on the basis that the shares will be provisionally allotted to them, but that we
will also offer the same shares to its existing shareholders in proportion to their shareholdings in terms of a claw-back offer,
together with the right to renounce this offer in favor of third parties, and that the number of shares not allotted and issued
pursuant to the claw-back offer will finally be allotted and issued to the underwriters. We raised R86.9 million
($13.3 million) from the claw-back offer.
Subscription Agreement between DRDGOLD Limited and Baker Steel Capital Managers LLP (BSCM), dated April 7, 2005.
Under this agreement BSCM acted as an agent on behalf of certain clients. Each BSCM client subscribed to a certain number
of our ordinary shares which added up to an aggregate of 17,000,000 shares at a subscription price of R5.50 per share and
BSCM paid the sum of R93.5 million ($14.4 million) being the subscription price due for the shares.
Memorandum of Agreement between DRDGOLD Limited, Simmer & Jack Mines Limited and Simmer & Jack Investments
(Proprietary) Limited (S&J Companies), dated August 31, 2005.
Under this agreement we agreed to sell 13,000,460 ordinary no par value shares in Buffelsfontein Gold Mines Limited (in
provisional liquidation) to the S&J Companies for R0.01 per share as part of a scheme of arrangement between the S&J
Companies and Buffelsfontein’s creditors in terms of Section 311 of the South African Companies Act, 1973. This agreement
is conditional upon the S&J Companies assuming all existing and future obligations relating to the pumping and management
of underground water in the Klerksdorp/Orkney/Stilfontein/Hartebeestfontein area and providing us with indemnity against
all liability arising in this regard.
Cession Agreement entered into among The Industrial Development Corporation of South Africa Limited (IDC), DRDGOLD Limited,
Business Ventures Investment No. 750 (Pty) Ltd and Business Ventures Investment No. 751 (Pty) Ltd (the BVI Companies), dated July
13, 2005.
Under this agreement IDC sold its claims against Crown Gold Recoveries (Pty) Limited, East Rand Proprietary Mines
Limited (ERPM) and the BVI Companies and the debentures it subscribed for in ERPM to us in return for the payment of the
purchase price of 4,451,219 of our ordinary shares to the value of approximately $4.3 million (R29.0 million), which have
already been allotted and issued to the IDC.
Share Sale Agreement entered into among The Industrial Development Corporation of South Africa Limited (IDC), DRDGOLD
Limited, Business Ventures Investment No. 750 (Pty) Ltd (BVI 1) and Business Ventures Investment No. 751 (Pty) Ltd (BVI 2), dated
July 13, 2005.
Under this agreement we acquired from the IDC, 60 ordinary shares in BVI 1, representing 60% of the total issued share
capital of BVI 1, and 60 ordinary shares in the BVI 2, representing 60% of the total issued share capital of BVI 2, for the
purchase price of R120.00.
Memorandum of Understanding between DRDGOLD Limited and Khumo Bathong Holdings (Pty) Ltd (KBH), dated July 6, 2005.
Under this Memorandum of Understanding the parties agreed that East Rand Proprietary Mines Limited, Crown Gold
Recoveries (Pty) Limited and Blyvooruitzicht Mining Company Limited will be consolidated under one subsidiary, namely
DRDGOLD South African Operations (Pty) Limited, or DRDSA. Furthermore KBH will subscribe for an initial 15% stake in
DRDSA and subsequently a KBH-led broad based black economic empowerment consortium will subscribe for a further
11% in DRDSA.
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Facility B Loan Agreement between Investec Bank (Mauritius) Limited and DRD (Isle of Man)
Limited (DRDIOM), dated March 3, 2005.
This agreement made available to DRDIOM an acquisition loan facility for a maximum of $35.0 million. Subsequent to
June 30, 2005, this facility was drawn down in the amount of $10.0 million. The agreement provides for the repayment of the
loan with our ordinary shares. In this regard, we allotted and issued 3,353,365 of our ordinary shares, to the value of $4.9
million, and an additional 1,833,715 of our ordinary shares, to the value of $2.5 million, to Investec Bank (Mauritius) Limited
to repay part of the drawn down amount.
Convertible Loan Facility Agreement between DRDGOLD Limited and Emperor Mines Limited (Emperor), dated July 8, 2005.
Under this agreement we agreed to provide an A$10.0 million ($7.6 million) convertible loan facility for financial and
operational assistance to Emperor. The term of this facility will be for 2.5 years with a fixed interest of 9% per annum. The
facility is secured by a first ranking charge over Emperor’s 100% interest in the Tuvatu Gold Prospect in Fiji. The facility is
repayable upon either the receipt of proceeds expected from the sale of Emperor’s interest in the Tuvatu Gold Prospect or by
December 31, 2007. This facility is also convertible at our election into ordinary fully paid shares of Emperor.
Agreement of Employment between DRDGOLD Limited and Mr. J.W.C. Sayers, dated as of August 10, 2005.
Under this agreement Mr. J.W.C. Sayers, appointed as Chief Financial Officer on September 5, 2005, receives from us an all-
inclusive remuneration package of R2.0 million ($0.3 million) per annum. Mr. J.W.C. Sayers is eligible under his
employment agreement, for an incentive bonus of up to 50% of his annual remuneration package in respect of each of four
bonus cycles of 6 months each over the duration his appointment, on condition that he achieves certain key performance
indicators.
Option Agreement entered into by and between DRDGOLD Limited and M5 Developments (Pty) Limited, dated July 21, 2005.
Under this agreement M5 Developments (Pty) Ltd was granted an option, for a non-refundable fee of R0.5 million
($0.1 million) per month, until exercise of the option, to acquire the Durban Deep Section’s mine village for R15.0 million
($2.2 million). The option period initially expired on September 19, 2005, but was extended to November 19, 2005. On
November 19, 2005 the option was exercised and the option fee will be deemed part payment of the purchase consideration.
Share Sale Agreement between DRD (Offshore) Limited, DRDGOLD Limited and Emperor Mines Limited, dated November 16, 2005
We concluded a sale and purchase agreement with Emperor, in terms of which Emperor will acquire our wholly owned
subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds our Papua New Guinea assets, comprising
a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma Gold Mines Limited and all of our exploration
tenements in Papua New Guinea. Currently we, through DRD (Isle of Man), hold a 45.33% interest in Emperor.
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10D. EXCHANGE CONTROLS
The following is a summary of the material South African exchange control measures, which has been derived from publicly
available documents. The following summary is not a comprehensive description of all the exchange control regulations. The discussion
in this section is based on the current law and positions of the South African Government. Changes in the law may alter the exchange
control provisions that apply to you, possibly on a retroactive basis.
Introduction
Dealings in foreign currency, the export of capital and revenue, payments by residents to non-residents and various other
exchange control matters in South Africa are regulated by the South African exchange control regulations, or the Regulations. The
Regulations form part of the general monetary policy of South Africa. The Regulations are issued under Section 9 of the Currency and
Exchanges Act, 1933 (as amended). In terms of the Regulations, the control over South African capital and revenue reserves, as well as
the accruals and spending thereof, is vested in the Treasury (Ministry of Finance), or the Treasury.
The Treasury has delegated the administration of exchange controls to the Exchange Control Department of the South African
Reserve Bank, or SARB, which is responsible for the day to day administration and functioning of exchange controls. SARB has a wide
discretion. Certain banks authorized by the Treasury to co-administer certain of the exchange controls, are authorized by the Treasury to
deal in foreign exchange. Such dealings in foreign exchange by authorized dealers are undertaken in accordance with the provisions and
requirements of the exchange control rulings, or Rulings, and contain certain administrative measures, as well as conditions and limits
applicable to transactions in foreign exchange, which may be undertaken by authorized dealers. Non-residents have been granted general
approval, in terms of the Rulings, to deal in South African assets, to invest and disinvest in South Africa.
The Regulations provide for restrictions on exporting capital from the Common Monetary Area consisting of South Africa,
Namibia, and the Kingdoms of Lesotho and Swaziland. Transactions between residents of the Common Monetary Area, are not subject to
these exchange control regulations.
There are many inherent disadvantages to exchange controls including distortion of the price mechanism, problems encountered
in the application of monetary policy, detrimental effects on inward foreign investment and administrative costs associated therewith. The
South African Finance Minister has indicated that all remaining exchange controls are likely to be dismantled as soon as circumstances
permit. Since 1998, there has been a gradual relaxation of exchange controls. The gradual approach to the abolition of exchange controls
adopted by the Government of South Africa is designed to allow the economy to adjust more smoothly to the removal of controls that
have been in place for a considerable period of time. The stated objective of the authorities is equality of treatment between residents and
non-residents with respect to inflows and outflows of capital. The focus of regulation, subsequent to the abolition of exchange controls, is
expected to favor the positive aspects of prudential financial supervision.
The present exchange control system in South Africa is used principally to control capital movements. South African companies
are not permitted to maintain foreign bank accounts without SARB approval and, without the approval of SARB, are generally not
permitted to export capital from South Africa or hold foreign currency. In addition, South African companies are required to obtain the
approval of SARB prior to raising foreign funding on the strength of their South African balance sheets, which would permit recourse to
South Africa in the event of defaults. Where 75% or more of a South African company's capital, voting power, power of control or
earnings is directly or indirectly controlled by non-residents, such a corporation is designated an “affected person” by SARB, and certain
restrictions are placed on its ability to obtain local financial assistance. We are not, and have never been, designated an “affected person”
by SARB.
Foreign investment and outward loans by South African companies are also restricted. In addition, without the approval of
SARB, South African companies are generally required to repatriate to South Africa profits of foreign operations and are limited in their
ability to utilize profits of one foreign business to finance operations of a different foreign business. South African companies establishing
subsidiaries, branches, offices or joint ventures abroad are generally required to submit financial statements on these operations as well as
progress reports to SARB on an annual basis. As a result, a South African Company's ability to raise and deploy capital outside the
Common Monetary Area is restricted.
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Although exchange controls have been gradually relaxed since 1998, unlimited outward transfers of capital are not permitted at
this stage. Some of the more salient changes to the South African exchange control provisions over the past few years have been as
follows:
•
corporations wishing to invest in countries outside the Common Monetary Area, in addition to what is set out below, apply for
permission to enter into corporate asset/share swap and share placement transactions to acquire foreign investments. The latter
mechanism entails the placement of the locally quoted corporation's shares with long-term overseas holders who, in payment for
the shares, provide the foreign currency abroad which the corporation then uses to acquire the target investment;
•
corporations wishing to establish new overseas ventures are permitted to transfer offshore up to R1.0 billion ($149.6 million) to
finance approved investments abroad and up to R2.0 billion ($299.2 million) to finance approved new investments in African
countries. However, the approval of SARB is required in advance. On application to SARB, corporations are also allowed to use
part of their local cash holdings to finance up to 10% of approved new foreign investments where the cost of these investments
exceeds the current limits;
•
as a general rule, SARB requires that more than 50% of equity of the acquired off-shore venture is acquired within a
predetermined period of time, as a prerequisite to allowing the expatriation of funds. If these requirements are not met, SARB
may instruct that the equity be disposed of. In our experience (with the acquisition of Emperor Mines) SARB has taken a
commercial view on this, and has on occasion extended the period of time for compliance; and
•
remittance of directors' fees payable to persons permanently resident outside the Common Monetary Area may be approved by
authorized dealers, in terms of the Rulings.
Authorized dealers in foreign exchange may, against the production of suitable documentary evidence, provide forward cover to
South African residents in respect of fixed and ascertained foreign exchange commitments covering the movement of goods.
Persons who emigrate from South Africa are entitled to take limited amounts of money out of South Africa as a settling-in
allowance. The balance of the emigrant's funds will be blocked and held under the control of an authorized dealer. These blocked funds
may only be invested in:
•
blocked current, savings, interest bearing deposit accounts in the books of an authorized dealer in the banking sector;
•
securities quoted on the JSE and financial instruments listed on the Bond Exchange of South Africa which are deposited with an
authorized dealer and not released except temporarily for switching purposes, without the approval of SARB. Authorized dealers
must at all times be able to demonstrate that listed or quoted securities or financial instruments which are dematerialized or
immobilized in a central securities depository are being held subject to the control of the authorized dealer concerned; or
•
mutual funds.
Aside from the investments referred to above, blocked Rands may only be utilized for very limited purposes. Dividends declared
out of capital gains or out of income earned prior to emigration remain subject to the blocking procedure. It is not possible to predict when
existing exchange controls will be abolished or whether they will be continued or modified by the South African Government in the
future.
Sale of Shares
Under present exchange control regulations in South Africa, our ordinary shares and ADSs are freely transferable outside the
Common Monetary Area between non-residents of the Common Monetary Area. In addition, the proceeds from the sale of ordinary
shares on the JSE on behalf of shareholders who are not residents of the Common Monetary Area are freely remittable to such
shareholders. Share certificates held by non-residents will be endorsed with the words “non-resident,” unless dematerialized.
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Dividends
Dividends declared in respect of shares held by a non-resident in a Company whose shares are listed on the JSE are freely
remittable.
Any cash dividends paid by us are expected to be paid in Rands. Holders of ADSs on the relevant record date will be entitled to
receive any dividends payable in respect of the shares underlying the ADSs, subject to the terms of the deposit agreement entered on
August 12, 1996, and as amended and restated, between the Company and The Bank of New York, as the depository. Subject to
exceptions provided in the deposit agreement, cash dividends paid in Rand will be converted by the depositary to Dollars and paid by the
depositary to holders of ADSs, net of conversion expenses of the depositary, in accordance with the deposit agreement. The depositary
will charge holders of ADSs, to the extent applicable, taxes and other governmental charges and specifies fees and other expenses.
Voting rights
There are no limitations imposed by South African law or by our Articles on the right of non-South African shareholders to hold
or vote our ordinary shares.
10E. TAXATION
Material Income Tax Consequences
This is a discussion of the material income tax considerations under South African and United States, or US, tax law. No
representation with respect to the consequences to any particular purchaser of our securities is made hereby. Prospective purchasers are
urged to consult their own tax advisers with respect to their particular circumstances and the effect of US national, state or local tax laws
to which they may be subject.
South Africa
South Africa imposes tax on worldwide income of South African residents. Generally, South African non-residents do not pay
tax in South Africa except in the following circumstances:
Income Tax
Non-residents will pay income tax on any amounts received by or accrued to them from a source within (or deemed to be within)
South Africa. Interest earned by a non-resident on a debt instrument issued by a South African company will be regarded as being derived
from a South African source but will be regarded as exempt from taxation in terms of Section 10(1)(hA) of the South African Income Tax
Act, 1962 (as amended), or the Income Tax Act. This exemption does not apply if:
•
the non-resident has been a resident of South Africa at any time and carried on a business in South Africa;
•
the non-resident was a resident of the Common Monetary Area, in other words, Lesotho, Namibia and Swaziland, and in such an
event the non-resident shall be deemed to be a resident of South Africa;
•
the interest is effectively connected with a business carried on by the non-resident in South Africa; and/or
•
the recipient of the interest is a natural person, unless they were absent from South Africa for at least 183 days in aggregate
during the year of assessment in which the interest was received or accrued.
No withholding tax is deductible in respect of interest payments made to non-resident investors.
No income tax is payable on dividends paid to residents or non-residents, in terms of Section 10(1)(k) of the Income Tax Act
except in respect of foreign dividends received by or accrued to residents of South Africa. Accordingly, there is no withholding tax on
dividends received by or accrued to non-resident shareholders of companies listed in South Africa and non-residents will receive the same
dividend as South African resident shareholders. Prior to payment of the dividend, the Company pays Secondary Tax on Companies at a
rate of 12.5% of the excess of dividends declared over dividends received in a dividend cycle but the full amount of the dividend declared
is paid to shareholders.
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Capital Gains Tax
Non-residents are generally not subject to capital gains tax, or CGT, in South Africa. They will only be subject to CGT on gains
arising from the disposal of capital assets if the assets disposed of consist of:
•
immovable property owned by the non-residents situated in South Africa, or any interest or right in or to immovable property. A
non-resident will have an interest in immovable property if it has a direct or indirect shareholding of at least 20% in a company,
where 80% or more of the net assets of that company (determined on a market value basis) are attributable directly or indirectly
to immovable property; or
•
any asset of a permanent establishment of a non-resident in South Africa through which a trade is carried on.
If the non-residents are not subject to CGT because the assets disposed of do not fall within the categories described above, it
follows that they will also not be able to claim the capital losses arising from the disposal of the assets.
Taxation of dividends
South Africa imposes a corporate tax known as Secondary Tax on Companies, or STC, on the distribution of earnings in the
form of dividends, and, at present, the STC tax rate is equal to 12.5%.
In 1993, all existing gold mining companies, in South Africa, had the option to elect to be exempt from STC. If the election
was made, a higher tax rate would apply for both mining and non-mining income. In fiscal 2005, 2004 and 2003, the tax rates for
taxable mining and non-mining income, for companies that elected the STC exemption were 46% and 38%, respectively. During those
same years the tax rates for companies that did not elect the STC exemption were 37% and 30%, respectively. In 1993, the Company
elected not to be exempt from STC, as this would have meant that the Company would have been liable for normal taxation at the
higher rates of 46% for mining income and 38% for non-mining income. The Company, having chosen not to be subject to the STC
exemption, is subject to 37% tax on mining income and 30% for non-mining income. However, with the exception of Blyvoor, all of
the Company's subsidiaries elected the STC exemption. Any dividends paid by Blyvoor, being a wholly-owned subsidiary of the
Company, would be exempt from STC. Any dividends paid by the Company, to the extent that they are paid out of income from
Blyvoor, will be subject to STC.
In July 2005, the above tax rates for taxable mining and non-mining income were amended, due to a revision of corporate tax
rates by the South African Government. Tax rates for taxable mining and non-mining income for companies that elected the STC
exemption are 45% and 37%, respectively. The tax rates for taxable mining and non-mining income for companies that did not elect
the STC exemption are 35% and 29%, respectively.
South Africa does not impose any withholding tax or any other form of tax on dividends paid to US holders with respect to
shares. Should South Africa decide in the future to impose a withholding tax on dividends paid to a US holder with respect to shares, the
Treaty would limit the rate of this tax to 5 percent of the gross amount of the dividends if a US holder holds directly at least 10 percent of
our voting stock and 15 percent of the gross amount of the dividends in all other cases. The above provisions shall not apply if the
beneficial owner of the dividends is resident in the US, carries on business in South Africa through a permanent establishment situated in
South Africa, or performs in South Africa independent personal services from a fixed base situated in South Africa, and the dividends are
attributable to such permanent establishment or fixed base.
United States
Certain United States Federal Income Tax Consequences
The following is a discussion of certain US federal income tax consequences to US holders (as defined below) of the purchase,
ownership and disposition of ordinary shares or ADSs. It deals only with US holders who hold ordinary shares or ADSs as capital assets
for US federal income tax purposes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, or
the Code, published rulings, judicial decisions and the Treasury regulations, all as currently in effect and all of which are subject to
change, possibly on a retroactive basis. This discussion has no binding effect or official status of any kind; we cannot assure holders that
the conclusions reached below would be sustained by a court if challenged by the Internal Revenue Service.
This discussion does not address all aspects of US federal income taxation that may be applicable to holders in light of their
particular circumstances and does not address special classes of US holders subject to special treatment (such as dealers in securities or
currencies, partnerships or other pass-through entities, financial institutions, life insurance companies, banks, tax-exempt organizations,
certain expatriates or former long-term residents of the United States, persons holding ordinary shares or ADSs as part of a “hedge,”
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“conversion transaction,” “synthetic security,” “straddle,” “constructive sale” or other integrated investment, persons whose functional
currency in not the US dollar, or persons that actually or constructively own ten percent or more of our voting stock). This discussion
addresses only US federal income tax consequences and does not address the effect of any state, local, or foreign tax laws that may apply,
or the alternative minimum tax.
A “US holder” is a holder of ordinary shares or ADSs that is, for US federal income tax purposes,
•
a citizen or resident of the US;
•
a corporation that is organized under the laws of the US or any political subdivision thereof;
•
an estate, the income of which is subject to US federal income tax without regard to its source; or
•
a trust, if a court within the US is able to exercise primary supervision over the administration of the trust and one or more US
persons have the authority to control all substantial decisions of the trust or if the trust has made a valid election to be treated as a
US person.
If a partnership holds any ordinary shares or ADSs, the tax treatment of a partner will generally depend on the status of the
partner and on the activities of the partnership. Partners of partnerships holding any notes, ordinary shares or ADSs are urged to consult
their tax advisors.
Because individual circumstances may differ, US holders of ordinary shares or ADSs are urged to consult their own tax
advisors concerning the US federal income tax consequences applicable to their particular situations as well as any consequences
to them arising under the tax laws of any foreign, state or local taxing jurisdiction.
Ownership of Ordinary Shares or ADSs
For purposes of the Code, US holders of ADSs will be treated for US federal income tax purposes as the owner of the ordinary
shares represented by those ADSs. Exchanges of ordinary shares for ADSs and ADSs for ordinary shares generally will not be subject to
US federal income tax.
For US federal income tax purposes, distributions with respect to the ordinary shares or ADSs, other than distributions in
liquidation and distributions in redemption of stock that are treated as exchanges, will be taxed to US holders as ordinary dividend income
to the extent that the distributions do not exceed our current and accumulated earnings and profits. For US federal income tax purposes,
the amount of any distribution received by a US holder will equal the Dollar value of the sum of the South African Rand payments made
(including the amount of South African income taxes, if any, withheld with respect to such payments), determined at the “spot rate” on
the date the dividend distribution is includable in such US holder's income, regardless of whether the payment is in fact converted into
Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date a US holder includes
the dividend payment in income to the date such holder converts the payment into Dollars will be treated as ordinary income or loss.
Distributions, if any, in excess of our current and accumulated earnings and profits will constitute a non-taxable return of capital and will
be applied against and reduce the holder's basis in the ordinary shares or ADSs. To the extent that these distributions exceed the US
holder's tax basis in the ordinary shares or ADSs, as applicable, the excess generally will be treated as capital gain, subject to the
discussion below under the heading “Passive Foreign Investment Company.” We do not intend to calculate our earnings or profits for US
federal income tax purposes.
Under the recently enacted Jobs and Growth Tax Relief Reconciliation Act of 2003, the maximum US federal income tax rate on
dividends paid to individuals through 2008 is reduced to 15%. This reduced rate generally would apply to dividends paid by us if, at the
time such dividends are paid, either (i) we are eligible for benefits under a qualifying income tax treaty with the US or (ii) our ordinary
shares or ADSs with respect to which such dividends were paid are readily tradable on an established securities market in the US.
However, this reduced rate is subject to certain important requirements and exceptions, including, without limitation, certain holding
period requirements and an exception applicable if we are treated as a passive foreign investment company as discussed under the
heading “Passive Foreign Investment Company.” US holders are urged to consult their own tax advisors regarding the US federal income
tax rate that will be applicable to their receipt of any dividends paid with respect to the ordinary shares and ADSs.
For purposes of this discussion, the “spot rate” generally means a rate that reflects a fair market rate of exchange available to the
public for currency under a “spot contract” in a free market and involving representative amounts. A “spot contract” is a contract to buy
or sell a currency on or before two business days following the date of the execution of the contract. If such a spot rate cannot be
demonstrated, the US Internal Revenue Service has the authority to determine the spot rate.
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Dividend income derived with respect to the ordinary shares or ADSs will constitute “portfolio income” for purposes of the
limitation on the use of passive activity losses and, therefore, generally may not be offset by passive activity losses, and as “investment
income” for purposes of the limitation on the deduction of investment interest expense. Such dividends will not be eligible for the
dividends received deduction generally allowed to a US corporation under Section 243 of the Code. Dividend income will be treated as
foreign source income for foreign tax credit and other purposes. In computing the separate foreign tax credit limitations, dividend income
should generally constitute “passive income,” or in the case of certain US holders, “financial services income.”
As discussed under “Taxation - South Africa” above, South Africa currently does not impose any withholding tax on
distributions with respect to the ordinary shares or ADSs. Should South Africa decide in the future to impose a withholding tax on such
distributions, the tax treaty between the United States and South Africa would limit the rate of this tax to 5 percent of the gross amount of
the distributions if a US holder holds directly at least 10 percent of our voting stock and to 15 percent of the gross amount of the
distributions in all other cases. In addition, if South Africa decided in the future to impose a withholding tax on distributions with respect
to the ordinary shares or ADSs, a determination would need to be made at such time as to whether any South African income taxes
withheld would be treated as foreign income taxes eligible for credit against such US holder's US federal income tax liability, subject to
limitations and conditions generally applicable under the Code. Any such taxes may be eligible at the election of such US holder, for
deduction in computing such US holder's taxable income. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. The calculation of foreign tax credits and, in the case of a US holder that elects to deduct foreign
taxes, the availability of deductions is complex and involves the application of rules that depend on a US holder's particular
circumstances. US holders are urged to consult their own tax advisors regarding the availability to them of foreign tax credits or
deductions in respect of South African income taxes, if any, withheld.
Disposition of Ordinary Shares or ADSs
Upon a sale, exchange, or other taxable disposition of ordinary shares or ADSs, a US holder will recognize gain or loss in an
amount equal to the difference between the US dollar value of the amount realized on the sale or exchange and such holder's adjusted tax
basis in the ordinary shares or ADSs. Subject to the application of the “passive foreign investment company” rules discussed below, such
gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the US holder has held the ordinary shares or
ADSs for more than one year. The deductibility of capital losses is subject to limitations. Gain or loss recognized by a US holder on the
taxable disposition of ordinary shares or ADSs generally will be treated as US-source gain or loss for US foreign tax credit purposes.
In the case of a cash basis US holder who receives Rand in connection with the taxable disposition of ordinary shares or ADSs,
the amount realized will be based on the spot rate as determined on the settlement date of such exchange. A US holder who receives
payment in Rand and converts Rand into US Dollars at a conversion rate other than the rate in effect on the settlement date may have a
foreign currency exchange gain or loss that would be treated as ordinary income or loss.
An accrual basis US holder may elect the same treatment required of cash basis taxpayers with respect to a taxable disposition of
ordinary shares or ADSs, provided that the election is applied consistently from year to year. Such election may not be changed without
the consent of the Internal Revenue Service. In the event that an accrual basis holder does not elect to be treated as a cash basis taxpayer,
such US holder may have a foreign currency gain or loss for US federal income tax purposes because of the differences between the US
dollar value of the currency received prevailing on the trade date and the settlement date. Any such currency gain or loss will be treated as
ordinary income or loss and would be in addition to gain or loss, if any, recognized by such US holder on the disposition of such ordinary
shares or ADSs.
Passive Foreign Investment Company
A special and adverse set of US federal income tax rules apply to a US holder that holds stock in a passive foreign investment
company, or PFIC. We would be a PFIC for US federal income tax purposes if for any taxable year either (i) 75% or more of our gross
income, including our pro rata share of the gross income of any company in which we are considered to own 25% or more of the shares
by value, were passive income or (ii) 50% or more of our average total assets (by value), including our pro rata share of the assets of any
company in which we are considered to own 25% or more of the shares by value, were assets that produced or were held for the
production of passive income. If we were a PFIC, US holders of the ordinary shares or ADSs would be subject to special rules with
respect to (i) any gain recognized upon the disposition of the ordinary shares or ADSs and (ii) any receipt of an excess distribution
(generally, any distributions to a US holder during a single taxable year that is greater than 125% of the average amount of distributions
received by such US holder during the three preceding taxable years in respect of the ordinary shares or ADSs or, if shorter, such US
holder's holding period for the ordinary shares or ADSs). Under these rules:
•
the gain or excess distribution will be allocated ratably over a US holder's holding period for the ordinary shares or ADSs, as
applicable;
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•
the amount allocated to the taxable year in which a US holder realizes the gain or excess distribution will be taxed as ordinary
income;
•
the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year; and
•
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such
year.
Although we generally will be treated as a PFIC as to any US holder if we are a PFIC for any year during a US holder's holding
period, if we cease to satisfy the requirements for PFIC classification, the US holder may avoid PFIC classification for subsequent years if
such holder elects to recognize gain based on the unrealized appreciation in the ordinary shares or ADSs through the close of the tax year
in which we cease to be a PFIC. Additionally, if we are a PFIC, a US holder who acquires ordinary shares or ADSs from a decedent
would be denied the normally available step-up in tax basis for such notes, ordinary shares or ADSs to fair market value at the date of
death and instead would have a tax basis equal to the lower of the fair market value or the decedent's tax basis.
A US holder who beneficially owns stock in a PFIC must file Form 8621 (Return by a Shareholder of a Passive Foreign
Investment Company or Qualified Electing Fund) with the Internal Revenue Service for each tax year such holder holds stock in a PFIC.
This form describes any distributions received with respect to such stock and any gain realized upon the disposition of such stock.
A US holder of the ordinary shares or ADSs that are treated as “marketable stock” under the PFIC rules may be able to avoid the
imposition of the special tax and interest charge described above by making a mark-to-market election. Pursuant to this election, the US
holder would include in ordinary income or loss for each taxable year an amount equal to the difference as of the close of the taxable year
between the fair market value of the ordinary shares or ADSs and the US holder's adjusted tax basis in such ordinary shares or ADSs.
Losses would be allowed only to the extent of net mark-to-market gain previously included by the US holder under the election for prior
taxable years. If a mark-to-market election with respect to ordinary shares or ADSs is in effect on the date of a US holder's death, the tax
basis of the ordinary shares or ADSs in the hands of a US holder who acquired them from a decedent will be the lesser of the decedent's
tax basis or the fair market value of the ordinary shares or ADSs. US holders desiring to make the mark-to-market election are urged to
consult their tax advisors with respect to the application and effect of making the election for the ordinary shares or ADSs.
In the case of a US holder who holds ordinary shares or ADSs and who does not make a mark-to-market election, the special tax
and interest charge described above will not apply if such holder makes an election to treat us as a “qualified electing fund” in the first
taxable year in which such holder owns the ordinary shares or ADSs and if we comply with certain reporting requirements. However, we
do not intend to supply US holders with the information needed to report income and gain pursuant to a “qualified electing fund” election
in the event that we are classified as a PFIC.
We believe that we were not a PFIC for our 2005 fiscal year ended June 30, 2005. However, the tests for determining whether
we would be a PFIC for any taxable year are applied annually and it is difficult to make accurate predictions of future income and assets,
which are relevant to this determination. In addition, certain factors in the PFIC determination, such as reductions in the market value of
our capital stock, are not within our control and can cause us to become a PFIC. Accordingly, there can be no assurance that we will not
become a PFIC.
Rules relating to a PFIC are very complex. US holders are urged to consult their own tax advisors regarding the application of
PFIC rules to their investments in our ordinary shares or ADSs.
Information Reporting and Backup Withholding
Payments made in the United States or through certain US-related financial intermediaries of dividends or the proceeds of the
sale or other disposition of our ordinary shares or ADSs may be subject to information reporting and US federal backup withholding if the
recipient of such payment is not an “exempt recipient” and fails to supply certain identifying information, such as an accurate taxpayer
identification number, in the required manner. Generally, individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. The backup withholding tax rate is currently 28%. For payments made after 2010, the backup
withholding rate will be increased to 31%. Payments made with respect to our ordinary shares or ADSs to a US holder must be reported
to the Internal Revenue Service, unless the US holder is an exempt recipient or establishes an exemption. Any amount withheld from a
payment to a US holder under the backup withholding rules is refundable or allowable as a credit against the holder's US federal income
tax, provided that the required information is furnished to the Internal Revenue Service.
US Gift and Estate Tax
An individual US holder of ordinary shares or ADSs will be subject to US gift and estate taxes with respect to ordinary shares or
ADSs in the same manner and to the same extent as with respect to other types of personal property.
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10F. DIVIDENDS AND PAYING AGENTS
Not applicable.
10G. STATEMENT BY EXPERTS
Not applicable.
10H. DOCUMENTS ON DISPLAY
You may request a copy of our US Securities and Exchange Commission filings, at no cost, by writing or calling us at
DRDGOLD Limited, P.O. Box 390, Maraisburg, Johannesburg, South Africa 1700. Attn: Group Company Secretary. Tel No. +27-11-
219-8700. A copy of each report submitted in accordance with applicable United States law is available for public review at our principal
executive offices.
A copy of each document concerning us that is referred to in this Annual Report on Form 20-F, is available for public view at
our principal executive offices at DRDGOLD Limited, 299 Pendoring Avenue, Blackheath, Randburg, South Africa 2195.
10I. SUBSIDIARIES
Not applicable.
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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk
General
In the normal course of our operations, we are exposed to market risk, including commodity price, foreign currency, interest,
liquidity and credit risks. We enter into transactions which make use of derivative instruments to economically hedge certain exposures.
These instruments include interest rate swaps and gold lease rate swaps. The decision to use these types of transactions is based on our
hedging policy. Although most of these instruments are used as economic hedges, none of them qualify for hedge accounting and,
consequently, are marked-to-market through the statements of operations in accordance with our accounting policies. We do not hold or
issue derivative financial instruments for speculative purposes, nor do we hedge forward gold sales.
Commodity price risk
The market price of gold has a significant effect on our results of operations, our ability and the ability of our subsidiaries to pay
dividends and undertake capital expenditures, and the market price of our ordinary shares or ADSs. Historically, gold prices have
fluctuated widely and are affected by numerous industry factors over which we have no control. It is not possible for us to predict the
aggregate effect of these factors on the gold price. The price of gold may not remain at a level allowing us to economically exploit our
reserves. It is not our policy to hedge this commodity price risk.
Until May 2002, we used forward contracts, options and swaps to reduce our risk exposure to volatility in the gold price. The
total gold production committed under our hedging program as of July 1, 2001, was 802,625 ounces over a three-year period.
Consequently, our shareholders were exposed to opportunity loss as a result of an increase in the price of gold.
During fiscal 2002, our management reached the conclusion that our hedge book structure would make it difficult for us to
provide our investors with exposure to increases in the price of gold, as gains would be offset against potential losses on the forward
contracts. As a result, our policy is not to hedge forward gold sales, however, we do hedge specified projects, acquisitions and capital
expenditure and we took advantage of opportunities in the market to close out the Eskom "gold for electricity" contract.
As a result of this decision in May 2002, we entered into equal and opposite positions of all outstanding derivatives (excluding
the Eskom gold for electricity contract) to effectively close these positions out and eliminate any existing commitment to sell our gold
production. In fiscal 2003, the loss that we realized on the existing positions was $72.8 million. The various counterparties, J.P. Morgan
Chase Bank, J. Aron & Company and UBS AG, each agreed to accept a portion of the amounts due to them under the restructuring
immediately in cash, which amounted to approximately $38.1 million, with the remainder, which amounted to approximately
$34.7 million, to be paid over an 18 month period. Of this amount, $6.6 million due to J.P. Morgan Chase Bank was secured by a general
notarial covering bond and surety mortgage over the metallurgical plants of the Blyvoor, West Wits and Buffels Sections and was due to
be repaid by June 2003. We repaid the full amount to J.P. Morgan Chase Bank on March 26, 2003 and obtained a release of these assets.
During July 2003, J. Aron & Company was paid in full and during August 2003 UBS AG was paid in full.
Eskom gold for electricity contract
In October 2000, we entered into a contract to buy electricity from Eskom, the parastatal authority in South Africa responsible
for the supply of electricity. Under the terms of our agreement, we pay Eskom standard electricity tariff for all energy we consume,
including the 75 GWh per month specified in the contract. This contract was to expire in September 2005. In addition, every
12 month-period starting in October we adjust the amounts paid in that period in accordance with an established formula based on the
gold price.
The gold price adjustment is based on the notional amount of 15,000 ounces per month of gold multiplied by the difference
between the contracted gold price, which is the price that was agreed on the date of the transaction for a determined period, and the
arithmetic average of London PM close for each business day in the calculation period.
We have concluded that (1) the contract in its entirety does not meet the definition of a derivative instrument and therefore it
does not have to be carried on our balance sheet at fair value; (2) the embedded gold for electricity forward contract possesses economic
characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (3) a separate, stand-alone
instrument with the same terms would qualify as a derivative instrument. Accordingly, the embedded derivative was separated from the
host contract and carried at fair value.
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As at June 30, 2004, the fair value of the gold for electricity contract was a liability of $3.1 million, after having closed out
265,000 ounces of the Eskom gold for electricity contract, at a cost of $25.1 million, during fiscal 2004. The fair value reflects the
difference between the price that was agreed on the date of the transaction and the forward price on June 30, 2004. As discussed in
Note 24 to our financial statements, the remaining 50,000 ounces of the gold for electricity contract was closed out on April 28, 2005 at a
cost of $3.6 million. This was done to take advantage of the continued lower Rand gold price, in line with out policy of not hedging gold
production.
Put options bought
Put options bought refer to the right, but not the obligation to sell a predetermined amount of gold at a predetermined price on
a predetermined date. During fiscal 2003, the remaining put options were closed out. This resulted in a cash inflow of $7.1 million.
Included in profit/(loss) on derivative instruments is $nil for fiscal 2005 and fiscal 2004, and a profit of $9.5 million for fiscal 2003,
relating to these instruments.
Other positions
The Company had entered into a gold rate lease swap and call position transactions which had been accounted for on a mark-
to-market basis in prior fiscal years, and which matured or were closed out in the fiscal 2004.
During fiscal 2004, a gold lease rate swap for 109,875 ounces, at a rate of 0.20%, matured.
A gold lease rate swap is a contract whereby the Company and a counterparty select a notional amount of gold, and thereafter
over the life of the contract one party pays a fixed lease rate based on that amount of gold and the other party pays a floating lease rate
based on the same amount of gold. The Company had exposure to increases in the three-month lease rate up to June 2004. The volume
the swap was based on decreases every quarter until it reached zero (by June 2004). Every quarter the Company received a fixed cash
flow equal to 0.2% per annum of the volume and $280 per ounce, and paid the three-month floating lease rate converted at the then
market spot rate.
During fiscal 2003, the Company bought call options as a risk management tool to protect the maximum exposure on the
gold for electricity contract. Options covering a total of 272,110 ounces were purchased for $14.9 million. These contracts were to
expire by September 2005. During fiscal 2004, the Company took advantage of the lower Rand gold price and closed out 265,000
ounces of the Eskom gold for electricity contract in line with its policy of not hedging gold production. Accordingly the exposure for
which the call options were bought as a risk management tool had been significantly reduced and the call options were closed out
during fiscal 2004, recording a gain of $0.1 million. The fair value of the call positions bought was an asset of $6.6 million as at June
30, 2003.
Included in profit/(loss) on derivative instruments is $nil for fiscal 2005, a loss of $3.2 million for fiscal 2004 and a profit of
$40.9 million for fiscal 2003, respectively, relating to these instruments.
Concentration of credit risk
Our financial instruments do not represent a concentration of credit risk, because we deal with a variety of major banks and
financial institutions located in South Africa and Australia, after evaluating the credit ratings of the representative financial institutions.
Furthermore, our accounts receivable and loans are regularly monitored and assessed for recoverability. Where it is appropriate to raise a
provision, an adequate level of provision is maintained.
In addition, our South African operations deliver their gold to Rand Refinery Limited, or RRL, which refines the gold to saleable
purity levels and then sells the gold, on our behalf, on the bullion market. The gold is sold by RRL on the same day as it is delivered and
settlement is made within two days. Once the gold has been assayed by RRL, the risks and rewards of ownership have passed.
The Tolukuma Section delivers its gold to one customer, N.M. Rothschild and receives proceeds within two days. The
concentration of credit risk in Australia is mitigated by the reputable nature of the customer and the settlement of the proceeds within a
week.
Porgera delivers their gold to AGR Matthey (Australia), who refines the gold and then delivers it to the Bank of Western
Australia Limited at a price negotiated by us. The concentration of credit risk in Australia is mitigated by the reputable nature of the
customer and the settlement of the proceeds within two days.
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Emperor delivers their gold to AGR Matthey (Australia), who refines the gold and then sells the gold on to third parties. All
proceeds are received within a week of delivery. The concentration of credit risk in Australia is mitigated by the reputable nature of the
sales agent and its customers and the settlement of the proceeds within 6 days.
Foreign currency risk
Our functional currency for the South African operations is the South African Rand; for the Tolukuma Section and Porgera it is
the Papua New Guinea Kina and for Emperor is the Fijian Dollar.
Although gold is sold in Dollars, we are obliged to convert this into Rands for our South African operations under the South
African Reserve Bank regulations. We are thus exposed to fluctuations in the Dollar/Rand exchange rate. We conduct our operations in
South Africa, Papua New Guinea and Fiji predominantly in Rand, Kina and Australian Dollar respectively. Currently, foreign exchange
fluctuations affect the cash flow that we will realize from our operations as gold is sold in Dollars while production costs are incurred
primarily in Rands, Papua New Guinean Kina and Australian Dollars. Our results are positively affected when the Dollar strengthens
against these foreign currencies and adversely affected when the Dollar weakens against these foreign currencies. Our cash and cash
equivalent balances are held in Dollars, Rands, Papua New Guinean Kina and Australian Dollars; holdings denominated in other
currencies are relatively insignificant. Certain of our financial liabilities are denominated in a currency other than the Rand. We are thus
exposed to fluctuations in the Rand exchange rate with the relevant currency.
Based on our fiscal 2005 financial results, a hypothetical 10% increase/decrease in exchange rate activity would have the
following approximate impacts on revenues and net profit after tax:
Exchange rate
Impact on revenue
Impact on net profit after tax
Rand/Dollar
$15.0 million
$10.5 million
Kina/Dollar
$11.5 million
$8.1 million
We have not entered into any foreign exchange hedging contracts to attempt to mitigate our foreign currency risk.
Interest rate and liquidity risk
Fluctuations in interest rates impact on the value of short-term cash investments and financing activities, giving rise to interest
rate risks.
Liquidity
In the ordinary course of business, we receive cash from our operations and are required to fund working capital and capital
expenditure requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve maximum returns while
minimizing risks. Funding deficits for our mining operations have been financed through the issue of additional shares, by utilizing
undrawn committed borrowing facilities and obtaining new facilities at competitive rates to fund our working capital requirements. Lower
interest rates result in lower returns on investments and deposits and also may have the effect of making it less expensive to borrow funds
at then current rates. Conversely, higher interest rates result in higher interest payments on loans and overdrafts. As at June 30, 2005,
undrawn committed borrowing facilities amounted to $11.0 million and at October 31, 2005, these amounted to $21.0 million.
Interest rate swap agreement
From time to time we enter into interest rate swap agreements to mitigate interest rate risk.
An interest rate swap agreement was entered into to minimize the exposure to changes in interest rates with regard to the coupon
payable on our $66,000,000 of 6% Senior Convertible Notes due 2006 (refer to Note 18 of the financial statements). The fixed coupon
rate (in Dollars) of 6% per annum was swapped for a floating South African interest rate, calculated at the forward JIBAR plus 200 basis
points per annum. An amount of 60% of the coupon rate is subject to this swap agreement, based on the requirements of the South
African Reserve Bank, as this represents the amount of the funds raised utilized in South Africa. The maturity date of this agreement is
November 2006. A 0.5% increase or decrease in the assumed weighted average interest rate would change loss/(profit) on derivative
instruments by approximately $30,000.
As discussed in Note 18 to our financial statements, the fair value of the interest rate swap agreement was a liability of
$0.6 million as at June 30, 2005 (a liability of $2.0 million and $1.8 million as at June 30, 2004 and June 30, 2003, respectively).
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Long-term debt
Set out below is an analysis of our debt as at June 30, 2005, analyzed between fixed and variable interest rates and classified by
currency.
Dollar
denominated
loans
Rand
denominated
loans
Total
$'000
$'000
$'000
Interest rate
Variable rate .............................................................................
10,020
4,025
14,045
Effective interest rate ............................................................
6.5%
9.5%
n/a
Fixed rate..................................................................................
64,947
-
64,947
Effective interest rate ............................................................
16.1%
n/a
n/a
Total..........................................................................................
74,967
4,025
78,992
Repayment period
2006 .........................................................................................
8,462
1,216
9,678
2007 .........................................................................................
65,489
2,431
67,920
2008 .........................................................................................
1,016
378
1,394
Total..........................................................................................
74,967
4,025
78,992
Labor risk
Approximately 70% of the labor force at our South African Operations are members of labor unions. The majority of the
union members are blue-collar employees. The unions negotiate two year wage agreements which are binding on employees in the
respective bargaining units, the largest of which consists of occupational groupings of mainly blue collar workers in the organization.
These agreements are valid from July 1 in the first year to June 30 of the second year. The levels of unionization for operations outside
South Africa vary. It is mostly contained amongst blue collar workers and membership is below 50%. The current agreement for
Blyvoor expired on June 30, 2005, however a new agreement has been reached for the next two years that provides wage increases of
6% as of July 1, 2005 and 6.5% as of July 1, 2006. Agreements for the CGR and ERPM Sections are currently being negotiated.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
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PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
There have been no material defaults in the payment of principal, interest, a sinking or purchase fund installment, or any other
material defaults with respect to any indebtedness of ours.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
Not applicable.
ITEM 15. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer and Chief Financial Officer and our Non-Executive Chairman have evaluated the effectiveness
of our disclosure controls and procedures (as this term is defined under the rules of the SEC) as of June 30, 2005. Based on this
evaluation, the Company’s Chief Executive Officer and Chief Financial Officer and Non-Executive Chairman concluded that, as of
June 30, 2005, our disclosure controls and procedures were effective in recording, processing, summarizing and reporting,
on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the US Securities
Exchange Act of 1934.
In the process of conducting our audit for fiscal 2004, we identified certain accounting errors in our reported US GAAP
quarterly results for fiscal 2004. As a result, we restated amounts in our quarterly financial statements, as described in Item 5A.:
“Operating and Financial Review and Prospects – Restatement of US GAAP Quarterly Results” of our Form 20-F filed with the SEC
for the year ended June 30, 2004. These restatements did not result in any restatement or revision to our financial results for fiscal
2004 as a whole, which were originally announced on August 10, 2004.
In fiscal 2004, we identified material weaknesses in our internal control over financial reporting that we reported to our Audit
Committee and to our auditors. These material weaknesses comprised:
(a)
a lack of sufficient knowledge and experience among our internal accounting personnel regarding the application of US
GAAP and SEC requirements;
(b)
insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and
application of US GAAP and SEC disclosure requirements; and
(c)
insufficient emphasis by management on evaluating our compliance with US GAAP requirements.
As part of the communications by KPMG with our Audit Committee with respect to KPMG's audit procedures for fiscal
2004, KPMG informed the Audit Committee that these deficiencies constituted material weaknesses, as defined by Auditing Standard
No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements,”
established by the Public Company Accounting Oversight Board, or PCAOB.
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In an effort to address these material weaknesses our senior management, under the supervision of our Audit Committee,
prepared and implemented a US GAAP financial reporting process as part of our US GAAP action plan. This plan is designed to
generally improve our US GAAP reporting processes and to strengthen our control processes and procedures in order to prevent a
recurrence of the circumstances that resulted in the need to restate our quarterly financial statements. The following is a description of
our US GAAP Action Plan and the steps that we have taken to implement these initiatives:
1.
Arrange for our senior management and certain accounting and finance-related personnel to attend training sessions on US GAAP
and financial reporting responsibilities and SEC disclosure requirements. In fiscal 2005, relevant key personnel attended the
following training courses:
•
US GAAP compared to current International Financial Reporting Standards (IFRS) – December 3, 2004, May 19, 2005 to
May 20, 2005;
•
US GAAP and Corporate Reporting – June 1, 2005 to June 2, 2005;
•
Overview of US GAAP – June 13, 2005;
•
US GAAP Technical Update – June 9, 2005 to June 10, 2005;
•
SEC Reporting – June 14, 2005;
•
Sarbanes-Oxley Update – June 15, 2005; and
•
Basics of US GAAP and Finance: What Every Practicing Lawyer Needs to Know – July 28, 2005 to July 29, 2005.
2.
Modify the mandate of our internal audit function to place greater emphasis on the adequacy of, and compliance with, procedures
relating to internal controls over US GAAP financial reporting and engage an internationally recognized accounting firm to assist
our accounting department and internal audit function in the preparation of our US GAAP consolidated financial statements. On
May 20, 2005, we engaged the services of Ernst & Young to provide assistance to the internal audit function in determining the
adequacy of, and compliance with, among other things, procedures relating to internal controls over US GAAP financial
reporting. Ernst & Young has assisted us in developing our Risk Based Internal Audit plan which encompasses the impact of our
US GAAP reporting requirements.
3.
Seek to recruit an accounting staff member with US GAAP expertise. In October 2004, the Company employed a Certified Public
Accountant, or CPA, whose experience includes working as an external auditor for a public accounting firm, a fortune 500
Nasdaq listed company and a registrant subject to compliance with the Sarbanes-Oxley Act of 2002.
4.
Engage an internationally recognized accounting firm to provide us with technical advice on US GAAP matters and SEC
disclosure requirements on an ongoing basis. In the fourth quarter of fiscal 2005, we engaged the services of Jefferson Wells
International Inc to provide the Company with assistance on an ad hoc basis for technical US GAAP issues that the Company’s
personnel address from time to time. They have assisted us thus far by providing us with a compliance checklist for
the fiscal 2005 Form 20-F reporting process.
In addition to the 4-step US GAAP Action Plan discussed above, we have employed an additional resource to assist the risk
department and the internal audit function.
We have experienced difficulties in finding internal personnel and external advisors in South Africa with sufficient US
GAAP experience. Concurrent quarterly reporting in both South African Generally Accepted Accounting Practice, or SA GAAP, as
the primary basis for reporting for South African purposes and US GAAP as the primary basis for our Exchange Act filings imposes a
significant time and expense burden on a business of our size, and will prove to be challenging as we convert to International
Financial Reporting Standards. Therefore, beginning in fiscal 2005, we ceased quarterly financial reporting and instead started to
report financial information semi-annually under both SA GAAP and US GAAP, with our first semi-annual financial statements
released for the six months ended December 31, 2004. We believe this process to be a more prudent use of our staff resources and
funds.
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As of June 30, 2005, with regards to the scope of our assessment, we did not have the right or authority to assess, modify or
dictate the internal controls of Porgera, nor have we reviewed its internal control. We also lacked the ability, in practice, to make the
assessment, as we did not have control of this entity. Accordingly, our conclusions regarding the effectiveness of our disclosure
controls and procedures and internal control over financial reporting do not extend to the disclosure controls and procedures and
internal control over financial reporting of Porgera. However, we do have adequate internal controls in place to ensure that the
financial information for Porgera is appropriately included in our financial statements and we participate in Porgera's monthly operating committee meetings where Porgera's monthly financial results are discussed and reviewed.
Changes in Internal Control over Financial Reporting
During the year ended June 30, 2005, there have not been any significant changes in our internal control over financial
reporting that have negatively materially affected, or are reasonably likely to negatively materially affect, our internal control over
financial reporting.
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ITEM 16. CORPORATE GOVERNANCE
16A. AUDIT COMMITTEE FINANCIAL EXPERT
There is at least one member of our audit committee that possesses the relevant attributes sufficient to have an understanding of
South African Generally Accepted Accounting Practice, or SA GAAP, and financial statements and the ability to assess the general
application of SA GAAP. However, we do not have an audit committee financial expert (as defined in Item 16A of the Form 20-F) as
no member of the Audit Committee currently has the required US GAAP experience.
The board is satisfied that the skills, experience and attributes of the members of the audit committee are sufficient to enable
those members to discharge the responsibilities of the audit committee.
16B. CODE OF ETHICS AND CONDUCT
We have adopted a Code of Ethics and Conduct that applies to all senior executives including our Non-Executive Chairman,
the Chief Executive Officer, Chief Financial Officer and the Group Financial Manager and Financial Manager at each mining
operation as well as all other employees. The Code of Ethics and Conduct can be accessed on the Company’s website at
www.drdgold.com
.
16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
KPMG Inc has served as our independent public accountants for the fiscal years ending June 30, 2005, 2004 and 2003, for
which audited financial statements appear in this Annual Report. The Annual General Meeting elects the auditors annually.
The following table presents the aggregate fees for professional services and other services rendered by KPMG Inc to us in fiscal
2005 and 2004:
Auditors' remuneration
Year ended June 30,
2005
2004
$’000
$’000
Audit fees......................................................................................................................
1,535
720
Audit-related fees..........................................................................................................
-
-
Tax fees ........................................................................................................................
55
250
All other fees .......................................................................................................................
5
-
1,595
970
Audit fees billed for the annual audit services engagement, which are those services that the external auditor reasonably can
provide, include the company audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of
documents filed with the SEC.
Fees for tax services include fees billed for tax compliance, tax advice and tax planning services.
The Audit Committee appoints, re-appoints and removes the external auditors as well as determines the remuneration and
terms of engagement of the external auditors. The committee pre-approves, and has pre-approved, all non-audit services provided by
the external auditors. The Audit Committee considered all of the fees mentioned above and determined that such fees are compatible
with maintaining KPMG Inc’s independence.
16D EXEMPTIONS FROM THE LISTING STANDADS FOR AUDIT COMMITTEES
Not applicable.
16E PURCHASE OF EQUITY SECURITIES BY THE ISSUER
Not applicable.
BACKGROUND IMAGE
156
PART III
ITEM 17. FINANCIAL STATEMENTS

Not applicable.
ITEM 18. FINANCIAL STATEMENTS

The following financial statements and related auditor’s reports are filed as part of this Annual Report.
Page

Report of the independent registered public accounting firm..............................................................................................
F-1

Consolidated statements of operations for the years ended June 30, 2005, 2004 and 2003. .............................................
F-2

Consolidated balance sheets at June 30, 2005 and 2004. ....................................................................................................
F-3

Consolidated statements of stockholders' equity for the years ended June 30, 2005, 2004 and 2003................................
F-4

Consolidated statements of cash flows for the years ended June 30, 2005, 2004 and 2003...............................................
F-5

Notes to the consolidated financial statements....................................................................................................................
F-6 to F-58

           Separate consolidated financial statements and notes thereto for Crown Gold Recoveries (Pty) Limited and its subsidiaries for its fiscal years ended ended June 30, 2005, 2004 and 2003 and Emperor Mines Limited and its subsidiaries for its fiscal years ended June 30, 2005, 2004 and 2003, are being filed pursuant to Rule 3-09 of Regulation S-X. Reference is made to Exhibit 15.2 and Exhibit 16.1, respectively, to our Annual Report on Form 20-F.
BACKGROUND IMAGE
F-1
Report of the Independent Registered Public Accounting Firm to the Board of Directors
and Stockholders of DRDGOLD Limited


We have audited the accompanying consolidated balance sheets of DRDGOLD Limited and its subsidiaries as of June 30, 2005 and
2004, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 2005. These consolidated financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial
position of DRDGOLD Limited and its subsidiaries at June 30, 2005 and 2004, and the results of their operations and their cash flows for
each of the years in the three-year period ended June 30, 2005, in conformity with accounting principles generally accepted in the United
States of America.

As discussed in Note 3 to the consolidated financial statements, DRDGOLD Limited changed its method of accounting for asset
retirement obligations effective July 1, 2002.





/s/ KPMG Inc
KPMG Inc
Registered Accountants and Auditors
Chartered Accountants (SA)

Johannesburg, Republic of South Africa
December 15, 2005
BACKGROUND IMAGE
F-2
DRDGOLD Limited
Consolidated Statements of Operations for the years ended June 30
2005
2004
2003
Notes
$'000
$'000
$'000
REVENUES
Product sales
183,609
183,254
109,419
COSTS AND EXPENSES
(137,540)
(143,355)
(91,805)
Production costs
(136,520)
(143,026)
(90,761)
Movement in gold in process
1,717
920
(564)
Movement in provision for environmental rehabilitation, reclamation and closure costs
19
(2,737)
(1,249)
(480)
OTHER OPERATING EXPENSES
Depreciation and amortization
12             (13,797)
(25,975)          (8,841)
Employment termination costs
6
(4,201)
(899)
(680)
Impairment of assets
7
(664)
(2,990)
-
Management and consulting fees
(6,651)
(2,448)
(1,650)
Profit/(loss) on derivative instruments
3,616
(1,042)
42,384
Profit/(loss) on sale of mining assets
2
(55)
1,729
Profit on disposal of subsidiary
4
-
-
5,302
SELLING, ADMINISTRATION AND GENERAL CHARGES
(including stock based compensation costs of $1.0 million (2004: $2.3 million and 2003:
$4.3 million))
(17,777)
(22,600)
(8,621)
NET OPERATING INCOME/(LOSS)
6,597
(16,110)
47,237
NON-OPERATING INCOME/(LOSS)
Interest and dividends
2,363
1,243
7,487
Unrealized foreign exchange (losses)/gains
(9,277)
10,672
11,229
Profit on sale of other assets and listed investments
527
63
152
FINANCE COSTS
Interest expense
(11,365)
(7,750)
(6,699)
(LOSS)/PROFIT FROM CONTINUING OPERATIONS BEFORE TAX AND
OTHER ITEMS
(11,155)
(11,882)
59,406
Income and mining tax expense
8                (5,762)
(14,230)
(15,830)
Equity in loss from associates
15
(20,511)
(11,975)
(6,867)
(LOSS)/PROFIT FROM CONTINUING OPERATIONS AFTER TAX
(37,428)
(38,087)
36,709
Minority interest
(2)
(7)
-
NET (LOSS)/PROFIT FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGE
(37,430)
(38,094)
36,709
Cumulative effect of accounting change (net of income taxes of $nil in 2003)
3
-
-
(173)
Loss from discontinued operation, net of income taxes
9
(44,359)
(20,804)
(22,577)
NET (LOSS)/PROFIT APPLICABLE TO COMMON STOCKHOLDERS
(81,789)
(58,898)
13,959
BASIC (LOSS)/PROFIT PER SHARE FROM CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY
(CENTS)
22                    (15)
(17)                  20
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY (CENTS)
22                        -
-
-
LOSS FROM DISCONTINUED OPERATION (CENTS)
22                    (17)
(10)
(12)
BASIC (LOSS)/PROFIT PER SHARE (CENTS)
22                    (32)
(27)                    8
DILUTED (LOSS)/PROFIT PER SHARE BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING POLICY (CENTS)
22                    (15)
(17)                  18
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY (CENTS)
22                         -
-
-
LOSS FROM DISCONTINUED OPERATION (CENTS)
22                    (17)
(10)
(12)
DILUTED (LOSS)/PROFIT PER SHARE (CENTS)
22                    (32)
(27)                    6
The accompanying notes are an integral part of these Consolidated Financial Statements.
BACKGROUND IMAGE
F-3
DRDGOLD Limited
Consolidated Balance Sheets at June 30
2005
2004
Notes
$'000
$'000
ASSETS
Current assets
61,355
58,460
Cash and cash equivalents
36,085
22,453
Receivables
10                  7,441
19,193
Receivables owing by related parties
10
579
321
Inventories
11                 15,455
16,493
Deferred income and mining tax
8
1,795
-
Mining assets
12              122,170
156,943
Cost
288,000
327,115
Accumulated depreciation and amortization
(165,830)
(170,172)
Other assets
Investment in associates
15
15,442
10,015
Non-current inventories
11
32,103
32,006
Non-current assets
13                  7,187
25,311
Total Assets
238,257
282,735
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
49,758
83,453
Bank overdraft
1,370
1,828
Accounts payable and accrued liabilities
17
33,317
61,153
Derivative instruments
18
-
309
Short-term portion of long-term loans
20
9,678
9,315
Income and mining taxes payable
5,393
2,744
Deferred income and mining tax
8
-
8,104
Non-current liabilities
108,572
116,741
Long-term loans
20                69,314
59,865
Deferred income and mining tax
8
16,112
13,004
Derivative instruments
18
550
4,765
Provision for environmental rehabilitation, reclamation and closure costs
19
22,596
39,107
Total Liabilities
158,330
200,194
Minority interest
874
929
Stockholders' equity
79,053
81,612
Authorized
600,000,000 (2004: 300,000,000) ordinary no par value shares and 5,000,000
(2004: 5,000,0000) cumulative preference shares
Issued
296,206,048 (2004: 233,307,667) ordinary no par value shares and 5,000,000
(2004: 5,000,000) cumulative preference shares
Cumulative preference shares
21
107
107
Stated capital and share premium
21
563,045
484,772
Additional paid-in capital
21
39,732
39,347
Unearned stock compensation
(338)
(971)
Accumulated deficit
(478,506)
(396,717)
Other comprehensive loss
(44,987)
(44,926)
Total Liabilities and Stockholders' Equity
238,257
282,735
The accompanying notes are an integral part of these Consolidated Financial Statements.
BACKGROUND IMAGE
F-4
DRDGOLD Limited
Consolidated Statements of Stockholders' Equity
For the years ended June 30
Cumulative
Stated capital
Additional
Unearned
Other
Total
Number of
Number of
preference
and share
paid-in
stock
Accumulated
comprehensive       stockholders'
Comprehensive
common
preferred
shares
premium
capital
compensation
deficit
loss
equity
(loss)/ income
shares
shares
$'000
$'000
$'000
$'000
$'000
$'000
$'000
$'000
BALANCE - JULY 1, 2002
177,173,485
5,000,000
107
351,537
33,392
-
(351,778)
(48,729)
(15,471)
Exercise of employee stock options
2,253,699
2,244
2,244
Issue of shares for cash
4,794,889
6,783
6,783
Share issue expenses
(213)
(213)
Net profit for the year
11,374
11,374
11,374
Stock based compensation
4,313
4,313
Other comprehensive income, net of tax of nil
Decrease in mark-to-market on listed investments
(1,759)
(1,759)
(1,759)
Foreign currency translation adjustments
(2,035)
(2,035)
(2,035)
BALANCE - JUNE 30, 2003 as previously reported
184,222,073
5,000,000
107
360,351
37,705
-
(340,404)
(52,523)
5,236
7,580
Retroactive adjustment for equity in losses of Emperor
Mines Limited
2,585
2,369
4,954
4,954
BALANCE - JUNE 30, 2003 as adjusted
184,222,073
5,000,000
107
360,351
37,705
-
(337,819)
(50,154)
10,190
12,534
Exercise of employee stock options
978,053
1,298
1,298
Issue of shares for cash
41,463,639
107,367
107,367
Share issue expenses
(992)
(992)
Shares issued for acquisition of joint venture 6,643,902
16,748
16,748
Net loss for the year
(58,898)
(58,898)
(58,898)
Unearned stock compensation
1,642
(1,642)
-
Amortization of unearned stock compensation
2,310
2,310
Other comprehensive income, net of tax of nil
Foreign currency translation adjustments
(1,639)
5,228
3,589
5,228
BALANCE - JUNE 30, 2004
233,307,667
5,000,000
107
484,772
39,347
(971)
(396,717)
(44,926)
81,612
(53,670)
Exercise of employee stock options
55 000
60
60
Issue of shares for cash
56,230,705
65,914
65,914
Share issue expenses
(4,305)
(4,305)
Shares issued for acquisition of associate
6,612,676
16,604
16,604
Net loss for the year
(81,789)
(81,789)
(81,789)
Unearned stock compensation
385
(385)
-
Amortization of unearned stock compensation
1,002
1,002
Other comprehensive income, net of tax of nil
Decrease in mark-to-market on listed investments
(45)
(45)
(45)
Foreign currency translation adjustments
16
(16)
-
(16)
BALANCE - JUNE 30, 2005
296,206,048
5,000,000
107
563,045
39,732
(338)
(478,506)
(44,987)
79,053
(81,850)
Analysis of accumulated other comprehensive loss:
2002
2003
2004
2005
Mark-to-market on listed investments
45
45
45
-
Foreign currency translation adjustments
(48,774)
(50,199)
(44,971)
(44,987)
(48,729)
(50,154)
(44,926)
(44,987)
The accompanying notes are an integral part of these Consolidated Financial Statements.
BACKGROUND IMAGE
F-5
DRDGOLD Limited
Consolidated Statements of Cash Flows
For the years ended June 30
2005              2004             2003
Notes            $’000
$'000
$'000
Net cash utilized by operating activities
(23,788)       (25,092)        (23,878)
Net (loss)/profit applicable to common stockholders
(81,789)        (58,898)            13,959
Reconciliation to net cash provided by operations:
Net increase in provision for rehabilitation – continuing operations
19
2,737             1,249                 480
Net increase in provision for rehabilitation – discontinued operation
19
1,023             2,206                 934
Depreciation and amortization – continuing operations
12
13,797           25,975              8,841
Depreciation and amortization – discontinued operation
12
971             4,160              1,761
Amortization of restraint of trade payments
-                     -
70
Impairment of assets – continuing operations
7
664             2,990
-
Impairment of assets – discontinued operation
39,451             1,276
-
Unrealized losses/(profits) on derivative instruments
2,158        (35,843)         (72,985)
(Profit)/loss on sale of mining assets
(2)                  55
(1,729)
Stock based compensation expense
1,002             2,310             4,313
Profit on sale of other assets and listed investments
(527)               (63)              (152)
Amortization of debt issuance costs
1,597             1,533
-
Deferred tax provision – continuing operations
(6,792)             6,842           15,830
Deferred tax provision – discontinued operation
-                     -
25,935
Equity in loss from associate
15
20,511           11,975             6,867
Minority interest in loss of subsidiary
2                    7                    -
Cumulative effect of change in accounting policy
-                     -
173
Profit on disposal of subsidiary
4
(25,687)                     -
(5,302)
Effect of changes in working capital items:
Receivables
5,750             7,114
(19,224)
Inventories
439             5,014
97
Movement in gold in process – continuing operations
(1,717)             (920)                564
Movement in gold in process – discontinued operation
383               (80)                687
Accounts payable and accrued liabilities (excluding short-term loans)
(4,888)
(7,389)
(4,526)
Increase in interest accruals
4,029             2,082
-
Movement in net taxation liability
3,100             3,313              (471)
Net cash utilized in investing activities
(31,640)       (94,074)          (9,818)
Additions to investments
(849)         (10,828)          (9,108)
Proceeds on sale of other assets and listed investments
482                  63                196
Additions to mining assets
(24,863)        (26,917)         (13,414)
Proceeds on disposal of mining assets
2,180
3,397
3,594
Cash paid for acquisition of joint venture interest and for subsidiaries, net of cash acquired
4
-         (59,789)
-
Additions to investment in associate
(8,590)                    -                     -
Proceeds on disposal of subsidiary, net of cash disposed
4
-                    -
8,914
Net cash generated in financing activities
67,441         88,626           55,449
Proceeds from the issue of the convertible notes
-
-
66,000
Costs associated with the issue of the convertible notes
-
(636)
(2,395)
Net proceeds from issue of shares
65,974          108,665              9,027
Share issue expenses
(4,305)             (992)              (213)
(Decrease)/increase in bank overdraft
(458)          (2,069)              3,365
Long-term loans received
10,020             2,765              4,733
Long-term loans repaid
(3,790)        (19,107)         (25,068)
Net increase/(decrease) in cash and cash equivalents
12,013       (30,540)           21,753
Effect of exchange rate changes on cash
1,619            8,570
(1,182)
Cash and cash equivalents at beginning of year
22,453          44,423          23,852
Cash and cash equivalents at end of year
36,085          22,453          44,423
Income taxes paid
9,224
4,075
471
Interest paid
7,107
5,014
6,909
The accompanying notes are an integral part of these Consolidated Financial Statements.
BACKGROUND IMAGE
F-6
1. NATURE OF OPERATIONS

DRDGOLD Limited, or the Company, was formed in 1895 and is a gold mining company engaged in underground and surface gold
mining including exploration, extraction, processing and smelting. The Group (being the Company and its subsidiaries, associates and
joint venture) focuses its operations on the West Witwatersrand basin in South Africa and in Papua New Guinea.

As at June 30, 2005, the South African operations consist of, the Blyvoor Section and a 40% interest in Crown Gold Recoveries (Pty)
Limited (comprising the Crown Section and the ERPM Section). The Australasian operations consist of the Tolukuma Section and a
20% interest in the Porgera Joint Venture, both based in Papua New Guinea. The Company has a 45.33% interest in Emperor Mines
Limited, located in Fiji. It also has exploration projects in South Africa, Papua New Guinea, Fiji and Australia.

2. RESTATEMENT OF FINANCIAL STATEMENTS

On July 30, 2004, the Company’s offer to the shareholders of Emperor Mines Limited, or Emperor, closed with the Company having
received acceptances from Emperor’s shareholders representing approximately 25.55% of Emperor’s issued share capital, thereby
increasing the Company's shareholding in Emperor from 19.78% to 45.33%. Accordingly, the Company issued 6,612,676 shares in
exchange for the 29,097,269 Emperor shares to the value of $16.6 million, based on the market value of the Company's shares on the
date issued. Share issue and transaction costs associated with the offer amounted to $1.7 million.

Due to its cumulative ownership of 45.33%, the Company has accounted for its investment in Emperor under the equity method of
accounting. Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock” , or
APB Opinion No. 18, requires the use of the equity method of accounting if the investment gives the Company the ability to exercise
significant influence over operating and financial policies, but not control, over an investee. As a result of the additional equity
ownership and change in relationship with Emperor, including representation on Emperor’s board of directors, the Company has the
ability to exercise significant influence over the operations of Emperor. Accordingly, the Company has restated the prior years’
financial statements, as if the equity method had been utilized from December 2002, the date of the initial acquisition of the
investment in Emperor.

As required by APB Opinion No. 18, the change to the equity method in accounting for the Emperor investment requires restatement
of prior period financial statements. Beginning in August 2004, the Company recognized 45.33% of the loss of Emperor, adjusted for
amortization of the excess purchase price. The amount included for the year ended June 30, 2004, represents 19.78% of Emperor’s
losses, adjusted for the amortization of the excess purchase price. The amount included for the year ended June 30, 2003, represents
14.15%, from January 2003 to March 2003, and 19.81%, from April 2003 to June 2003, of Emperor’s losses, adjusted for the
amortization of the excess purchase price.
BACKGROUND IMAGE
F-7
2. RESTATEMENT OF FINANCIAL STATEMENTS (continued)

The following is a summary of the effects of the restatement, for the change to the equity method in accounting for the investment in
Emperor, on the consolidated statements of operations for the years ended June 30, 2004 and 2003, as well as the effect on the
consolidated balance sheet as at June 30, 2004 and 2003.
Effect on consolidated statement of operations
Year ended June 30, 2004
As previously
reported          Adjustments            As restated
$'000                        $'000                       $'000
Equity in loss from associates
(8,827)
(3,148)
(11,975)
Net loss applicable to common stockholders
(55,750)
(3,148)
(58,898)
Basic and diluted loss per share (cents)
(26)
(1)
(27)
Effect on consolidated statement of operations
Year ended June 30, 2003
As previously
reported          Adjustments            As restated
$'000                       $'000                       $'000
Equity in loss from associates
(9,452)
2,585
(6,867)
Net profit applicable to common stockholders
11,374
2,585
13,959
Basic profit per share (cents)
6
2
8
Diluted profit per share (cents)
4
2
6
Effect on consolidated balance sheet
At June 30, 2004
As previously
reported          Adjustments 
As restated
$'000                       $'000                       $'000
Investments in associates
12,255
(2,240)
10,015
Total assets
284,975
(2,240)
282,735
Accumulated deficit
(396,154)
(563)
(396,717)
Other comprehensive loss (a)
(43,249)
(1,677)
(44,926)
Effect on consolidated balance sheet
At June 30, 2003
As previously
reported          Adjustments            As
restated
$'000                        $'000                      $'000
Investments in associates
7,852
4,954
12,806
Total assets
202,381
4,954
207,335
Accumulated deficit
(340,404)
2,585
(337,819)
Other comprehensive loss (a)
(52,523)
2,369
(50,154)

(a) Other comprehensive loss adjustments represent the Company’s share of foreign currency translation adjustments of Emperor.
BACKGROUND IMAGE
F-8
3. SIGNIFICANT ACCOUNTING POLICIES

The following are accounting policies used by the Group which have been consistently applied as indicated below:

Use of estimates
The preparation of the financial statements in conformity with generally accepted accounting principles in the United States requires
the Group’s management to make assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. These estimates include the collectability of related party receivables, the valuation of deferred tax assets, the impairment of
mining assets, and the estimation of reclamation and closure costs and environmental rehabilitation costs, among others. Actual
results could differ from those estimates.

Consolidation
The consolidated financial information includes the financial statements of the Company, its subsidiaries and investments in
associates and joint venture. A company which is more than 50% owned by the Group, which the Group controls directly or
indirectly, through other subsidiary interests, is classified as a subsidiary. The results of any subsidiary, associate or joint venture
acquired or disposed of during the year, are consolidated from the effective date of acquisition and up to the effective date of
disposal.

Intra-company transactions and balances are eliminated on consolidation.

Investment in joint venture
Investments in unincorporated mining joint ventures in which the Group has joint control, under a contractual agreement, are reported
using the proportionate consolidation method.

Investment in associates
Investments in associates are accounted for by the equity method of accounting. These are entities over which the Group has the
ability to exercise significant influence, but which it does not control. The ability to exercise significant influence is presumed where
the Group owns more than 20%, but less than 50%, of the voting stock of an investee. The Group’s investments in associates are
carried in the balance sheet at an amount that reflects its share of the net assets of the associates.

The recoverable amount of the associate, that is the Group's proportionate share of the estimate of future undiscounted distributions
from the associate, or its disposal value, if higher, is compared to the carrying value of the associate. If an impairment exists on this
basis, a reduction in the carrying value of the associate is recorded to the extent that the carrying value exceeds the discounted future
cash flows expected to be derived from the associate.

Equity accounting involves recognizing, in the statement of operations, the Group’s share of the associates’ profit or loss for the year
after tax to the extent of the Group's investment in and advances to its associates.

Goodwill on the acquisition of associates is included in the carrying value of the investment in associates.

Goodwill
Where the excess purchase price of a business acquisition cannot be attributed to assets acquired, including acquired properties and
mineral rights, it is included in goodwill and reviewed for impairment in accordance with the provisions of Statement of Financial
Accounting Standards, or SFAS No. 142, “Goodwill and Other Intangible Assets.”

Goodwill is stated at cost less impairment. Goodwill is tested for impairment at the reporting unit level on an annual basis, or more
frequently if the Group believes indicators of impairment exist. The performance of the test involves a two tier process. The first step
of the impairment test involves comparing the fair value of the reporting unit with the reporting unit's carrying amount, including
goodwill. The fair value of the reporting unit is determined based on estimated future discounted cash flows. If the carrying amount
of the reporting unit exceeds the reporting unit's fair value, the second step of the goodwill impairment test is performed to determine
the amount of the impairment loss. The second step of the goodwill impairment test involves comparing the implied fair value of the
reporting unit's goodwill with the carrying amount of that goodwill. The impairment which is recognized is measured as the amount
by which the carrying amount exceeds the implied fair value of the reporting unit's goodwill.
BACKGROUND IMAGE
F-9
3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency
The Group's functional currency for the South African operations is the South African Rand and for the Papua New Guinean
operations is the Papua New Guinean Kina. Transactions denominated in currencies other than the functional currency are recorded at
the rate of exchange ruling at the transaction date. Monetary assets and liabilities denominated in such currencies are translated at the
rates applicable at the balance sheet date and profits and losses arising as a result of translating those assets and liabilities to the
functional currency are recorded in the statement of operations.

For foreign subsidiaries, whose functional currency is a currency other than the Rand, assets and liabilities are translated using the
closing rates at year end, and the statement of operations are translated at average rates. Differences arising on translation are
included as a component of other comprehensive loss. The translation of amounts into US Dollars is in accordance with SFAS No.
52, “ Foreign Currency Translation ,” whereby assets and liabilities are translated using the closing rates at year end, the statement of
operations are translated at average rates and equity at historical rates. The translation differences arising as a result of converting to
US Dollars using the current exchange rate method, are included as a separate component of stockholders’ equity - other
comprehensive loss.

Receivables
Receivables consist of amounts owing by external and related parties and include amounts of a long- and short-term nature.
Provisions for uncollectible amounts are included in determining net income or loss where a decline in the value of the receivable has
occurred. Interest on balances owed to the Group accrues on a daily basis. Interest accrued on impaired balances owed to the Group is
not recorded as it is not considered to be recoverable.

Cash and cash equivalents
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less.
Due to the short maturity of the investments, the carrying amounts approximate their fair value.

Non-current unlisted investments
Non-current unlisted investments, in which the Group does not have significant influence or a controlling interest, are carried at
acquisition cost. Realized gains and losses are included in determining net income or loss. Impairment losses are included in
determining net income or loss where an other than temporary decline in the value of the investment has occurred.

Non-current listed investments
Non-current listed investments, are treated as ‘available for sale’, and are accounted for at fair value with unrealized gains and losses
excluded from earnings and reported as a separate component of stockholders’ equity – other comprehensive loss. Realized gains and
losses are included in determining net income or loss.

Inventories
Inventories, comprising gold in process (being gold at the stage of production immediately prior to smelting) and supplies, are stated
at the lower of cost and market value. Costs are assigned to inventory on an average cost basis. Costs relating to gold in process
comprise all costs incurred to the stage immediately prior to smelting, including costs of extraction, depletion and processing, based
on the relevant stage of production. Selling, refining and general administration costs are excluded from inventory valuation.

Non-current inventory comprises ore stockpile. These in-process inventories are measured on the absorption cost method and valued
at the lower of average production cost and net realizable value, after a reasonable allowance for further processing costs. Costs
relating to ore stockpile comprise all costs incurred to the stage immediately prior to stockpiling, including costs of extraction and
crushing, as well as processing costs associated with ore stockpiles, based on the relevant stage of production.

Exploration costs
Mining exploration costs, including property acquisitions and mineral and surface rights relating to exploration stage properties, are
expensed as incurred.

Development costs
Development costs relating to major programs at existing mines are capitalized. Development costs consist primarily of expenditures
to initially establish a mine and to expand the capacity of operating mines. Ordinary development costs to maintain production are
expensed as incurred.
BACKGROUND IMAGE
F-10
3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Mining assets
Land is recorded at cost and not depreciated. Buildings and other non-mining fixed assets are recorded at cost less accumulated
depreciation and impairments.

Actual expenditures incurred for mineral property interests, mine development costs, mine plant facilities and equipment are
capitalized to the specific mine to which the cost relates. Amortization is calculated on a mine-by-mine basis (i.e. the cost pools are
the individual mines) using the units of production method. Under the units of production method, the Group estimates the
amortization rate based on actual production over total proven and probable ore reserves of the particular mine. This rate is then
applied to actual costs incurred to arrive at the amortization expense for the period. Proven and probable ore reserves of a particular
mine reflect estimated quantities of economically recoverable reserves that can be recovered in the future from known mineral
deposits that are presently accessible.

Impairment of mining assets
The impairment of long-lived assets is accounted for in terms of SFAS No. 144, “ Accounting for the Impairment or Disposal of Long-
Lived Assets. ”

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or group of assets may not be recoverable. Recoverability of an asset or asset group is assessed by comparing the carrying
amount of an asset or group of assets to the estimated future undiscounted net cash flows of the asset or group of assets. Estimates of
future cash flows include estimates of future gold prices and foreign exchange rates. It is therefore reasonably possible that changes
could occur which may affect the recoverability of the Group’s mining assets. If an asset or asset group is considered to be impaired,
the impairment which is recognized is measured as the amount by which the carrying amount of the asset or group of assets exceeds
the discounted future cash flows expected to be derived from that asset or group of assets. The asset, or asset group, is the lowest
level for which there are identifiable cash flows that are largely independent of other cash flows. The lowest level for which there are
identifiable cash flows that are largely independent of other cash flows is on a mine-by-mine basis. Therefore the Company makes the
analysis on a mine-by-mine basis.

Deferred stripping costs
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to operating costs
on the basis of the average life of mine stripping ratio and the average life of mine costs per ton. The average stripping ratio is
calculated as the number of tons of waste material expected to be removed during the life of mine per ton of ore mined. The average
life of mine cost per ton is calculated as the total expected costs to be incurred to mine the ore body divided by the number of tons
expected to be mined. The average life of mine stripping ratio and the average life of mine cost per ton are recalculated annually in
light of additional knowledge and changes in estimates.

The cost of the “excess stripping” is capitalized as mine development costs when the actual mining costs exceed the sum of the
adjusted ore tons mined, being the actual ore tons plus the product of the actual ore tones multiplied by the average life of mine
stripping ratio, multiplied by the life of mine cost per ton. When the actual mining costs are below the sum of the adjusted ore tons
mined, being the actual ore tons plus the product of the actual ore tons multiplied by the average life of mine stripping ratio,
multiplied by the life of mine cost per ton, previously capitalized costs are expensed to increase the cost up to the average. Thus, the
cost of stripping in any period will be reflective of the average stripping rates for the ore body as a whole. Deferred stripping costs of
$12.5 million (2004: $3.5 million), at Porgera, are classified as mining assets and the amounts amortized are included in the
depreciation and amortization charge for all periods presented. During fiscal 2005, $11.1 million (2004: $4.1 million) of deferred
stripping costs were capitalized to mining assets.

The deferred stripping costs are included in the calculations of impairment tests performed in accordance with the provisions of
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Borrowing costs
Interest on borrowings utilized to finance qualifying capital projects under construction is capitalized during the construction phase as
part of the cost of the project. Other borrowing costs are expensed as incurred. No borrowing costs were capitalized during the years
ended June 30, 2005, 2004 or 2003.
BACKGROUND IMAGE
F-11
3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Reclamation and closure costs
SFAS No. 143, “ Accounting for Asset Retirement Obligations,” or SFAS No. 143, was adopted by the Group with effect from July 1,
2002, and requires that the fair value of liabilities for asset retirement obligations be recognized in the period in which they are
incurred. A corresponding increase to the carrying amount of the related asset is recorded and is depreciated over the life of the asset.
Prior to the adoption of SFAS No. 143, the Group accrued for the estimated reclamation and closure liability through annual charges
to earnings over the estimated life of the mine. The cumulative effect of the change in accounting policy on the balance sheet at that
date was to increase mining assets by $0.55 million and increase rehabilitation liabilities by $0.72 million with a cumulative effect of
change in accounting principle adjustment charge to net earnings of $0.17 million in fiscal 2003.

Environmental rehabilitation costs
Where a related asset is not easily identifiable, environmental rehabilitation costs which are based on the Group’s interpretation of
current environmental and regulatory requirements are accrued as and when tailings are deposited. The estimated costs of
rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Based
on current environmental regulations and known rehabilitation requirements, management has included its best estimate of these
obligations in its rehabilitation accrual.

Environmental liabilities other than rehabilitation costs which relate to liabilities from specific events are accrued when they are
known, probable and reasonably estimable.

In South Africa, annual contributions are made to dedicated rehabilitation trust funds to fund the estimated cost of rehabilitation
during and at the end of the life of the relevant mine. The funds contributed to the trusts, including income earned thereon, are
included under non-current assets.

Revenue
Revenue consists of sales of gold bullion and is recognized when the product is delivered to the relevant refinery, Rand Refinery
Limited in South Africa, N.M. Rothschild in Australasia (for the Tolukuma Section) and AGR Matthey in Papua New Guinea (for
Porgera), at which stage title, including all risks and rewards of ownership, passes from the Group to the buyer.

Once the gold bars reach the refinery, they are assayed to determine the gold content of each bar before being sent for refining where
it is purified to 99.9% purity and cast into troy ounce bars of varying weights. The bullion is then sold by the refinery on the same
day as the delivery, and the proceeds are remitted to the Group within two days.

Derivative instruments
Under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, all derivative instruments are
recognized on the balance sheet at their fair value, unless they meet the criteria for the normal purchase normal sale exception. On the
date a derivative contract is entered into, the derivative can be designated as (1) a hedge of the fair value of a recognized asset or
liability (fair value hedge), (2) a hedge of a forecasted transaction (cash flow hedge), or (3) a hedge of a net investment in a foreign
entity. The Group’s derivative transactions, while designed to provide effective economic hedges under the Group’s risk management
policies, do not qualify for hedge accounting. Therefore, any changes in their fair value are recognized in the statement of operations,
currently. Derivative instruments are not entered into for trading purposes.

Pension plans and other employee benefits
Pension plans, which are multi-employer plans, in the nature of defined contribution plans, are funded through annual contributions.
Refer Note 23.

In addition, the Group makes long-service awards to certain eligible employees, based on qualifying ages and levels of service. Due
to the nature of the award and the uncertainty surrounding the ultimate payment of the long-service award, no provision is made for
potential payment and the Group expenses such costs as they are incurred. Refer Note 23.

The Group contributes to a defined contribution multi-employer medical fund for current employees and certain retirees on an
annually determined contribution basis. No contributions are made for employees retiring after December 31, 1996. Refer Note 23.
BACKGROUND IMAGE
F-12
3. SIGNIFICANT ACCOUNTING POLICIES (continued)

Premium and debt costs
Discounts and underwriting, legal and other direct costs incurred in connection with the issuance of debt are deferred and are
amortized, over the term of the debt, to interest expense using the effective interest rate method.

Taxation
Deferred income and mining taxes
The Group follows the liability method of accounting for deferred income and mining tax whereby the Group recognizes the tax
consequences of temporary differences by applying current statutory tax rates applicable to future years to differences between
financial statement amounts and the tax bases of certain assets and liabilities. Changes in deferred tax assets and liabilities include the
impact of any tax rate changes enacted during the year.

A valuation allowance is raised against deferred tax assets which are not considered more likely than not to be realizable.

Secondary Taxation on Companies (STC)
STC is a tax levied by the South African Revenue Services on dividends declared and becomes payable on declaration of a dividend.
STC is expensed when the related dividend is declared.

(Loss)/profit per share
(Loss)/profit per share is calculated based on the net result divided by the weighted average number of shares in issue during the year.
Fully diluted (loss)/profit per share is based upon the inclusion of potential dilutive shares with a dilutive effect on (loss)/profit per
share. In fiscal 2005, the shares underlying the convertible notes and the shares underlying the staff options allocated in terms of the
Employee Share Option Scheme, or ESOS, along with their respective impact on the net (loss)/profit applicable to common
stockholders, of $7.8 million and $nil, were considered in determining the diluted (loss)/profit per share. In fiscal 2004 the shares
underlying the convertible notes and the shares underlying the staff options allocated in terms of ESOS, along with their respective
impact on the net (loss)/profit applicable to common stockholders, of $3.6 million and $nil, were considered in determining the
diluted loss per share. In fiscal 2003 the shares underlying the options allocated in terms of ESOS, and their respective impact on the
net (loss)/profit applicable to common stockholders, of $2.6 million and $nil, were considered in determining the diluted loss per
share.

In fiscal 2005, 2004 and 2003, a loss applicable to common stockholders of $81.8 million and $58.9 million, and a profit of
$14.0 million, respectively, was recorded. As a result of the losses recorded in fiscal 2005 and 2004, the adjustments for potential
dilutive shares were anti-dilutive.

Stock-based compensation plans
At June 30, 2005, the Company has in place an Employee Share Option Scheme, which is described more fully in Note 23.

The Group has adopted the disclosure only provisions of SFAS No. 123, “ Accounting for Stock-Based Compensation, ” or
SFAS No. 123, and SFAS No. 148, “ Accounting for Stock-Based Compensation Transition and Disclosure and amendment of
SFAS No. 123 ,” and applies Accounting Principles Board Opinion No. 25, “ Accounting for Stock Issued to Employees, ” or APB
Opinion No. 25, and related Interpretations, with respect to its accounting for its employee based compensation plan.

The difference between the option strike price and the prevailing market value of the share at grant date is recorded as an expense
over the vesting period. In accordance with APB Opinion No. 25 and related Interpretations, $1.0 million, (2004: $2.3 million;
2003: $4.3 million) of stock-based compensation cost was recognized as an expense for the year ended June 30, 2005.
BACKGROUND IMAGE
F-13
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-based compensation plans (continued)
The following table illustrates the effect on net (loss)/profit applicable to common stockholders if the Company had applied the fair
value recognition provisions of SFAS No. 123 to its employee based compensation plan (thousands except for earnings per share
information):
Year ended
Year ended
Year ended
June 30,
2005
June 30,
2004
June 30,
2003
Net (loss)/profit applicable to common stockholders
- as stated
(81,789)           (58,898)               13,959
- add back: stock-based compensation costs included in statement of operations, net of
related tax effects
1,002
2,310                  4,313
- less: total stock-based compensation costs determined under fair value based method,
net of related tax effects
(2,709)
(3,700)                (4,861)
- pro-forma
(83,496)           (60,288)                13,411
Basic (loss)/profit per share
- as stated (cents)
(32)                  (27)
8
- pro-forma (cents)
(32)                  (28)
7
Diluted (loss)/profit per share
- as stated (cents)
(32)                  (27)
6
- pro-forma (cents)
(32)                  (28)
6
Discontinued operation
The results of operations of discontinued Group components and gains or losses from their disposal are each presented separately net
of tax in the notes to the consolidated financial statements for all periods presented. A Group component is considered a discontinued
operation if its operations and cash flows have been or will be eliminated from the ongoing activities of the Group as a result of a
disposal transaction, the Group will not have any significant subsequent continuing involvement with the component, and the
component can be clearly distinguished, operationally and for financial reporting purposes. If not disposed of by the balance sheet
date, to qualify as discontinued operation, a component must also meet the conditions to be classified as held for sale. Net assets of a
discontinued Group component classified as held for sale are measured at the lower of its carrying amount or fair value less cost to
sell. Gains from the sale of a discontinued Group component are recognized in the period realized and reported separately.
Comparatives
Comparatives have been reclassified, where necessary to conform to the current year’s presentation.
Recent pronouncements
SFAS No. 123R, “Share-Based Payment”
In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (revised 2004), “Share-Based
Payment” , to focus primarily on accounting for transactions where an entity obtains employee services in share-based payment
transactions and to eliminate the alternative of applying the intrinsic value measurement provisions of APB Opinion No. 25 to stock
compensation awards issued to employees. The new standard requires enterprises to measure the cost of employee services received
in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is to be recognized over the
period during which an employee is required to provide service in exchange for the award.
The Company has continued to apply APB Opinion No. 25 and will adopt the provisions of SFAS No. 123R effective July 1, 2005.
Under SFAS No. 123R, the Company must determine the appropriate fair value model to be used for valuing share-based payments,
the amortization method for compensation cost, and the transition method to be used at date of adoption. The transition methods
include prospective and retroactive adoption options. Under the retroactive options, prior periods may be restated either as of the
beginning of the year of adoption or for all periods presented. The prospective method requires that compensation expense be
recorded for all unvested stock options and restricted stock at the beginning of the first quarter of adoption of SFAS No. 123R; the
retroactive methods would record compensation expense for all unvested stock options and restricted stock beginning with the first
period restated. The Company is evaluating the requirements of SFAS No. 123R, and expects that the adoption of SFAS No. 123R
may have a material impact on consolidated results of operations and earnings per share. The Company has not yet determined the
method of adoption or the effect of adopting SFAS No. 123R, and also has not determined whether the adoption will result in
amounts that are similar to the current pro forma disclosures under SFAS No. 123.
BACKGROUND IMAGE
F-14
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent pronouncements (continued)
SFAS No. 151, “Inventory Costs, an amendment to Accounting Research Bulletin No. 43, Inventory Pricing”
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment to Accounting Research Bulletin No. 43,
Inventory Pricing”. The amendments made by SFAS No. 151 clarify that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current period charges and require the allocation of fixed production
overheads to inventory based on the normal capacity of the production facilities.
The provisions of this standard are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The
Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

SFAS No. 153, “Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29”
In December 2004, the FASB issued SFAS No. 153, “Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29,
Accounting for Non-monetary Transactions.” The statement eliminates the exception from fair value measurement for non-monetary
exchanges of similar productive assets in paragraph 21(b) of APB Opinion No. 29 and replaces it with an exception for exchanges
that do not have commercial substance. SFAS No. 153 specifies that a non-monetary exchange has commercial substance if the future
cash flows of the entity are expected to change significantly as a result of the exchange.
The statement is effective for all fiscal periods beginning after June 15, 2005. The Company does not expect the adoption of this
standard to have a material impact on its consolidated financial statements.
SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and SFAS No. 3”
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” to replace APB Opinion No. 20, by
revising the accounting treatment and reporting requirements for all voluntary changes in accounting principles. APB Opinion No. 20
required that the cumulative effect of the change in accounting principle be included in net income. Under the new statement, the
change in accounting principle is applied retrospectively (as if the principle had always been used) to prior period’s financial
statements, hence revising the comparative amounts. The statement also specifically requires that changes in the method of
depreciation, amortization and depletion for long-lived, non-financial assets be accounted for as a change in estimate affected by a
change in accounting principle.
SFAS No. 154 is effective for accounting changes and corrections of errors occurring in fiscal years beginning after
December 15, 2005. The Company does not expect the adoption of this standard to have a material impact on its consolidated
financial statements.
EITF Issue 03-13, “Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets, in Determining Whether to Report Discontinued Operations”
In November 2004, the EITF of the FASB reached a consensus on Issue 03-13 on evaluating whether the criteria in paragraph 42 of
Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets, have been met for the purposes of classifying the
results of operations of an entity that either has been disposed or classified as held for sale as discontinued operations.
The consensus stated that the criteria in paragraph 42 should only be applied to a component of the enterprise that is either disposed
of or classified as held for sale in fiscal periods beginning after December 15, 2005. The Company does not expect the adoption of
this EITF to have a material impact on its consolidated financial statements.
EITF Issue 04-06, “Accounting For Stripping Costs Incurred During Production in the Mining Industry”
In March 2005, the EITF reached a consensus (ratified by the FASB) that stripping costs incurred during the production phase of a
mine are variable production costs that should be included in the costs of inventory produced during the period that the stripping
costs are incurred.

The EITF consensus is effective for the first reporting period in years beginning after December 15, 2005, with early adoption
permitted. The Company is reviewing the guidance issued in Issue 04-06 and has not yet determined the impact of this
pronouncement on its consolidated financial statements.
BACKGROUND IMAGE
F-15
4. ACQUISITION AND DISPOSAL OF BUSINESSES

2005 acquisitions

Emperor Mines Limited
On July 30, 2004, the Company’s offer to the shareholders of Emperor Mines Limited, or Emperor, closed with the Company having
received acceptances from Emperor’s shareholders representing approximately 25.55% of Emperor’s issued share capital, thereby
increasing the Company's shareholding in Emperor from 19.78% to 45.33%. Accordingly, the Company issued 6,612,676 shares in
exchange for the 29,097,269 Emperor shares to the value of $16.6 million, based on the market value of the Company's shares on the
date issued. Share issue and transaction costs associated with the offer amounted to $1.7 million.

The estimated fair value of the assets and liabilities acquired as part of this transaction were as follows:
$'000
Cash and cash equivalents
1,187
Receivables
426
Inventories
2,174
Mining assets
20,034
Deferred borrowing costs
189
Deferred income and mining tax
59
Accounts payable and accrued liabilities
(2,698)
Short-term portion of long-term loans
(815)
Income and mining taxes payable
(37)
Long-term loans
(3,530)
Provision for environmental rehabilitation
(385)
Fair value of attributable net assets at date of acquisition (25.55% interest)
16,604
Attributable net assets at date of acquisition (25.55% interest)
7,133
Excess paid over net asset value
9,471
Costs on acquisition
1,702
Consideration
18,306
Settled by way of shares issued
16,604
Settled by way of cash
1,702
18,306

The fair value of the 6,612,676 no par value shares issued was $16.6 million, determined based on the prevailing market value of
DRDGOLD Limited shares on June 10, 2004 (refer Note 21), in final settlement of the purchase price determined on July 30, 2004.

The excess paid over the net asset value of Emperor relates to the fair value placed on Emperor’s mining assets by the Company.
BACKGROUND IMAGE
F-16
4. ACQUISITION AND DISPOSAL OF BUSINESSES (continued)

2005 disposals

North West Operations
On March 3, 2005, the Company entered into a 60-day review period at the North West Operations (comprising the Buffels and
Harties Sections) due to continuing losses at these operations. The purpose of this 60-day review period was to assess whether these
operations could be restored to break-even.

On March 9, 2005, the North West Operations suffered the effects of an earthquake of 5.3 on the Richter scale. As a consequence of
the extensive damage caused by the earthquake, the No. 5 Shaft of the North West Operations was closed. There was continuing
seismic activity in the area and on March 16, 2005, the Company closed the No. 2 Shaft because of concerns for the safety of the
employees.

On March 22, 2005, application was made to the High Court of South Africa for the provisional liquidation of Buffelsfontein Gold
Mines Limited (which owns the North West Operations), which order was granted on the same day.

The aggregate carrying value of the assets and liabilities disposed of in connection with the provisional liquidation were as follows:
$'000
Cash and cash equivalents
317
Receivables
2,645
Inventories
1,854
Mining assets
-
Non-current assets
18,672
Accounts payable and accrued liabilities
(21,590)
Provision for environmental rehabilitation
(19,649)
Net liabilities
(17,751)
100% thereof
17,751
Cash proceeds received
-
Costs incurred on disposal
(7,265)
Foreign currency translation gain realized
7,619
Profit realized on disposal of subsidiary
18,105
Cash proceeds received
-
Costs incurred on disposal
(7,265)
Less cash and cash equivalents of entity disposed of
(317)
Net cash flow on disposal of subsidiary
(7,582)
BACKGROUND IMAGE
F-17
4. ACQUISITION AND DISPOSAL OF BUSINESSES (continued)

2004 acquisitions

Net-Gold Services Limited
With effect from April 28, 2004, the closing date, the Group acquired 50.25% of the shares of Net-Gold Services Limited, a subsidiary
of G.M. Network Limited. This entity brokers the payment of purchases made by subscribers, through settlement in gold. The results
of Net-Gold Services Limited's operations have been included in the consolidated financial statements since that date. Included in the
acquisition is an option to exchange the Group's shareholding in Net-Gold Services Limited for approximately 14.3% of the shares in
G.M. Network Limited, a non-public company that focuses on the development of patents and other intellectual property specifically
in connection with electronic trading on the Internet. This option is valid until December 31, 2007.

The estimated fair value of the assets and liabilities acquired as part of this transaction were as follows:
$'000
Cash and cash equivalents
1,378
Receivables
44
Inventories
1,034
Accounts payable and accrued liabilities
(655)

Fair value of net assets at date of acquisition
1,801

50.25% thereof
905
Goodwill arising on acquisition (refer Note 16)
1,095
Consideration
2,000
Less cash and cash equivalents of acquired entity
(1,378)
Net consideration
622

Settled by way of cash and cash equivalents
622

Porgera Joint Venture
With effect from October 14, 2003, the Group acquired the shares in Orogen Minerals (Porgera) Limited, or OMP, and Mineral
Resources Porgera Limited, or MRP. The transaction was affected through the amalgamation of OMP, MRP and the Company's
wholly-owned subsidiary, Dome Resources (PNG) Limited. OMP changed its name to DRD (Porgera) Limited. This resulted in the
Company acquiring a 20% interest in the Porgera Joint Venture in Papua New Guinea. The Porgera mine's main business focus is the
extraction of gold.
BACKGROUND IMAGE
F-18
4. ACQUISITION AND DISPOSAL OF BUSINESSES (continued)

Porgera Joint Venture (continued)
The estimated fair value of the assets and liabilities acquired as part of this transaction were as follows:
$'000
Cash and cash equivalents
1,219
Receivables
3,036
Taxation receivable
1,877
Inventories
9,504
Mining assets
63,812
Non-current inventories
27,826
Accounts payable and accrued liabilities
(6,659)
Deferred income and mining tax
(19,799)
Provision for environmental rehabilitation
(3,682)

Fair value of attributable net assets at date of acquisition (20% interest)
77,134

Attributable net assets at date of acquisition
77,134
Less cash and cash equivalents of acquired entity
(1,219)
Net consideration
75,915

Settled by way of cash and cash equivalents
59,167
Settled by way of shares issued
16,748
Net consideration
75,915

The fair value of the 6,643,902 no par value shares issued was $16.7 million, determined based on the prevailing market value of
DRDGOLD Limited shares on November 22, 2003 (refer Note 21), in final settlement of the purchase price determined on October
14, 2003.

Fortis Limited
With effect May 21, 2004, the Group acquired the shares in Fortis Limited, or Fortis, a company dealing with insurance and
reinsurance activities, in Papua New Guinea. Fortis was acquired for a consideration of $712,000, the only asset of Fortis being cash
and cash equivalents of $712,000.

2004 disposals

The Group made no disposals during the year.

2003 acquisitions

The Group made no acquisitions during the year.
BACKGROUND IMAGE
F-19
4. ACQUISITION AND DISPOSAL OF BUSINESSES (continued)

2003 disposals

Crown Gold Recoveries (Pty) Limited
Effective July 1, 2002, the Company engaged in a transaction consistent with its black economic empowerment strategy by entering
into a share purchase agreement with the Industrial Development Corporation of South Africa, or IDC, and Khumo Bathong
Holdings (Pty) Limited, or KBH. Under this share purchase agreement, the Company sold 57% of its interest in Crown Gold
Recoveries (Pty) Limited, or CGR, to IDC and 3% of its interest in CGR to KBH for a total consideration of $11.7 million, and
realized a profit of $5.3 million.

KBH obtained an option to purchase IDC's shares in CGR. IDC and KBH also each purchased their respective share of three
shareholder loans, aggregating $21.0 million owed by CGR to the Company.

As part of this transaction, the Company loaned KBH $0.7 million to fund that entity's initial purchase of the 3% interest in CGR. The
loan bears interest at the prime rate of The Standard Bank of South Africa on overdraft plus 3% per annum. This loan has a term of
five years from July 1, 2002 and is repayable on demand. This loan was secured by a pledge of 49,928,824 shares of ERPM held by
KBH. However, since the acquisition of ERPM by CGR, the loan is no longer secured. As of June 30, 2004, the loan has been
impaired (Refer Note 15).

Shortly thereafter, KBH chose to exercise its option to purchase all of IDC's interest in CGR. As a result, with effect from July 15,
2002, the share capital of CGR is now owned 40% by the Company and 60% by KBH. Also, as part of this transaction, KBH repaid
IDC's portion of the shareholder loans on behalf of CGR. Consequently, CGR now owes 60% of the loans to KBH and 40% of the
loans to the Company.

As a result of this transaction, CGR is no longer a subsidiary of the Company. The results of operations and the financial position of
CGR are no longer consolidated into the Group’s annual financial statements. The Company's remaining 40% interest in CGR is
equity accounted as an investment in an associate.

The aggregate carrying value of the assets and liabilities disposed as part of this transaction were as follows:
$'000
Cash and cash equivalents
2,738
Other current assets
2,730
Mining assets
13,886
Other assets
739
Current liabilities
(6,310)
Provision for environmental rehabilitation
(2,317)
Long-term liabilities
(882)
Net assets
10,584
60% thereof
6,350
Cash proceeds received
11,652
Profit realized on sale of subsidiary
5,302
Impairment of loan due by CGR
(4,164)
Cash proceeds received
11,652
Less cash and cash equivalents of entity disposed of
(2,738)
Net cash flow on disposal of subsidiary
8,914
BACKGROUND IMAGE
F-20
5. RELATED PARTY TRANSACTIONS

The Company has related party relationships with its associates and with its directors and senior management.

All contracts with related parties for the supply of goods and services are approved in accordance with the Company's procurement
policies. The contract terms are compared to similar suppliers of goods and services to benchmark that the contract is on market
related terms.

Transactions with Director
Dr. M. P. Ncholo, chairman of Khumo Bathong Holdings (Pty) Limited, or KBH, is also a Non-Executive Director of the Company.
Dr. M. P. Ncholo earned $49,439 in board and other fees from the Company during the year ended June 30, 2005 (2004: $22,410).

During fiscal 2004, financial assistance was provided by East Rand Proprietary Mines Limited, or ERPM, the Company’s 40%
associate company with KBH, to the family of Dr. M. P. Ncholo, with regards to funeral expenses relating to the death of a family
member who was a temporary employee of ERPM. In terms of ERPM’s practice, the funds were advanced on compassionate grounds
to assist the family with costs associated with the funeral. This amounted to $14,414. At June 30, 2005, this amount was still
outstanding in the accounts of ERPM.

Transactions with associate companies
During the year ended June 30, 2005, the Company earned $0.5 million (2004: $1.0 million and 2003: $1.3 million) in management
fees from Crown Gold Recoveries (Pty) Limited, or CGR, and $0.5 million (2004: $2.0 million and 2003: $1.4 million) in
management fees from ERPM. At June 30, 2005 CGR owed the Group $34.6 million (2004: $34.3 million), KBH owed the Group
$1.2 million (2004: $1.1 million), and ERPM owed the Group $10.6 million (2004: $10.2 million). Interest amounting to $2.7 million
(2004: $2.9 million) was payable to the Group on the loans to CGR, $0.1 million (2004: $0.1 million) was payable to the Group on
the loans to KBH, and $1.1 million (2004: $0.7 million) was payable to the Group on the loans to ERPM for the year ended June 30,
2005. No interest income on the loans was recorded as it was not considered to be recoverable. No dividends were received from
associates in fiscal 2005, fiscal 2004 or fiscal 2003. As of June 30, 2005, the Company has recognized losses generated by CGR and
ERPM against these loans and they are therefore carried at nil value (refer Note 15).

Rand Refinery agreement
On October 12, 2001, the Group entered into an agreement with Rand Refinery Limited, or Rand Refinery, for the refining and sale of
all of its gold produced in South Africa. Under the agreement, Rand Refinery performs the final refining of the Group’s gold and
casts it into troy ounce bars. Then, Rand Refinery sells the gold on the same day as delivery, for the London afternoon fixed price on
the day the gold is sold. In exchange for this service, the Group pays Rand Refinery a variable refining fee plus fixed marketing, loan
and administration fees. Mr. D.J. Pretorius, the Group Legal Counsel, is also a Director of Rand Refinery and is a member of their
Audit Committee. Also, Mr. I.D. Graulich, the Group’s General Manager: Investor Relations, is Alternate Director to Mr. D.J.
Pretorius. The Group currently owns 3% (2004: 10.6%) of Rand Refinery (which is jointly owned by South African mining
companies). During the year, all gold produced in South Africa was refined by Rand Refinery and as at year-end no balances owed
by or to this entity.

Mr. C. Press loan
During fiscal 2003, Mr. C. Press, a director of Net-Gold Services (Pty) Limited, or Net-Gold, a consolidated subsidiary, loaned an
amount of US$24,946 to Net-Gold. This loan is interest free, unsecured and has no fixed terms of repayment. The funds were used
for short-term working capital advances. As at June 30, 2005, the full balance was still outstanding.

Consultancy service agreement
The Company entered into a consultancy service agreement with one of its non-executive directors, Mr. N. Goodwin. Under this
agreement, Mr. N. Goodwin provided the Company with project management services at the Argonaut Project. This agreement took
effect on September 2, 2002. The agreement was for a fixed one year term from September 2, 2002, so long as the Argonaut Project was
ongoing. Under this agreement, Mr. N. Goodwin was paid a fee of $400 per day. Mr. Goodwin worked for 128 days under this agreement
for a total amount of $51,200. Mr. N. Goodwin resigned as a non-executive director effective January 29, 2003. This agreement was
terminated as of February 26, 2003.
BACKGROUND IMAGE
F-21
5. RELATED PARTY TRANSACTIONS (continued)

Western Areas Limited
On or about October 9, 2001, the Company concluded a contract of guarantee and cession as security for payment with Investec Bank
Limited, or Investec. Under the terms of this agreement, the Company agreed to guarantee Western Areas Limited’s, or WAL’s,
obligations to Investec up to the value of the Sale Shares (being ordinary shares of Randgold, JCI and CAM acquired by the Company
between December 14, 1999 and January 11, 2000). Also, the Company ceded the Sale Shares, as security, to and in favor of Investec
allowing Investec to sell the Sale Shares in the event that WAL defaulted.

On or about September 26, 2001, the Sale Shares were ceded to Investec and WAL granted the Company a put option in respect of
the Sale Shares at a total price of at least R116.4 million ($13.3 million). CAM and JCI undertook to apply all dividends received
from WAL in respect of their shareholdings to the reduction of all amounts owed by them to the Company. The parties agreed that
the monthly option fee would be payable to exercise their rights under the call option for the duration of the Company's guarantee and
cession and agreed that if Investec exercised its rights under that guarantee, the rights of CAM and JCI under the call option would
terminate.

The option fee payable to the Company by CAM and JCI for the period of November 2001 up to December 13, 2001 amounted to
R21.6 million ($2.0 million) plus VAT in the amount of R3.0 million ($0.3 million) plus interest in the amount of R1.7 million
($0.2 million) at the prescribed rate of 15.5% per annum from January 25, 2001 to the date of payment.

On December 13, 2001, the Company invoiced JCI on behalf of JCI and CAM in these amounts. On December 14, 2001, the
Company made a demand on CAM and JCI for the amount of R32.8 million ($3.0 million). On December 24, 2001, the Company's
attorney's made demands on CAM and JCI for the same amount. The Company instituted legal proceedings against JCI and CAM for
the recovery of these amounts. The matter was heard on August 30, 2004. At this date partial settlement of certain small claims
related to the larger JCI and CAM claim, to the value of R2.4 million ($0.4 million), was awarded by the High Court of South Africa,
however the Company had provided in full in the financial year ended June 30, 2002, for the balance outstanding by CAM against the
probable bad debt. Refer Note 10.

On October 21, 2004, the High Court of South Africa ordered JCI and CAM to pay the Company an amount of R35.7 million
($5.5 million), plus interest and costs, including the costs of two counsel. JCI’s and CAM’s counterclaim to recover the earlier part-
payment was also dismissed with costs. JCI and CAM made an application to the High Court of South Africa for leave to appeal,
which was rejected. In March 2005, the Company received a payment of R37.3 million ($6.6 million) in settlement of all claims. Of
this amount R31.5 million ($5.1 million) was recorded as a reversal of the doubtful debt allowance in the statement of operations and
R5.8 million ($1.5 million) was recognized as interest received.
BACKGROUND IMAGE
F-22
5. RELATED PARTY TRANSACTIONS (continued)

Laverton Gold NL
Laverton Gold NL is also a related party because Mr. J. Stratton, a director of CAM and Consolidated African Mines Jersey, or
CAMJ, was a corporate advisor to the Company.

In May 2000, the Company's board appointed a special committee to investigate irregular related party transactions involving Mr. J.
Stratton from the Company's office in Perth, Australia (which has now been closed). The related party transactions involved the
issuance of approximately 8.2 million Company ordinary shares (the "Rawas Shares") in exchange for assets of the Rawas group that
owned the Rawas gold mine in Indonesia, pursuant to agreements between the Company and Laverton Gold NL, an Australian listed
company.

During July and October 1999, the Company allotted and issued the Rawas Shares at the market value of $12.4 million to several
creditors of Laverton or its subsidiaries, including CAMJ, JCI and related companies, in anticipation of receiving shares of, and
claims against, the companies in the Rawas Group and the rights to the Rawas mine. The allocation of the Rawas Shares was based
on each creditor's relative exposure. No proper valuation proceedings were conducted prior to the issuance.

According to the evidence gathered during the course of the investigation, the Company's board determined that, faced with pressure
from its creditors (i) Laverton arranged the issue by the Company of its ordinary shares to creditors in consideration for assets of no
value, for the benefit of Laverton and its creditors and not for the Company; (ii) to avoid the South African Companies Act
requirement for a special resolution, the Company had issued the Rawas Shares at an inflated issue price unrelated to the true value of
the consideration; (iii) as the special resolution was not obtained, the allotment and issue of ordinary shares for the Rawas transaction
was unlawful and invalid. Upon discovery by the board of the unlawful transactions, the board decided to rescind the agreements
with Laverton NL during fiscal 2001. At that time, the Company had received ownership of the claims against, but not the shares of,
the companies in the Rawas Group. As a result of this rescission the shares of the Rawas Group were never delivered to the
Company.

Because of subsequent splits and consolidations resulting in validly issued ordinary shares being consolidated with invalid Rawas
Shares, it was not possible to distinguish the Rawas Shares from the other issued ordinary shares of the Company . None of the Rawas
Shares, and their holders at the time, could be identified and, therefore, none of the Rawas Shares could be removed from the
Company's members' register. In July 2002 the High Court of South Africa validated the Rawas shares.

The $12.4 million value of the Rawas shares was credited to stated capital in the financial statements. During fiscal 2000, the
Company wrote off the attributed $12.4 million value of the shares in the statement of operations as aborted acquisition costs and
loans made by the Company to members of the Rawas Group, amounting to $2.9 million, as no amounts have been recovered on
these loans.

The Company has instituted various legal proceedings in South Africa and Australia in connection with these related party
transactions and these proceedings are still ongoing. Due to the uncertainty of the outcome of the legal proceedings, the Company has
not recorded any amounts in respect of this litigation.
BACKGROUND IMAGE
F-23
5. RELATED PARTY TRANSACTIONS (continued)

Issue of shares to Khumo Bathong Holdings (Pty) Limited
KBH subscribed for 4,794,889 of the Company's ordinary shares for a cash subscription price of $6.8 million during the year ended
June 30, 2003. These shares were sold by KBH in fiscal 2005.

Purchase of 100% of ERPM by CGR
In October 2002, CGR entered into an agreement to acquire 100% of the outstanding share capital of and loan accounts in East Rand
Proprietary Mines Limited, or ERPM, for $11.0 million. In connection with this transaction, the Company provided ERPM with a
loan of $1.3 million. In addition, an amount of $8.0 million was lent by the Company to CGR which CGR advanced to the then
shareholders of ERPM as an interest free loan. CGR received from the shareholders, as security for the loan, a pledge of the entire
issued share capital of ERPM and a cession of the shareholders' claim to CGR. The South African competition authorities approved
the transaction and the $8.0 million loan is deemed to be part payment of the purchase price of $11.0 million by CGR for the
acquisition of the shares and the claims of ERPM. The Company has recognized losses generated by CGR against this loan and the loan
is therefore carried at nil value.

6. EMPLOYMENT TERMINATION COSTS
Year ended
Year ended
Year ended
June 30,
2005
June 30,
2004
June 30,
2003
$'000                  $'000                  $'000
Blyvoor Mine (a)
3,051
899                       85
West Wits Mine
-
-                       53
Other (b)
1,150
-                     542
4,201
899
680

(a) On June 28, 2004, the Company entered into a 60-day review period at the Blyvoor Mine designed to restore the operations to
profitability. The 60-day review was extended to September 13, 2004. On October 5, 2004, 1,619 employees were retrenched at a
cost of $3.1 million. No balance was outstanding with regards to these payments as at June 30, 2005.

During fiscal 2004, voluntary retrenchments were offered to employees and approximately 220 employees accepted the offer. This
gave rise to an expense of $0.9 million for the year ended June 30, 2004. No balance was outstanding with regards to these payments
as at June 30, 2004.

(b) In an effort to reduce corporate costs, retrenchments were made at the Company’s corporate head office during fiscal 2005.
Retrenchment costs for 20 employees amounted to $1.2 million. No balance was outstanding with regards to these payments as at
June 30, 2005.

During fiscal 2003, two directors retired from active duty. Retrenchment payments of $0.1 million were made to Mr. V. Hoops (HR
Director) and $0.4 million to Mr. F. Coetzee (Chief Operating Officer).
BACKGROUND IMAGE
F-24
7. IMPAIRMENT OF ASSETS
Year
ended
Year
ended
Year
ended
June 30,
2005
June 30,
2004
June 30,
2003
$'000               $'000              $'000
Mining assets
- Durban Deep Section (a)
664
-
-
Other assets (b)
-
1,965
-
Goodwill (c)
-
1,025
-
664
2,990
-

(a) During fiscal 2005, mining properties at the Durban Deep Section were written down by $0.7 million to $2.2 million, being the
estimated fair value of these assets. The Company has negotiated the sale of these mining properties and the estimated fair value was
based on these negotiations (refer to Note 27).

(b) Consistent with the Group's black economic empowerment strategy, the West Wits Operations' assets were sold during fiscal 2003
to a black economic empowerment partner, Bophelo Trading (Pty) Limited, subsequently renamed Mogale Gold (Pty) Limited, or
Mogale. During fiscal 2004, Mogale was placed under judicial management and the balance of the purchase price owed was therefore
seen to be irrecoverable. In addition, funds advanced to Khumo Bathong Holdings (Pty) Limited were impaired as the most
significant asset owned by this entity is its 60% interest in CGR and ERPM, which were experiencing liquidity problems in fiscal
2004.

(c) As a result of the losses recorded by Net-Gold Services Limited, goodwill recorded on the acquisition was impaired in fiscal 2004
(refer Note 16).
BACKGROUND IMAGE
F-25
8. DEFERRED INCOME AND MINING TAX
Year
ended
Year
ended
Year
ended
June 30,
2005
June 30,
2004
June 30,
2003
$'000              $'000               $'000
(Loss)/profit from continuing operations before tax and other items
South Africa
(33,233)
(22,427)
66,533
Foreign
22,078
10,545
(7,127)
(11,155)
(11,882)
59,406
(a) Income and mining tax (expense)/benefit
Current income and mining tax
Foreign
(12,315)
(7,165)
-
Current non-mining income tax
South Africa
(263)
(223)
-
Foreign
24
-
-
Deferred income and mining tax
South Africa
-
(5,532)
(33,955)
Foreign
6,792
(1,310)
(330)
Prior year rate change
-
-
18,455
Secondary tax on companies
-
-
-
Total income and mining tax expense from continuing operations
(5,762)
(14,230)
(15,830)

Mining tax on mining income in South Africa is determined based on a formula which takes into account the profit and revenue from
mining operations during the year. Non-mining income, which consists primarily of interest, is taxed at a standard rate. The tax rates
applicable to the mining and non-mining income of a gold mining company depends on whether the company has elected to be
exempt from the Secondary Tax on Companies, or STC. STC is a tax on dividends declared, which is payable by the company
declaring the dividend, and, at present, the STC tax rate is equal to 12.5%. In 1993, all existing gold mining companies had the option
to elect to be exempt from STC.

If the election was made, a higher tax rate would apply for both mining and non-mining income. In fiscal 2005, 2004 and 2003, the
tax rates for taxable mining and non-mining income, for companies that elected the STC exemption were 46% and 38%, respectively.
During those same years the tax rates for companies that did not elect the STC exemption were 37% and 30%, respectively. In 1993,
the Company elected not to be exempt from STC, as this would have meant that the Company would have been liable for normal
taxation at the higher rates of 46% for mining income and 38% for non-mining income. The Company, having chosen not to be
subject to the STC exemption, is subject to 37% tax on mining income and 30% for non-mining income. However, with the exception
of Blyvoor, all of the Company's South African subsidiaries elected the STC exemption. Any dividends paid by Blyvoor, being a
wholly-owned subsidiary of the Company, would be exempt from STC. Any dividends paid by the Company, to the extent that they
are paid out of income from Blyvoor, will be subject to STC. The tax rate for all the Australasian operations is 30%.

In July 2005, the above tax rates for taxable mining and non-mining income were amended, due to a revision of corporate tax rates by
the South African Government. Tax rates for taxable mining and non-mining income for companies that elected the STC exemption
are 45% and 37%, respectively. The tax rates for taxable mining and non-mining income for companies that did not elect the STC
exemption are 35% and 29%, respectively. The Company does not expect the change in tax rates to have a material impact on its
financial statements.
BACKGROUND IMAGE
F-26
8. DEFERRED INCOME AND MINING TAX (continued)

South African deferred taxation has been provided at the effective mining rate applicable in terms of the mining tax formula to the
relevant operations at either 37% or 46% (2004: 37% or 46%; 2003: 37% or 46%), while the Australasian deferred tax has been
provided at the Australian statutory tax rate of 30% (2004: 30%; 2003: 30%). Material items causing the Group's income tax
provision from continuing operations to differ from the estimated effective mining tax rates were as follows:
Year
ended
Year
ended
Year
ended
June 30,
2005
June 30,
2004
June 30,
2003
$'000              $'000               $'000
Mining tax at estimated effective rate
4,686
3,646
(18,698)
Non-mining tax at statutory rate
6,855
5,763
127
Foreign tax at statutory rates
(6,979)
(6,545)
-
Taxation at normal rates
4,562
2,864
(18,571)
Non-deductible expenditure
(1,653)
(21)
(9,834)
Non-taxable income
1,626
49
7,971
Additional tax expense relating to the prior year
(212)
(223)
-
Rate change
-
-
4,623
Valuation allowances
(10,085)
(16,899)
(19)
Income and mining tax expense as reported
(5,762)
(14,230)
(15,830)
(b) Deferred income and mining tax liabilities and assets:
June 30,
2005
June 30,
2004
$'000               $'000
South Africa
Deferred income and mining tax liabilities and assets on the balance sheet
as of June 30, 2005 and 2004, relate to the following:
Gross deferred income and mining tax liabilities:
Mining assets
(19,565)
(30,474)
Gross deferred income and mining tax assets:
49,957
126,582
Assessable tax loss carried forward
33,483
96,338
Unredeemed capital expenditure
12,098
23,743
Provision for environmental rehabilitation
2,056
1,590
Derivative instrument liability
-
1,143
Inventories
-
28
Other provisions
2,320
3,740
Deferred income and mining tax valuation allowances
(30,392)
(96,108)
Deferred income and mining tax assets
-
-
Net deferred income and mining tax liability - long-term
(909)
(982)
Net deferred income and mining tax asset - current
909
982
BACKGROUND IMAGE
F-27
8. DEFERRED INCOME AND MINING TAX (continued)
June 30,
2005
June 30,
2004
$'000               $'000
Australasia
Deferred income and mining tax liabilities and assets on the balance sheet
as of June 30, 2005 and 2004, relate to the following:
Gross deferred income and mining tax liabilities:
(19,126)
(23,780)
Mining assets
(17,731)
(13,920)
Inventories
(1,314)
(9,852)
Other
(81)
(8)
Gross deferred income and mining tax assets:
4,906
2,932
Assessable tax loss carried forward
201
499
Provision for environmental rehabilitation
2,378
1,584
Other provisions
2,327
849
Deferred income and mining tax valuation allowances
(97)
(260)
Deferred income and mining tax liabilities
(14,317)
(21,108)
Net deferred income and mining tax liability - long-term
(15,203)
(12,022)
Net deferred income and mining tax liability - current
-
(9,086)
Net deferred income and mining tax asset - current
886
-
Total
Deferred income and mining tax liabilities and assets on the balance sheet
as of June 30, 2005 and 2004, relate to the following:
Gross deferred income and mining tax liabilities:
(38,691)
(54,254)
Mining assets
(37,296)
(44,394)
Inventories
(1,314)
(9,852)
Other
(81)
(8)
Gross deferred income and mining tax assets:
54,863
129,514
Assessable tax loss carried forward
33,684
96,837
Unredeemed capital expenditure
12,098
23,743
Provision for environmental rehabilitation
4,434
3,174
Derivative instrument liability
-
1,143
Inventories
-
28
Other provisions
4,647
4,589
Deferred income and mining tax valuation allowances
(30,489)
(96,368)
Deferred income and mining tax liabilities
(14,317)
(21,108)
Net deferred income and mining tax liability - long-term
(16,112)
(13,004)
Net deferred income and mining tax liability – current
-
(8,104)
Net deferred income and mining tax asset - current
1,795
-
BACKGROUND IMAGE
F-28
8. DEFERRED INCOME AND MINING TAX (continued)

The classification of deferred income and mining tax assets and liabilities is based on the related asset or liability creating the
deferred tax. Valuation allowances have been provided on deferred tax assets arising out of assessed losses and unredeemed capital
expenditure because it is more likely than not that these losses and unredeemed capital expenditures will not be utilized in the
foreseeable future.

The valuation allowance was $7.0 million as of July 1, 2002. During the years ending June 30, 2003, 2004 and 2005, the valuation
allowance increased by $75.2 million and $14.2 million and decreased by $65.9 million, respectively. These movements include
foreign exchange differences. The decrease in fiscal 2005 is impacted by the elimination of the deferred tax asset and related
valuation allowance of the discontinued operation.

As at June 30, 2005 and June 30, 2004 the Group had estimated tax losses carried forward consisting of:
Unredeemed
capital
Tax losses
expenditure
2005                           2004
2005
2004
$'m                             $'m
$'m
$'m
The Company
28.2
16.5
19.8
21.1
South African subsidiaries
67.7
210.8
16.6
41.0
Australasian subsidiaries
0.6
1.7
-
-
Total
96.5
229.0
36.4
62.1

The estimated tax losses of the Company and its subsidiaries have no expiry date. Should a subsidiary cease to trade, the estimated
tax losses would be forfeited.

Unremitted earnings of foreign subsidiaries and foreign joint ventures

No provision has been made for South African income tax or foreign tax that may result from future remittances of undistributed
earnings of foreign subsidiaries or the joint venture because it is expected that such earnings will be permanently reinvested in these
foreign entities.

The distribution of these undistributed earnings of $6.0 million at June 30, 2005, by DRD (Isle of Man), in Isle of Man, Porgera and
the Tolukuma Section in Papua New Guinea, and other foreign entities would result in income and foreign withholding taxes of
approximately $1.8 million.
BACKGROUND IMAGE
F-29
9. LOSS FROM DISCONTINUED OPERATION

The results of Buffelsfontein Gold Mines Limited from July 1, 2002 to March 22, 2005 and the gain on disposal are reported as
discontinued operation. The Group's consolidated statements of operations for the years ending June 30, 2004 and June 30, 2003 have
been adjusted to reflect this presentation (refer to Note 4 for a more detailed discussion on the discontinued operation).

The operating results for the discontinued operation are as follows:
Year ended
Year ended
Year ended
June 30, 2005
June 30, 2004
June 30, 2003
$'000                        $'000                       $'000
Revenues                                                                                                                             81,538
130,036
151,923
(Loss)/profit before tax
(62,464)
(20,804)
3,358
Income and mining tax expense
-
-
(25,935)
Loss after tax
(62,464)                    (20,804)                    (22,577)
The gain on disposal of the discontinued operation is as follows:
Cash proceeds received
-
Costs incurred on disposal
(7,265)
Net liabilities disposed of
17,751
Foreign currency translation gain realized
7,619
Gain on disposal of discontinued operation
18,105
The loss from discontinued operation is made up as follows:
Loss after tax
(62,464)
(20,804)
(22,577)
Gain on disposal of discontinued operation
18,105
-
-
Loss from discontinued operation, net of tax
(44,359)                    (20,804)                    (22,577)

BACKGROUND IMAGE
F-30
10. RECEIVABLES
June 30,
2005
June 30,
2004
$'000              $'000
Trade accounts receivable
5,156
7,583
Less: allowances for doubtful debts – trade accounts receivable
(932)
(93)
Interest receivable
2
899
Taxation receivable
1,254
4,952
Prepayments of insurance
1,823
2,435
Receivable from associates - management fees
579
321
Payroll paid in advance
138
3,417
Amounts owing by related parties (a)
-
5,024
Less: allowances for doubtful debts – related parties
-
(5,024)
Current receivables
8,020
19,514
Non-current receivables
Amounts owing by related parties (b)
789
841
Less: allowances for doubtful debts – related parties
(789)
(841)
Total receivables
8,020
19,514
Disclosed as current receivables
7,441
19,193
Disclosed as current receivables owing by related parties
579
321
8,020
19,514
June 30,
2005
June 30,
2004
June 30,
2003
Reconciliation of allowances for doubtful debts - related parties
$'000               $'000              $'000
Opening balance
5,865
4,220
3,040
(Credit)/charge to statement of operations
(5,067)
765
-
Foreign exchange
(9)
880
1,180
Closing balance
789
5,865                4,220
June 30,
2005
June 30,
2004
June 30,
2003
Reconciliation of allowances for doubtful debts – trade accounts receivable
$'000               $'000              $'000
Opening balance
93
353
122
Charge/(credit) to statement of operations
907
(298)
151
Foreign exchange
(68)
38
80
Closing balance
932
93
353

a) Amounts owing by related parties comprise amounts due from CAM for the option over the Sale Shares, which were fully
provided for in fiscal 2004. In March 2005, the Company received a payment of R37.3 million ($6.6 million) as settlement of all
claims.

b) Amounts owing by KBH arising from the sale of 60% of CGR (refer Note 4). These loans had been fully provided for in fiscal
2004.
BACKGROUND IMAGE
F-31
11. INVENTORIES
June 30,
2005
June 30,
2004
$'000               $'000
Gold-in-progress
4,174
3,258
Supplies
11,281
13,235
Ore stock pile
32,103
32,006
47,558
48,499
Less: non-current inventories (Ore stock pile)
(32,103)
(32,006)
15,455
16,493

12. MINING ASSETS
June 30,
2005
June 30,
2004
$'000               $'000
Mining properties, mine development costs and mine plant facilities and equipment
Cost
288,000
327,115
Opening balance
327,115
219,969
Impairment
(63,576)
(1,549)
Additions
24,863
26,917
Asset retirement obligation raised
-
2,538
Disposals
(2,178)
(3,480)
Acquired through business combinations
-
63,812
Disposed through liquidation of subsidiary
(309)
-
Foreign exchange
2,085
18,908
Accumulated depreciation and amortization
(165,830)
(170,172)
Opening balance
(170,172)
(136,712)
Impairment
23,461
176
Depreciation and amortization - continuing operations
(13,797)
(25,975)
Depreciation and amortization - discontinued operation
(971)
(4,160)
Disposed through liquidation of subsidiary
309
-
Foreign exchange
(4,660)
(3,501)
Net book value
122,170
156,943

Certain assets, with a net book value of $10.9 million, have been pledged as security for long-term borrowings. Refer to Note 20.
BACKGROUND IMAGE
F-32
12. MINING ASSETS (continued)

Included in mining assets are deferred stripping costs as follows:
June 30,
2005
June 30,
2004
$'000
$'000
Deferred stripping costs
Cost
15,135              4,075
Opening balance
4,075                     -
Additions
11,060              4,075
Accumulated depreciation and amortization
(2,658)               (548)
Opening balance
(548)                     -
Depreciation and amortization
(2,110)               (548)
Net book value
12,477              3,527
13. NON-CURRENT ASSETS
June 30,
2005
June 30,
2004
$'000                $'000
Listed investments (a)
101
78
Cape Tel Limited
1
2
Drillsearch Energy Limited
92
69
Startrack Communications Limited
8
7
Unlisted investments (b)
670
2,392
Rand Refinery Limited
562
1,888
The Employment Bureau of Africa
57
501
Other
51
3
Amounts contributed to environmental trust funds (c)
6,416
22,841
7,187
25,311

(a) These investments are classified as available for sale, and are accounted for at fair value.

Unrealized gains and losses related to investments that are included in accumulated other comprehensive loss are summarized below:
June 30,
2005
June 30,
2004
$'000               $'000
Gross unrealized holding gains
-
-
Gross unrealized holding losses
-                 -

Realized gains of $0.5 million, $0.1 million and $0.2 million were recorded in fiscal 2005, fiscal 2004 and fiscal 2003 respectively.

(b) Unlisted investments comprise investments in various unlisted companies, the fair value of which is not directly available from
market quotations. The directors of the Company perform valuations of the investments on an annual basis to ensure that an other
than temporary decline in the value of the investments has not occurred.

(c) Amounts have been contributed to irrevocable trusts under the Company's control. The monies in the trust are invested primarily
in interest bearing debt securities and equity-limited unit trusts and may be used only for environmental rehabilitation purposes.
BACKGROUND IMAGE
F-33
14. JOINT VENTURE
The unincorporated mining joint venture for which the statement of operations and balance sheet has been proportionately
consolidated is as follows:
June 30, 2005
June 30, 2004
percentage held
percentage held
Porgera Joint Venture
20%
20%
Together with Placer Dome Inc. and Mineral Resources Enga, DRD (Porgera) Limited is a participant in the Porgera Joint Venture.
Each joint venture partner has an undivided holding in the mineral tenements forming part of the mine, and in a proportionate share
of the mine’s production and costs, through a joint venture agreement. Each joint venture partner is responsible for the sale of their
proportionate share of production.
The summarized financial statements of DRD (Porgera) Limited reflect the revenue received for their 20% share of production at the
mine, as well as administrative costs, including depreciation and amortization, and taxation incurred by DRD (Porgera) Limited, in
addition to their proportionate share of the costs incurred by the joint venture. The Group acquired its 20% interest in the Porgera
Joint Venture in Papua New Guinea on October 14, 2003.
Summarized financial statements of DRD (Porgera) Limited, including the joint venture which has been proportionately consolidated,
are as follows (from date of acquisition):
June 30,
2005
June 30,
2004
Statement of operations
$'000
$'000
Revenues
82,793
60,445
Costs and expenses
(37,451)
(30,311)
Production costs
(36,209)
(31,650)
Movement in gold in process
1,182
1,499
Movement in rehabilitation provision, reclamation and closure costs
(2,424)
(160)
Other operating expenses
Depreciation and amortization
(11,613)
(9,260)
Selling, administration and general charges
(4,350)
(2,243)
Net operating income
29,379
18,631
Interest and dividends
164
9
Interest expense
(1,044)
(1,103)
Profit before tax
28,499
17,537
Income and mining tax expense
(5,515)
(8,475)
Net profit
22,984
9,062
Balance sheet
Current assets
20,687
17,498
Cash and cash equivalents
7,956
6,333
Receivables
1,546
1,768
Receivables owing by Group companies
2,126
1,897
Inventories
9,059
7,500
Mining assets
66,238
61,741
Other assets
32,103
32,006
Non-current inventories
32,103
32,006
Total assets
119,028
111,245
Current liabilities
(28,914)
(39,740)
Accounts payable and accrued liabilities
(12,461)
(7,528)
Payables owing to Group companies
(10,965)
(29,384)
Income and mining taxes payable
(5,488)
(2,828)
Non-current liabilities
(23,132)
(27,508)
Deferred income and mining tax
(14,308)
(21,108)
Provisions for environmental rehabilitation, reclamation and closure costs
(8,824)
(6,400)
Net assets
66,982
43,997
BACKGROUND IMAGE
F-34
15. INVESTMENTS IN ASSOCIATES
The associates are:
June
30,
2005
June 30,
2004
Country of incorporation
percentage
held
percentage
held
Crown Gold Recoveries (Pty) Limited
South Africa
40.00%
40.00%
Emperor Mines Limited
Australia
45.33%
19.78%
June 30,
2005
June 30,
2004
$'000                  $'000
Opening carrying amount
10,015
12,806
Acquired during the year
25,191
-
Advances to associates
-
8,827
Net share of results in associates
(7,231)
(11,975)
Share of results before tax
(7,173)
(11,972)
Share of tax
(58)
(3)
Foreign exchange
747
357
Impairment of investment in associates
(13,280)
-
Closing carrying amount
15,442
10,015
The following has been recognized in the statement of operations:
Equity in loss from associates
(7,231)
(3,148)
Losses applied to advances to associates
-
(8,827)
Impairment of investment in Emperor
(13,280)
-
(20,511)
(11,975)

On July 30, 2004, the Company's shareholding in Emperor Mines Limited, or Emperor, increased from 19.78% to 45.33% (refer to
Note 4). The Company has restated the prior year’s financial statements as if the equity method had been utilized from December
2002, the date of the initial acquisition of the investment in Emperor (refer to Note 2). The amounts included for the years ended
June 30, 2005 and June 30, 2004 represent 45.33%, from August 2004, and 19.78% of Emperor’s losses or profits respectively,
adjusted for the amortization of the excess purchase price. The amount included for the year ended June 30, 2003, represents 14.15%,
from January 2003 to March 2003, and 19.81%, from April 2003 to June 2003, of Emperor’s losses, adjusted for the amortization of
the excess purchase price. As a result of losses incurred by Emperor, the investment in Emperor was impaired, by $13.3 million, to
fair value during fiscal 2005. The fair value of Emperor was calculated using discounted future cash flows expected to be derived
from the associate.

At June 30, 2005 and June 30, 2004, the proportionate share of the Company’s investment in the net assets of Emperor, as well as the
unamortized excess purchase price of Emperor, was as follows:
June 30,
2005
$’000
June 30,
2004
$’000
Proportionate share of Emperor’s net assets
13,517
4,922
Excess purchase price, net of accumulated amortization
1,925
5,093
Closing carrying amount
15,442
10,015
Market value of the Company’s investment in Emperor (based on the quoted market
price at June 30, 2005)
12,525
12,255

On July 1, 2002, the Company sold 60% of its wholly owned subsidiary company, Crown Gold Recoveries (Pty) Limited, or CGR, to
Khumo Bathong Holdings (Pty) Limited in a transaction consistent with the Company's black economic empowerment strategy (refer
Note 4). In fiscal 2002, the results of this company had been consolidated into the results of the Group. Effective July 1, 2002, the
Company’s remaining 40% interest has been treated as an investment in an associate and equity accounted. As at June 30, 2005 and
2004 the investment in CGR is carried at $nil.
BACKGROUND IMAGE
F-35
 
16. GOODWILL
June 30,
2005
June 30,
2004
$’000             $’000
Opening balance
-
-
Goodwill on acquisition of Net-Gold Services Limited (refer Note 4)
-
1,095
Impairment of goodwill (refer Note 7)
-
(1,025)
Foreign exchange
-
(70)
Closing balance
-
-
17. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
June 30,
2005
June 30,
2004
$'000              $'000
Trade accounts payable
22,130
34,506
Accrual for leave pay provisions
4,354
13,410
Payroll and other compensation payable
6,833
13,206
Other
-
31
33,317
61,153
18. DERIVATIVE INSTRUMENTS
June 30,
2005
June 30,
2004
$'000              $'000
Gold for electricity contract (a)
-
(3,090)
Interest rate swap agreement (b)
(550)
(1,984)
(550)
(5,074)
Disclosed under non-current liabilities
(550)
(4,765)
Disclosed under current liabilities
-
(309)
(550)
(5,074)
(a) The gold for electricity contract was closed out on April 28, 2005, for $3.6 million. In fiscal 2004, the amount comprised the fair
value of the gold for electricity contract entered into by the Company. Changes in fair value were recorded as profit/(loss) on
derivative instruments in the statement of operations. The fair value represented the difference between the contract price that was
agreed on the date of the transaction and the forward price on June 30, 2004, (refer to Note 24 for further details of quantities and the
timing of settlement). The liability of $3.1 million reflected the fair value as at June 30, 2004, when the gold price was R2,451 per
ounce against an average contract price of R2,256 per ounce. The gold price adjustment was based on the notional amount of 15,000
ounces of gold multiplied by the difference between the contracted gold price, which was the price that was agreed on the date of the
transaction for a determined period, and the arithmetic average of the London PM fix for each business day in the calculation period.
During fiscals 2005, 2004 and 2003, the realized and unrealized (loss)/gain included in profit/(loss) on derivative instruments for this
instrument amounted to losses of $0.4 million (realized) and $1.4 million (unrealized), and a gain of $43.8 million (unrealized),
respectively.

b) This amount reflects the fair value of the interest rate swap agreement that was entered into to manage the interest rate and
currency risk on the bi-annual interest payments of the convertible notes which were issued in fiscal 2003. The interest rate swap has
not been accounted for as a hedge. Changes in fair value have been recorded as profit/(loss) on derivative instruments in the
statement of operations. The fair value represents the difference between the fixed coupon rate of 6% per annum and the forward
Johannesburg Inter-bank Acceptance Rate, or JIBAR, plus 200 interest basis points together with the spot and forward US$ exchange
rate with reference to the coupon amount payable bi-annually. At June 30, 2005, the six month JIBAR rate was 6.929%. During
fiscals 2005, 2004 and 2003, the realized gain/(loss) included in (loss)/profit on the interest rate swap amounted to a gain of
$0.2 million, a loss of $1.4 million and a loss of $1.5 million, respectively. During fiscals 2005, 2004 and 2003, the unrealized
gain/(loss) included in (loss)/profit on the interest rate swap amounted to $nil, a loss of $0.3 million and $nil, respectively.
BACKGROUND IMAGE
F-36

19. PROVISION FOR ENVIRONMENTAL REHABILITATION, RECLAMATION AND CLOSURE COSTS

While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Group has estimated that the total future
costs for the mines, in current monetary terms, will be $25.8 million at June 30, 2005 (2004: $39.2 million). The estimates are
prepared on an annual basis by the Group's Environmental Manager in accordance with the Company's rehabilitation plans. The
relevant rehabilitation plan is submitted to local authorities for approval and the provision is adjusted accordingly to reflect changes
therein.

Amounts have been contributed to irrevocable trusts (refer Note 13) under the Group's control. The monies in the trusts are invested
primarily in interest bearing debt securities and may be used only for environmental rehabilitation purposes. The Group intends to
finance the ultimate rehabilitation costs from the money invested with the trust funds, as well as, at the time of mine closure, the
proceeds on sale of remaining assets and gold from plant clean-up.
June 30,
2005
June 30,
2004
$'000               $'000
Provision for asset retirement obligations
Opening balance
24,929
16,951
Foreign exchange
(224)
3,466
Disposed of through liquidation of subsidiary
(14,614)
-
Asset retirement obligation arising during period
-
2,538
Accretion - continuing operations
(1,002)
791
Accretion - discontinued operation
1,023
1,183
Closing balance
10,112
24,929
Provision for environmental rehabilitation costs
Opening balance
14,178
7,676
Foreign exchange
(136)
1,339
(Disposed of through liquidation)/assumed in purchase of subsidiary and joint venture
(5,297)
3,682
Accretion - continuing operations
3,739
458
Accretion - discontinued operation
-
1,023
Closing balance
12,484
14,178
Provision for environmental rehabilitation
22,596
39,107

The provision for asset retirement obligations relates to expected costs associated with the demolition of gold plants, shaft headgear
and shaft infrastructure.

The provision for environmental rehabilitation costs relates to the expected costs associated with the revegetation of tailings dams,
revegetation of rock dumps and the rehabilitation of open cast areas.

Included in the net book value of the mining asset balance are asset retirement costs, relating to the following mines:
June 30,
2005
June 30,
2004
$'000               $'000
Blyvoor
269
318
North West
-
389
Porgera
5,040
5,498
Tolukuma
-
21
5,309
6,226
BACKGROUND IMAGE
F-37
20. LONG-TERM LOANS
June 30,
2005
June 30,
2004
$'000               $'000
These comprise loans from:
Secured
Industrial Development Corporation, or IDC (a)
4,025
5,281
Investec Bank (Mauritius) Limited (b)
10,020
-
Unsecured
Senior Convertible Notes (c)
64,947
61,134
Investec Bank Limited (d)
-
2,765
78,992
69,180
Less: Payable within one year shown under current liabilities
(9,678)
(9,315)
Total long-term liabilities
69,314
59,865

The terms and conditions, including interest rates, attaching to the above loans are given in the narrative below:

(a) On July 18, 2002, Blyvooruitzicht Gold Mining Company Limited, or Blyvoor, entered into a loan agreement with the Industrial
Development Corporation, or IDC, for R65.0 million ($10.4 million) specifically for financing capital expenditures incurred by
Blyvoor in completing the Blyvoor expansion project. The loan bears interest at 1% below the prime rate of First National Bank of
Southern Africa Limited on overdraft. As of June 30, 2005, the interest rate on this loan stood at 9.5% per annum and $4.0 million
had been drawn down. The loan is repayable in 48 monthly installments starting from August 2002. Repayments were suspended in
January 2005 until January 2006, with the final payment due in July 2007.

The loan is secured over the Blyvoor metallurgical plant, with a net book value of $10.9 million at June 30, 2005. The loan agreement
prohibits the Company from disposing of or further encumbering the assets covered by the special notarial bond and places
restrictions over its ability to change the business of Blyvoor.

(b) On October 14, 2004, DRD (Isle of Man) entered into a facility of $15.0 million with Investec Bank (Mauritius) Limited, or
Investec (Mauritius), of which $10.0 million has been drawn down. The facility may be used to finance future acquisitions or rights
offers by companies in which the Company wishes to acquire shares, or with prior written consent of Investec (Mauritius), it may be
used for any other purpose. The facility bears interest at the three-month London Inter-bank Offered Rate, or LIBOR, plus 300 basis
points. Funds advanced and interest on this facility must be repaid in cash in equal installments every three months from the date of
the relevant advance so that the amount of the advance is paid in full to Investec (Mauritius) on or before November 12, 2007.

The facility is secured by DRD (Isle of Man)’s shares in Emperor Mines Limited, DRD (Porgera) Limited and Tolukuma Gold Mines
Limited. The loan agreement prohibits the Company from disposing of or further encumbering the secured assets. The facility
restricts the flow of payments from DRD (Isle of Man) to the Company through requiring that all net operating cash or cash
distributions received by DRD (Isle of Man) in respect of the secured assets must be used to first service the Company’s interest and
principal payment obligations under the facility by requiring that the Company hold, in a debt servicing account, sufficient cash to
cover its quarterly principal payments. Any funds in excess of these repayment requirements may be transferred to the Company.
Investec (Mauritius) has the option to require DRD (Isle of Man) to pay 50% of any payments, which are a distribution, by or on
behalf of DRD (Isle of Man) to or for the account of the Company as a prepayment of the facility.
BACKGROUND IMAGE
F-38
20. LONG-TERM LOANS (continued)

(c) On November 12, 2002, the Company issued $66,000,000 of 6% Senior Convertible Notes due 2006, in a private placement. The
interest payments of 6% per annum are payable semi-annually on May 12 and November 12 of each year. The Company issued the
notes at a purchase price of 100% of the principal amount thereof. If not converted, or previously redeemed, the notes will be repaid
at 102.5% of their principal amount plus accrued interest on the fifth business day following their maturity date in November 2006.

The notes are convertible at any time at the option of the holder into the Company's ordinary shares, or American Depositary Shares,
or ADSs, at a conversion price of $3.75 per share or ADS, subject to adjustment in certain events if the cumulative adjustments
amount to 1% or more of the conversion rate.

The Company may redeem the notes, in whole or in part, at any time after November 12, 2005, at a redemption price equal to 100%
of the principal amount of the notes to the redeemed, plus accrued original issue discount, plus accrued and unpaid interest, if any, to
but excluding, the date of redemption on giving not less than 30 nor more than 60 days notice if (1) the closing price of its ADSs on
the Nasdaq SmallCap Market or substitute national securities exchange has exceeded 150% of the conversion price then in effect for
at least 20 trading days within a period of 30 consecutive trading days ending on the trading day immediately before the date of
mailing of the provisional redemption notice and (2) the shelf registration statement covering the resale of the notes and the ordinary
shares and ordinary shares underlying the ADSs issuable upon conversion of the notes is effective and available for use and is
expected to remain effective and available for use for 30 days following the provisional redemption date, unless registration in no
longer required.

If there is a change in control of the Company, holders of the notes have the right to require it to repurchase their notes, at 102.5% of
the principal amount of the notes.

In connection with the offering of the notes, the Company entered into a registration rights agreement with the initial purchaser of the
notes. This agreement obligated the Company to file with the SEC a shelf registration statement with respect to the offer and sale of
the notes and the ordinary shares or the ordinary shares underlying the ADSs issuable upon conversion of the notes. On September
30, 2003, the SEC declared effective the Company's registration statement of Form F-3 pertaining to the notes. To date, no notes
have been converted.

In connection with the delay in the registration of the notes, the Company incurred liquidated damages payable to the note holders in
the amount of $1.2 million, which have been included in interest expense in the statement of operations for fiscal 2003.

The notes are presented in the consolidated balance sheet as follows:
June 30,
2005
June 30,
2004
$'000               $'000
Opening balance
61,134
61,422
Liability portion
49,732              47,750
Derivative portion (1)
11,402              13,672
Amortization of capitalized issuance costs (2)
1,597                   897
Interest accrued (3)
9,869                5,932
Interest payment
(3,960)              (3,960)
Change in fair value of derivative portion (1)
(3,816)              (2,270)
Foreign exchange
123                 (887)
Closing balance
64,947
61,134
Liability portion
57,361
49,732
Derivative portion (1)
7,586
11,402

(1) The conversion option embedded in the Senior Convertible Notes is accounted for as an embedded derivative instrument under
SFAS No. 133. The option does not qualify for hedge accounting. The embedded derivative instrument is carried at fair value, such
fair value being determined on the residual cash flow method, with changes in fair value included in the statement of operations in the
period in which the change occurs and classified as loss/(profit) on derivative instruments.
BACKGROUND IMAGE
F-39

20. LONG-TERM LOANS (continued)

(2) The issuance costs relating to the convertible loan note have been capitalized, and are being amortized over the life of the
instrument.

(3) Interest on the notes is calculated on the effective yield basis, at an effective rate of 16.08% per annum.

Included in unrealized foreign exchange gains/(losses) is a loss of $4.4 million, and a gain of $10.6 million and $11.2 million, in
fiscals 2005, 2004 and 2003, respectively, relating to foreign exchange movements on the convertible note.

(d) On June 24, 2004, Investec Bank Limited, or Investec, granted the Company a R100.0 million (June 30, 2004: $15.9 million) loan
facility. The facility bore interest at the three-month Johannesburg Inter-bank Acceptance Rate, or JIBAR, plus 300 basis points. As
at June 30, 2004, the interest rate was 10.95%. The Company could elect to repay the facility in cash or by the issue of its ordinary
shares, valued at the market price of the shares on the date of settlement. The balance owing at June 30, 2004, including additional
amounts drawn down in fiscal 2005 totaling $13.1 million, were settled on September 30, 2004, through the issue of 7,850,657 of the
Company’s ordinary shares.

Long-term loans are scheduled for repayment in the 12 months to:
$'000
30 June 2006
9,678
30 June 2007
67,920
30 June 2008
1,394
30 June 2009 onwards
-
78,992
June 30,
2005
June 30,
2004
Currencies in which long-term loans are denominated are as follows:
$'000               $'000
United States Dollars
74,967
61,134
South African Rands
4,025
8,046
78,992
69,180

The Group has undrawn committed borrowing facilities of $nil (June 30, 2004: $2.9 million) from the Industrial Development
Corporation and bank overdraft facilities of $1.4 million (June 30, 2004: $1.8 million) of which $1.4 million (June 30, 2004:
$1.8 million) had been utilized at year-end. On October 14, 2004, the Company agreed a third $15.0 million loan facility with
Investec Bank (Mauritius) Limited. As at June 30, 2005, $10.0 million had been drawn down and $5.0 million was available under
this facility. On December 10, 2004, the Company agreed a fourth $15.0 million loan facility with Investec. As at June 30, 2005, $9.0
million had been drawn and subsequently repaid through the issue of 8,060,647 of the Company’s shares and $6.0 million was still
available under this facility.
BACKGROUND IMAGE
F-40
21. STOCKHOLDERS EQUITY

Ordinary shares:

June 30, 2005

During the year ended June 30, 2005, the Company issued 56,230,705 no par value shares at market value to certain institutional
investors, in exchange for gross cash proceeds of $65.9 million. In addition, 6,612,676 no par value shares, with a value of $16.6
million, were issued in exchange for the 29,097,269 Emperor Mines Limited shares (refer Note 4).

June 30, 2004

During the year ended June 30, 2004, the Company issued 41,463,639 no par value shares at market value to certain institutional
investors, in exchange for gross cash proceeds of $107.4 million. In addition, 6,643,902 no par value shares, with a value of $16.7
million, were issued to Oil Search Limited in final settlement of the Porgera Joint Venture acquisition price (refer Note 4).

June 30, 2003

During the year ended June 30, 2003, the Company issued 4,794,889 shares at market value to Khumo Bathong Holdings (Pty)
Limited in exchange for gross cash proceeds of $6.8 million.

Cumulative preference shares:

The terms of issue of the cumulative preference shares are that they carry the right, in priority to the Company's ordinary shares, to
receive a dividend equal to 3% of the gross future revenue generated by the exploration or the disposal of the Argonaut mineral rights
acquired from Randgold & Exploration Company Limited in September 1997. During fiscal 2005, the Argonaut mineral rights
reverted to the South African Government after no application for conversion was lodged within the stipulated period of one year,
under the provisions of the MPRD Act. The Company has lodged an application for a prospecting right in respect of the Argonaut
area, which is pending at the Department of Minerals and Energy.

Durban Deep “C” options:

The Company has authorized but not issued 10,000,000 Durban Deep “C” options on ordinary shares at an exercise price of R15 per
ordinary share which are exercisable at any time during the period from the date on which the option is issued to a date not later than
five years from the date of issue. These options are to be used as consideration for acquisitions by the Company.
BACKGROUND IMAGE
F-41
22. (LOSS)/PROFIT PER SHARE
(Loss)/profit per share is calculated based on the (loss)/profit divided by the weighted average number of shares in issue during the
year. Fully diluted (loss)/profit per share is based upon the inclusion of potential common shares with a dilutive effect on (loss)/profit
per share.
For the year ended June 30, 2005
Loss
Per-share
$000                 Shares
amount
(Numerator)   (Denominator)
$
cents
Basic and fully diluted loss per share
Shares outstanding July, 1, 2004
233,307,667
Weighted average number of shares issued - 2005
24,388,129
Net loss from continuing operations applicable to common stockholders
(37,430)         257,695,796
(15)
Loss from discontinued operation
(44,359)
(17)
Net loss applicable to common stockholders
(81,789)
(32)
Anti-dilutive shares (shares underlying Senior Convertible Notes)
-           17,600,000
Anti-dilutive shares (shares underlying staff options allocated)
-

There is no dilution in loss per share for the fiscal year ended June 30, 2005, as the effect of dilutive securities in issue would have
been anti-dilutive as the Company recorded a loss for the year.

(Loss)/profit per share is calculated based on the (loss)/profit divided by the weighted average number of shares in issue during the
year. Fully diluted (loss)/profit per share is based upon the inclusion of potential common shares with a dilutive effect on (loss)/profit
per share.
For the year ended June 30, 2004
Loss
Per-share
$000                Shares
amount
(Numerator)   (Denominator)
$
cents
Basic and fully diluted loss per share
Shares outstanding July, 1, 2003
184,222,073
Weighted average number of shares issued - 2004
32,287,770
Net loss from continuing operations applicable to common stockholders
(38,094)          216,509,843
(17)
Loss from discontinued operation
(20,804)
(10)
Net loss applicable to common stockholders
(58,898)
(27)
Anti-dilutive shares (shares underlying Senior Convertible Notes)
-            17,600,000
Anti-dilutive shares (shares underlying staff options allocated)
621,713

There is no dilution in loss per share for the fiscal year ended June 30, 2004, as the effect of dilutive securities in issue would have
been anti-dilutive as the Company recorded a loss for the year.
BACKGROUND IMAGE
F-42
22. (LOSS)/PROFIT PER SHARE ( continued )
For the year ended June 30, 2003
Profit
Per-share
$000                           Shares
amount
(Numerator)      (Denominator)           $
cents
Basic profit per share
Shares outstanding July, 1, 2002
177,173,485
Weighted average number of shares issued - 2003
6,127,180
Net profit from continuing operations before cumulative effect of accounting
change
36,709          183,300,665
20
Cumulative effect of accounting change
(173)
-
Loss from discontinued operation
(22,577)
(12)
Net profit applicable to common stockholders
13,959
8
Fully diluted profit per share
Weighted average number of shares as per basic profit per share
183,300,665
Weighted average dilutive number of shares underlying Senior Convertible
Notes
(2,598)             11,090,411
Weighted average dilutive number of shares underlying staff options allocated
2,943,230
Diluted net profit from continuing operations applicable to common
stockholders                                                                                                                                   11,361
197,334,306
6
Cumulative effect of accounting change
173
-
Loss from discontinued operation
22,577
12
Diluted net profit from continuing operations before cumulative effect of
accounting change
34,111
18
BACKGROUND IMAGE
F-43
23. EMPLOYEE BENEFIT PLANS

Pension and provident funds

In South Africa, the Group participates in a number of multi-employer industry-based retirement plans. All plans are governed by the
Pension Funds Act, 1956. The provident funds are funded on the “money accumulative basis” with the members' and Group's
contributions having been fixed in the constitutions of the funds. In Papua New Guinea retirement fund contributions are regulated by
the Superannuation Act. According to the Act, the Group has to contribute 7% of the employee's earnings to a local superfund
(NASFUND), whilst the employee contributes 5% of their gross salaries and wages. Payments are made to the fund on a monthly
basis.

The majority of the Group's employees are covered by either of the above-mentioned funds. Fund contributions by the Group for the
year ended June 30, 2005 amounted to $7.4 million (2004: $8.7 million; 2003: $6.4 million).

Post-retirement benefits other than pensions

Prior to the Company's acquisition of Blyvooruitzicht Gold Mining Company Limited, or Blyvoor, skilled workers (clerical workers
and mine management) at that operation participated in multi-employer health plans, which paid certain medical costs. Employer
contributions were determined on an annual basis by these health funds. Qualifying dependants received the same benefits as active
employees. Blyvoor voluntarily accepted liability for post-retirement medical benefits of employees who were members of these
multi-employer health plans prior to the acquisition. The fixed amount, which was determined based on negotiations between
Blyvoor and the various medical schemes, was settled during fiscal 2004.

Currently, no post-retirement benefits other than pensions are available to workers.

Long-service awards

The Group participates in the Chamber of Mines of South Africa Long-Service Awards Scheme, or the Scheme. The Scheme does
not confer on any employee or other persons any right of payment of any award. In terms of the Scheme, bonus payments may be
made to certain employees, usually semi-skilled, upon reaching the age of 55, who have completed 15 years of continuous service in
South African gold mining companies which are members of the Chamber of Mines of South Africa and the Employment Bureau of
Africa, provided such service is not pensionable service. The Scheme lays down the rules under which an employee may be eligible
for the award. The award is paid by the company for which the employee works upon becoming eligible for the award and electing to
receive payment. All awards must be confirmed by the Chamber of Mines of South Africa before payment. The amount of the award
is based on both the employee's skill level and years of service with qualified gold mining companies.

The accumulated benefit obligation at June 30, 2005, is not significant. During fiscal 2005, the Company expensed $0.3 million
(2004: $0.2 million; 2003: $0.1 million) relating to the long-service awards.
BACKGROUND IMAGE
F-44
23. EMPLOYEE BENEFIT PLANS (continued)

Share option plan

The Company has an Employee Share Option Scheme, or ESOS, under which all employees may be granted options to purchase
shares in the Company's authorized, but unissued ordinary shares. Unissued shares that have been reserved for the ESOS may not
exceed 15% of the number of issued ordinary and preferred ordinary shares.

The number of issued and exercisable share options is approximately 4.4% of the issued ordinary share capital. The participants in the
ESOS are fully taxed on any gains realized on the exercise of their options.

On October 24, 1997, the terms of the ESOS were amended. The amended terms applied to options outstanding at the date of the
amendment and options to be issued thereafter. The exercise price of options is the lowest seven day trailing average of the closing
market prices of an ordinary share on the JSE Limited (South Africa), or JSE, as confirmed by the Company's directors, during the
three months proceeding the day on which the employee is granted the option. Prior to the amendment, the exercise price was the
closing JSE market price on the day preceding the grant date of the option. The vesting period for options is determined by the
directors.

All options expire ten years after grant date.

During the fiscal years 1998 to 2005, the Company issued options, one quarter of which were exercisable six months after grant date,
a further quarter of which are exercisable twelve months after grant date and a further quarter of which are exercisable annually
thereafter. Share options activity in respect of these options was as follows:
Outstanding                                 Exercisable
Average
Average
price per
price per
Number of
share
Number of
share
Shares            (in Rand)
Shares            (in Rand)
Balance at July 1, 2002
5,600,364
10.30
199,000
9.54
Granted                                                                                                     3,113,500
23.04
Exercised                                                                                                 (2,055,944)
8.26
Forfeited/lapsed                                                                                      (1,012,863)
11.85
Balance at June 30, 2003
5,645,057
17.62
931,205
19.43
Granted                                                                                                     3,452,117
18.37
Exercised                                                                                                    (940,269)
8.56
Forfeited/lapsed                                                                                         (388,167)
17.98
Balance at June 30, 2004
7,768,738
19.03
2,964,354
18.67
Granted                                                                                                     5,794,784
7.21
Exercised                                                                                                     (66,000)
6.50
Forfeited/lapsed                                                                                     (1,003,611)
15.10
Balance at June 30, 2005
12,493,911
13.96
5,949,499
17.68

Average price per share is disclosed in South African Rand as the options are on ordinary shares and the option price is stated in
South African Rand. As of June 30, 2005, the average price per share for outstanding options is $2.09 and average price per share for
exercisable options is $2.64.
BACKGROUND IMAGE
F-45
23. EMPLOYEE BENEFIT PLANS (continued)

For the purposes of the pro-forma disclosures in terms of SFAS No. 123, the weighted average grant date fair value of the above
options granted in fiscal 2005 at exercise prices which exceeded the market price of the stock on grant date was R0.83 (2004: R3.31;
2003: Rnil). The weighted average grant date fair value of the above options granted in fiscal 2005 at exercise prices, which were less
than the market price of the stock on grant date, was R2.33 (2004: R4.37; 2003: R8.07).

The grant date fair value of these options was determined using a Black-Scholes pricing option model, applying the following
weighted average assumptions:
June 30, 2005      June 30, 2004     June 30, 2003
Expected life (in years)
3
3
3
Risk free interest rate
7.98%
9.24%                   10.74%
Volatility
35%
31%                        47%
Dividend yield
0%
0%                          0%

During fiscal 1998, the Company also issued certain options which were exercisable immediately, but which vested over a period of
twelve months. Share options activity in respect of these options was as follows:
Outstanding                                      Exercisable
Average                                         Average
price per
price per
Number of
share
Number of
share
Shares            (in Rand)               Shares           (in Rand)
Balance at July 1, 2002
3,000
7.00                 3,000                     7.00
Forfeited/lapsed
(3,000)
7.00
Balance at June 30, 2003
-
-
-
-

For the purposes of the pro-forma disclosures in terms of SFAS 123, the weighted average grant date fair value of the above options
granted in 1998 was R2.67. These options had an exercise price equal to the market price of the stock on grant date.

The grant date fair value of these options was determined using a Black-Scholes pricing option model, applying the following
assumptions:
1998
Expected life (in years)
1
Risk free interest rate
15.25%
Volatility
85%
Dividend
yield
0%
BACKGROUND IMAGE
F-46
23. EMPLOYEE BENEFIT PLANS (continued)

During fiscal 2002, the Company issued certain options, 25% which were exercisable immediately and the remaining 75% in equal
tranches after 6, 12, 24 and 36 months. Share options activity in respect of these options was as follows:

Outstanding                                 Exercisable
Average                                          Average
price per                                      
price per
Number of
share
Number of
share
Shares
(in Rand)
Shares
(in Rand)
Balance at July 1, 2002
937,500
15.81              187,500                   15.81
Exercised
(227,125)
15.81
Forfeited/lapsed
(78,750)
15.81
Balance at June 30, 2003
631,625
15.81              305,375                   15.81
Exercised
(43,750)
15.81
Forfeited/lapsed
(11,250)
15.81
Balance at June 30, 2004
576,625
15.81               419,125                  15.81
Exercised
-
15.81
Forfeited/lapsed
(18,750)
15.81
Balance at June 30, 2005
557,875
15.81               557,875                 15.81

Average price per share is disclosed in South African Rand as the options are on ordinary shares and the option price is stated in
South African Rand. As of June 30, 2005, the average price per share for outstanding options is $2.37 and average price per share for
exercisable options is $2.37.
For the purposes of the pro-forma disclosures in terms of SFAS No. 123, the weighted average grant date fair value of the above
options granted in 2002 at exercise prices, all of which were less than the market price of the stock on grant date, was R19.08.

The grant date fair value of these options was determined using a Black-Scholes pricing option model, applying the following
weighted average assumptions:

2002
Expected life (in years)
3
Risk free interest rate
12.58%
Volatility
49.7%
Dividend yield
0%
BACKGROUND IMAGE
F-47
23. EMPLOYEE BENEFIT PLANS (continued)

During fiscal 2002, the Company issued certain options, which were exercisable immediately. Share options activity in respect of
these options was as follows:

Outstanding                                  Exercisable
Average                                        Average
price per                                      price
per
Number of
share
Number of
share
Shares
(in Rand)
Shares
(in Rand)
Balance at July 1, 2002
9,292
8.37              9,292                        8.37
Exercised
(9,292)
8.37
Balance at June 30, 2003
-
-
-
-
For the purposes of the pro-forma disclosures in terms of SFAS 123, the weighted average grant date fair value of the above options
granted in 2002 at exercise prices, all of which were less than the market price of the stock on grant date, was R6.20.

The grant date fair value of these options was determined using a Black-Scholes pricing option model, applying the following
weighted average assumptions:
2002
Expected life (in years)
0
Risk free interest rate
12.79%
Volatility
23.4%
Dividend yield
0%

The following tables summarize information relating to all employee stock options outstanding as June 30, 2005:
Outstanding                                               Exercisable
Weighted
average
Weighted                                        Weighted
contractual
average
average
Number of
life (in
exercise
Number of
exercise
Shares
years)                   price                    Shares                     price
(in
Rand)
(in
Rand)
Range of exercise prices (R)
R4.52 to R6.78
3,765,624                       9.57                      5.24
402,587
5.70
R6.79 to R10.18
333,375                       5.89                      7.41
333,375
7.41
R10.19 to R15.28
1,838,300
9.30                    10.93
600,650
10.93
R15.29 to R22.93
6,141,487
7.90
18.29
4,407,362
18.20
R22.94 to R34.41
933,000
7.32
29.09
723,400
29.09
R34.42 to R36.08
40,000
7.00
36.08
40,000
36.06
13,051,786
8.48
14.04
6,507,374
17.52
BACKGROUND IMAGE
F-48
24. FAIR VALUE OF FINANCIAL INSTRUMENTS

Cash and cash equivalents

The carrying value of cash and cash equivalents approximates their fair value due to the short-term maturity of these deposits. The
Group attempts to minimize its credit risk by placing cash and cash equivalents with major banks and financial institutions located in
South Africa, Australia and Papua New Guinea, after evaluating the credit ratings of the respective financial institutions. The Group
believes that no concentration of credit risk exists in respect of cash and cash equivalents.

Derivative instruments

In the normal course of its operations, the Group is exposed to market risks, including commodity price, foreign currency, interest,
liquidity and credit risks. The Company entered into transactions, which make use of derivative instruments, to economically hedge
certain exposures. These instruments include interest rate swaps and gold lease rate swaps. The decision to use these types of
transactions is based on the Company's hedging policy, which precludes the forward selling of gold. Although most of these
instruments are used as economic hedges, none of them qualify for hedge accounting and, consequently, are marked-to-market
through the statement of operations in accordance SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities .”
The Group does not hold or issue derivative financial instruments for speculative purposes.

Eskom gold for electricity contract

In October 2000, the Company entered into a contract to buy electricity from Eskom. Under the terms of the Company's agreement,
the Company pays Eskom the standard electricity tariff for all energy it consumes, including the 75 GWh per month specified in the
contract. This contract was to expire in September 2005. In addition, every 12 month-period starting in October the Company adjusts
the amounts paid in that period in accordance with an established formula based on the gold price.

The gold price adjustment is based on the notional amount of 15,000 ounces of gold multiplied by the difference between the
contracted gold price, which is the price that was agreed on the date of the transaction for a determined period, and the arithmetic
average of London PM fix for each business day in the calculation period.

The Company concluded that (1) the contract in its entirety does not meet the definition of a derivative instrument and therefore it
does not have to be carried on the balance sheet at fair value; (2) the embedded gold for electricity forward contract possesses
economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (3) a
separate, stand-alone instrument with the same terms would qualify as a derivative instrument. Accordingly, the embedded derivative
was separated from the host contract and carried at fair value.

As discussed in Note 18, the contract was closed out on April 28, 2005, at a cost of $3.6 million. The fair value of the gold for
electricity contract was a liability of $3.1 million as at June 30, 2004. The fair value reflected the difference between the price that
was agreed on the date of the transaction and the forward price on June 30, 2004. Therefore, the liability of $3.1 million reflected the
loss as at June 30, 2004, when the gold price was R2,451 per ounce against an average contract price of R2,256 per ounce.
BACKGROUND IMAGE
F-49
24. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Put options bought

Put options bought refer to the right, but not the obligation to sell a predetermined amount of gold at a predetermined price on a
predetermined date. During fiscal 2003, the remaining put options were closed out. This resulted in a realized gain of $7.1 million.
Included in profit/(loss) on derivative instruments is $nil for fiscal 2004, and a profit of $9.5 million for fiscal 2003, relating to this
instrument.

Other positions

The Company had entered into a gold rate lease swap and call option transactions which had been accounted for in the financial
statements on a mark-to-market basis in prior fiscal years, and which matured or were closed out in fiscal 2004.

During fiscal 2004, a gold lease rate swap for 109,875 ounces, at a rate of 0.20% matured. A gold lease rate swap is a contract
whereby the Company and a counterparty select a notional amount of gold, and thereafter over the life of the contract one party pays
a fixed lease rate based on that amount of gold and the other party pays a floating lease rate based on the same amount of gold. The
Company had exposure to increases in the three-month lease rate up to June 2004. The volume the swap was based on decreases
every quarter until it reached zero (by June 2004). Every quarter the Company received a fixed cash flow equal to 0.2% per annum of
the volume and $280/oz, and paid the three-month floating lease rate converted at the then market spot rate.

During fiscal 2003, the Company bought call options as a risk management tool to protect the maximum exposure on the gold for
electricity contract. Options covering a total of 272,110 ounces were purchased for $14.9 million. These contracts expire by
September 2005. During fiscal 2004, the Company took advantage of the lower rand gold price and closed out 265,000 ounces of the
Eskom gold for electricity contract in line with its policy of not hedging gold production. Accordingly the exposure for which the call
options were bought as a risk management tool had been significantly reduced and the remaining call options were closed out during
fiscal 2004, recording a gain of $0.1 million.

Included in profit/(loss) on derivative instruments is $nil for fiscal 2005, a loss of $3.2 million for fiscal 2004 and a profit of $40.9
million for fiscal 2003, relating to these instruments.

Concentration of credit risk

The Company believes that its financial instruments do not represent a concentration of credit risk, because the Group deals with a
variety of major banks and financial institutions located in South Africa, Australia and Papua New Guinea, after evaluating the credit
ratings of the representative financial institutions. Furthermore, its debtors and loans are regularly monitored and assessed for
recoverability. Where it is appropriate to raise a provision, an adequate level of provision is maintained.

In addition, the Group's South African operations all deliver their gold to Rand Refinery Limited, or Rand Refinery, which refines the
gold to saleable purity levels and then sells the gold, on behalf of the Group, on the bullion market. The gold is sold by Rand
Refinery on the same day as it is delivered and settlement is made within two days. Once the gold has been delivered to Rand
Refinery, the risks and rewards of ownership have passed.

The Tolukuma mining operation delivers its gold to one customer, N M Rothschild (Australia) and receives proceeds within two
days. The concentration of credit risk in Australia is mitigated by the reputable nature of the customer and the settlement of the
proceeds within two days.
BACKGROUND IMAGE
F-50
24. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

The Porgera mining operation delivers its gold to AGR Matthey (Papua New Guinea) who refines the gold and then delivers it to the
Bank of Western Australia Limited at a price negotiated by the Company. The concentration of credit risk in Papua New Guinea is
mitigated by the reputable nature of the customer and the settlement of the proceeds within two days.

Foreign currency risk

The Group's functional currency for the South African operations is the South African Rand and for the Papua New Guinea
operations it is the Papua New Guinea Kina. Although gold is sold in US Dollars, the Company is obliged to convert these into
Rands for its South African operations in terms of South African Reserve Bank, or SARB, regulations. The Company is thus exposed
to fluctuations in the Dollar / South African Rand exchange rate. The Company conducts its operations in South Africa and Papua
New Guinea. Currently, foreign exchange fluctuations affect the cash flow that it will realize from its operations as gold is sold in
US Dollars while production costs are incurred primarily in Rands and Kina.

The Company's results are positively affected when the Dollar strengthens against these foreign currencies and adversely affected
when the Dollar weakens against the foreign currencies. The Company's cash and cash equivalent balances are held in US Dollars,
Rands and Australian Dollars; holdings denominated in other currencies are relatively insignificant. Certain of the Company's
financial liabilities are denominated in a currency other than the Rand (refer Note 20). The Company is thus exposed to fluctuations
in the Rand with the relevant currency. The Company has not entered into any foreign exchange hedging contracts to attempt to
mitigate its foreign currency risk.

Interest rate and liquidity risk

Fluctuations in interest rates impact the value of short-term cash investments and financing activities, giving rise to interest rate risks.

Interest rate swap agreement

An interest rate swap agreement was entered into in November 2002 to manage the exposure to changes in interest rates with regard
to the interest payable on the Senior Convertible Notes (refer Note 20). The fixed interest rate (in US Dollars) was swapped for a
floating South African interest rate, calculated at the Johannesburg Inter Bank Acceptance Rate, or JIBAR, plus 200 basis points per
annum. An amount of 60% of the coupon rate is subject to this swap agreement, based on the requirements of the SARB, as this
represents the amount of the funds raised in South Africa. The maturity date of this agreement is November 2006. The Company
believes that the counterparty to this agreement, being The Standard Bank of South Africa Limited, is a financially sound institution
and the credit risk for non-performance is not significant.

As discussed in Note 18, the fair value of the interest rate swap agreement was a liability of $0.6 million as at June 30, 2005.

Labor risk

Approximately 70% of the labor force, at our South African Operations, are members of labor unions. The majority of the union
members are blue-collar employees. The unions negotiate two year wage agreements which are binding on employees in the
respective bargaining units, the largest of which consists of occupational groupings of mainly blue collar workers in the organization.
The new wage agreement for Blyvoor is valid from July 1, 2005 to June 30, 2007. As at October 31, 2005, wage agreements were
still being negotiated at Crown and ERPM. The levels of unionization for operations outside South Africa vary. It is mostly contained
amongst blue-collar workers and membership is below 50%.
BACKGROUND IMAGE
F-51
24. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)

Fair value of financial instruments

The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction
between willing parties, other than in a forced or liquidation sale.

The following table represents the carrying amounts and fair values of the Group's financial instruments outstanding:

June 30,
2005
June 30,
2005
June 30,
2004
June 30,
2004
$'000              $'000               $'000               $'000
Carrying
amount
Fair value
Carrying
amount
Fair value
Financial assets
Cash and cash equivalents
36,085
36,085             22,453
22,453
Receivables
8,020
8,020            19,514
19,514
Listed investments
101
101                    78
78
Unlisted investments
670
670               2,392
2,392
Investment in environmental trusts
6,416
6,416             22,841
22,841
Financial liabilities
Bank overdraft
1,370
1,370               1,828
1,828
Accounts payable and accrued liabilities
33,317
33,317             61,153
61,153
Derivative instruments
550
550               5,074
5,074
Long-term loans
- long-term portion
69,314
63,819             59,865
53,512
- short-term portion
9,678
9,678               9,315
9,315

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities and short-term loans
approximates their fair values due to the short-term maturities of these assets and liabilities.

The fair value of listed investments has been determined by reference to the market value of the underlying investments. The
investment in the environmental trusts is invested primarily in interest bearing securities and equity-limited unit trusts, the carrying
value of which approximates their fair value.

The fair value of the fixed interest rate long-term debt instruments is subject to changes in market interest rates. The fair values are
calculated based on a credit adjusted US Treasury rate, with comparable terms of maturity.

25. COMMITMENTS AND CONTINGENT LIABILITIES

June 30,
2005
June 30,
2004
$'000               $'000
Capital expenditure commitments:
Contracted but not provided for in the financial statements
274
1,671
Authorized by the directors but not contracted for
3,393
12,167
3,667
13,838

Litigation
The Group is subject to litigation in the normal course of business. The Group believes that any adverse outcome from litigation would
not have a material effect on its financial position or results of operations.
BACKGROUND IMAGE
F-52
25. COMMITMENTS AND CONTINGENT LIABILITIES (continued)

Securities class action
On June 13, 2005, a securities class action was filed in the United States District Court for the Southern District of New York against the
Company and two of its officers. Since then, four nearly identical securities class action complaints have been filed against the Company
and the same officers. The cases have been consolidated in the Southern District of New York. The Company expects that a consolidated
amended complaint will be filed on behalf of a group of lead plaintiffs selected by the Court to represent the putative class of plaintiffs
alleged in the complaints. The Company anticipates that a response to such a complaint will be required some time in early 2006. To date,
neither the Company nor the individual defendants have been formally served with any complaint regarding these matters.

The actions are allegedly filed on behalf of purchasers of the Company’s shares during two purported class periods spanning from
October 23, 2003 to February 25, 2005. The complaints allege generally that the Company and the individual defendants made false and
misleading public statements regarding, among other things:
•
the Company’s restructuring of its North West Operations in South Africa;
•
the Company’s ability to reduce the negative impact of the increasing value of the South African Rand; and
•
the strength of the Company’s balance sheet.

Based on the Company’s review of the complaints, management believes the lawsuits are without merit and intends to vigorously defend
the Company and its officers named in the complaints. The Company is not currently in a position to estimate the extent of any losses that
may result from the securities class action.

Tax on earnings of Company officers
The South African Revenue Services, or SARS, conducted a payroll audit on the Company’s payroll during 2002. At the time the
Company, acting on professional advice, did not deduct tax from some of the earnings of certain of its officers, who were provisional
tax payers. SARS took the view that the Company was in fact obliged to have made these deductions and called for a full disclosure
of all payments for the tax years 1999, 2000, 2001, 2002 and 2003 in respect of the earnings of Mr. R.A.R. Kebble and Mr. M.J.
Prinsloo.

If it is established that these officers had failed to declare and pay taxes on their earnings during these tax years, SARS may have
recourse for arrear taxes against the Company in terms of Section 5(2) of the South African Income Tax Act, 1962 as amended.
Whilst the Company is aware that its possible exposure could be up to R25.0 million ($3.7 million), it is, in view of the fact that the
tax records of the aforementioned individuals are protected by statutory confidence, not yet possible to determine the full extent of
the exposure, if any, that the Company faces. Whilst the Company is aware that SARS have engaged the aforementioned individuals
personally, to date no tax assessments have been made against the Company.
BACKGROUND IMAGE
F-53
26. GEOGRAPHIC AND SEGMENT INFORMATION

Based on risks and returns, the Directors consider that the primary reporting format is by business segment. The Group operates in one industry segment, being the extraction and production of gold and related by-products. Therefore the disclosures for the primary segment have already been given in these financial statements.

The chief operating decision-maker is the Board of Directors, who evaluate the business based on the following geographical operational segments, based on revenue generated from the location of the seller:
Year ended June 30, 2005
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Blyvoor
Mine
North
West Mine
West Wits
Mine
Other
Total South
African
operations
Porgera
Mine
Tolukuma
Mine
Other
Total
Australasian
operations
Total
operations
Discontinued
operation
Total
continuing
operations
Revenues
68,370          81,538
-
-         149,908         82,793         32,446                 -
115,239
265,147
(81,538)
183,609
Depreciation and amortization
(2,716)            (971)
-             2,773            (914)
(11,613)
(3,336)         1,095          (13,854)
(14,768)
971
(13,797)
Production costs
(73,814)     (100,695)
-          (1,218)     (175,727)        (36,210)      (25,278)                 -
(61,488)
(237,215)          100,695
(136,520)
Results
Net operating income/(loss)
(11,917)
(62,714)
(486)
(8,20 3 )         (83,3 20 )         29,808
245        (2,850)            27,203
(56,11 7 )             62,714           6,59 7
(Loss)/profit after tax
(12,567)
(62,464)
(355)
(20,57 4 )
(95,9 60 )         24,028           (718)
(27,242)           (3,932)       (99,89 2 )
62,464       (37,42 8 )
Balance sheet
Mining assets
46,112
-
152
1,384
47,648         66,238           7,344             940            74,522
122,170
Total assets
54,665
-
1,971
20,527
77,163       11 7 , 788          17,259        26,047          16 1 , 0 9 4         2 38 , 257
Net current assets/(liabilities)
(6,715)
-
(35)
6,697
(53)
( 1 , 262)
6,371
6,541
1 1 , 6 5 0
1 1 , 59 7
Other information
Capital expenditures
729
3,524
-
37
4,290
17,174           3,399
-            20,573          24,863            (3,524)         21,339
Impairment of assets
-
39,451
-               664
40,115                   -                  -                  -
-
40,115
(39,451)              664
Total number of employees
3,481
824
4,305

The South African operations deliver their gold to Rand Refinery Limited, which acts as their agent in the sale of gold bullion. The Tolukuma mining operation and Porgera mining operation also has one customer for their gold bullion, namely N M Rothschild and AGR Matthey, respectively.
BACKGROUND IMAGE
F-54
26. GEOGRAPHIC AND SEGMENT INFORMATION ( continued )
Year ended June 30, 2004
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Blyvoor
Mine
North
West Mine
West Wits
Mine
Other
Total South
African
operations
Porgera
Mine
Tolukuma
Mine
Other
Total
Australasian
operations
Total
operations
Discontinued
operation
Total
continuing
operations
Revenues
90,066      130,036
-
-         220,102         60,445          32,743                -
93,188
313,290
(130,036)
183,254
Depreciation and amortization
(2,643)       (4,160)
-             1,199         (5,604)        (9,260)         (7,340)        (7,931)          (24,531)      (30,135)               4,160
(25,975)
Production costs
(90,366)   (134,465)
-           (1,189)    (226,020)      (31,650)       (19,821)                 -
(51,471)
(277,491)          134,465
(143,026)
Results
Net operating income/(loss)
(8,980)
(21,523)
(1,539)
(26,890)       (58,932)         18,631          2,402              266             21,299       (37,633)
21,523       (16,110)
(Loss)/profit after tax
(15,450)
(20,804)
(1,403)
(20,157)
(57,814)          9,062           2,294
(12,433)          (1,077)       (58,891)
20,804       (38,087)
Balance sheet
Mining assets
48,518
27,689
-
6,164
82,371      61,741           7,000             5,831           74,572
156,943
Total assets
31,572
79,368
4,245
103,681
218,866      19,204           9,571           35,094           63,869
282,735
Net current (liabilities)/assets
(59,902)
(157,709)
(19,036)        298,902           62,255    (25,102)        (1,651)
(60,495)        (87,248)
(24,993)
Other information
Capital expenditures
9,151
5,511
-
89
14,751          8,723         3,442
1           12,166
26,917            (5,511)        21,406
Impairment of assets
-
1,276
-
2,990              4,266
-
-                     -
-
4,266            (1,276)          2,990
Total number of employees
12,986
751
13,737

The South African operations deliver their gold to Rand Refinery Limited, which acts as their agent in the sale of gold bullion. The Tolukuma mining operation and Porgera mining operation also has one customer for their gold bullion, namely N M Rothschild and AGR Matthey, respectively.
BACKGROUND IMAGE
F-55
26. GEOGRAPHIC AND SEGMENT INFORMATION ( continued )
Year ended June 30, 2003
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Blyvoor Mine
North West
Mine
West Wits
Mine
Other
Total South
African
operations
Australasian
operations
Total
operations
Discontinued
operation
Total
continuing
operations
Revenue s
81,753              151,923                  4,796
-             238,472              22,870            261,342         (151,923)           109,419
Depreciation and amortization
(1,509)               (1,761)                  (402)                 (369)              (4,041)             (6,561)
(10,602)               1,761
(8,841)
Production costs
(65,240)           (144,598)               (4,859)             (1,557)           (216,254)           (19,105)
(235,359)           144,598
(90,761)
Results
Net operating income/(loss)
54,713
2,352
(80)
(2,403)               54,582              (4,993)
49,589              (2,352)
47,237
Profit/(loss) after tax
39,074
(22,577)                    161
2,173
18,831
(4,872)
13,959
22,577
36,536
Balance sheet
Mining assets
38,089
31,920
-
602
70,611
12,646
83,257
Total assets
56,088
63,530
20,217
31,350
171,185
36,150
207,335
Net current assets/(liabilities)
(13,788)
(24,356)
1,306
55,913
19,075
(16,656)
2,419
Other information
Capital expenditures
4,176
6,375
-
170               10,721                  2,693
13,414              (6,375)              7,039
Impairment of assets
-
-
-
-
-
-
-
-
-
Total number of employees
18,766
472
19,238
The South African operations deliver their gold to Rand Refinery Limited, which acts as their agent in the sale of gold bullion. The Australasian operations also have one customer for their gold bullion, namely N M Rothschild.

The Australasian operations comprise Tolukuma gold mine and its related corporate structures.
BACKGROUND IMAGE
F-56
27. SUBSEQUENT EVENTS

Simmer and Jack Mines Limited’s acquisition of Buffelsfontein Gold Mines Limited
On October 6, 2005, the Company concluded an agreement with Simmer and Jack Mines Limited, or Simmer and Jack, for the
sale of its shareholding in Buffelsfontein Gold Mines Limited, or Buffelsfontein (in provisional liquidation). The agreement is
conditional upon:
•
the acceptance by the High Court of South Africa and the majority of Buffelsfontein’s creditors of a scheme of
arrangement proposed by Simmer and Jack;
•
approval by the Competition Commission; and
•
the Department of Water Affairs and Forestry agreeing to substitute the Company with Simmer and Jack in the
underground water pumping directives that currently regulate the proportionate contribution of the surrounding mines to
the costs and maintenance of pumping.

Buffelsfontein, known as the Company’s North West Operations, or NWO, was placed in provisional liquidation on
March 22, 2005, following continued financial losses and a massive earthquake on March 9, 2005, which caused irreparable
damage to No. 5 Shaft.

Simmer and Jack’s scheme of arrangement involves the payment of R45.0 million ($6.7 million) to the provisional liquidators
and the fresh appointment of employees without assumption of any accumulated pre-liquidation employee benefits.

Simmer and Jack currently manages NWO, pays its holding costs in terms of an interim agreement with the provisional
liquidators and conducts limited mining of surface dumps. It may offset up to R20.0 million ($3.0 million) of its contribution to
holding costs against the proposed payment to the provisional liquidators of R45.0 million ($6.7 million).

In exchange for the transfer of its holding in Buffelsfontein, Simmer and Jack paid the Company one Rand, and indemnified the
Company against any liabilities or obligations which could arise against it in connection with the environmental rehabilitation of
Buffelsfontein, as well as the management and pumping of underground water. Simmer and Jack has the benefit, however, of
drawing down against the rehabilitation trust fund which was transferred to the Department of Minerals and Energy upon the
provisional liquidation of Buffelsfontein.

The Company remains committed to the R9.0 million ($1.3 million) social fund established to help any NWO employees who
may be retrenched as a result of the liquidation and has made a provision for this amount at June 30, 2005. In total, the Company
has paid an amount of R47.9 million ($7.7 million), post-liquidation to assist the NWO’s liquidators, most of which was used to
pay workers’ wages. The Company remains Buffelsfontein’s largest creditor with approximately R1 billion ($149.6 million)
owing.

The provisional liquidators of Buffelsfontein are pursuing a valid, but as yet unquantified insurance claim for damage and losses
incurred in the March 2005 earthquake. The proceeds of this claim are not included in the scheme proposed by Simmer and Jack.

On October 21, 2005, the scheme of arrangement for the acquisition of Buffelsfontein proposed by Simmer and Jack and accepted
by the majority of Buffelsfontein creditors, including the Company, was approved and sanctioned by the High Court of South Africa.
Buffelsfontein applied to the High Court for the lifting of its provisional liquidation, which was granted on November 1, 2005.

Capital development projects at Blyvooruitzicht Gold Mining Company Limited, or Blyvoor
Two projects at Blyvoor, with a total capital cost of R82.8 million ($12.4 million), the re-establishment of mining operations
from the No. 2 Sub-Shaft in two phases costing R80.5 million ($12.0 million) and a R2.3 million ($0.4 million) expansion of the
Slimes Dam Project, were approved by the Company’s Board of Directors on August 24, 2005.
BACKGROUND IMAGE
F-57
27. SUBSEQUENT EVENTS (continued)

Black Economic Empowerment, or BEE, transaction with Khumo Bathong Holdings (Pty) Limited, or KBH
On July 6, 2005, the Company signed a Memorandum of Understanding with its black economic empowerment partner, KBH,
regarding the acquisition by KBH of a 15% stake in the Company’s South African Operations.

In addition, on July 20, 2005, the Company acquired, from the Industrial Development Corporation, all of its CGR and ERPM
debt through the issue of 4,451,219 shares in the Company, which at the date of issue represented approximately $4.3 million
(R29.0 million).

On October 27, 2005, the Company’s board of directors approved the black economic empowerment transaction. The transaction has
been facilitated by the Industrial Development Corporation, which agreed to a debt restructuring in CGR.

The new structure results in Khumo Gold SPV (Pty) Limited, or Khumo Gold, which is an affiliate of KBH acquiring, as a first step, 
a 15% interest in a newly created company, DRDGOLD South African Operations (Pty) Limited, or DRDGOLD SA, which includes 
ERPM, CGR and Blyvoor. The Company will retain an 85% interest.

In the second step, Khumo Gold has been granted an option, exercisable over the next three years, to acquire a further 11% interest in
DRDGOLD SA for the payment consideration of $1.4 million (R9.3 million). This further equity tranche will include a 6% stake to
be placed in a new, proposed Employee Trust. DRDGOLD Limited will subscribe for $4.8 million (R31.8 million) new Khumo Gold preference shares. The proceeds from these preference shares will be used by Khumo Gold to settle an existing loan to KBH of $1.2 million (R7.9 million), subscribe for $0.6 million (R4.1 million) new preference shares in ERPM, subscribe for $0.4 million (R2.7 million) new preference shares in CGR, subscribe for $0.6 million (R3.9 million) new preference shares in Blyvoor and subscribe for an initial 15% of the issued ordinary shares in DRDGOLD SA for $2.0 million (R13.2 million).

Dr. Paseka Ncholo, the Company’s Non-Executive Chairman, will take over as Executive Chairman of DRDGOLD SA with effect
from November 1, 2005. Due to the fact that Dr. Paseka Ncholo is also KBH’s Chairman, the transaction will be a related party
transaction. It will therefore be subject to regulatory approvals and to confirmation by an appointed, independent expert and the
Company’s audit committee that it is fair and reasonable to the Company’s shareholders.

Financing and operating assistance for Emperor
The Company has initiated a financing and operating assistance package to 45.33% owned Emperor. This follows a complete
review by the Company of Emperor’s operations.

To assist Emperor with its restructuring plan, the Company has agreed to provide a A$10.0 million ($7.6 million) Convertible
Loan Facility to Emperor as part of a re-financing package, which includes an agreement with ANZ Bank to restructure
Emperor’s existing debt servicing obligations.

ANZ Bank has given its consent to the granting of the Convertible Loan Facility and the related security to the Company. Further
the Australian Stock Exchange has also granted a waiver of listing rules to permit Emperor to grant such security to the Company
on the terms incorporated in the Convertible Loan Facility.

The Convertible Loan Facility, which was negotiated on behalf of Emperor by its independent directors, carries an interest rate of
9% per annum and is secured by a first ranking charge over Emperor’s 100% interest in the Tuvatu Gold Prospect in Fiji.

The Convertible Loan Facility is repayable upon either receipt of the proceeds expected from the sale of Emperor’s interest in the
Tuvatu Gold Prospect, or by December 31, 2007. Emperor has previously announced a conditional sale agreement in relation to
the Tuvatu Gold Prospect and expects to receive consideration of approximately A$10.0 million ($7.6 million) on completion of
that transaction.

The Convertible Loan Facility is convertible, at the Company’s election, into ordinary fully paid shares of Emperor at a
conversion price equal to the lower of A$0.30 per Emperor share or the 45 day volume weighted average price of Emperor shares
on Australian Stock Exchange prior to the date of conversion. The Convertible Loan Facility was approved by the shareholders
of Emperor, other than the Company, on August 29, 2005.

In terms of an operational support agreement, also negotiated on behalf of Emperor by its independent directors, the Company
will provide Emperor with management and technical services.

Sale of the Durban Deep Section’s mine village
The Company concluded an agreement with M5 Developments (Pty) Ltd, or M5, on July 21, 2005, in terms of which M5, against
payment of a non-refundable fee of R1.5 million ($0.2 million), was granted an option to acquire the Durban Deep Section’s mine
village for R15.0 million ($2.2 million). The option was exercised on November 19, 2005 and the option fee will be deemed part
payment of the purchase consideration.
BACKGROUND IMAGE
F-58
27. SUBSEQUENT EVENTS (continued)
Acquisition of a 5% holding in Allied Gold Limited
On November 11, 2005 the Company acquired a 5% holding in the Australian Stock Exchange listed Allied Gold Limited, or Allied,
for A$3.0 million ($2.3 million).
In a separate transaction, the Company has also undertaken to, pursuant to any existing Allied shareholder electing not to follow its
rights, take up not more than 17,420,000 shares, to be issued by Allied to raise an additional A$7.0 million ($5.3 million) at an issue
price of A$0,40 ($0.30) per share.
Both these transactions are subject to South African Reserve Bank approval.
The capital raising, which represents approximately 17.5% of Allied's share capital will also be subject to Allied shareholder
approval, which Allied has undertaken to seek to obtain by no later than January 20, 2006.
Consolidation of the Company’s offshore operations into Emperor Mines Limited
On November 16, 2005, the Company concluded a sale and purchase agreement with Emperor, in terms of which Emperor will
acquire the Company’s wholly owned subsidiary, DRD (Isle of Man) Limited, or DRD (Isle of Man), which in turn holds the
Company’s Papua New Guinea assets, comprising a 20% interest in the Porgera Joint Venture, a 100% interest in Tolukuma
Gold Mines Limited and all of the Company’s exploration tenements in Papua New Guinea.
Implementation of the transaction requires the restructuring of the Company’s offshore operations, whereby DRD (Isle of Man)
will transfer the following material assets to the Company’s new wholly-owned subsidiary DRDGOLD (Offshore) Limited, or
DRD (Offshore):
•
its 45.33% interest in Emperor; and
•
an A$10.0 million ($7.6 million) convertible loan facility which DRD (Isle of Man) has advanced to Emperor, in
terms of which the Company can elect to convert such debt facility into additional Emperor shares at A$0.30 ($0.23)
per Emperor share.
The Company will then sell DRD (Isle of Man) to DRD (Offshore). The restructuring is subject, inter alia, to the following
conditions precedent:
•
Shareholder approval;
•
South African Reserve Bank, or SARB, approval; and
•
other regulatory consents.
DRD (Offshore) will then sell DRD (Isle of Man) to Emperor. The purchase consideration is subject to certain completion
adjustments to reflect the change in the capital position of both Emperor and DRD (Isle of Man) between October 1, 2005, which
is the effective date, and completion of the transaction. The purchase consideration will be settled by the issue of new Emperor
shares to DRD (Offshore) and a portion in cash.
The transaction is subject, inter alia, to the following conditions precedent:
•
the restructuring becoming unconditional,
•
approval by the Australian Foreign Investment Review Board;
•
SARB approval;
•
Emperor shareholder approval;
•
there being no material adverse change in either Emperor or the gold assets; and
•
a number of regulatory and banking consents and approvals being obtained.
Upon completion of the transaction and the issue of the new Emperor shares, the Company will hold approximately 90.5% of
Emperor. This transaction will be accounted for as a reverse acquisition.
Emperor has announced its intention to raise approximately $15.0 million through the placement of new shares following
completion of the transaction. The capital raising would take place in early 2006.
BACKGROUND IMAGE
157
ITEM 19. EXHIBITS

The following exhibits are filed as a part of this Annual Report:
1.1*
Memorandum of Association of DRDGOLD Limited.
1.2^^
Articles of Association of DRDGOLD Limited, as amended on November 8, 2002.
1.3*
Excerpts of relevant provisions of the South African Companies Act.
1.4**
Durban Roodepoort Deep (1996) Share Option Scheme as amended.
2.1*
Excerpts of relevant provisions of the Johannesburg Stock Exchange Listings Requirements.
2.2^^
Indenture between DRDGOLD Limited, as Issuer, and The Bank of New York, as Trustee, dated November 12, 2002.
2.3^^
Purchase Agreement between DRDGOLD Limited and CIBC World Markets Corp., dated November 4, 2002.
2.4^^
Registration Rights Agreement between DRDGOLD Limited and CIBC World Markets Corp., dated November 4,
2002.
2.5^^
DRDGOLD Limited 6% Senior Convertible Note Due 2006 in the amount of $61,500,000 issued pursuant to Rule
144A of the Securities Act of 1933, as amended.
2.6^^
DRDGOLD Limited 6% Senior Convertible Note Due 2006 in the amount of $4,500,000 issued pursuant to
Regulation S under the Securities Act of 1933, as amended.
4.1*
Tribute Agreement, dated October 9, 1992 between DRDGOLD Limited and Rand Leases.
4.2*
Service Agreement, dated July 27, 1995, between DRDGOLD Limited and Randgold.
4.3*
Agreement, dated September 28, 1995, among First Wesgold Mining (Proprietary) Limited, DRDGOLD Limited and
Rand Leases in respect of purchase of assets of First Wesgold by Rand Leases.
4.4**
Pumping Assistance, dated October 14, 1997, for the 1997/1998 fiscal year from the Minister of Mineral and Energy
Affairs – Republic of South Africa to DRDGOLD Limited.
4.5***
Deposit Agreement among DRDGOLD Limited, The Bank of New York as Depositary, and owners and holders of
American Depositary Receipts, dated as of August 12, 1996, as amended and restated as of October 2, 1996, as further
amended and restated as of August 11, 1998.
4.6****
Security Agreement, dated November 5, 1998, between The Chase Manhattan Bank, DRDGOLD Limited, Blyvoor,
Buffels and West Wits.
4.7****
Loan Agreement, dated June 8, 1999, between Industrial Development Corporation of South Africa Limited, Crown
and DRDGOLD Limited.
4.8****
Lender Substitution Deed, dated August 18, 1999, between DRDGOLD Limited, DRD Australasia, NM Rothschild &
Sons (Singapore) Limited, NM Rothschild & Sons (Australia) Limited, as agent in its own capacity, and Rothschild
Nominees (Pty) Limited.
4.9****
A $10m Facility Agreement, dated September 10, 1999, between DRDGOLD Limited, DRD Australasia and NM
Rothschild & Sons (Australia) Limited.
4.10****
Facility Agreement, dated August 9, 1996, between PT Barisan Tropical Mining, Rothschild Australia Limited and the
Participants.
4.11****
Deposit Agreement, dated September 30, 1999, between Buffels and BOE Merchant Bank, a division of BOE Bank
Limited.
4.12****              Undertaking
and Security Agreement, dated November 17, 1999, between BOE Bank Limited, through its division
BOE Merchant Bank, and Buffels.
4.13****
Guarantee and Indemnity Agreement, dated November 17, 1999, between DRDGOLD Limited, Blyvoor, Argonaut
Financial Services (Proprietary) Limited, West Wits, Crown and BOE Bank Limited, through its division BOE
Merchant Bank.
4.14****
Loan Security Agreement, dated November 17, 1999, between FBCF Equipment Finance (Proprietary) Limited and
Buffels.
4.15****
Sale of Business Agreement in respect of Harties, dated August 16, 1999, between Avgold Limited, Buffels and
DRDGOLD Limited.
4.16****
Form of Restraint Agreement.
4.17****
Sale of Shares Agreement, dated September 29, 1997, between RMP Properties Limited, Randgold, Crown, City Deep
Limited, Consolidated Main Reef Mines and Estate Limited, Crown Mines Limited, RMP Properties SA Limited and
Industrial Zone Limited.
4.18*****          Form
of
Non-Executive Employment Agreement.
4.19*****
Form of Executive Employment Agreement.
4.20*****
Share Sale Option Agreement, dated March 12, 1993, between Newmont Proprietary Limited, Ballimore No. 56
Proprietary Limited, Clayfield Proprietary Limited and Dome Resources N.L.
BACKGROUND IMAGE
158
4.21*****
Convertible Loan Agreement, dated November 19, 1997, between Tolukuma Gold Mines Proprietary Limited, Dome
Resources N.L. and Mineral Resources Development Company Proprietary Limited.
4.22*****
First Deed of Variation of Loan Agreement, between Mineral Resources Development Company Pty Limited, Dome
Resources N.L. and Tolukuma Gold Mines Pty Limited.
4.23*****
Agreement, dated February 21, 2000, between DRDGOLD Limited and Western Areas Limited.
4.24*****           Independent Auditor’s Report from PricewaterhouseCoopers to the Board of Directors and Shareholders of Crown
Consolidated Gold Recoveries Limited, dated August 28, 2000.
4.25*****           Shareholders’ Agreement, dated September 29, 2000, between DRDGOLD Limited, Fraser Alexander Tailings
(Proprietary) Limited and Mine Waste Solutions (Proprietary) Limited.
4.26*****          First Addendum to the Agreement, dated November 15, 2000, between DRDGOLD Limited and Western Areas
Limited.
4.27*****
Second Addendum to the Agreement, dated December 21, 2000, between DRDGOLD Limited and Western Areas
Limited.
4.28^
Agreement between DRDGOLD Limited, Western Areas, Limited, Consolidated African Mines Limited and JCI Gold
Limited, dated April 25, 2001.
4.29^
Addendum to the Agreement between DRDGOLD Limited, Western Areas Limited, Consolidated African Mines
Limited and JCI Gold Limited, dated August 31, 2001.
4.30^
Addendum to the Agreement between DRDGOLD Limited, Western Areas Limited, Consolidated African Mines
Limited and JCI Gold Limited, dated September 26, 2001.
4.31^
Guarantee and Cession in Securitatem Debiti Agreement between DRDGOLD Limited and Investec Bank Limited,
dated October 9, 2001.
4.32^
Second Deed of Variation of Loan Agreement between Tolukuma Gold Mines Limited, Dome Resources NL and
Mineral Resources Development Company Limited, dated June 28, 2001.
4.33^
Principal Terms and Conditions for Waiving Right to Declare Default and Enforce Security Deed under 1993 Purchase
Agreement between Newmont Second Capital Corporation, Tolukuma Gold Mines (Pty.) Limited, Dome Resources
(PNG) Pty. Limited, Dome Resources NL and DRDGOLD Limited, dated July 16, 2001.
4.34^
Loan Agreement between Bank of South Pacific Limited and Tolukuma Gold Mines Limited, dated November 8,
2001.
4.35^^
Master Finance Lease between Volvo Truck Finance Australia (Pty) Ltd and Dome Resources N.L., dated October 31,
2000.
4.36^^
Agreement between DRDGOLD Limited and Rand Refinery Ltd, dated October 12, 2001.
4.37^^
Share Purchase Agreement between Crown Consolidated Gold Recoveries Ltd, The Industrial Development
Corporation of South Africa Ltd, Khumo Bathong Holdings (Pty) Ltd and DRDGOLD Limited, dated June 12, 2002.
4.38^^
Shareholder’s Agreement between The Industrial Development Corporation of South Africa Limited, Khumo Bathong
Holdings (Pty) Ltd, Crown Consolidated Gold Recoveries Ltd, Crown Gold Recoveries (Pty) Ltd. And DRDGOLD
Limited, dated June 12, 2002.
4.39 ^^
Addendum to Shareholder’s Agreement between The Industrial Development Corporation of South Africa Limited,
Khumo Bathong Holdings (Pty) Ltd, Crown Consolidated Gold Recoveries Ltd, Crown Gold Recoveries (Pty) Ltd.
And DRDGOLD Limited, dated June 14, 2002.
4.40 ^^
Subscription Agreement between Khumo Bathong Holdings (Pty) Limited and DRDGOLD Limited, dated June 12,
2002.
4.41 ^^
Loan Agreement between DRDGOLD Limited and Khumo Bathong Holdings (Pty) Ltd, dated June 12, 2002.
4.42 ^^
Memorandum of Loan Agreement No. 1 between Durban Roodepoort Deep and Crown Gold Recoveries (Pty) Ltd,
dated June 12, 2002.
4.43 ^^
Memorandum of Loan Agreement No. 2 between DRDGOLD Limited and Crown Gold Recoveries (Pty) Ltd, dated
June 12, 2002.
4.44 ^^
Memorandum of Loan Agreement No. 3 between Crown Consolidated Gold Recoveries Ltd and Crown Gold
Recoveries (Pty) Ltd, dated June 12, 2002.
4.45 ^^
Loan Agreement between Industrial Development Corporation of South Africa Ltd. And Blyvooruitzicht Gold Mining
Company Ltd, dated July 18, 2002.
4.46 ^^
Agreement of Loan and Pledge between DRDGOLD Limited and East Rand Proprietary Mines Ltd, dated September
18, 2002.
4.47 ^^
Management Services Agreement between DRDGOLD Limited, Khumo Bathong Holdings (Pty) Ltd and Crown Gold
Recoveries (Pty)Ltd, dated October 1, 2002.
4.48 ^^
Agreement amongst DRDGOLD Limited, West Witwatersrand Gold Mines Limited and Bophelo Trading (Pty) Ltd,
dated October 1, 2002.
BACKGROUND IMAGE
159
4.49^^
Letter Agreement between DRDGOLD Limited and The Standard Bank of South Africa, represented by its Standard
Corporate and Merchant Bank Division, dated October 7, 2002.
4.50^^
Memorandum of Agreement between Daun Et Cie A.G., Courthiel Holdings (Pty) Ltd, Khumo Bathong Holdings
(Pty) Ltd, Claas Edmond Daun, Paul Cornelis Thomas Schouten, Moltin Paseka Ncholo, Michelle Patience Baird,
Derek Sean Webbstock, as sellers, and Crown Gold Recoveries (Pty) Ltd, as purchaser, dated October 10, 2002.
4.51^^
Memorandum of Loan Agreement between DRDGOLD Limited and Crown Gold Recoveries (Pty) Ltd, dated October
10, 2002.
4.52^^
Letter Agreement Relating to Consultancy Arrangement between DRDGOLD Limited and Nicolas Goodwin.
4.53^^
Management Services Agreement between DRDGOLD Limited and East Rand Proprietary Mines Ltd, dated October
10, 2002.
4.54^^
Agreement for sale of shares in Emperor Mines Limited, between DRD (Isle of Man) Limited and Kola Ventures
Limited, dated December 13, 2002.
4.55^^^
Confirmation,
dated
August 14, 2003, between DRDGOLD Limited and Investec Bank (Mauritius) Limited.
4.56^^^
Amendment to Confirmation, dated September 4, 2003, between DRDGOLD Limited and Investec Bank (Mauritius)
Limited.
4.57^^^^
Deed of Amalgamation for the Corporate Restructuring of Orogen Minerals (Porgera) Limited, Mineral Resources
Porgera Limited and Dome Resources (PNG) Limited, dated October 14, 2003.
4.58^^^^
Undertaking, between Oil Search Limited and DRD (Isle of Man) Limited, dated October 14, 2003.
4.59^^^^
Loan Assignment Agreement between Orogen Minerals Limited, DRD (Isle of Man) and Orogen Minerals (Porgera)
Limited, dated October 14, 2003.
4.60^^^^
Agreement between Orogen Minerals Limited and DRD (Isle of Man) Limited, dated October 14, 2003.
4.61^^^^
Loan Assignment Agreement, between Dome Resources (PNG) Limited, Dome Resources Pty Limited, DRD (Isle of
Man) Limited and Tolukuma Gold Mines Limited, dated November 21, 2003.
4.62^^^^
Memorandum of Agreement made and entered into between DRDGOLD Limited, West Witwatersrand Gold Mines
Limited, Mogale Gold (Proprietary) Limited and Luipaards Vlei Estates (Proprietary) Limited dated June 6, 2003.
4.63#
Porgera Joint Venture Operating Agreement between Placer (P.N.G.) Pty Limited and Highlands Gold Properties Pty.
Limited and PGC (Papua New Guinea) Pty Limited, dated November 2, 1988.
4.64#
Agreement of Employment between DRDGOLD Limited and Mr. D.J.M. Blackmur, dated as of October 21, 2003.
4.65#
Banking facilities Agreement made and entered between DRDGOLD Limited and Standard Bank of South Africa,
Limited, dated November 14, 2003.
4.66#
Agreement of Employment between DRDGOLD Limited and Mr. M.M. Wellesley-Wood, dated as of December 1,
2003.
4.67#
Service Agreement between DRD (Isle of Man) Limited and Mr. M.M. Wellesley-Wood, dated as of December 1,
2003.
4.68#
Agreement of Employment between DRDGOLD Limited and Mr. I.L. Murray, dated as of December 1, 2003.
4.69#                   Service
Agreement
between DRD (Isle of Man) Limited and Mr. I.L. Murray, dated as of December 1, 2003.
4.70#
Subscription and Option Agreement made and entered between DRD (Isle of Man) Limited, Net-Gold Services
Limited and G.M. Network Limited, dated January 26, 2004.
4.71#
Forward Bullion Transaction Agreements made and entered between DRDGOLD Limited and Investec Bank Limited,
dated February 4, 2004, February 6, 2004, February 11, 2004 and February 12, 2004.
4.72#
Loan Agreement made and entered between DRDGOLD Limited and Investec Bank Limited, dated June 24, 2004.
4.73#
Termination Agreement made and entered between DRDGOLD Limited, Eskom Holdings Limited and Investec Bank
Limited, dated June 24, 2004.
4.74#
Novation Agreement made and entered between J Aron & Company, Eskom Holdings Limited and Investec Bank
Limited, dated June 24, 2004.
4.75#
Memorandum of Understanding made and entered between Buffelsfontein Gold Mines Limited, Buffels Division
and The National Union of Mineworkers, The United Association of South Africa, The Mine Workers Union
(Solidarity) and The South African Electrical Workers Association regarding retrenchments associated with No. 9,
10 and 12 Shafts of Buffelsfontein Division, dated August 6, 2004.
4.76#
CCMA Settlement Agreement made and entered between Blyvooruitzicht Gold Mining Company Limited and The
United Association of South Africa, South African Equity Workers’ Association, Solidarity and The National
Union of Mineworkers regarding the retrenchment of up to 2,000 employees of the Blyvooruitzicht Gold Mining
Company, dated September 2, 2004.
4.77#
Loan Agreement made and entered between DRDGOLD Limited and Investec Bank Limited, dated September 15,
2004.
4.78#
Subscription Agreement made and entered between DRD (Isle of Man) Limited and DRDGOLD Limited, dated
September 21, 2004.
4.79#
Common Terms Agreement of Loan made and entered between DRD (Isle of Man) Limited and Investec Bank
(Mauritius) Limited, dated October 14, 2004.
BACKGROUND IMAGE
160
4.80#
Facility A Loan Agreement made and entered between DRD (Isle of Man) Limited and Investec Bank (Mauritius)
Limited, dated October 14, 2004.
4.81##
Loan Agreement made and entered between DRDGOLD Limited and Investec Bank Limited, dated December 10,
2004.
4.82##
Subscription Agreement between DRDGOLD Limited and Baker Steel Capital Managers LLP (BSCM), dated April 7,
2005.
4.83##
Underwriting Agreement between DRDGOLD Limited, the Baker Steel Capital Managers LLP (BSCM) and certain
underwriters, dated April 5, 2005.
4.84##
Memorandum of Agreement between DRDGOLD Limited, Simmer & Jack Mines Limited and Simmer & Jack
Investments (Proprietary) Limited (S&J Companies), dated August 31, 2005.
4.85##
Cession Agreement entered into among The Industrial Development Corporation of South Africa Limited (IDC),
DRDGOLD Limited, Business Ventures Investment No. 750 (Pty) Ltd and Business Ventures Investment No. 751
(Pty) Ltd (the BVI Companies), dated July 13, 2005.
4.86##
Share Sale Agreement entered into among The Industrial Development Corporation of South Africa Limited (IDC),
DRDGOLD Limited, Business Ventures Investment No. 750 (Pty) Ltd (BVI 1) and Business Ventures Investment No.
751 (Pty) Ltd (BVI 2), dated July 13, 2005.
4.87##
Memorandum of Understanding between DRDGOLD Limited and Khumo Bathong Holdings (Pty) Ltd (KBH), dated
July 6, 2005.
4.88##
Facility B Loan Agreement between Investec Bank (Mauritius) Limited and DRD (Isle of Man)
Limited (DRDIOM), dated March 3, 2005.
4.89##
Convertible Loan Facility Agreement between DRDGOLD Limited and Emperor Mines Limited (Emperor), dated
July 8, 2005.
4.90##
Agreement of Employment between DRDGOLD Limited and Mr. J.W.C. Sayers, dated as of August 10, 2005.
4.91##
Option Agreement entered into by and between DRDGOLD Limited and M5 Developments (Pty) Limited, dated July
21, 2005.
 
 
 
 
4.92##
Share Sale Agreement between DRD (Offshore) Limited, DRDGOLD Limited and Emperor Mines Limited, dated
November 16, 2005.
8.1##
List of Subsidiaries.
12.1##
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2##
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1##
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2##
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
14.1##
Consent of KPMG Inc - DRDGOLD Limited.
14.2##
Consent of KPMG Inc - Crown Gold Recoveries (Pty) Limited.
14.3##
Consent of KPMG - Emperor Mines Limited.
15.1#
15.2##
Crown Gold Recoveries (Pty) Limited Consolidated Financial Statements for the years ended June 30, 2004 and 2003.
Crown Gold Recoveries (Pty) Limited Consolidated Financial Statements for the years ended June 30, 2005, 2004 and 2003.
16.1##
Emperor Mines Limited Consolidated Financial Statements for the years ended June 30, 2005, 2004 and 2003.
___________
*
Incorporated by reference to our Registration Statement (File No. 0-28800) on Form 20-F.
**
Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 1997.
***
Incorporated by reference to our Registration Statement (File No. 333-9242) on Form F-6.
****       Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 1999.
*****     Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2000.
^
Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2001.
^^
Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2002.
^^^         Incorporated by reference to Amendment No. 4 of our Annual Report on Form 20-F for the fiscal year ended June 30, 2002.
^^^^       Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2003.
#
Incorporated by reference to Amendment No. 3 of our Annual Report on Form 20-F for the fiscal year ended June 30, 2004.
##           Filed herewith.
BACKGROUND IMAGE
161
SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
DRDGOLD LIMITED
By:     /s/ M.M. Wellesley-Wood
M.M. Wellesley-Wood
Chief Executive Officer
By:     /s/ J.W.C. Sayers
J.W.C. Sayers
Chief Financial Officer
Date: December 15, 2005


BACKGROUND IMAGE
EXHIBIT 4.81

(1)
INVESTEC BANK LIMITED

(2)           DRDGOLD LIMITED


LOAN AGREEMENT
(Reference Number : DRD 003)





BACKGROUND IMAGE

THIS LOAN AGREEMENT is dated 10 December 2004
BETWEEN
(1)
INVESTEC BANK LIMITED (incorporated in South Africa with registered number:
1969/004763/06) whose registered office is at 100 Grayston Drive, Sandown, Sandton (“IBL”)
(2)
DRDGOLD LIMITED (formerly DURBAN ROODEPOORT DEEP, LIMITED) (incorporated in
South Africa with registered number: 1895/00926/06) whose registered office is at 45 Empire
Road, Parktown, Johannesburg (“DRD”)
WHEREAS
IBL has agreed to make a loan of ZAR 100,000,000.00 (One Hundred Million Rand) to DRD subject to the
terms and conditions set out in this Loan Agreement.
1.
FACILITY

1.1
IBL agrees to make available a loan facility (the “Facility”) to DRD subject to the terms and
conditions set out in this Loan Agreement. Reference to the ‘Facility” herein shall be that part of
the Facility is drawn down at any time.

1.2
The total amount of the Facility is ZAR 100,000,000.00 (one Hundred Million Rand) which may be
drawn down subject to the terms hereof.

2.
PURPOSE
The Facility shall be used by DRD for general funding purposes.
3.
CONDITIONS PRECEDENT
DRD shall not be entitled to draw down any part of the Facility until IBL has received as
conditions precedent, in each case in the form and substance satisfactory to it, the documents,
items and evidence specified in the Schedule to this Loan Agreement.
4.
DRAWDOWN
4.1
Subject to the satisfaction of the conditions precedent specified in Clause 3, DRD may draw down
up to ZAR20,000,000.00 (Twenty Million Rand) of the Facility on the day after signature hereof or
any time thereafter but not later than the third day following signature hereof provided that DRD
BACKGROUND IMAGE
has given to IBL on the Business Day before the date of the proposed drawdown, notice of the
proposed drawdown, such notice to be irrevocable and in a form acceptable to IBL.

4.2
The balance of the Facility may be drawn down at IBL’s discretion. Any draw down notice shall
be given in the form referred to in clause 4.1.

4.3
IBL may refuse to honour any draw down notice in its sole discretion.

5.
REPAYMENT

5.1
IBL shall, in its sole discretion and determination, be entitled at any time to call for repayment of
any portion of the Facility as is drawn down at any time by delivering a notice (the “Repayment
Notice” to this effect in accordance with the terms hereof. The date of delivery of this notice
shall be the “Recall Date” for the purpose of this Loan Agreement.

5.2
Upon receipt of the Repayment Notice DRD may elect to repay the Facility in cash or by the issue
of Shares (as defined below) to IBL or DRD may elect to repay the Facility partly in cash and
partly by the issue of Shares. This election shall be exercised by the delivery of a notice (the
“Election Notice”) to IBL within one business day of the Recall Date. A failure to deliver an
Election Notice shall be deemed by IBL to be an election by DRD to repay the Facility in cash.

5.3
In the case of a repayment of the Facility in cash or any part repayment in cash such repayment
shall be made together with accrued interest thereon within 3 Business Days of the Repayment
Notice.

5.4
The delivery of an Election Notice that the Facility shall be redeemed by the issue of Shares or
partly by the issue of Shares shall be irrevocable.

5.5
In the case of a repayment by the issue of Shares, the provisions relating to interest shall not
apply. Where repayment is partly in cash and partly by the issue of Shares the provisions relating
to interest shall apply solely to that part of the Facility repaid in cash.

6.
PREPAYMENT

6.1
DRD may prepay the Facility without premium or penalty in whole or in part (but if in part, any
prepayment shall be in integral multiples of Five Million Rand) and shall be paid solely on the last
day of any Interest Period provided that DRD shall have given IBL not less than 3 Business Day
prior notice (which shall be irrevocable and binding). Such prepayment shall be made together
with accrued interest on the amount prepaid.
BACKGROUND IMAGE

6.2
DRD may not make any prepayment except in accordance with this Clause.

7.
INTEREST PERIODS

7.1
The period during which the Facility is outstanding will be divided into successive periods (each an
“Interest Period”). The first Interest Period relating to the Facility shall commence on the
drawdown date and each subsequent Interest Period shall commence on the expiry of the
preceding Interest Period. Each Interest Period will be of a duration for one month provided that:
7.1.1     if any Interest Period ends on a day which is not a Business Day, such Interest Period
shall be extended to the next Business Day unless that would extend the Interest Period
into the next following calendar month, in which event that Interest Period shall be
shortened so as to end on the immediately preceding Business Day.
8.
INTEREST

8.1
Subject to Clause 9 below the rate of interest applicable to the Facility during each Interest Period
shall be the rate per annum determined by the Calculation Agent to be the:
8.1.1 Three month – JIBAR – Reference Banks plus 300 interest basis points.
8.2
Interest is payable in arrears on the last day of each Interest Period and is calculated on the basis
of the actual number of days elapsed and a 365 day year.

8.3
Any certificate of determination by IBL as to any rate of interest payable in respect of the Facility
shall (save for manifest error) be prima facie proof of the amount owing and shall constitute a
liquid document for provisional sentence or default judgement purposes.

9.
ADDITIONAL INTEREST
Without prejudice to any other rights IBL may have, if DRD fails to pay any sum payable under
this Loan Agreement on its due date, it will pay to IBL interest on such sum from the date of such
failure to the date of actual payment (both before and after judgement) at 3 percent per annum
over the costs of funds to IBL for such period as it remains in default. Such interest shall be
payable at any time on demand.


BACKGROUND IMAGE
10.
FEE

DRD shall pay to IBL a fee determined to be 4% of the Facility which is drawn at any time and
from time to time. This Fee shall be paid in cash and shall be payable upon drawdown of the
respective portion of the Facility.
11.
REPAYMENT BY THE ISSUE OF SHARES

11.1.     Any issue of Shares under these terms shall be subject to and in compliance with the shareholder
approval requirements of the Nasdaq Marketplace Rules 4350 (i)(B), (C) and (D) and the JSE
Securities Exchange South Africa (“JSE”) Requirements. Except in accordance with the Nasdaq
Marketplace Rules or an approval or exemption obtained from Nasdaq, IBL will not at any time
hold 20% or more of the Shares outstanding or the voting power of DRD after the transaction.
The parties agree that they will amend this agreement as may be necessary to reflect any
limitations placed on the agreement by Nasdaq or the JSE.

11.2.     All Shares to be issued in repayment of the Facility or part of the Facility shall become issuable no
later than the 60
th
calendar day following the Recall Date. For the purpose hereof, the period
from the Recall Date to and including the 60
th
calendar day following the Recall Date shall be
referred to as the ‘Redemption Period” and the final day of this period shall be referred to as the
“Final Redemption Day”.

11.3.     In respect of any amount of the Facility that is recalled by IBL and which is to be re-paid by the
issue of Shares, IBL may elect to have such redemption made in tranches (each a “Redemption
Tranche”), subject to each Redemption Tranche representing a repayment of at least Five Million
Rand of the Facility.

11.4.     During the Redemption Period IBL shall telephonically notify DRD of the terms of a Redemption
Tranche and confirm this notification by facsimile (the “Redemption Notification”). The date of
such telephonic notification shall be a “Redemption Notification Date”.

11.5.    Upon the delivery of a Redemption Notification the number of Shares determined in accordance
with 11.6 shall be immediately issuable and be issued and delivered to IBL within 10 days of the
Redemption Notification Date.

11.6.    The number of Shares to be issued in respect of any Redemption Tranche shall be determined by
dividing the Rand Facility Redemption Amount by the Rand Purchase Price, where;
BACKGROUND IMAGE
“Rand Facility Redemption Amount” means the amount of the Facility being redeemed in any
Redemption Tranche as specified in the Redemption Notification relating thereto.

“Rand Purchase Price” means an amount in Rand equal to the simple average of the Daily Volume
Weighted Average Price of the Shares on the Exchange for the 10 Exchange Business Days
immediately preceding the Redemption Notification date.
“Daily Volume Weighted Average Price” means an amount in Rand, calculated to the 4  decimal
th
 
place, determined to be the total daily value of all main board trades on the Exchange divided by
the total daily volume of all main board trade on the Exchange.
11.7.    Any part of the Facility remaining to be repaid in the Final Redemption Date shall be deemed to
be the subject to a Redemption Notification deemed to be delivered on the Final Redemption Day.

12.
FEES AND EXPENSES

12.1     DRD will pay to IBL on demand all expenses (including legal and out-of-pocket expenses and
together with Value Added Tax if any thereon) on a full indemnity basis incurred by IBL in
connection with the enforcement of or preservation of any rights under this Loan Agreement or
otherwise in respect of any monies owing hereunder.

12.2
DRD will pay all stamp, documentary registration and other similar duties (including any payable
by IBL) in connection with this Loan Agreement and/or any document entered into pursuant
hereto. DRD shall bear all costs relating to the issue of any Shares which have been issued or are
likely to be issued in connection with the repayment of the Facility or part thereof.

12.3
Each party shall bear its own expenses in connection with the preparation and finalization of the
Loan Agreement.

13.
PAYMENTS

13.1
DRD will make all payments and deliveries under or in respect of this Loan Agreement on the due
date for value and immediately available funds to IBL at such accounts as IBL may from time to
time instruct DRD.

13.2
If any payment becomes due on a day which is not a Business Day, the due date of such payment
will be extended to the next Business Day unless such business day is in a new calendar month in
which case such payment shall be made n the immediately preceding Business Day.
BACKGROUND IMAGE
13.3
DRD will make all payments under the Facility without set-off or counter-claim and free and clear
of any withholding or deduction (save as required by law) for any present or future taxes, levies,
duties or other charges. If DRD is obliged by law to make any such withholding or deduction,
DRD will pay to IBL in the same manner and at the same time additional amounts to ensure that
IBL receives a net amount equal to the full amount which it would have received if no such
deduction or withholding had been required. DRD shall deliver to IBL on demand a certificate of
deduction or other evidence satisfactory to IBL that any amount withheld or deducted has been
paid to the appropriate authority.

13.4
IBL will maintain an account or accounts evidencing the amounts from time to time owing to it
under the Facility. Such account or accounts shall (save for manifest error) be prima facie
evidence of the amounts from time to time owing by DRD hereunder.

14.
REPRESENTATIONS AND WARRANTIES BY DRD
DRD represent and warrants to IBL on the date of this Loan Agreement and on each date that the
Facility is available or outstanding (with reference to the facts and circumstances then existing),
as follows:
14.1
DRD is duly incorporated and validly existing under the laws of South Africa and has power to
enter into this Loan Agreement.

14.2
All necessary corporate and other action to authorize the entry into and performance of this Loan
Agreement, including the requirements of the rules and regulation of the JSE, has been taken by
DRD, except for the shareholder approvals that may be required under the Nasdaq Marketplace
Rules 4350 (i)(B), (C) and (D) and the regulation of any Shares issued pursuant to this Loan
Agreement under the US Securities Act of 1933, as amended (the “Securities Act”), or the state
securities laws of any US State;

14.3     This Loan Agreement constitutes its legal, valid and binding obligations in accordance with its
terms, has been duly authorized and executed by it and does not and will not breach its
Memorandum and Articles of Association or other relevant constitutional documents or any
agreement or obligation by which it is bound or violate any applicable law;

14.4     Its obligations under this Loan Agreement are its unconditional and unsubordinated obligations
and rank at least pari passu with all other of its unsecured and unsubordinated indebtedness; and

14.5     All approvals, authorizations, consents, licenses, permissions and registrations which are
necessary or advisable to obtain from any governmental public or other authority or without
BACKGROUND IMAGE
limitation any third party for the purpose of or relating to the Facility have been obtained and all
provisions and conditions thereof have been complied with.

14.6
Neither DRD, any of DRD’s affiliates nor any persons acting on behalf of them have engaged, or
will engage in any directed selling efforts with respect to the Shares issued under this Loan
Agreement (it being acknowledged that DRD is not making this representation and warranty with
respect to actions of IBL or its affiliates).

15.
REPRESENTATIONS AND WARRANTIES BY IBL IN THE CASE OF ANY REPAYMENT BY
THE ISSUE OF SHARES
Terms used in this section 15 have the meaning given to them by Regulation S under the
Securities Act.
15.1
IBL represent and warrants to DRD as follows:

15.1.1  IBL is not a U.S. person and if DRD issues Shares to IBL under this Loan Agreement, IBL will
acquire those Shares in an offshore transaction pursuant to Regulation S. If IBL decides to offer,
resell, pledge or otherwise transfer the Shares issued under this Loan Agreement it will only do so
in an offshore transaction in accordance with the provisions of Rule 903 of Regulation S;

15.1.2   No sale, pledge, resale or other transfer of the Shares which may be delivered hereunder has
been or will be made so as to transfer the Shares issued under this Loan Agreement into the
United States or to or for the account or benefit of a U.S. person;

15.1.3   Neither IBL, any of IBL’s affiliates nor any person acting on behalf of them have engaged, or will
engage in any directed selling efforts with respect to the Shares issued under this Loan
Agreement (it being acknowledged that IBL is not making this representation and warranty with
respect to actions of DRD or its affiliates). IBL, each of IBL’s affiliates and any person acting on
their behalf have compiled and will comply with the offering restriction requirements of Regulation
S; and

15.1.4   IBL understands that the Shares issued under this Loan Agreement (i) have not been and will not
be registered under the Securities Act (ii) may not be offered or sold within the United States or
to or for the account or benefit of a U.S. person and (iii) may only be resold in accordance with
Regulation S under the Securities Act IBL represents and agrees that it will offer and sell Shares
issued under this Loan Agreement as part of their distribution, at any time and otherwise, until
after the end of the Distribution Compliance Period, only in accordance with Rule 903 of
Regulation S, under the Securities Act.
BACKGROUND IMAGE

15.1.5  IBL shall, at or prior to confirmation of a sale of Shares issued under this Loan Agreement and
pursuant to Regulation S, have sent to each distributor, dealer or person receiving a selling
concessions, fee or other remuneration in respect of Shares issued under this Loan Agreement
before the expiration of the Distribution Compliance Period a confirmation or notice to
substantially the following effect:

“The Shares covered by this notice have not been registered under the United States Securities
Act of 1933 (the “Securities Act”) and may not be offered or sold or transferred within the United
States or to or for the account or benefit of U.S. persons (i) as part of their distribution, at any
time and (ii) otherwise, until after the expiration of 40 days from the later of completion of the
distribution of the Shares issued or issuable under this Loan Agreement, as determined by IBL
and certified to DRD, except in either case in accordance with Rule 903 of Regulation S under the
Securities Act. The Shares covered by this notice may not be deposited in any unrestricted
American Depository Receipt Program relating to the Shares. You must not directly or indirectly
engage in any short selling or hedging transaction with regard to the Shares, except as permitted
by the US federal securities laws, Nasdaq Rules, JSE Requirements and the regulations
thereunder. Terms used above have the meaning given to them by Regulation S”.
15.1.6  IBL agrees that it will not directly or indirectly engage in any short selling or hedging transactions
with regard to the Shares issued under this Loan Agreement except as permitted under the US
federal securities laws, Nasdaq Rules, JSE Requirements and the regulations thereunder.

15.2     Distribution Compliance Period. “Distribution Compliance Period” means a period that begins
when the Shares are first issued by DRD under this Loan Agreement during a Redemption Period
and continues until after the expiration of 40 days from the completion of the distribution of the
Shares issued or issuable under this Loan Agreement, as determined by IBL and certified to DRD.
IBL will give DRD written notices of the beginning of the 40 day Distribution Compliance Period
and a copy of IBL’s certification of the date of completion of the distribution of the Shares within
one business day of that completion.

15.3
Delivery of Shares. IBL hereby acknowledges and agrees that:

15.3.1   It and any distributor of the Shares issued under this Loan Agreement will not take delivery, in
whole or in part, until it provides DRD with:
(A)  (i) a written certification that it is not a U.S. person and that the Loan Agreement has not
being executed on behalf of a U.S. person; or (ii) a written opinion of counsel, reasonably
acceptable to DRD, to the effect that the Loan Agreement and the Shares deliverable
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thereunder have been registered under the Securities Act (it being acknowledged that DRD
has no obligation to register the Shares issued under this Loan Agreement) or are exempt
from registration thereunder (it being acknowledged that the Shares issued under this Loan
Agreement are not eligible for resale under Rule 144A under the Securities Act); and
(B)  a written certification that IBL is not executing the Loan Agreement within the United States
and that the Shares issued under this Loan Agreement are not to be delivered within the
United States, except as otherwise permitted by Rule 903 of Regulation S, unless the Shares
issued under this Loan Agreement are registered under the Securities Act of an exemption
from such registration is available (it being acknowledged that the Shares issued under this
Loan Agreement are not eligible for resale under Rule 144A under the Securities Act).

15.3.2   If the Shares issued under this Loan Agreement may be delivered in one or more part, IBL will
provide DRD with the items specified in Section 15.3.1 above prior to each delivery.

15.4     Legend

15.4.1  Shares issued under this Loan Agreement will be issued in certificated form, any certificated
representing the Shares, in whole or part, shall bear the following legend:
“The securities evidenced hereby have not been registered under the United States Securities Act
of 1933, as amended (the “Securities Act”) and, accordingly, may not be offered, sold, pledged or
otherwise transferred within the United States or to, or for the account or benefit, of U.S. persons
except as set forth in the following sentence. By its acquisition hereof the holder(1) represents
that it is not a U.S. person and is acquiring these securities in an offshore transaction in
compliance with Regulation S under the Securities Act, (2) agrees that it will not offer, sell, pledge
or otherwise transfer these securities except (a) to DRDGold Limited (“DRD”) or any subsidiary
thereof, (b) outside of the United States to a non U.S. person in an offshore transaction in
accordance with Rule 903 or Rule 904 of Regulation S (c) pursuant to a registration statement
which has been declared effective under the Securities Act (and the holder understands that DRD
has no obligation to cause such a registration statement to become effective) of (d) pursuant to
an exemption from registration under the Securities Act (and the holder understands that these
securities are not eligible to resale pursuant to Rule 144A under the Securities Act), in each case
in accordance with any applicable securities laws of any state of the United States, (3) agrees that
these securities may not be deposited in any unrestricted American Depositary Receipt Program
relating to these securities (a) as part of the distribution of these securities, at any time (b)
otherwise, until after the expiration of 40 days from the completion of the distribution of the
Shares issued or issuable under the Loan Agreement between DRD and Investec Bank Limited
(“IBL”), as determined by IBL and certified to DRD, and, in the case of (c), in accordance with
applicable United States federal and state securities laws and will deliver such certificates and
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legal opinions as may be requested by the issuer or the issuer’s ADR depositary, to confirm that
the deposit complies with the foregoing restrictions, (4) agrees that it will deliver to each person
to whom this security or an interest therein is transferred a notice substantially to the effect of
this legend, and (5) agrees that it will not directly or indirectly, engage in any short selling or
hedging transaction with regard to this security or any American Depositary Receipt relating to
this security except as permitted by the US federal securities laws, Nasdaq Rules, JSE
Requirements ad the regulations thereunder. As used herein, the terms “offshore transaction,
“United States” and “U.S. person” have the meanings given to them by Regulation S under the
Securities Act”.
15.4.2   In addition to the legend set forth in Section 15.4.1 above, any certificate representing the rights
and obligations under this Loan Agreement, in whole or in part, shall also bear the following
legend:
“The securities to be issued upon the execution of this Loan Agreement have not been registered
under the Securities Act and the rights and obligations under this Loan Agreement have not been
registered under the Securities Act and the rights and obligations under this Loan Agreement may
not be exercised in the United States or by or on behalf of any U.S. person unless registered
under the Securities Act or unless an exemption from such registration is available”.

15.4.3   IBL understands that the Shares issued under this Loan Agreement will be issued to it in reliance
on specific exemptions from the registration requirements of United States and state securities
laws, that the Shares issued under this Loan Agreement have not been registered with any sate
or federal securities commissions and that DRD is relying upon the truth and accuracy of the
representations, warranties, acknowledgements and agreements of IBM set forth herein in order
to determine the applicability of such exemptions.

15.4.4   IBL acknowledges for itself and each of its affiliates and any person acting on behalf of any of
them that, in connection with this Loan Agreement, the Shares issued under this Loan Agreement
or the American Depositary Receipts evidenced by such Shares, it has not and will not, directly or
indirectly, engage in any transaction or series of transactions that, although in technical
compliance with Regulation S (a) is part of a plan or scheme to evade the registration provisions
of the Securities Act, or (b) would require registration of the Shares issued under this Loan
Agreement under the Securities Act.

15.5
In respect of Transfers and Subsequent Purchasers. DRD and IBL agree that neither party may
transfer the rights and obligations conferred by this Loan Agreement, in whole or in part, without
the prior written consent of the non-transferring party and that any transfer of the rights and
obligations conferred by this Loan Agreement, in whole or in part, will be made in accordance
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with Regulation S. IBL agrees that, in addition to the restrictions on resale contained therein and
before the expiration of the Distribution Compliance Period, it may not transfer any portion of the
Shares issued under this Loan Agreement to any party unless such party enters into an
agreement with DRD containing representations, warranties and restrictions on resale
substantially similar to this contained herein.

16.
RECORDAL
Any adjustment by the Calculation Agent for the purposes of this Loan Agreement shall be
interpreted in accordance with the provisions contained in the Definitions. In this regard, DRD is
referred, inter alia, to the definition of Potential Adjustment Event therein which, amongst others,
includes any event that has a diluting or concentrative effect on the theoretical value of the
Share. Where a Potential Adjustment Event has been declared the Calculation Potential
Adjustment Agent shall make an adjustment to the terms of this Loan Agreement to reflect the
extent to which the theoretical value of the Share is affected by the Potential Adjustment Event.
This provision is not intended to amend the Definitions but is intended to record the effect that a
Potential Adjustment Event may have to the terms of this Loan Agreement.
17.
UNDERTAKINGS
DRD will provide to IBL such financial and other information relating to DRD as IBL may from time
to time request.
18.
ADDITIONAL COSTS
DRD will pay to IBL on demand any amount (not exceeding an amount calculated on the basis of
market practice at the relevant time as certified by IBL) which IBL may from time to time certify
to be necessary to compensate it for any increased costs or reduction in return resulting from
compliance of any change in, or in the interpretation of, any law or regulation or any official
directive or request (whether or not having the force of law) including without limitation any
relating to mandatory liquid asset and special deposit requirements.
19.        ILLEGALITY
If at any time it is unlawful, or contrary to any requests from or requirement of any central bank
or other fiscal monetary or other regulatory authority, for IBL to make, fund or allow to remain
outstanding all or any part of the Facility, then IBL will promptly after becoming aware of the
same deliver to DRD a certificate to that effect and DRD shall on such date as IBL specify repay
the Facility together with accrued interest and any other amounts then due to IBL hereunder.
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Where such illegality relates to the repayment of the Facility by the issue of Shares then DRD
shall be obligated to repay the Facility in cash together with accrued interest and any other
amounts due to IBL hereunder.

20.
EVENTS OF DEFAULT

20.1
Each of the following events will constitute and Event of Default:

20.1.1    DRD fails to pay any sum payable under this Loan Agreement on the due date; or

20.1.2  DRD fails to observe and perform any other obligations under this Loan Agreement or is in breach
or becomes in breach of any representation or warranty given by it in this Loan Agreement in any
respect: or

20.1.3  Any financial obligations of DRD become payable prior to their due date or any creditor in respect
thereof becomes entitled to declare any such obligation payable prior to its due date or any such
obligation is not paid when due or any security therefore becomes enforceable; or

20.1.4  A receiver or other similar office is appointed or in relation to DRD or the whole or any part of its
undertaking, assets, rights or revenues; or

20.1.5  Any encumbrancer takes possession of or a distress, execution,sequestration or other similar
process is levied of enforced upon the whole or any part of its undertaking, assets, rights or
revenues; or

20.1.6  DRD ceases to carry on the whole or a substantial part of its business or stops or suspends
payment of its debts or proposes or enters into any composition, scheme, compromise
arrangement with or for the benefit of its creditors generally or any claims of them; or

20.1.7  DRD becomes insolvent or any petition or other action is presented or taken and any order is
made by any court or any meeting is convened for the purpose of considering any resolution or
any resolution is passed for the winding-up, liquidation or dissolution of DRD.

20.2     At any time after the occurrence of an Event of Default IBL may by written notice to DRD
terminate its obligations under this Loan Agreement and/or demand immediate repayment of the
Facility together with accrued interest and all other sums due hereunder in cash only and DRD will
comply with such demand forthwith.

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21.
WAIVERS

21.1
No failure or delay on the part of IBL to exercise any power, right or remedy under this Loan
Agreement shall operate as a waiver thereof nor shall any single or partial exercise by it of any
power, right or remedy preclude any other or further exercise thereof or the exercise of any other
power, right or remedy.

21.2
The remedies provided in this Loan Agreement are cumulative and not exclusive of any remedies
provided by law.

22.
SET - OFF

22.1
IBL may, without prior notice to DRD, apply any credit balance (whether or not then due and in
whatever currency) which is at any time held by any office or branch or related company of IBL
for the account of IBL in or towards satisfaction of any sum then due and payable from DRD
under this Loan Agreement and in respect of which a default in payment has occurred.

22.2
For the purposes of exercising any rights under this Clause, or any rights under the general law,
IBL may convert or translate all or any part of any such a credit balance into another currency
applying a rate which in its opinion fairly reflects prevailing rates of exchange.

22.3
IBL is not obliged to exercise any of its rights under this Clause, which shall be without prejudice
and in addition to any rights under the general law.

22.4
In this Clause “rights under the general law” includes, but is not limited to any right of set-off,
combination or consolidation of accounts, lien or similar rights which IBL has under any applicable
law.

23.
INDEMNITIES
DRD shall on demand indemnify IBL against any liability, loss or expense which IBL shall certify as
incurred by it as a consequence of a default in payment by DRD of any sum under this Loan
Agreement when due, any repayment or prepayment of the Facility or part thereof being received
otherwise and on the last day of an Interest Period Facility; the early breaking, termination or
reversing (in whole or in part) of any agreement or arrangement entered into by DRD with IBL or
any third party for the purpose of or in connection with fixing, capping the rate of or otherwise
hedging interest payable under this Loan Agreement or the Facility not being drawndown for any
reason after a drawdown notice has been given including in any such case, but not limited to, any
loss of profit and any loss or expense incurred in maintaining or funding the Facility or any sum or
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in liquidating or redeploying deposits from third parties acquired are contracted for in order to
effect or maintain the same.
24.
CURRENCY
If, under any applicable or regulation or pursuant to a judgement or order being made or
registered against or the liquidation of DRD or without limitation for any other reason, any
payment under or in connection with this Loan Agreement is made or fails to be satisfied in a
currency (“the payment currency”) other than the currency which such payment is expressed to
be due under or in connection with this Loan Agreement (“the contractual currency”) then, to the
extent that the amount of such payment actually received by IBL, when converted into the
contractual currency at the applicable rate of exchange, falls short of the amount due under or in
connection with this Loan Agreement DRD as a separate and independent obligation shall
indemnify and hold harmless IBL against the amount of such shortfall. For the purposes of the
Clause, the “applicable rate of exchange” means the rate at which IBL is able on or about the
date of such payment to purchase, in accordance with its normal practice, the contractual
currency with the payment currency and shall take into account (and DRD shall be liable for) any
premium, or other costs of exchange including any taxes incurred by reason of any such
exchange.
25.
COUNTERPARTS
This Loan Agreement may be executed in any number of counterparts in which case this Loan
Agreement will be as effective if all signatures on the counterparts were on a single copy of this
Loan Agreement.
26.
ASSIGNMENT

26.1
DRD may not assign or transfer any of its rights or obligations under this Loan Agreement.

2.6.2      Subject to the provisions of Clause 15.5 hereof IBL may assign or transfer all or any of its rights
and obligations under this Loan Agreement to any person. DRD will enter into all documents
specified by IBL to be necessary to effect any such assignment or transfer.

27.
NOTICES

27.1
Every notice or other communication under this Loan Agreement shall be in writing and may be
delivered by letter or facsimile transmission despatched to the other party at its address or
facsimile numbers stated below or such other address or facsimile number as may from time to
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time be notified to the other party for this purpose. Each party chooses the following addresses
as their respective domicilium citandi et executandi.
Investec Bank Limited

All notices to be addressed for the attention of Milton Samios, Investec Bank Limited, 100
Grayston Drive, Sandown Sandton.

Facsimile Number : (011) 286 7371

DRDGOLD LIMITED

Address: 45 Empire Road, Parktown, Johannesburg / For the attention of Anton Lubbe.
Facsimile Number: +27 (11) 482 1022
27.2
Every notice or other communication shall, unless otherwise provided for in this Loan Agreement
be effective when actually received.

28.
LAW

28.1
This Loan Agreement shall be governed by and construed in accordance with South African law.

28.2
The parties irrevocably agree that the courts of South Africa shall have jurisdiction to hear and
determine a suit, action or proceeding, and to settle any disputes, which may arise out of or in
connection with this Loan Agreement and for such purposes hereby irrecoverably submit to the
jurisdiction of such courts.

28.3
Nothing contained in this clause shall limit the right of IBL to take proceedings against DRD in any
other court of competent jurisdiction, nor shall the taking of any such proceedings in one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or
not (unless precluded by applicable law).

29.
INTERPRETATION
In this Agreement:
29.1
This agreement is referred to herein as the “Loan Agreement”.
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29.2      This Loan Agreement incorporates and is subject to the terms of the ISDA Master Agreement
between the parties which is executed and delivered as a condition precedent hereto (the “ISDA
Agreement”).

29.3      This Loan Agreement is subject to and incorporates the 2000 ISDA Definitions and the 2002
Equity Derivative Definitions ( the “Definitions”) as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”).

29.4     In the event of any inconsistency between the Loan Agreement and the ISDA Agreement, the
Loan Agreement shall prevail. In the event of any inconsistency between the Definitions and the
Loan Agreement, the Loan Agreement shall prevail.
29.5     The Loan Agreement constitutes a Confirmation as defined and referred to in the ISDA
Agreement.

29.6
“Business Day” means a day on which banks are open for business in South Africa;

29.7
“Final Closing Date” means the final date that DRD delivers Shares to IBL under Section 11 of the
Loan Agreement.

29.8
“Share” and “Shares” means ordinary fully paid shares of DRDGold Limited which are listed on the
JSE Securities Exchange South Africa (“JSE”) and which may be identified by the JSE code “DRD”;
and

29.9
For the purposes of this Loan Agreement the following elections shall be made in respect of terms
defined in the Definitions;
“Exchange” means the JSE Securities Exchange South Africa.
“Business Day Conventions” means “Following”.
“Related Exchange(s)” means “All Exchanges” as defined in the Definitions.
“Calculation Agent” means Investec Bank Limited.
“Clearance System” means STRATE
For the purpose of “Adjustments”, “Method of Adjustment” shall be “Calculation Agent
Adjustment”.

For the purpose of “Extraordinary Events”. The following elections are made:

in respect of “Consequences of Merger Events”/ modified calculations Agent Adjustment” in the
case of “Share-for-Share”, “Share-for-Other” and “Share for Combined”,
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and in respect of “Consequences of Tender Offers” “Modified calculation Agent Adjustment” in the
case of “Share-for-Share”, “Share-for –Other” and “Share for Combined”,

“Composition of Combined Consideration” shall be “Not Applicable”, and

Calculation Agent Adjustment shall apply in respect of “Nationalisation, Insolvency or Delisting”.

“Non-Reliance” shall be “Applicable”.

“Agreements and Acknowledgements regarding regarding Hedging Activities” shall be
“Applicable”.

Additional Acknowledgements shall be “Applicable”.
IN WITNESS whereof this Loan Agreement has been executed on the date stated above.
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SCHEDULE

CONDITIONS PRECEDENT

1.
The execution and delivery of the ISDA Master Agreement referred to herein together with the
documents referred to in Part 3 of the Schedule thereto.

2.
Certified Copy of the resolution of the Board of Directors of DRD approving the execution of this
Loan Agreement and the terms hereof.

3.
DRD shall procure that its rights under Transactions in existence between it and Eskom Holdings
Limited which are governed by the terms of an ISDA Master Agreement, as at the date of
signature hereof, are ceded to IBL as security for the performance by DRD of all its obligations to
IBL.
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Signed by


For and on behalf of
DRDGOLD LIMITED

/s/ Anton Lubbe
Divisional Director: Growth and Technical Services


In the presence of:-
/s/ Alet Beyers
Financial Accountant


Signed by


/s/ Investec Bank Limited

For and on behalf of
INVESTEC BANK LIMITED
In the presence of:-
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EXHIBIT 4.82
SUBSCRIPTION AGREEMENT
This agreement is made on 7 April 2005
Between
(1)  Baker Steel Capital Managers LLP, an entity incorporated as a limited liability partnership in
accordance with the laws of England, having registration number OC 301191 and its registered
address at Kingsbury House 15-17 King Street, London SW1Y 6QU, United Kingdom (“ BSCM” ),
acting as duly authorised agent on behalf of the BSCM Clients (as defined below), and where the
context so requires or indicates, on its own behalf as principal;
(2)  DRDGOLD Limited , a company incorporated as a limited company in accordance with the laws
of the Republic of South Africa having registration number 1895/000926/06 and its registered address
at 45 Empire Road, Parktown, Johannesburg, South Africa, 2193 (“ DRDGOLD or the Company ”)
Recitals
A.
The parties signed a Subscription Agreement on 5 April 2005, and have agreed that certain of the
terms thereof require amendment. In the premise the parties have agreed that the Subscription
Agreement aforesaid shall on signature hereof be cancelled and replaced by this agreement.
B.
BSCM, on behalf of the BSCM Clients, wishes to subscribe for 17,000,000 ordinary shares in the
Company in accordance with the terms of this agreement. On completion, BSCM will pay the
Subscription Price in return for the allotment of such number of fully paid shares in the Company.
It is agreed as follows:
1.  Interpretation
1.1
In this agreement and the Schedules, unless the contrary intention appears:
1.1.1      “ BSCM Clients ” means the following Funds, which through BSCM will
participate in this subscription:
1.1.1.1. Genus Natural Resources Master Fund;
1.1.1.2. Genus Dynamic Gold Fund;
1.1.1.3. CF Ruffer Baker Steel Gold Fund;
1.1.1.4. P&C Global Gold & Natural Resources Fund Limited; and
1.1.1.5. RIT Capital Partners plc;
1.1.2        “ Company Warranties ” means the warranties referred to in Schedule 2.
1.1.3
“ Completion ” means the completion of the transactions and matters
specified in clause 5;
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1.1.4     “ Encumbrance ” means a mortgage, charge, pledge, lien, option, restriction,
right of first refusal, right of pre-emption, third party right or interest, or other
encumbrance or security of any kind;
1.1.5     “ Material Adverse Event ” means any:
1.1.5.1. resolution of the shareholders of the Company, or the Board of the
Directors of the Company recommending to the shareholders of the
Company that they so resolve, to place the Company into judicial
management or liquidation;
1.1.5.2. order of court placing the Company into liquidation or judicial
management (whether provisionally or finally);
1.1.5.3. arrangement or composition by the Company with its creditors generally,
or cessation, or threatened cessation, by the Company of the carrying on of
its business;
1.1.5.4. final and unappealable judgment, sounding in money, against the
Company, in an amount exceeding R10,000,000, which remains
unsatisfied for a period exceeding 30 days after the judgment becomes
unappealable;
1.1.5.5. commission by the Company of an act which (if committed by a natural
person) would be an act of insolvency in terms of the Insolvency Act, 24
of 1936, or of an act mentioned in section 344 of the Companies Act, 61 of
1973;
1.1.5.6. national or international economic or financial event or situation which
has developed, occurred or come into effect and which, in the reasonable
opinion of BSCM is likely materially and adversely to affect the financial
position, business or prospects of the Company; or
1.1.5.7. accident, fire, explosion, storm, flood, earthquake, subsidence, epidemic
or other natural physical disaster which, in the reasonable opinion of
BSCM is likely materially and adversely to affect the financial position,
business or prospects of the Company.
1.1.6    “ Shares ” means ordinary shares of no par value in DRDGOLD;
1.1.7    “Subscription Price” means R5.50 (Five Rand and fifty cents) per
Subscription Share;
1.1.8
“ Subscription Shares ” means 17,000,000 (seventeen million) fully paid
ordinary shares in DRDGOLD of no par value for which the BSCM Clients
are subscribing under clause 2;
1.1.9     “ the agreement ” or “ this agreement ” means the subscription agreement
contained herein together with all its Schedules.
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1.2
In this agreement and the Schedules unless the context otherwise requires:
1.2.1    Words denoting any one gender include all other genders and words denoting
the singular shall include the plural and vice versa.
1.2.2  A reference to:
(a)
a “clause” or a “Schedule” is a reference to a clause of, or a Schedule to,
this agreement;
(b)
a person includes a reference to a body corporate, an unincorporated
association or a partnership and that person’s legal and personal
representatives and successors; and
(c)
any statutory provision includes a reference to the statutory provision as
modified or re-enacted or both from time to time (whether before or after
the date of this agreement).
1.3
When any payment falls due or any other obligation falls to be performed on a
Saturday, Sunday or a day on which banks are not open for the transaction of normal
business in the Republic of South Africa, then such payment shall be made, or such
obligation performed, on the next succeeding day on which banks are open for the
transaction of normal business in the Republic of South Africa.
1.4
Headings are for ease of reference only and shall not affect the interpretation of this
agreement.
2.
Subscription
Each of the BSCM Clients shall subscribe, (to the extent that such subscription is not
restricted or prohibited in terms of clause 8 and subject also to clause 4), for the number of
Subscription Shares set out in Schedule 1, no later than two days after fulfilment of the
conditions precedent set out in clause 3, being in aggregate 17,000,000 fully paid, ordinary
shares at a premium of R5.50 per share, in accordance with the terms of this agreement.
3.
Conditions Precedent
3.1
Save for the provisions of clauses 1, 3, 7 and 9 to 16 which will become effective
immediately, this Agreement is subject to the fulfilment of the Conditions Precedent
that -
3.1.1   the Company obtains all such approvals to the transaction recorded herein as
may be required from the JSE Securities Exchange South Africa (“JSE”) and
Securities Regulation Panel, including approval of the listing of the
Subscription Shares by the JSE;
3.1.2    the Company obtains all such other regulatory approvals, including that of the
South African Reserve Bank, to the transaction recorded herein as may be
required;
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3.1.3    all resolutions of the shareholders of the Company necessary to give effect to
the transaction recorded herein are passed by such shareholders in general
meeting without material modification, and any special resolutions are
registered by the Registrar of Companies;
and in the event that all the Conditions Precedent shall not have been fulfilled on or
before 15 June 2005, this Agreement shall terminate in accordance with clause 10.
3.2
The Company and BSCM shall use their reasonable endeavours to procure the
fulfilment of the Conditions Precedent set out in clause 3.1 and the Company shall
notify BSCM immediately upon the fulfilment thereof.
3.3
The occurrence of a Material Adverse Event at any time prior to Completion shall
constitute a resolutive condition, and accordingly in any such event this agreement
shall cease to be of any force or effect and the obligations to subscribe and pay for the
Subscription Shares as set out in clause 5 will lapse.
4.
Non-Fulfilment of Conditions Precedent
If the resolutions of the shareholders of the Company necessary to give effect to the
transaction recorded herein are not passed by such shareholders in general meeting, or any of
the other conditions precedent in clause 3.1 is not fulfilled, by 15 June 2005, the Company
undertakes to offer to enter into a new Subscription Agreement with BSCM Clients, on the
same or similar terms as this Agreement, save that the Subscription Price will be equivalent to
a 10% (ten percent) discount to the volume weighted average traded price of the Shares over
the 30 (thirty) trading days prior to signing of the new subscription agreement, which signing
will take place within 7 (seven) days of such general meeting or such non-fulfilment and a
circular requesting the Company’s shareholder approval to such subscription will be
dispatched within 14 (fourteen) days thereafter or as soon as possible after any regulatory
approvals required to be obtained are obtained.
5.
Completion
5.1
Completion will take place on subscription by the BSCM Clients as required in terms
of clause 2, at the offices of the Company or at such other place as the parties agree,
when:
5.1.1    BSCM shall, as agent of the BSCM Clients, pay to the Company the sum of
R93.5 million (ninety-three million five hundred thousand Rand) being the
Subscription Price due for the Subscription Shares; and
5.1.2   the Company will:
(a)
duly allot and issue the Subscription Shares as required by the allocation
set out in Schedule 1, and having regard to any assignment in terms of
clause 8, as fully paid up Shares; and
(b)
deliver to BSCM (or as it directs) a share certificate or certificates
relating to the same;
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5.2
All payments made by BSCM Clients to the Company will be made either by
telegraphic or electronic transfer of funds for same day value to such bank account as
the Company nominates.
6.
Warranties by the Company
6.1
The Company hereby warrants to BSCM for its benefit and that of the BSCM Clients,
that each of the Company Warranties is, and will be, true and accurate at the date of
this agreement and at Completion.
6.2
The maximum aggregate liability of the Company in relation to the Company
Warranties shall under no circumstances exceed the Subscription Price for the
Subscription Shares or part thereof that the Company has actually received from
BSCM Clients in cleared funds.
7.
Warranties and Acknowledgements by BSCM
7.1
Terms used in this clause 7 have the meaning given to them by Regulation S under the
US Securities Act of 1933, as amended (the “Securities Act”), or the state securities
laws of any US State.
7.2
BSCM specifically warrants its authority to enter into this agreement, and to do all
things required of the BSCM Clients on their behalf.
7.3
BSCM, as agent on behalf of each of the BSCM Clients and where expressly stated,
BSCM as principal, represents and warrants to the Company that:
7.3.1    BSCM Clients are not U.S. persons and if the Company issues Shares to
BSCM Clients under this Agreement, BSCM Clients will acquire those
Shares in an offshore transaction pursuant to Regulation S. If BSCM Clients
decide to offer, resell, pledge or otherwise transfer the Subscription Shares
they will only do so in an offshore transaction in accordance with the
provisions of Rule 903 of Regulation S;
7.3.2    No sale, pledge, resale or other transfer of the Subscription Shares which may
be delivered hereunder has been or will be made so as to transfer the
Subscription Shares issued under this Agreement into the United States or to
or for the account or benefit of a U.S. person;
7.3.3    Neither BSCM nor any BSCM Client, any of their affiliates nor any persons
acting on behalf of it has engaged, or will engage in any directed selling
efforts with respect to the Subscription Shares (it being acknowledged that
BSCM Clients are not making this representation and warranty with respect to
actions of the Company or its affiliates). BSCM and BSCM Clients, each of
their affiliates and any person acting on their behalf have complied and will
comply with the offering restriction requirements of Regulation S; and
7.3.4    BSCM and BSCM Clients understand that the Subscription Shares issued
under this Agreement (i) have not been and will not be registered under the
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6
Securities Act (ii) may not be offered or sold within the United States or to, or
for the account or benefit of, a U.S. person and (iii) may only be resold in
accordance with Regulation S under the Securities Act. BSCM and BSCM
Clients represent and agree that they will offer and sell the Subscription
Shares as part of their distribution, at any time and otherwise, until after the
end of the Distribution Compliance Period, only in accordance with Rule 903
of Regulation S, under the Securities Act.
7.3.5    BSCM and BSCM Clients shall, at or prior to confirmation of a sale of Shares
issued under this Agreement and pursuant to Regulation S, have sent to each
distributor, dealer or person receiving a selling concession, fee or other
remuneration in respect of the Subscription Shares before the expiration of the
Distribution Compliance Period a confirmation or notice to substantially the
following effect:
7.3.5.1. “The Shares covered by this notice have not been registered under the
United States Securities Act of 1933 (the “Securities Act”) and may not
be offered or sold or transferred within the United States or to or for the
account or benefit of U.S. persons (i) as part of their distribution, at any
time and (ii) otherwise, until after the expiration of 40 days from the later
of completion of the distribution of the Subscription Shares issued or
issuable under this Agreement, as determined by BSCM and BSCM
Clients and certified to the Company, except in either case in accordance
with Rule 903 of Regulation S under the Securities Act. The Shares
covered by this notice may not be deposited in any unrestricted American
Depository Receipt Program relating to the Shares. You must not directly
or indirectly engage in any short selling or hedging transaction with regard
to the Shares, except as permitted by the US federal securities laws,
Nasdaq Rules, JSE Requirements and the regulations thereunder. Terms
used above have the meaning given to them by Regulation S.”
7.3.6    BSCM Clients agree that they will not directly or indirectly engage in any
short selling or hedging transactions with regard to the Subscription Shares
except as permitted under the US federal securities laws, Nasdaq Rules, JSE
Requirements and the regulations thereunder.
7.3.7    Distribution Compliance Period. "Distribution Compliance Period" means a
period that begins when the Subscription Shares are first issued by the
Company under this Agreement during a Redemption Period and continues
until after the expiration of 40 days from completion of the distribution of the
Subscription Shares, as determined by BSCM and BSCM Clients and
certified to the Company. BSCM and BSCM Clients will give the Company
written notices of the beginning of the 40 day Distribution Compliance Period
at least 3 Business Days before the beginning of the Distribution Compliance
Period and a copy of BSCM and BSCM Clients’ certification of the date of
completion of the distribution of the Shares within one business day of that
completion.
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7.4
Delivery of Shares.
BSCM on behalf of the BSCM Clients hereby acknowledges and agrees that:
7.4.1   They and any distributor of the Subscription Shares will not take delivery, in
whole or in part, until they provide the Company with:
7.4.1.1. (i) a written certification that they are not a U.S. person and that the
Agreement has not being executed on behalf of a U.S. person; or (ii) a
written opinion of counsel, reasonably acceptable to the Company, to the
effect that the Agreement and the Shares deliverable thereunder have been
registered under the Securities Act (it being acknowledged that the
Company has no obligation to register the Subscription Shares) or are
exempt from registration thereunder (it being acknowledged that the
Subscription Shares are not eligible for resale under Rule 144A under the
Securities Act); and
7.4.1.2. a written certification that BSCM is not executing the Agreement within
the United States and that the Subscription Shares are not to be delivered
within the United States, except as otherwise permitted by Rule 903 of
Regulation S, unless the Subscription Shares are registered under the
Securities Act or an exemption from such registration is available (it being
acknowledged that the Subscription Shares are not eligible for resale under
Rule 144A under the Securities Act).
7.4.2    If the Subscription Shares may be delivered in one or more parts, BSCM on
behalf of the BSCM Clients will provide the Company with the items
specified in clause 7.4.1 above prior to each delivery.
7.5    Legend
7.5.1   The Subscription Shares will be issued in certificated form, any certificate
representing the Subscription Shares, in whole or in part, shall bear the
following legend:
7.5.1.1. “The securities evidenced hereby have not been registered under the
United States Securities Act of 1933, as amended (the “Securities Act”),
and, accordingly, may not be offered, sold, pledged or otherwise
transferred within the United States or to, or for the account or benefit of,
U.S. persons except as set forth in the following sentence. By its
acquisition hereof, the holder (1) represents that it is not a U.S. person and
is acquiring these securities in an offshore transaction in compliance with
Regulation S under the Securities Act, (2) agrees that it will not offer, sell,
pledge or otherwise transfer these securities except (a) to DRDGOLD
Limited ("DRDGOLD") or any subsidiary thereof, (b) outside of the
United States to a non-U.S. person in an offshore transaction in
accordance with Rule 903 or Rule 904 of Regulation S, (c) pursuant to a
registration statement which has been declared effective under the
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Securities Act (and the holder understands that DRDGOLD has no
obligation to cause such a registration statement to become effective) or
(d) pursuant to an exemption from registration under the Securities Act
(and the holder understands that these securities are not eligible for resale
pursuant to Rule 144A under the Securities Act), in each case in
accordance with any applicable securities laws of any state of the United
States, (3) agrees that these securities may not be deposited in any
unrestricted American Depositary Receipt Program relating to these
securities (a) as part of the distribution of these securities, at any time (b)
otherwise, until after the expiration of 40 days from the completion of the
distribution of the Shares issued or issuable under the Agreement between
DRDGOLD and Baker Steel Capital Managers LLP (“BSCM”) on behalf
of certain of its clients, as determined by BSCM and certified to
DRDGOLD, and, in the case of (c), in accordance with applicable United
States federal and state securities laws, (4) agrees that it will deliver to
each person to whom this security or an interest therein is transferred a
notice substantially to the effect of this legend, and (5) agrees that it will
not directly or indirectly, engage in any short selling or hedging
transaction with regard to this security or any American Depositary
Receipt relating to this security except as permitted by the US federal
securities laws, Nasdaq Rules, JSE Requirements and the regulations
thereunder. As used herein, the terms “offshore transaction”, “United
States” and “U.S. person” have the meanings given to them by Regulation
S under the Securities Act.”
7.5.2    In addition to the legend set forth in clause 7.5.1 above, any certificate
representing the rights and obligations under this Agreement, in whole or in
part, shall also bear the following legend:
7.5.2.1. “The securities to be issued upon the execution of this Agreement have
not been registered under the Securities Act and the rights and obligations
under this Agreement may not be exercised in the United States or by or
on behalf of any U.S. person unless registered under the Securities Act or
unless an exemption from such registration is available.”
7.5.3    BSCM and BSCM Clients understand that the Shares issued under this
Agreement will be issued to them in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws,
that the Subscription Shares have not been registered with any state or federal
securities commissions and that the Company is relying upon the truth and
accuracy of the representations, warranties, acknowledgments and agreements
set forth herein in order to determine the applicability of such exemptions.
7.5.4    BSCM and BSCM Clients acknowledge for themselves and each of their
affiliates and any person acting on behalf of any of them that, in connection
with this Agreement, the Subscription Shares or the American Depositary
Receipts evidenced by such Shares, they have not and will not, directly or
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indirectly, engage in any transaction or series of transactions that, although in
technical compliance with Regulation S (a) is part of a plan or scheme to
evade the registration provisions of the Securities Act, or (b) would require
registration of the Subscription Shares under the Securities Act.
7.5.5    In respect of transfers and subsequent purchasers, the Company and BSCM
on behalf of the BSCM Clients agree that neither party may transfer the rights
and obligations conferred by this Agreement, in whole or in part, without the
prior written consent of the non-transferring party and that any transfer of the
rights and obligations conferred by this Agreement, in whole or in part, will
be made in accordance with Regulation S. BSCM on behalf of the BSCM
Clients agrees that, in addition to the restrictions on resale contained herein
and before the expiration of the Distribution Compliance Period, they may not
transfer any portion of the Subscription Shares to any party unless such party
enters into an agreement with the Company containing representations,
warranties and restrictions on resale substantially similar to those contained
herein.
8.
Assignment
8.1
Any BSCM Client may through the agency of BSCM and subject to the following
provisions of this clause 8, cede its rights and delegate its obligations to subscribe and
pay for Subscription Shares in terms of this agreement, to any one or more of the other
BSCM Clients, subject only to written notification by BSCM to the Company on the
date (“subscription date”) when the Subscription Shares are subscribed and paid for.
8.2
BSCM shall be obliged to use all reasonable commercial endeavours to procure that
all the Subscription Shares are, subject only to the provisions of this clause 8,
subscribed for and paid for by the BSCM Clients.
8.3
No cession and delegation as set forth in clause 8.1, or as contemplated by the
following provisions of this clause 8, shall be competent unless the corresponding
obligations and rights (respectively) are delegated and ceded, and the shares may be
lawfully subscribed for by the cessionary.
8.4
In this sub-clause 8.4 and in the following provisions of this clause 8:
8.4.1      “internal
rule”
means:
8.4.1.1.  in relation to all the BSCM Clients, any internal rule or binding provision
set out in any existing offering document by a BSCM Client, or which has
been specifically approved by any regulatory authority;
8.4.1.2.  in relation to the BSCM Clients mentioned in clause 1.1.1.1, 1.1.1.4 and
1.1.1.5, and additionally to the provisions of clause 8.4.1.1, the internal
prudential requirements operated by those BSCM Clients limiting the
holdings by those BSCM Clients of equities in any one company to an
aggregate value of a percentage of the net asset value of each of those
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Funds which is a lesser percentage than that which is permitted in terms of
clause 8.4.1.1 and/or the regulatory requirements incumbent upon them;
in either case as separately notified to the Company in writing by BSCM prior
to or simultaneously with signature hereof, which limits the holdings of
equity in any single entity to a limit, howsoever determined, of the asset value
of the holdings of any BSCM Client;
8.4.2   “regulatory authority” means any legally competent authority having
jurisdiction, howsoever founded and whether arising from the domiciliary
status of a BSCM Client or from a BSCM Client’s carrying on business or
operations in the jurisdiction of such regulatory authority;
8.4.3    “regulatory requirement” means any requirement of legislation whether
primary or subsidiary in any jurisdiction in which a BSCM Client carries on
business, operates or solicits investments, or of any regulatory authority
having jurisdiction over such BSCM Client, with which such BSCM Client
must comply as a requirement of any consent, licence, permission or other
authority for the carrying on of its business or operations; and (without any
derogation from clause 8.4.1) includes any internal rule imposed pursuant to,
or in existence for the purpose of ensuring compliance with, such regulatory
requirement.
8.5
In the event that any BSCM Client (“defaulting subscriber”) cannot, without
breaching an internal rule or regulatory requirement applicable to it, comply with any
obligation upon it to subscribe and pay for any Subscription Shares for which it is
otherwise obliged to subscribe, BSCM shall within its discretion be obliged to allocate
those of the Subscription Shares for which the defaulting subscriber is so unable to
subscribe to one or more of the other BSCM Clients, subject only to clause 8.7 below,
and such allocation shall constitute cession and delegation by the defaulting subscriber
to the relevant BSCM Clients to whom such reallocation is so effected (and the
provisions of clause 8.1 shall apply in respect of notification to the Company of the
cession and delegation).
8.6
If because of any regulatory requirement or internal rule it is necessary between the
date of signature hereof and the subscription date, for there to be serial reallocations of
the rights and obligations to subscribe and pay for Subscription Shares, it shall not be
necessary for BSCM to notify any such reallocations to the Company, and the only
notification required shall be of the final reallocation effective as at the subscription
date; provided however, that BSCM shall be obliged to notify the Company timeously
of any event which might result, because of any regulatory requirement or internal
rule as set out in the aforegoing provisions of this clause, in less than the full number
of Subscription Shares being taken up by one or more of the BSCM Clients.
8.7
No reallocation as set forth in the aforegoing provisions of this clause 8 shall be
possible or permissible in the event that such reallocation would result in allocation of
Subscription Shares to a BSCM Client which is unable, because of any matter
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mentioned in clause 8.5, to subscribe and/or pay for, and/or to hold, the relevant
Subscription Shares, even if that results in less than the full number of Subscription
Shares being subscribed and paid for, allotted and issued. However, it is recorded for
the avoidance of doubt, that BSCM is obliged and warrants its authority, to effect all
reallocations hereby contemplated in such a way as to ensure that the full number of
Subscription Shares which BSCM Clients are entitled to hold, are subscribed for and
paid for to the maximum possible extent in the event that the aggregate number of
Subscription Shares which the BSCM Clients are entitled to hold is less than the full
number of the Subscription Shares.
8.8
It is recorded and acknowledged that the internal rules and/or regulatory requirements
applicable to the BSCM Clients are so interpreted that the contingent obligations of all
of them (other than RIT Capital Partners plc (“RIT”)) in terms of the Underwriting
Agreement signed by the Company and BSCM on behalf of all the BSCM Clients
other than RIT on 5 April 2005 to acquire shares in the Company must be taken into
account for the purposes of calculating the limits mentioned in clause 8.4.1, and that
for that purpose it is necessary, to calculate the maximum limits applicable to any
individual BSCM Client’s obligations to subscribe and pay for Subscription Shares, to
assume for the purposes of that calculation that the relevant BSCM Client will acquire
all the DRDGOLD shares provisionally allotted to it under the said Underwriting
Agreement.
9.
Confidentiality
9.1
Any communication between the Company and BSCM and between any of their
respective subsidiaries or representatives which is marked confidential or which is of
a commercially sensitive, proprietary or confidential nature will be kept strictly
confidential by the party receiving such communication.
9.2
Each of such parties will take reasonable precautions to ensure that its officers and
employees and the officers and employees of each of its subsidiaries comply with the
provisions of this clause and that none of such individuals discloses any term of this
agreement, or discloses or uses any confidential information which it acquires in
connection with this agreement or in connection with the negotiations leading up to
the same, unless the other party agrees.
9.3
Nothing in this clause will prevent the disclosure of any information where the same
has been disclosed or might reasonably be expected to be disclosed in any circular to
shareholders or other public document or where required by law or any regulation or
rule of any stock exchange or other regulatory authority, save that in the latter event,
such disclosure shall be made by the party concerned only after reasonable
consultation, if practicable, with the other and, so far as practicable, taking into
account the reasonable requirements (as to timing, contents and manner of making or
despatch of such disclosure) of the other.
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10.
Duration and Termination
10.1
Without prejudice to any accrued rights and obligations this agreement shall continue
in full force and effect until the earlier of:
10.1.1 the date on which the parties agree in writing that this agreement is to
terminate;
10.1.2 termination in accordance with clauses 3.1 or 3.3.
10.2     The termination of this agreement shall be without prejudice to the rights of the
parties in respect of any breach of this agreement occurring prior to such termination.
10.3     Notwithstanding the above provisions, the obligations of the parties pursuant to
clauses 9 and 11 will survive termination.
11.
Announcements
11.1     Subject to clause 11.2 no announcement, communication or circular concerning the
transaction referred to in this agreement shall be made or despatched at any time
(whether before or after Completion) by any party without the prior written consent of
any other (such consent not to be unreasonably withheld or delayed).
11.2     Where the announcement, communication or circular is required by law or any
regulation or rule of any stock exchange or other regulatory authority, it shall be made
by the party concerned only after reasonable consultation, if practicable, with the
other and, so far as practicable, taking into account the reasonable requirements (as to
timing, contents and manner of making or despatch of the announcement,
communication or circular) of the other.
12.
Further Assurance
Each of the parties agrees to perform all further acts and things as the other parties may
reasonably require in implementing and giving effect to the provisions of this agreement and
for the purposes of vesting in the parties the full rights and benefits to be vested in the parties
under this agreement.
13.
General
13.1    This agreement and the documents referred to in it contain the whole agreement
between the parties relating to the transaction (being the subscription for Shares)
contemplated by this agreement and supersede all previous agreements between the
parties in relation to these transactions.
13.2     No variation or agreed termination of this agreement shall be of any force or effect
unless in writing and signed by each party.
13.3     The failure to exercise or any delay in exercising any right or remedy under this
agreement shall not constitute a waiver of that right or remedy or a waiver of any
other right or remedy and no single or partial exercise of any right or remedy under
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this agreement shall prevent any further exercise of that right or remedy or the
exercise of any other right or remedy.
13.4
This agreement shall be personal to the parties and save where specified otherwise no
party shall be entitled to assign its rights or obligations under this agreement to any
person without the prior written consent of the other parties.
14.
Notices
14.1
Any notice or other communication under or in connection with this agreement shall
be in writing and shall be delivered personally or by commercial courier to each party
due to receive the notice or communication at its address set out below:-
14.1.1 BSCM and each of the BSCM Clients:                Kingsbury House
15-17 King Street
London SW1Y 6QU
United Kingdom
Fax: +09-44-207-329-8222
14.1.2 DRDGOLD:
45 Empire Road
Parktown
Johannesburg
South Africa
2193
Fax: +27-11-482-1022
or at such other address as the relevant party may specify by notice in writing to the
other parties.
14.2     Any notice or other communication shall be deemed to have been duly given if
delivered personally when left at the address referred to in the immediately preceding
clause, or if delivered by commercial courier on the date of signature of the courier’s
receipt.
15.
Governing Law
15.1     The construction, validity and performance of this agreement shall be governed and
construed in all respects by the laws of the Republic of South Africa.
15.2
Each of the parties irrevocably agrees and submits to the non-exclusive jurisdiction of
the courts of the Republic of South Africa to hear and determine any suit, action or
proceeding which may arise out of or in connection with this agreement.
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16.
Counterparts
This agreement may be executed in any number of counterparts, each of which when executed
and delivered shall be an original, but the counterparts together shall constitute one and the
same instrument.
This agreement has been entered into on the date stated at the beginning of this document.



SIGNED at Johannesburg on 7     April 2005 .
th
 
For    DRDGOLD LIMITED
/s/ Mark Wellesley-Wood
who hereby warrants that he or she is duly
authorised to sign this Agreement.
Signatory: Mark Wellesley-Wood
Capacity: Chief Executive Officer
Authority: By Resolution


SIGNED at Bangkok on 7     April 2005.
th
 

For      BAKER STEEL CAPITAL MANAGERS LLP
(acting both as principal and as duly appointed agent
for each of the BSCM Clients)
/s/ Trevor Steel
who hereby warrants that he or she is duly authorised
to sign this Agreement.
Signatory: Trevor Steel
Capacity: Managing Partner
Authority:
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Schedule 1
Subscription Shares/Subscribers
The following persons are the BSCM Clients and shall (subject to assignment, or reallocation and/or
inability, as set out in clause 8 of the agreement) subscribe and pay for, and receive the allotment and
issue of, the number of Subscription Shares set out below.


Subscriber                                                                                               
Number of
Subscription
Shares
Percentage
Genus Natural Resources Master Fund
5,666,667                             33
Genus Dynamic Gold Fund
5,326,666                             31
CF Ruffer Baker Steel Gold Fund
2,946,667                            17
P&C Global Gold & Natural Resources Fund Limited
1,700,000                            10
RIT Capital Partners plc
1,360,000                              8
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Schedule 2
Company Warranties
1.
Corporate
1.1
The Company is a duly incorporated limited liability company validly existing under
the laws of South Africa.
1.2
The share register of the Company contains materially true, complete and accurate
records of the members of the Company at the date hereof.
1.3
True copies of the memoranda and articles of association of the Company have been
disclosed to BSCM and set out all rights attaching to the share capital of the
Company.
1.4
The Company has the right, power and authority, and has taken all action necessary,
to execute, deliver and exercise its rights, and perform its obligations, under or
otherwise pursuant to this Agreement.
1.5
The Company’s obligations under or otherwise pursuant to this Agreement are
binding on the Company.
1.6
The entry into and performance by the Company of its obligations pursuant to this
Agreement do not and will not:
1.6.1       conflict in any material respect with any law or regulation or judicial or
official order binding on the Company; or
1.6.2       conflict with the constitutional documents of the Company; or
1.6.3       conflict in any material respect with any document which is binding on the
Company;
1.7
The Company is not insolvent or unable to pay its debts and no order has been made,
petition presented or resolution passed for the winding up of the Company nor has any
receiver or manager been appointed over the whole or any part of the Company’s
business or assets.
1.8
The audited consolidated balance sheet of the Company and its subsidiary
undertakings (the “DRDGOLD group”) as at 30 June 2004 and the audited
consolidated profit and loss account for the financial year ended on such date
(including the notes thereto) give a true and fair view of the state of affairs of the
DRDGOLD group at such date and of their profits for the year ended on that date and
were prepared in accordance with South African generally accepted accounting
principles consistently applied and comply with applicable legislation;
1.9
The published interim results of the Company and its subsidiary undertakings for the
six month period ended on 31 December 2004 have been prepared, in terms of South
BACKGROUND IMAGE
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African GAAP, with all due care and attention (having regard to the fact that the
interim results are unaudited but have been reviewed by the Company’s auditors) and
on accounting bases and assumptions consistent with those adopted in the preparation
of the audited consolidated balance sheet as at 30 June 2004 and the audited
consolidated profit and loss account for the financial year ended on that date;
1.10     Since the date to which the Company’s interim results referred to in 1.9 were made
up, the business of the DRDGOLD group has been carried on in the ordinary and
usual course, no contracts or commitments of any unusual or onerous nature have
been entered into and there has been no significant adverse change in the financial or
trading position or, to the best of the Company’s knowledge, information and belief,
prospects of the DRDGOLD group taken as a whole, save in all cases for what has
been disclosed to BSCM, in writing;
1.11
All statements of fact contained in any document or announcement issued or made by
or on behalf of the Company to its shareholders since 31 December 2004 remain true
and accurate and not misleading and all forecasts and estimates and all statements of
opinion, intention and expectation contained therein were made on reasonable ground
after due and proper consideration;
1.12
The business plan prepared by the Company and dated 3 March 2005, a copy of which
has been disclosed to BSCM, has been prepared with all due care and attention and all
statements of fact contained therein were when made and remain true and accurate
and not misleading and all forecasts and estimates and all statements of opinion,
intention and expectation contained therein were made on reasonable grounds after
due and proper consideration.
2.
Subscription Shares and Title to Shares
2.1
On issue, the Subscription Shares will be free from any Encumbrance.
2.2
The unissued share capital of the Company is free from any Encumbrance and there
are no arrangements in force or claimed entitling any person to, or to the creation of,
any Encumbrance or to the issue or creation of any shares, stock, debentures or loan
capital of the Company, other than those disclosed in the 2004 annual financial
statements.

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EXHIBIT 4.83
UNDERWRITING AGREEMENT
between
DRDGOLD LIMITED
and
THE PERSONS REFERRED TO IN SCHEDULE 1 HERETO
and
BAKER STEEL CAPITAL MANAGERS LLP
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2
TABLE OF CONTENTS
1.
DEFINITIONS AND INTERPRETATION ..................................................................... 4
2.
RESOLUTIVE CONDITIONS ...................................................................................... 8
3.
SUBSCRIPTION ....................................................................................................... 9
4.
CLAW-BACK OFFER ...............................................................................................10
5.
ALLOTMENT AND ISSUE ........................................................................................11
6.
COMMUNICATIONS ................................................................................................12
7.
UNDERWRITING COMMISSION ...............................................................................12
8.
WARRANTIES .........................................................................................................13
9.
INDEMNITY ..............................................................................................................13
10.
UNDERTAKINGS BY DRDGOLD ...............................................................................14
11.
BREACH ..................................................................................................................15
12.
ADDRESSES FOR LEGAL PROCESSES AND NOTICES .............................................16
13.
GENERAL ................................................................................................................17
14.
COSTS ................................................................................................................... 21
Schedule 1:
LIST OF UNDERWRITERS
Schedule 2:
WARRANTIES GIVEN BY DRDGOLD
Schedule 3:
WARRANTIES GIVEN BY THE UNDERWRITERS AND BSCM
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3



UNDERWRITING AGREEMENT
between
DRDGOLD LIMITED
(a company duly incorporated in accordance with the laws of
the Republic of South Africa under registration number 1895/000926/06)
(“DRDGOLD”)
and
THE PERSONS REFERRED TO IN SCHEDULE 1 HERETO
(herein represented by BSCM as their duly authorised agent)
(“the Underwriters”)
and
BAKER STEEL CAPITAL MANAGERS LLP
(an entity incorporated as a limited liability partnership in accordance with the laws of
England under registration number OC 301191)
(“BSCM”)
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4
PREAMBLE:
A.
DRDGOLD wishes to raise capital through the issue of new shares.
B.
The Underwriters have agreed to subscribe for the Offer Shares on the basis that the
Offer Shares will be provisionally allotted to them, but that DRDGOLD will also offer
such Offer Shares to its existing shareholders in proportion to their shareholdings in
terms of a Claw-back Offer, together with the right to renounce this offer in favour of
third parties, and will only finally allot and issue to the Underwriters such number of
the Offer Shares as are not allotted and issued pursuant to the Claw-back Offer.
C.
BSCM is the duly authorised agent of the Underwriters.
D.
Accordingly, the Parties wish to enter into this Agreement to set out the terms and
conditions of the transaction referred to in paragraph B above.
THE PARTIES AGREE AS FOLLOWS:
1.
DEFINITIONS AND INTERPRETATION
1.1
In this Agreement and the preamble above, the following words and phrases
shall have the following meanings, unless the context indicates otherwise:
1.1.1
“the Act”
means the Companies Act, Act 61 of 1973, as
amended, of the Republic of South Africa;
1.1.2
“this Agreement”
means this Underwriting Agreement, including
all of its Schedules;
1.1.3
“Business Day”
means any day other than a Saturday, Sunday
or statutory holiday in the Republic of South
Africa;
1.1.4
“Circular”
means the circular which will be required in
terms of the Listings Requirements of the JSE
to be posted to the Shareholders in connection
with the Claw-back Offer;
1.1.5
“Claw-back Offer”
means the rights offer referred to in clause 4;
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1.1.6
“JSE”
means the JSE Securities Exchange South
Africa;
1.1.7
“Offer Shares”
means 15 804 116 ordinary no par value
shares in the authorised but unissued share
capital of DRDGOLD;
1.1.8
“Offer Price”
means the price of R5.50 per Offer Share;
1.1.9
“Parties”
means the parties to this Agreement, and
“Party” shall mean any of them, as the context
may require;
1.1.10
“Shareholders”
means all of the registered holders of ordinary
shares in the issued share capital of
DRDGOLD; and
1.1.11
“Signature Date”
means the date of signature of this Agreement
by the Party last signing it.
1.2
General Interpretation
For the purposes of this Agreement the following rules of construction shall
apply, unless the context requires otherwise:
1.2.1
the singular shall include the plural and vice versa;
1.2.2
a reference to any gender, whether masculine, feminine or neuter,
includes the other two;
1.2.3
any reference to a person includes, without being limited to, any
individual, body corporate, unincorporated association or other entity
recognised under any law as having a separate legal existence or
personality;
1.2.4
the Schedules form an integral part of this Agreement and words and
expressions defined in this Agreement shall bear, unless the context
otherwise requires, the same meaning in such Schedules. To the
extent that there is any conflict between the Schedules to this
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Agreement and the provisions of this Agreement, the provisions of this
Agreement shall prevail;
1.2.5
if any provision in a definition is a substantive provision conferring
rights or imposing obligations on any Party, notwithstanding that it
appears only in this interpretation clause, effect shall be given to it as if
it were a substantive provision of this Agreement;
1.2.6
references to a statutory provision include any subordinate legislation
made from time to time under that provision and references to a
statutory provision include that provision as from time to time modified
or re-enacted as far as such modification or re-enactment applies, or is
capable of applying, to this Agreement or any transaction entered into
in accordance with this Agreement;
1.2.7
a “law” shall be construed as any law (including common law), statute,
constitution, decree, judgment, treaty, regulation, directive, by-law,
order or any other legislative measure or enactment of any
government, local government, statutory or regulatory body or court
and shall be deemed to include the rules and other requirements of
any applicable stock exchange;
1.2.8
references in this Agreement to “clauses” and “Schedules” are to
clauses of, and schedules to, this Agreement;
1.2.9
any reference in this Agreement to this Agreement or any other
agreement, document or instrument shall be construed as a reference
to this Agreement or that other agreement, document or instrument as
amended, varied, restated, novated or substituted from time to time;
1.2.10
any word and expression defined in any part or clause of this
Agreement other than in this clause 1 shall, unless the application of
the word or expression is specifically limited to that section or clause in
question, bear the meaning ascribed to the word or expression
throughout this Agreement;
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1.2.11
unless otherwise provided, any number of days prescribed shall be
determined by excluding the first and including the last day or, where
the last day falls on a day that is not a Business Day, the next
succeeding Business Day;
1.2.12
days and dates referred to in this Agreement are days and dates in the
Republic of South Africa;
1.2.13
save to the extent expressly provided for, no provision of this
Agreement constitutes a stipulation for the benefit of any person who is
not a Party;
1.2.14
where figures are referred to in numerals and in words, if there is any
conflict between the two, the words shall prevail; and
1.2.15
if any word or term is not defined in this Agreement but is defined in
the Act, that word or term shall bear the definition assigned to it in the
Act.
1.3
Specific Rules of Interpretation
1.3.1
The use of the word “including” followed by a specific example/s shall
not be construed as limiting the meaning of the general wording
preceding it and the principles of eiusdem generis and noscitur a sociis
shall not be applied in the interpretation of this Agreement.
1.3.2
The terms of this Agreement have been negotiated and shall not be
interpreted or construed to the disadvantage of a Party because that
Party was responsible for or participated in the preparation of this
Agreement (or any part of it) and the contra proferentem rule shall not
be applied in the interpretation of this Agreement.
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1.4
Headings and Sub-headings
All the headings and sub-headings in this Agreement are for convenience only
and are not to be taken into account for the purposes of interpreting it.
2.
RESOLUTIVE CONDITIONS
2.1
Subject to clause 2.2, this Agreement shall take effect on the Signature Date
but, save for the provisions of this clause 2 and clauses 1, 11, 12 and 13, shall
fall away and be of no further force and effect if, by 31 May 2005, or such later
date as DRDGOLD and BSCM may agree in writing prior to 31 May 2005, any
one of the following resolutive conditions is fulfilled:
2.1.1
any documentation in respect of this Agreement and the Claw Back
Offer which requires approval in terms of the Listings Requirements of
the JSE is not duly approved by the JSE, or the JSE does not agree to
list the Offer Shares;
2.1.2
any approvals and consents necessary to offer the Offer Shares for
subscription within the United States of America have not been
obtained;
2.1.3
any other regulatory approvals, including without limitation that of the
South African Reserve Bank, necessary to implement this Agreement
have not been obtained;
2.1.4
any documentation which is required to be registered by the Registrar
of Companies in terms of the Act has not been duly registered; or
2.1.5
any statement which is required to be lodged with and registered by
the Registrar of Companies in terms of section 80(1)(c)(ii) of the Act in
respect of any payment to be made in terms of this Agreement has not
been so lodged or registered.
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2.2
The condition contained in clause 2.1.2 is stipulated for the benefit of
DRDGOLD alone and may accordingly be waived by it by written notice to that
effect given to BSCM on or before 31 May 2005 or any later date as may be
agreed between DRD and BSCM in terms of clause 2.1.
2.3
If this Agreement is terminated in accordance with the provisions of clause
2.1, then, subject to the provisions of clause 2.5, no Party shall have any claim
against any other Party pursuant to the fulfilment of any of the conditions.
2.4
DRDGOLD shall use reasonable endeavours to ensure that the resolutive
conditions referred to in clause 2.1 are not fulfilled. However, DRDGOLD shall
not be obliged to institute any appeal or review proceedings whatsoever to
ensure the non-fulfilment of those resolutive conditions.
2.5
If this Agreement is terminated in accordance with clause 2.1 or cancelled in
accordance with clause 11.1:
2.5.1
DRDGOLD shall forthwith pay to the Underwriters any amounts paid to
it by the Underwriters in terms of clause 3 by electronic transfer to the
accounts notified in writing by BSCM to DRDGOLD.
2.5.2
Each of the Underwriters shall forthwith pay to DRDGOLD any
amounts paid to it by DRDGOLD in terms of clause 7 by electronic
transfer to the account referred to in clause 3.
2.6
No Party may apply the principle of set-off without the prior written consent of
each of the other Parties.
2.7
Each Party shall sign all such documents and do everything else that may
reasonably be required of it by the other Parties to ensure the non-fulfilment of
the resolutive conditions referred to in clause 2.1, and all of the Parties shall
co-operate with each other in all respects to that end.
3.
SUBSCRIPTION
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3.1
Each of the Underwriters hereby severally agrees to subscribe for that number
of Offer Shares set out adjacent to its name in Schedule 1 upon the terms of
this Agreement.
3.2
The subscription price for the shares subscribed for shall be the Offer Price,
payable as to 94% thereof (“the first payment”) within 2 (two) Business Days
after the Signature Date and the balance on the date on which the Claw-back
Offer closes for acceptances in terms of the Circular.
3.3
Against receipt of the first payment for the number of Offer Shares subscribed
for by an Underwriter, DRDGOLD shall provisionally allot that number of Offer
Shares to the Underwriter concerned, and shall furnish to BSCM a certified
copy of the resolution of DRDGOLD’s Board of Directors authorizing such
provisional allotment.
3.4
The payments referred to in this clause 3 shall be made by electronic funds
transfer to the following account:
Name:
DRDGOLD Limited
Bank:
The Standard Bank of South Africa Limited
Branch:
Johannesburg
Branch code:
0205
Account number:
000 042 463
4.
CLAW-BACK OFFER
DRDGOLD shall execute all such documents and do everything else (including using
reasonable endeavours to obtain all necessary consents in connection therewith) as
may be reasonably required to extend a renounceable rights offer to all of the
Shareholders on the terms set out in this clause 4.
4.1
Each Shareholder shall be offered the right to subscribe for 6 (six) of the Offer
Shares at the Offer Price for every 100 ordinary shares in DRDGOLD held by
that Shareholder.
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4.2
Each Shareholder shall be entitled to renounce its right to subscribe to anyone
else.
4.3
The rights offer shall be expressed and contained in the Circular, which shall
be posted to the Shareholders without undue delay after DRDGOLD has
received all the necessary regulatory approvals to proceed with the rights
offer.
4.4
The Circular may contain provisions to the effect that the rights offer is not
made within any particular jurisdiction or that Shareholders within any
particular jurisdiction may not accept the rights offer.
4.5
The rights offer shall contain such other terms and conditions as DRDGOLD
may require, provided that these terms and conditions shall not vitiate the
provisions of clauses 4.1, 4.2, 4.3 and 4.4.
5.
ALLOTMENT AND ISSUE
The events set out in this clause 5 shall occur within 7 (seven) days of the date on
which the Claw-back Offer closes for acceptances in terms of the Circular:
5.1
DRDGOLD shall allot and issue that number of the Offer Shares subscribed
and paid for pursuant to the Claw-back Offer, and shall ensure that all
amounts received in respect of such subscriptions are held separately from all
other funds of DRDGOLD in a bank account established solely for such
purpose, and that such subscription amounts are to be held to the order of the
Underwriters and used first in satisfying in full DRDGOLD’s payment
obligations under clause 5.3 below.
5.2
DRDGOLD shall allot and issue to the Underwriters, in the proportions set out
in Schedule 1, that number of the Offer Shares which have not been
subscribed and paid for pursuant to the Claw-back Offer. If the implementation
of this clause 5.2 results in any of the Underwriters becoming entitled to be
allotted and issued with a fraction of a share, DRDGOLD shall be entitled to
make such adjustments to the number of shares to be allotted and issued to
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the Underwriters in terms of this clause 5.2 as may be equitable in the
circumstances and necessary to eliminate such fraction.
5.3
DRDGOLD shall pay, by electronic transfer to the accounts notified in writing
by BSCM to DRDGOLD, to each Underwriter an amount equal to the product
of the Offer Price and the difference between the number of shares
subscribed for by that Underwriter in terms of clause 3 and the number of
shares issued to it in terms of clause 5.2.
5.4
In the event that allotment and issue in terms of this clause 5 has not occurred
by 22 August 2005 the underwriting obligations of the Underwriters shall
terminate, and all amounts paid by the Underwriters in terms of clause 3 shall
be repaid by DRDGOLD to the Underwriters mutatis mutandis in accordance
with clause 5.3 and shall immediately be due.
6.
COMMUNICATIONS
6.1
DRDGOLD shall, within a reasonable time after receiving a request from
BSCM, inform BSCM of the number of Offer Shares which have been
subscribed and paid for pursuant to the Claw-back Offer insofar as such
information is known to DRDGOLD. DRDGOLD shall use reasonable
endeavours to ensure the accuracy of the information given to BSCM but shall
not otherwise be bound to ensure the correctness thereof.
6.2
DRDGOLD shall inform BSCM of the total number of shares which are
subscribed for pursuant to the Claw-back Offer as soon as practicable after
that number becomes known to DRDGOLD.
6.3
BSCM shall be entitled to make the requests referred to in clause 6.1 from
time to time, but not so frequently as may be unreasonable.
7.
UNDERWRITING COMMISSION
7.1
In consideration of each Underwriter subscribing for shares in terms of clause
3, DRDGOLD shall, on the date on which the Claw-back Offer closes for
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acceptances in terms of the Circular, pay to each Underwriter a commission of
an amount equal to 6% of the amount payable by that Underwriter in terms of
clause 3.
7.2
In the event that the Offer Shares are not allotted and issued, whether under
the Claw-back Offer or to the Underwriter pursuant to clause 5 on or before 12
July 2005, DRDGOLD shall for each seven day period commencing at 12.01
a.m. on the next following day, pay each Underwriter a further commission of
an amount equal to 0.25% of the amount payable by that Underwriter in terms
of clause 3, in each case within 5 (five) Business Days of the end of the
relevant seven day period, but so that the total further commission payable
under this clause 7.2 shall not amount in aggregate to more than 0.75% of the
amount payable by that Underwriter in terms of clause 3.
8.
WARRANTIES
8.1
DRDGOLD hereby gives the Underwriters the warranties contained in
Schedule 2.
8.2
The Underwriters and BSCM hereby severally give DRDGOLD the warranties
contained in Schedule 3.
9.
INDEMNITY
DRDGOLD hereby indemnifies each of the Underwriters and BSCM against all claims
of any nature whatsoever made against the Underwriters or BSCM in any jurisdiction
in which the Claw-back Offer is made, which arise out of this Agreement including
(without limitation) any claim resulting from any loss, damage, liability, cost, charge or
expense incurred by BSCM or any of the Underwriters as a result of investigating,
preparing, disputing, defending or settling any actual or potential claim or mitigating
any loss on its part and, in particular, any claims:
9.1
which arise out of the inclusion of any untrue information in, or the omission of
any required information from, the Circular;
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9.2
which arise directly out of the carrying out by or on behalf of BSCM or any of
the Underwriters of that party’s obligations under or in connection with this
Agreement, save for those which arise from the breach by any of the
Underwriters of any law or contract;
9.3
which arise out of an actual breach by DRDGOLD of any provision of this
Agreement;
9.4
which arise out of the failure or alleged failure by DRDGOLD to comply with all
applicable laws and regulations in any jurisdiction in which the Claw-back
Offer is made in relation to the Claw-back Offer; or
9.5
which arise in any other connection with the Claw-back Offer, save for those
which arise from the breach by any of the Underwriters of any law or contract.
10.
UNDERTAKINGS BY DRDGOLD
DRDGOLD hereby undertakes that it will not, without the prior written consent of
BSCM (which consent shall not be unreasonably withheld or delayed), in the 6 (six)
months following the Signature Date:
10.1
issue in the aggregate such number of ordinary shares as exceeds 5% (five
per cent) of the total number of shares in the issued share capital of
DRDGOLD as at the Signature Date, provided that:
10.1.1
this provision shall not apply to any shares which are to be issued in
terms of any other agreement entered into by DRDGOLD with BSCM
or any of the Underwriters, nor shall such shares be reckoned for the
purposes of determining the aggregate number of ordinary shares
which are issued during this period;
10.1.2
this provision shall not apply to any shares which are to be issued
under the DRDGOLD Share Option Scheme or issued pursuant to the
exercise of options granted in terms thereof, nor shall such shares be
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reckoned for purposes of determining the aggregate number of
ordinary shares which are issued during this period; and
10.1.3
this provision shall not apply to any shares which are to be issued as
repayment under any contract of loan or other debt facility entered into
prior to the Signature Date, nor shall such shares be reckoned for
purposes of determining the aggregate number of ordinary shares
which are issued during this period;
10.2
borrow, in the aggregate, more than 5% (five per cent) of the value of its
market capitalisation at the time at which such borrowing is to be made, which
borrowings shall be calculated with the exclusion of DRDGOLD’s current debt
facilities of US$50 000 000 (fifty million United States Dollars).
11.
BREACH
11.1
If any of the Underwriters breaches any of the provisions of clause ?3 and fails
to remedy such breach within 2 (two) days after receiving written demand from
DRDGOLD to do so, DRDGOLD shall be entitled to cancel this Agreement on
written notice to BSCM (such that the provisions of clause 2.5 shall take
effect).
11.2
Subject to the provisions of clause 11.1, if any Party (“the defaulting Party”)
commits any breach of this Agreement, then no other Party shall be entitled to
cancel it unless the breach is material and goes to the root of the contract and
cannot be remedied adequately by the payment of damages and, being such
a breach, it is not remedied or is not capable of being remedied by specific
performance within a reasonable time (which shall not be less than 30 (thirty)
days) after the defaulting Party receives written notice from any other Party to
remedy the breach.
11.3
The respective remedies of the Parties in terms of this clause 11 shall not be
exhaustive and shall be in addition and without prejudice to any other
remedies they may have under or in consequence of this Agreement.
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12.
ADDRESSES FOR LEGAL PROCESSES AND NOTICES
12.1
The Parties choose for the purposes of this Agreement the following
addresses, telefax numbers and email addresses:
12.1.1
BSCM and each of the Underwriters:
Kingsbury House
15-17 King Street
London SW1Y 6QU
United Kingdom
Fax: +44207 389 8222
12.1.2
DRDGOLD:
45 Empire Road
Parktown
Johannesburg
South Africa
2193

Fax: +27-11-482 1022
12.2
Any legal process to be served on a Party may be served on it at the address
specified for it in clause 12.1 and the Parties choose that address as their
domicilium citandi et executandi for all purposes under this Agreement.
12.3
Any notice or other communication to be given to the Parties in terms of this
Agreement shall be valid and effective only if it is given in writing, provided
that any notice given by telefax or email shall be regarded for this purpose as
having been given in writing.
12.4
A notice to a Party which is sent by registered post in a correctly addressed
envelope to the address specified for it in clause 12.1 shall be deemed to
have been received (unless the contrary is proved) within 14 (fourteen) days
from the date it was posted, or which is delivered to the Party by hand at that
address shall be deemed to have been received on the day of delivery,
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provided it was delivered to a responsible person during ordinary business
hours.
12.5
Each notice by telefax or email to a Party at the telefax number or email
address specified for it in clause 12.1 shall be deemed to have been received
(unless the contrary is proved) within 4 (four) hours of transmission if it is
transmitted during normal business hours of the receiving Party or within 4
(four) hours of the beginning of the next Business Day at the destination after
it is transmitted, if it is transmitted outside those business hours.
12.6
Notwithstanding anything to the contrary in this clause 12, a written notice or
other communication actually received by a Party shall be adequate written
notice or communication to it notwithstanding that the notice was not sent to or
delivered at its chosen address.
12.7
A Party may by written notice to the other Party change its address, telefax
number or email address for the purposes of clause 12.1 to any other address
(other than a post office box number), telefax number or email address,
provided that the change shall become effective on the seventh day after the
receipt of the notice.
13.
GENERAL
13.1
Severance
If any provision of this Agreement, which is not material to its efficacy as a
whole, is rendered void, illegal or unenforceable in any respect under any
law, the validity, legality and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby and the Parties shall
endeavour in good faith to agree to an alternative provision to the void, illegal
or unenforceable provision.
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13.2
Survival of Rights, Duties and Obligations
Termination of this Agreement for any cause shall not release a Party from
any liability which at the time of termination has already accrued to such Party
or which thereafter may accrue in respect of any act or omission prior to such
termination.
13.3
Whole Agreement
This Agreement (together with any documents referred to in this Agreement)
supersedes any previous agreement between the Parties in relation to the
matters dealt with in this Agreement and represents the entire understanding
between the Parties in relation to the matters dealt with in this Agreement.
13.4
Waiver and Forbearance
The rights of any Party shall not be prejudiced or restricted by any indulgence
or forbearance extended to another Party and no waiver by any Party in
respect of any breach shall operate as a waiver in respect of any subsequent
breach.
13.5
Non Variation
Save as otherwise expressly provided no agreement to amend, add to or
otherwise vary or waive any provisions of this Agreement or to cancel or
terminate it shall be effective unless made in writing and duly signed by the
Parties or on their behalf by their duly authorised agents.
13.6
Assignment
13.6.1
Save as otherwise expressly provided in this Agreement, and more
particularly in clause 13.6.2, no Party may cede or delegate any of its
rights or obligations hereunder without the prior written consent of the
other Parties.
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13.6.2
Notwithstanding clause 13.6.1, any Underwriter may cede and
delegate, in whole or in part, any of its rights and obligations to any one
or more of the other Underwriters, subject only to prior written
notification to all the other Parties and to the rights ceded and
obligations delegated being dealt with as indivisible from each other, so
that no right may be ceded without delegation of the corresponding
obligations or vice versa.
13.7
Further Assurance
Each Party shall co-operate with the other Party and execute and deliver to
the other Party such other instruments and documents and take such other
actions as may be reasonably requested from time to time in order to carry
out, evidence and confirm its rights and the intended purpose of this
Agreement.
13.8
Counterparts
This Agreement may be signed in any number of counterparts, all of which
taken together shall constitute one and the same instrument. A Party may
enter into this Agreement by signing any such counterpart.
13.9
Announcements
13.9.1
Subject to clause 13.9.2, no announcement, communication or
circular concerning the transaction referred to in this Agreement shall
be made or despatched at any time (whether before or after the
implementation of this Agreement) by any Party without the prior
written consent of the other Parties (such consent not to be
unreasonably withheld or delayed).
13.9.2
Where the announcement, communication or circular is required by
law or any regulation or rule of any stock exchange or other
regulatory authority, it shall be made by the Party concerned only
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after reasonable consultation, if practicable, with the other and, so far
as practicable, taking into account the reasonable requirements (as to
timing, contents and manner of making or despatch of the
announcement, communication or circular) of the other.
13.10
Confidentiality
13.10.1
Any communication between DRDGOLD and any of the other Parties which is
marked confidential or which is of a commercially sensitive, proprietary or
confidential nature will be kept strictly confidential by the Party receiving such
communication.
13.10.2
Each Party shall take reasonable precautions to ensure that its officers and
employees and the officers and employees of each of its subsidiaries comply
with the provisions of this clause and that none of such individuals discloses
any term of this Agreement, or discloses or uses any confidential information
which it acquires in connection with this Agreement or in connection with the
negotiations leading up to the same, unless the other Parties agree.
13.10.3
Nothing in this clause will prevent the disclosure of any information where the
same has been disclosed or might reasonably be expected to be disclosed in
any circular to shareholders or other public document or where required by
law or any regulation or rule of any stock exchange or other regulatory
authority, save that in the latter event, such disclosure shall be made by the
party concerned only after reasonable consultation, if practicable, with the
other and, so far as practicable, taking into account the reasonable
requirements (as to timing, contents and manner of making or despatch of
such disclosure) of the other.
13.11
Remedies
No remedy conferred by this Agreement is intended, unless specifically
otherwise stated, to be exclusive of any other remedy which is otherwise
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available at law, by statute or otherwise. Each remedy shall be cumulative
and in addition to every other remedy given hereunder or now or hereafter
existing at law, by statute or otherwise. The election of any one or more
remedy by any of the Parties shall not constitute a waiver by such Party of the
right to pursue any other remedy.
13.12
Good Faith
Each of the Parties undertakes with the other to do all things reasonably
within its power, which are necessary or desirable to give effect to the spirit
and intent of this Agreement.
13.13
Governing Law and Jurisdiction
13.13.1
This Agreement shall be governed by and construed in accordance
with the laws of the Republic of South Africa.
13.13.2
The Parties submit themselves to the non-exclusive jurisdiction of the
Witwatersrand Local Division of the High Court of the Republic of
South Africa.
14.
COSTS
14.1
DRDGOLD shall bear the stamp duty or uncertificated securities tax payable
upon the issue of the Offer Shares.
14.2
DRDGOLD will bear the costs in connection with the preparation and
execution of this Agreement and related documents, including the reasonable
costs of BSCM’s legal and other professional advisers in reviewing the same.
14.3
Any costs incurred by any Party arising out of the breach by another Party of
any other provisions of this Agreement, shall be borne by the Party found to
be in breach as between attorney and own client.
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SIGNED at Johannesburg on 5
th
April 2005 .
For    DRDGOLD LIMITED
/s/ Ian Murray
who hereby warrants that he or she is duly
authorised to sign this Agreement.
Signatory: Ian Murray
Capacity: Director
Authority: Resolution
SIGNED at Johannesburg on 5
th
April 2005 .
For    BAKER STEEL CAPITAL MANAGERS LLP
(acting both as principal and as duly appointed
agent for each of the Underwriters)
/s/ BAKER STEEL CAPITAL MANAGERS LLP
who hereby warrants that he or she is duly
authorised to sign this Agreement.
Signatory:
Capacity:
Authority:
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SCHEDULE 1
LIST OF UNDERWRITERS
The following persons are the Underwriters and shall subscribe and pay for the number of
Offer Shares out below and shall be issued with the Offer Shares which are not subscribed
for pursuant to the Claw-back Offer in the percentage proportions set out below.
Underwriter
Number of
Offer Shares
Percentage
Genus Natural Resources Master Fund
5 268 039
33.4%
Genus Dynamic Gold Fund
5 900 204
37.3%
CF Ruffer Baker Steel Gold Fund
3 476 905
22.0%
P&C Global Gold & Natural Resources Fund Limited
1 158 968
7.3%
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SCHEDULE 2
WARRANTIES GIVEN BY DRDGOLD
(clause 8.1)
DRDGOLD gives the following warranties to the Underwriters. These warranties apply as at
the Signature Date.
1.
all legal requirements regarding the Claw-back Offer to which DRDGOLD is subject
will be complied with, including that:
a. the Offer Shares have been validly created; and
b. the directors of DRDGOLD are empowered to allot and issue the Offer Shares
and that such allotment and issue will be free from any lien or other encumbrance.
2.
DRDGOLD has the right, power and authority, and has taken all action necessary, to
execute, deliver and exercise its rights, and perform its obligations, under or
otherwise pursuant to this Agreement.
3.
DRDGOLD’s obligations under or otherwise pursuant to this Agreement are binding
on DRDGOLD.
4.
the entry into and performance by DRDGOLD of its obligations pursuant to this
Agreement do not and will not:
a. conflict in any material respect with any law or regulation or judicial or official
order binding on DRDGOLD;
b. conflict with the constitutional documents of DRDGOLD; or
c. conflict in any material respect with any document which is binding on
DRDGOLD.
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25
5.
DRDGOLD has all corporate authorities (including from its shareholders) required for
it to perform its obligations hereunder.
6.
DRDGOLD is not insolvent or unable to pay its debts and no order has been made,
petition presented or resolution passed by DRDGOLD for the winding up of
DRDGOLD nor has any receiver or manager been appointed over the whole or any
part of DRDGOLD’s business or assets
7.
the audited consolidated balance sheet of DRDGOLD and its subsidiary undertakings
(the “DRDGOLD group”) as at 30 June 2004 and the audited consolidated profit and
loss account of the DRDGOLD group for the financial year ended on such date
(including the notes thereto) give a true and fair view of the state of affairs of the
DRDGOLD group at such date and of their profits for the year ended on that date and
were prepared in accordance with South African generally accepted accounting
principles in South Africa consistently applied and comply with applicable legislation.
8.
the published interim results of the DRDGOLD group for the six month period ended
on 31 December 2004 have been prepared in terms of South African GAAP with all
due care and attention (having regard to the fact that the interim results are unaudited
but have been reviewed by DRDGOLD’s auditors) and on accounting bases and
assumptions consistent with those adopted in the preparation of the audited
consolidated balance sheet of the DRDGOLD group as at 30 June 2004 and the
audited consolidated profit and loss account of the DRDGOLD group for the financial
year ended on that date.
9.
since 31 December 2004, the business of the DRDGOLD group has been carried on
in the ordinary and usual course, no contracts or commitments of any unusual or
onerous nature have been entered into and there has been no significant adverse
change in the financial or trading position or, to the best of DRDGOLD’s knowledge,
information and belief, prospects of the DRDGOLD group taken as a whole; save in
all cases for what has been disclosed to BSCM in writing.
10.
all statements of fact contained in any document or announcement issued or made by
or on behalf of DRDGOLD to its shareholders since 31 December 2004 remain true
and accurate and not misleading and all forecasts and estimates and all statements
BACKGROUND IMAGE






26
of opinion, intention and expectation contained therein were made on reasonable
ground after due and proper consideration.
11.
the business plan prepared by DRDGOLD and dated 3 March 2005, a copy of which
has been disclosed to BSCM, has been prepared with all due care and attention and
all statements of fact contained therein were when made and remain true and
accurate and not misleading and all forecasts and estimates and all statements of
opinion, intention and expectation contained therein were made on reasonable
ground after due and proper consideration.
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27
SCHEDULE 3
WARRANTIES GIVEN BY THE UNDERWRITERS AND BSCM
(clause
8.2)
Interpretation
Terms used in this Schedule 3 have the meaning given to them by Regulation S under the
US Securities Act of 1933, as amended (the “Securities Act”), or the state securities laws of
any US State.
Warranties
Each of the Underwriters and, where applicable, BSCM, severally gives the warranties set
out below regarding itself and its affairs as at the Signature Date to DRDGOLD:
1.
BSCM warrants that, as at the Signature Date, it is duly authorised to enter into this
Agreement as agent for each of the Underwriters.
2.
No Underwriter is a U.S. person and if DRDGOLD issues any of the Offer Shares to
an Underwriter under this Agreement, that Underwriter will acquire those shares in an
offshore transaction pursuant to Regulation S. If an Underwriter decides to offer,
resell, pledge or otherwise transfer any of the Offer Shares, it will only do so in an
offshore transaction in accordance with the provisions of Rule 903 of Regulation S.
3.
No sale, pledge, resale or other transfer of any of the Offer Shares which may be
delivered hereunder has been or will be made so as to transfer any of the Offer
Shares issued under this Agreement into the United States or to or for the account or
benefit of a U.S. person.
4.
No Underwriter, nor any of its affiliates nor any persons acting on behalf of it has
engaged, or will engage in any directed selling efforts with respect to any of the Offer
Shares (it being acknowledged that this warranty does not apply with respect to
actions of DRDGOLD or its affiliates). Each Underwriter and each of its affiliates and
any person acting on their behalf have complied and will comply with the offering
restriction requirements of Regulation S.
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28
5.
Each Underwriter understands that any of the Offer Shares issued under this
Agreement:
a. have not been and will not be registered under the Securities Act;
b. may not be offered or sold within the United States or to, or for the account or
benefit of, a U.S. person; and
c. may only be resold in accordance with Regulation S under the Securities Act.
6.
Each Underwriter represents and agrees that it will only offer and sell any of the Offer
Shares as part of its distribution in accordance with Rule 903 of Regulation S, under
the Securities Act until after the end of the Distribution Compliance Period.
7.
No Underwriter shall, at or prior to confirmation of a sale of Shares issued under this
Agreement and pursuant to Regulation S, have sent to each distributor, dealer or
person receiving a selling concession, fee or other remuneration in respect of any of
the Offer Shares before the expiration of the Distribution Compliance Period a
confirmation or notice to substantially the following effect:
“The Shares covered by this notice have not been registered under the United
States Securities Act of 1933 (the “Securities Act”) and may not be offered or
sold or transferred within the United States or to or for the account or benefit of
U.S. persons (i) as part of their distribution, at any time and (ii) otherwise, until
after the expiration of 40 days from the later of completion of the distribution of
any of the Offer Shares issued or issuable under this Agreement, as determined
by the Underwriter concerned and certified to DRDGOLD Limited, except in either
case in accordance with Rule 903 of Regulation S under the Securities Act. The
Shares covered by this notice may not be deposited in any unrestricted American
Depository Receipt Program relating to the Shares. You must not directly or
indirectly engage in any short selling or hedging transaction with regard to the
Shares, except as permitted by the US federal securities laws, Nasdaq Rules,
JSE Requirements and the regulations thereunder. Terms used above have the
meaning given to them by Regulation S.”
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29
8.
Each Underwriter agrees that it will not directly or indirectly engage in any short
selling or hedging transactions with regard to any of the Offer Shares except as
permitted under the US federal securities laws, Nasdaq Rules, JSE Requirements
and the regulations thereunder.
9.
Distribution Compliance Period
"Distribution Compliance Period" means a period that begins when any of the Offer
Shares are first issued by DRDGOLD under this Agreement and continues until after
the expiration of 40 days from completion of the distribution DRDGOLD. Each
Underwriter will give DRDGOLD written notices of the beginning of the 40 day
Distribution Compliance Period at least 3 Business Days before the beginning of the
Distribution Compliance Period and a copy of the Underwriter certification of the date
of completion of the distribution of the Shares within one business day of that
completion.
10.
Delivery of Shares
Each Underwriter hereby acknowledges and agrees that it and any distributor of any
of the Offer Shares will not take delivery, in whole or in part, until they provide
DRDGOLD with:
a. (i) a written certification that they are not a U.S. person and that the
Agreement has not being executed on behalf of a U.S. person; or (ii) a written
opinion of counsel, reasonably acceptable to DRDGOLD, to the effect that the
Agreement and the Shares deliverable thereunder have been registered
under the Securities Act (it being acknowledged that DRDGOLD has no
obligation to register any of the Offer Shares) or are exempt from registration
thereunder (it being acknowledged that any of the Offer Shares are not
eligible for resale under Rule 144A under the Securities Act); and
b. a written certification that it is not executing the Agreement within the United
States and that any of the Offer Shares are not to be delivered within the
United States, except as otherwise permitted by Rule 903 of Regulation S,
BACKGROUND IMAGE






30
unless any of the Offer Shares are registered under the Securities Act or an
exemption from such registration is available (it being acknowledged that any
of the Offer Shares are not eligible for resale under Rule 144A under the
Securities Act).
11.
If any of the Offer Shares may be delivered in one or more parts, the Underwriter
concerned will provide DRDGOLD with the items specified in clause ?0 above prior to
each delivery.
12.
Legend
a.
The shares issued to the Underwriters in terms of this Agreement will be
issued in certificated form, any certificate representing any of the Offer
Shares, in whole or in part, shall bear the following legend:
“The securities evidenced hereby have not been registered under the United
States Securities Act of 1933, as amended (the “Securities Act”), and,
accordingly, may not be offered, sold, pledged or otherwise transferred
within the United States or to, or for the account or benefit of, U.S. persons
except as set forth in the following sentence. By its acquisition hereof, the
holder (1) represents that it is not a U.S. person and is acquiring these
securities in an offshore transaction in compliance with Regulation S under
the Securities Act, (2) agrees that it will not offer, sell, pledge or otherwise
transfer these securities except (a) to DRDGOLD Limited ("DRDGOLD") or
any subsidiary thereof, (b) outside of the United States to a non-U.S. person
in an offshore transaction in accordance with Rule 903 or Rule 904 of
Regulation S, (c) pursuant to a registration statement which has been
declared effective under the Securities Act (and the holder understands that
DRDGOLD has no obligation to cause such a registration statement to
become effective) or (d) pursuant to an exemption from registration under
the Securities Act (and the holder understands that these securities are not
eligible for resale pursuant to Rule 144A under the Securities Act), in each
case in accordance with any applicable securities laws of any state of the
United States, (3) agrees that these securities may not be deposited in any
unrestricted American Depositary Receipt Program relating to these
BACKGROUND IMAGE






31
securities (a) as part of the distribution of these securities, at any time (b)
otherwise, until after the expiration of 40 days from the completion of the
distribution of the Shares issued or issuable under the Agreement between
DRDGOLD and Baker Steel Capital Managers LLP on behalf of certain of its
associated funds (“the Underwriter”), as determined by the Underwriter and
certified to DRDGOLD, and, in the case of (c), in accordance with applicable
United States federal and state securities laws, (4) agrees that it will deliver
to each person to whom this security or an interest therein is transferred a
notice substantially to the effect of this legend, and (5) agrees that it will not
directly or indirectly, engage in any short selling or hedging transaction with
regard to this security or any American Depositary Receipt relating to this
security except as permitted by the US federal securities laws, Nasdaq
Rules, JSE Requirements and the regulations thereunder. As used herein,
the terms “offshore transaction”, “United States” and “U.S. person” have the
meanings given to them by Regulation S under the Securities Act.”
b.
In addition to the legend set forth in Section ?0 above, any certificate
representing the rights and obligations under this Agreement, in whole or in
part, shall also bear the following legend:
“The securities to be issued upon the execution of this Agreement have not
been registered under the Securities Act and the rights and obligations under
this Agreement may not be exercised in the United States or by or on behalf
of any U.S. person unless registered under the Securities Act or unless an
exemption from such registration is available.”
13.
Each Underwriter understands that the shares issued under this Agreement will be
issued to them in reliance on specific exemptions from the registration requirements
of United States federal and state securities laws, that any of the Offer Shares have
not been registered with any state or federal securities commissions and that
DRDGOLD is relying upon the truth and accuracy of the representations, warranties,
acknowledgments and agreements set forth herein in order to determine the
applicability of such exemptions.
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32
14.
Each Underwriter acknowledges for itself and each of its affiliates and any person
acting on behalf of any of them that, in connection with this Agreement, any of the
Offer Shares or the American Depositary Receipts evidenced by such Shares, they
have not and will not, directly or indirectly, engage in any transaction or series of
transactions that, although in technical compliance with Regulation S (a) is part of a
plan or scheme to evade the registration provisions of the Securities Act, or (b) would
require registration of any of the Offer Shares under the Securities Act.
15.
In respect of transfers and subsequent purchasers, DRDGOLD and each Underwriter
agree that neither party may transfer the rights and obligations conferred by this
Agreement, in whole or in part, without the prior written consent of the non-
transferring party and that any transfer of the rights and obligations conferred by this
Agreement, in whole or in part, will be made in accordance with Regulation S. Each
Underwriter agrees that, in addition to the restrictions on resale contained herein and
before the expiration of the Distribution Compliance Period, it may not transfer any
portion of any of the Offer Shares to any party unless such party enters into an
agreement with DRDGOLD containing representations, warranties and restrictions on
resale substantially similar to those contained herein.
BACKGROUND IMAGE

EXHIBIT 4.84
Memorandum of Agreement
Made and entered into between:-
DRDGOLD LIMITED
(
Reg No 1901/000926/06)
(a company duly incorporated in accordance with the company laws of the Republic of South
Africa with limited liability, herein represented by Daniel Pretorius, he being duly authorised hereto
under and by virtue of a resolution of the board of directors of the company passed at
Johannesburg on the day 31   of August 2005, and a certified copy whereof is annexed hereto
st
 
marked "A");
of the one part;
and
 
BACKGROUND IMAGE
SIMMER & JACK MINES LIMITED
(Reg No 1924/007778/06)
(a company duly incorporated in accordance with the company laws of the Republic of South
Africa with limited liability, herein represented by Roger Kebble, in his capacity as a director
thereof, he being duly authorised hereto under and by virtue of a resolution of the board of
directors of the company passed at Johannesburg on the 31
ST
day of August 2005, and a certified
copy whereof is annexed hereto marked ‘B’).
and
jointly of the other part
.

1.1
In the AGREEMENT, unless inconsistent with the context, the following terms
Page 2
SIMMER & JACK INVESTMENTS (PROPRIETARY) LIMITED
(Reg No 1981/002168/07)
 
(a company duly incorporated in accordance with the company laws of the Republic of South
Africa with limited liability, herein represented by Gordon Trevlyn Miller, in his capacity as a
director thereof, he being duly authorised hereto under and by virtue of a resolution of the board of
directors of the company passed at Johannesburg on the 31
st
day of August 2005, and a certified
copy whereof is annexed hereto marked"C")

1.
Definitions
and/or expressions shall have the separate meanings assigned to them
hereunder and for purposes of convenience the said definitions are reflected
throughout the AGREEMENT in capitals:-
 
.
 
BACKGROUND IMAGE
1.1.1
1.1.2
1.1.3
Page 3
"AGREEMENT"
shall mean this agreement between the
PARTIES and shall be deemed to
include all annexes thereto which shall
be initialed or signed, as the case may
be, by the PARTIES for purposes of
identification;
"
ANGLOGOLD
"
shall mean Anglogold Ashanti Limited
and shall be deemed to include its
subsidiary and associate companies
and its/their respective successors in
title or assigns;
"
ANGLOGOLD
APPLICATION"
shall mean the motion court
proceedings instituted in the COURT
under case No 7655/05 by
ANGLOGOLD as applicant and DRD
BUFFELSFONTEIN, STILFONTEIN,
HARMONY, The Minister of Minerals
and Energy, The Minister of Water
Affairs and Forestry, The Minister of
Environmental Affairs and Tourism and
HARTEBEESTFONTEIN as the First to
Eighth Respondents inclusive, in
connection with the relief sought for the
continued
pumping and extraction of

BACKGROUND IMAGE
1.1.4
1.1.5
"
ATTORNEYS
"
"
BUFFELSFONTEIN
"
Page 4
underground
water in the mines therein
referred to, and a copy of which Notice
of Motion is annexed hereto marked “D”,
shall mean Levy, Feinsteins &
Associates Incorporated, practicing
under the style of "Feinsteins" , of
Johannesburg;
shall mean Buffelsfontein Gold Mines
Limited (Reg No 1995/010072/06) (in
provisional liquidation) (and shall be
deemed to include its successors in
title), the authorised share capital
whereof is R200 000,00 (two hundred
thousand rand) divided into 20 000 000
(twenty million) ordinary par value
shares of R0,01 (one cent) each and
the issued share capital whereof is
R130004,60 (one hundred and thirty
thousand and four rand sixty cents)
divided into 13000460 (thirteen million
and four hundred and sixty) ordinary par
value shares of R 0,01 (one cent) each,
the registered and beneficial owner
BACKGROUND IMAGE
1.1.6
Page 5
whereof is DRD;
"
CLAIMS
"
shall mean all or any claims of
whatsoever nature or howsoever arising
against DRD at any time after the
CLOSING DATE (save in the case of
the DWAF DIRECTIVES which shall
apply to any claims after the earlier of
31 October 2005 or the CLOSING
DATE) by one, more or all of the
following, namely:-
1.1.6.1
ANGLOGOLD
;
1.1.6.2
BUFFELSFONTEIN
;
1.1.6.3
HARMONY
;
1.1.6.4
HARTEBEESTFONTEIN
;
1.1.6.5
STILFONTEIN
,
directly
or
indirectly
arising from:-
•
the DWAF DIRECTIVES, now
extant or which may hereafter

BACKGROUND IMAGE
1.1.7
1.1.8
1.1.9
Page 6
come into being; and/or
•
the
ANGLOGOLD APPLICATION;
and/or
•
the
REHABILITATION OBLIGATIONS:
"
CLOSING DATE
"
shall mean the date of the
implementation of the provisions of
clause 9 infra, which shall as near as
possible correspond to the date of the
fulfillment of the last of the conditions
precedent in clause 3 infra or at latest 3
(three) business days thereafter;
"COMPANIES"
shall mean S&J and S&J INV, whose
rights and obligations under the
AGREEMENT shall be joint, several
and in solidum;
"COURT"
shall mean the High Court of South
Africa (Witwatersrand Local Division);

1.1.10      "DME"
shall mean the Department of Minerals
and Energy of the Government of the

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1.1.11     "DRD”"

1.1.12     "DWAF"

1.1.13     "DWAF DIRECTIVES"
Page 7
Republic of South Africa;
shall mean DRDGold Limited and shall
be deemed to include its successors in
title;
shall mean the Department : Water
Affairs and Forestry of the Government
of the Republic of South Africa;
shall mean the directives emanating from
DWAF in terms of Section 19(3) of the
WATER ACT , now extant [as per those
directives dated 13 April 2005, 15 April
2005, 7 May 2005 and 30 June 2005, and
copies whereof are annexed hereto marked
"E(1)" to "E(4)" respectively and shall
be deemed to include any directives by
DWAF supplemental thereto and/or in
variance thereof and/or in substitution
therefor and relating to the KOSH AREA
MINES and all future directives, against
DRD in respect of water management in the
KOSH AREA MINES;
BACKGROUND IMAGE
shall collectively mean those assets of

1.1.14    "EXCLUDED ASSETS"

1.1.15    "HARMONY"

1.1.16    "HARTEBEEST-
FONTEIN

1.1.17     "INDEMNITY"

1.1.18     "INTERIM
AGREEMENT"
Page 8
BUFFELSFONTEIN excluded from the
SCHEME OF ARRANGEMENT and as
more fully identified in Annexe "F"
hereto;
shall mean Harmony Gold Mining
Company Limited and shall be deemed
to include its subsidiary and associate
companies and its/their respective
successors in title or assigns
shall mean Hartebeestfontein Gold
Mining Company Limited and shall be
deemed to include its successors In
title, a wholly owned subsidiary of
BUFFELSFONTEIN;
shall mean the indemnification to be
furnished by the COMPANIES in favour
of DRD against the CLAIMS as more
fully provided in clause 8 infra;
shall mean the preliminary agreement
entered into between BUFFELS-
FONTEIN and the COMPANIES at

BACKGROUND IMAGE

1.1.19 " KOSH AREA MINES"

1.1.20 " LIQUIDATORS "

1 .1 .21 " MINERAL LAWS"
Page 9
Johannesburg on 7 July 2005 and shall
be deemed to incorporate the
supplemental agreement between the
same parties dated 28 July 2005
;
shall mean the mines in the Klerksdorp
/Orkney/ Stilfontein / Hartebeestfontein
areas In the Northern Province
commonly known as the "Kosh area"
and which constitute the subject matter
of the DWAF DIRECTIVES;
shall mean Barend Petersen, Norman
Klein and Segopotje Sheila Mphahlele,
The provisional liquidators of
BUFFELSFONTEIN, duly appointed
thereto by the Master of the High Court
on 30 March 2005 under Certificate of
Appointment No G280/05;
shall collectively mean:-
1.1.21.1
the Minerals Act, No 51 of
1991 ;
1.1.21.2
the Mineral and Petroleum
Resources Act, No 28 of
BACKGROUND IMAGE

1.1.22 " NORTH WEST
OPERATIONS"

1.1.23 " PARTIES "

1.1.24 " REHABILITATION
OBLIGATIONS"
Page 10
2002; and
1.1.21.3
all regulations promulgated
pursuant thereto;
shall collectively mean the individual
business units of BUFFELSFONTEIN,
known as the Harties Division and the
Buffels Division, the former comprising
shafts #2, #5, #6, #7 and #8 and the
latter shafts #9, #10 and #12,
incorporating two metallurgical
processing plants known as the North
and South Plants;
shall mean the three parties to the
AGREEMENT;
shall mean any obligations which would
directly or indirectly impact upon DRD in
relation to the NORTH WEST
OPERATIONS consequent upon DRD
being the holding company of
BUFFELSFONTEIN and the ultimate
holding company of HARTEBEESTFONTEIN•
and whether such obligations
BACKGROUND IMAGE
1.1.25
"REHABILITATION
TRUST FUND "
1.1.26      "S&J"
1.1.27      "S&J INV
"
1.1 .28      "SANCTION"
1.1.29
"SANCTION DATE "
Page 11
directly or indirectly emanate from the
DME under the MINERAL LAWS
and/or under the ANGLOGOLD
APPLICATION or otherwise;
shall mean the trust fund established by
BUFFELSFONTEIN for the benefit of
the DME on account of the
REHABILITATION OBLIGATIONS ;
shall mean Simmer & Jack Mines
Limited and shall be deemed to include
its successors in title;
shall mean Simmer & Jack Investments
(Proprietary) Limited and shall be
deemed to include its successors in title
- a wholly owned subsidiary of S&J ;
shall mean the sanction of the
SCHEME OF ARRANGEMENT by the
COURT ;
shall mean the date of the registration in
the office of the Registrar of Companies
in terms of Section 311(6)(a) of the
BACKGROUND IMAGE
Page 12
Companies Act, No 61 of 1973, as
amended, of the Order of Court granting
the SANCTION;

1.1.30 "SCHEME OF
ARRANGEMENT":
shall mean the Scheme of Arrangement
to be proposed by S&J INV between
BUFFELSFONTEIN and its creditors in
terms of Section 311 of the Companies
Act, No 61 of 1973, as amended, as set
forth in the draft thereof annexed hereto
and marked "G" or with such
amendments thereto as may be
determined by the LIQUIDATORS
and/or DRD In their reasonable
discretion;
1.1.31 "SHARES"
shall mean the 13 000 460 (thirteen
million four hundred and sixty) ordinary
par value shares of R 0,01 (one cent)
each in the capital of
BUFFELSFONTEIN, the registered and
beneficial owner whereof is DRD
1.1 .32 "STILFONTEIN"
shall mean Stilfontein Gold Mining
Company Limited and shall be deemed
BACKGROUND IMAGE
Page 13
to include its subsidiary and associate
companies and its/their respective
successors in title or assigns;

1.1.33 "WATER ACT"
shall mean The National Water Act, No
36 of 1991;

1.1.34 "WATER PUMPING
AGREEMENT"
shall mean the Memorandum of
Agreement entered
into between
STILFONTEIN and HARTEBEEST-
FONTEIN at Johannesburg on 25
November 1991, relating to the
pumping of water at STILFONTEIN's
Margaret and Scott Shafts and Western
Sub Incline Shaft.

1.2
Words importing:-
1.2.1
.
the singular shall include the plural and vice versa;
1.2.2
anyone gender shall include the others;
1.2.3
persons shall, where the context admits, include firms or
corporations
.
1.3
Where figures are referred to in numerals and, words , then the latter shall
prevail in the event of any dispute
.
BACKGROUND IMAGE
Page 14

1.4
Any reference to a statute, regulation or other legislation shall be a reference to
such statute, regulation or other legislation as at the date of signature of these
presents and as amended or substituted from time to time.

1.5
When any number of days is prescribed in the AGREEMENT, same shall be
reckoned exclusively of the first and inclusively of the last day unless the last
day falls on a Saturday, Sunday or public holiday, in which case the last day
shall be the next succeeding day which is not a Saturday, Sunday or public
holiday.

1.6
The use of the word "including" followed by a specific example/s shall not be
construed as limiting the meaning of the general wording preceding it and the
eiusdem generis rule shall not be applied in the interpretation of such general
wording or such specific example/s.

1.7
Where any term is defined within a particular clause other than as set forth in
this clause 1, then that term shall bear the meaning ascribed to it in that clause
wherever it is used in the AGREEMENT.

1.8
The terms of the AGREEMENT having been negotiated, the contra
proferentem rule shall not be applied in the interpretation thereof.

1.9
Any term which refers to a South African legal concept or process (in no way
derogating from the generality thereof, for example "winding-up" or
"curatorship") shall be deemed to include a reference to the equivalent or
analogous concept or process in any other jurisdiction
BACKGROUND IMAGE
Page 15
AGREEMENT may apply or to the laws of which any party cited hereunder may
be or become subject.

2.
Recorded
It is recorded that
:-

2.1
DRD is and has at all material times hereto been the holding company of
BUFFELSFONTEIN, the latter in turn being the holding company of
HARTEBEESTFONTEIN;

2.2
BUFFELSFONTEIN at all times material hereto conducted the NORTH WEST
OPERATIONS which were severely damaged as a direct consequence of a seismic
event which took place on 9 March 2005;

2.3
as a result of such seismic event, BUFFELSFONTEIN was placed in
provisional liquidation on 22 March 2005 and the LIQUIDATORS were appointed
thereto;

2.4
S&J has evidenced a desire to pursue the NORTH WEST OPERATIONS and
to such end the COMPANIES have concluded the INTERIM AGREEMENT with
BUFFELSFONTEIN to mine such operations on a limited basis pending the
acquisition of the business and assets thereof, alternatively pending the acquisition of
the SHARES and the submission of the SCHEME OF
ARRANGEMENT and Its SANCTION;

BACKGROUND IMAGE
Page 16

2.5
as a pre-requisite to pursuing the SCHEME OF ARRANGEMENT, the
COMPANIES are desirous of concluding an agreement with DRD for the
acquisition of the SHARES;

2.6
DRD is prepared to enter into a sale agreement with the COMPANIES subject
to the latter furnishing the INDEMNITY;

2.7
the PARTIES have reached agreement in principle in regard to the aforegoing
which is to be reduced to writing as more fully set forth hereafter
.

3.
Conditions Precedent

3.1
Notwithstanding anything to the contrary in the whole of the AGREEMENT
contained, it shall be conditional upon the fulfillment of the following conditions
precedent, to wit:-

3.1.1
the INDEMNITY not being withdrawn or varied prior to the
CLOSING DATE, when same shall become operative in
accordance with the provisions of clause 8 infra;

3.1.2
the delivery of the SHARES in negotiable form to the
ATTORNEYS to be held by them 'in trust' pending the arrival of the
CLOSING DATE, when same shall be released to S&J INV in
accordance with clause 9 infra;
BACKGROUND IMAGE
2.
Page 17

3.1.3
subject to the arrival of the CLOSING DATE, the written
confirmation by DWAF that the DWAF DIRECTIVES shall with
effect from the earlier of the CLOSING DATE or 31 October 2005,
be amended or re-issued so as to provide that DRD will from such
date be substituted by S&J on the basis, however, that any amount
payable pursuant to such directives will not result in any duplication
insofar as it pertains to S&J - by way of explanation the present
DWAF DIRECTIVES are against four parties and that the
introduction of S&J shall not be deemed to be, or treated as, a fifth
party but as an entity substituting DRD
;

3.1.4
the submission of the SCHEME OF ARRANGEMENT, its
SANCTION and the arrival of the SANCTION DATE
;

3.1.5
written confirmation that the WATER PUMPING AGREEMENT,
the cancellation whereof is a condition precedent under the SCHEME OF
ARRANGEMENT, shall be so cancelled by the parties thereto prior to the
SANCTION DATE;

3.1.6
the unconditional written approval of the Competition Commission
or the Competition Tribunal, as the case may be, in terms of Chapter 3 of the
Competition Act, No 89 of 1998, as amended, of the AGREEMENT and the
SCHEME OF ARRANGEMENT,
within a period of 120 days from the date of signature of the AGREEMENT.
-----
BACKGROUND IMAGE
Page 18

3.2
It is recorded that the conditions precedent are imposed for the benefit of all the
PARTIES and accordingly shall only be capable of being waived by them, in
whole or in part, upon the written concurrence of all the PARTIES.

3.3
Should any of the aforesaid conditions precedent not be fulfilled or waived
within the period aforesaid or within such extended period/s as the PARTIES
may from time to time in writing agree upon, then and in such event the
AGREEMENT shall ipso facto be and become null and void ab initio and the
PARTIES shall be obliged to restore each other as near as possible to the
status quo ante and none of the PARTIES shall have any claims against the
otherls of them save to the extent that there is a breach of the provisions of
clause 3.4 infra.

3.4
The PARTIES reciprocally warrant in favour of each other that they will use
their reasonable endeavours to procure timeous compliance with the conditions
precedent afore-referred to and to such end will upon written request sign all
reasonable documents and furnish all reasonable information
.

4. Warranties
by DRD
DRD represents and warrants in favour of the COMPANIES and upon the veracity
whereof the AGREEMENT shall be founded, that:-
4.1
it is the registered and beneficial owner of the SHARES;

BACKGROUND IMAGE
Page 19

4.2
the SHARES are unencumbered and it is accordingly entitled to sell same and
to deal therewith in accordance with the provisions of the AGREEMENT;

4.3
BUFFELSFONTEIN is the registered and beneficial owner of the total issued
share capital of HARTEBEESTFONTEIN and that such shares are under the
control of the LIQUIDATORS and constitute part of the EXCLUDED ASSETS.

5.

Companies' Acknowledgments
The COMPANIES acknowledge:-

5.1
that they have not in any manner been induced in any shape or form, be it by
representations by DRD or any other person acting on its behalf, to enter into
the AGREEMENT and that save for the aforesaid warranties, the
AGREEMENT shall not be founded upon any other warranties or
representations of whatever nature;

5.2
that the acquisition by S&J INV of the SHARES shall be "voetstoots" in all
respects and the implied warranty as to latent defects is expressly excluded;

5.3
that, subject to the arrival of the CLOSING DATE, S&J INV will acquire control
of BUFFELSFONTEIN and the underlying assets thereof, save and except the
EXCLUDED ASSETS, which shall remain under the control of those persons
to be appointed as Receivers pursuant to the SCHEME OF ARRANGEMENT;

BACKGROUND IMAGE
Page 20

5.4
that the granting of the INDEMNITY hereafter is fundamental to the conclusion
of the AGREEMENT and in the absence whereof DRD would not dispose of
the SHARES for the nominal consideration hereinafter referred to;

5.5
that they have made their own enquiries and undertaken their own due
diligence of and in connection with the ANGLOGOLD APPLICATION, the
DWAF DIRECTIVES, the REHABILITATION OBLIGATIONS and the
REHABILITATION TRUST FUND and the possible CLAIMS arising thereout
and that no warranties of whatsoever nature or howsoever arising have been
given by DRD to them of and in connection therewith;

5.6
that they shall be obliged to give effect to the INTERIM AGREEMENT until the
arrival of the SANCTION DATE or, in the event of the failure of the SCHEME
OF ARRANGEMENT, until such other date as the parties to the INTERIM
AGREEMENT may in writing agree upon;

5.7
that they shall give effect to their obligations under the SCHEME OF
ARRANGEMENT and will use their best endeavours to pursue same to finality
as expeditiously as possible after the signature of the AGREEMENT;

5.8
and agree that the obligations arising out of the DWAF DIRECTIVES insofar as
they apply to DRD shall, subject to the arrival of the CLOSING DATE, be
assumed and discharged by them retrospectively with effect from the earlier of
the CLOSING DATE or 31 October 2005, this notwithstanding anything to the
contrary in the whole of the AGREEMENT contained .
BACKGROUND IMAGE
3.
Page 21

6.     Sale
Subject to the timeous fulfillment or waiver of the conditions precedent and subject
further to the warranties, acknowledgments and the INDEMNITY as hereinbefore and
hereinafter referred to:-

6.1
DRD does hereby sell to S&J INV which does hereby purchase from it
"voetstoots", the SHARES, for the purchase consideration hereinafter referred
to; and

6.2
the benefits of and risks attaching to the acquisition of the SHARES shall pass
from DRD to S&J INV with effect from the CLOSING DATE.

7.
Purchase Consideration
The purchase consideration payable by S&J INV to DRD for the SHARES shall be the
sum of R1,00 (one rand) and payment whereof shall be effected on the CLOSING
DATE.

8.
Indemnity

8.1
The COMPANIES do hereby with effect from the CLOSING DATE indemnify,
hold harmless and absolve DRD against the CLAIMS and on the basis that:-
8.1.1
if DRD or the COMPANIES become aware of any matter which
give rise to any CLAIM , then notice thereof and all reasonable
BACKGROUND IMAGE
Page 22
details in connection therewith shall be given by the recipient of the
information to the other/s of them as soon as possible after the
recipient becomes aware thereof;

8.1.2
any such CLAIM shall not be compromised or settled without the
prior written consent of all the PARTIES;

8.1.3
the COMPANIES shall be entitled to dispute, resist or appeal any
CLAIMS and to control any proceedings arising out of the exercise of any of those
rights by the COMPANIES provided that-
8.1.3.1
8.1.3.2
the COMPANIES shall as a pre-requisite thereto
indemnify DRD against all reasonable costs (including
legal costs on an attorney and own client scale),
charges, liabilities and expenses which may be
incurred by DRD directly or indirectly for the purposes
of or in connection with anything done by DRD in its
name in accordance with the provisions hereof; and
the COMPANIES shall keep DRD informed of the
manner in which they exercise their rights under this
indemnity and shall at all times exercise those rights in
such manner as DRD may reasonably require so as to
avoid or to minimise any further loss;
BACKGROUND IMAGE
Page 23

8.1.4
DRD shall make available to the COMPANIES such information
and assistance and sign all such documentation as may
reasonably be required by the COMPANIES for the purposes of
disputing, resisting, appealing, compromising or contesting any
such CLAIM;

8.1.5
the COMPANIES shall be obliged to furnish DRD with regular
monthly reports as to their progress with regard to any contested
CLAIM;

8.1.6
none of the PARTIES shall be entitled, without the prior written
consent of the other/s, to cede or assign any of its rights or
delegate any of its obligations arising out of this indemnity.

8.2
Notwithstanding anything to the contrary hereinbefore contained:-

8.2.1
should any CLAIM arise from the REHABILITATION
OBLIGATIONS, then and in such event the REHABILITATION
TRUST FUND which shall from the CLOSING DATE remain under
the control of BUFFELSFONTEIN, shall be utilised to off set, In
whole or in part, any such CLAIM; and

8.2.2
DRD shall in its sole and absolute discretion, if it evidences any
dissatisfaction of whatever nature of the manner in which any
CLAIM is being disputed, resisted, appealed against or contested in
any form by the COMPANIES, take over any such proceedings

BACKGROUND IMAGE
Page 24
and pursue the same to the final end and determination thereof
at the cost of the COMPANIES and shall be entitled to call for
the establishment of such deposits and/or bank guarantees as a
prerequisite thereto in order to off set any such costs as may be
incurred by DRD.

9.     Closing Date
On the CLOSING DATE, the PARTIES and/or their duly authorised representatives
shall meet at the offices of the ATTORNEYS and at which the following shall
contemporaneously take place:-

9.1
DRD shall deliver to the COMPANIES:-

9.1.1
via the ATTORNEYS (who shall release the same from trust), the
certificates in respect of the SHARES and the relevant share transfer
forms which shall be currently dated and duly completed to enable
transfer of the SHARES to be registered in the name of S&J INV;

9.1.2
the following appertaining to BUFFELSFONTEIN to the extent that
any of such documents are not already in the possession of the
LIQUIDATORS, alternatively shall procure in conjunction with the
LIQUIDATORS for the following to be handed to the COMPANIES :-
BACKGROUND IMAGE
9.2
9.1.2.1
9.1.2.2
9.1.2.3
9.1.2.4
9.1.2.5
Page 25
the original Memorandum and Articles of Association
or certified copies thereof;
the original Certificate of Incorporation or a certified
copy thereof;
the original title deed/s or certified copy/ies thereof in
respect of the immovable property/ies of which
BUFFELSFONTEIN is/are the registered owner,
including all mining titles in respect thereof;
the written resignations of the directors, secretary and
public officer of BUFFELSFONTEIN;

resolutions of the board of directors of
BUFFELSFONTEIN:-
9.1.2.5.1.   consenting to the transfer of the SHARES
to S&J INV;
9.1.2.5.2.   accepting the resignations of all the
directors, public officer and secretary of
BUFFELSFONTEIN and simultaneously
appointing the nominees of S&J INV in
their stead;
S&J INV shall effect payment of the purchase consideration.
BACKGROUND IMAGE
Page 26
10. Breach Provisions

10.1      Should any of the PARTIES commit a breach of any of the provisions of the
AGREEMENT which are applicable to it/them, either prior or subsequent to the
CLOSING DATE, then and in such event the aggrieved PARTY/IES shall be
obliged to afford the guilty PARTY/IES a period of 30 (thirty) days written notice
(calculated from the date of receipt thereof) within which to remedy the breach,
failing which the aggrieved PARTY/IES shall then be entitled at its/their sale
and absolute discretion, subject to 10.2 infra, to cancel the AGREEMENT and
claim damages, alternatively to abide thereby and claim damages without
prejudice to any other rights then vested in the aggrieved PARTY/IES in law.

10.2     Notwithstanding anything to the contrary in 10.1 supra, the aggrieved
PARTY/IES shall only be entitled to cancel the AGREEMENT if the breach is
of a material nature and strikes at the roots of the AGREEMENT and cannot
otherwise be reasonably remedied by monetary compensation, alternatively if
such compensation is claimed and not paid.
11. Adjudication of Disputes

11.1     Should any dispute arise between the PARTIES in regard to:-
11.1.1
the interpretation of;
11.1.2
the effect of;

BACKGROUND IMAGE
Page 27
11.1.3
the PARTIES' respective rights or obligations under;
11.1.4
a breach of;
11.1.5
the termination of;
11.1.6
any matter arising out of the termination of;
the AGREEMENT, that dispute shall be decided by arbitration in the manner
set out in this clause 11.
11.2    The arbitrator shall be appointed by the PARTIES, and failing agreement, shall
be nominated by the Arbitration Foundation of Southern Africa ("AFSA") out of
the nominees of the parties hereto. Should AFSA not be in existence at the
time, the nomination shall be made by the Chairman for the time being of the
Johannesburg Bar Council.

11.3     The arbitration shall be held at Sandton, Gauteng, and 'in camera' on the basis
that such proceedings will be strictly private and confidential.

11 .4    The arbitration shall be held in accordance with the Rules of AFSA, or if AFSA
shall not be in existence, in accordance with the formalities and procedures
settled by the arbitrator, which shall be in an informal and summary manner,
that is, it shall not be necessary to observe or carry out either the usual
formalities or procedures or the strict rules of evidence, and otherwise subject
as aforesaid to the Arbitration Act, 1965, of the Republic of South Africa and

any statutory modification or re-enactment thereof.
BACKGROUND IMAGE
Page 28

11.5     The arbitrator shall be entitled to:-
11.5.1
investigate or cause to be investigated any matter, fact or thing
which he considers necessary or desirable in connection with any
matter referred to him for decision;
11.5.2
decide the matters submitted to him according to what he
considers just and equitable in all the circumstances, having
regard to the purpose of the AGREEMENT; and
11.5.3
make such award, including an award for specific performance, an
interdict, damages or a penalty or the costs of arbitration or
otherwise, as he in his discretion may deem fit and appropriate.

11.6     The arbitration shall be held as expeditiously as possible after it is demanded
with a view to it being completed within 30 (thirty) days after it has been so
demanded.

11.7     This clause is severable from the remainder of the AGREEMENT and shall
therefore remain in effect even if the AGREEMENT is terminated.

11.8     Subject to the above provisions of this clause 11, the law governing the
AGREEMENT shall be South African law and the Court having jurisdiction to
enforce any award made under this clause shall be the Witwatersrand Local
Division of the High Court of the Republic of South Africa and all appeal courts
therefrom.
BACKGROUND IMAGE
Page 29
12. Clause Headings
The clause headings to the AGREEMENT are for reference purposes only and do not bear
upon the interpretation of the AGREEMENT. If any provision in a definition is a
substantive provision conferring rights or imposing obligations on any party,
notwithstanding that it is only in the definition, effect shall be given to it as if it were a
substantive provision in the body of the agreement.
13. Domicilia

13.1     The PARTIES hereby choose dom!cilia citand! et executandi for all purposes
under the AGREEMENT at the addresses set opposite their respective names
hereunder:-
13.1.1
DRD
care of the ATTORNEYS, 10th Floor, JD House, 27
Stiemens Street, Braamfontein, Johannesburg 2001 - telefax
number (011) 712-0700;
13.1.2
the COMPANIES - Mervyn Taback Inc, 26 Sturdee Avenue, Rosebank,
2196 (marked for the attention of Mr L van Staden) –
telefax number(011) 219 6500.

13.2     Any notice to any PARTY shall be addressed to such PARTY at its/their
domicilium aforesaid and either sent by telefax or delivered by hand. In the
case of any notice -
BACKGROUND IMAGE
Page 30
13.2.1
sent by telefax, it shall be deemed to have been received, unless
the contrary is proved, on the date of the successful transmission
thereof if a business day, otherwise the next following business
day;
13.2.2
delivered by hand, it shall be deemed to have been received,
unless the contrary is proved on the date of delivery, provided such
date is a business day or otherwise on the next following business
day.

13.3      Any PARTY shall be entitled, by notice to the other, to change its/their
domicilium to another address in the Republic of South Africa, provided that the
changes shall only become effective 14 (fourteen) days after service of the
notice in question.

13.4     Notwithstanding anything to the contrary herein before contained, a written
notice or communication actually received by one of the PARTIES from the
other, including by way of telefax transmission, shall be adequate written notice
or communication to such PARTY.
14.  Mutual Support
The PARTIES undertake at all times to render to each other every possible assistance
and to extend to each other the maximum co-operation for the purposes of attaining
the objects of the AGREEMENT.

BACKGROUND IMAGE
Page 31
15. No Indulgences
No extension of time or indulgence granted by any PARTY to the other/s shall be
deemed in any way to affect, prejudice or derogate from the rights of such PARTY/IES
in any respect under the AGREEMENT, nor shall it in any way be regarded as a
waiver of any rights hereunder, or a novation of the AGREEMENT.
16. Severability of Contract
In the event of any provisions of the AGREEMENT being invalid, such provision/s shall
be regarded as severable from the remainder of the AGREEMENT which shall remain
of full force and effect.
17. Whole Agreement
The AGREEMENT constitutes the entire contract between the PARTIES and no
amendment or consensual cancellation of the AGREEMENT or any provision or term
thereof, and no extension of time, waiver, relaxation or suspension of any of the
provisions or terms of the AGREEMENT, shall be of legal efficacy save insofar as the
same is reduced to writing and signed by the PARTIES.
BACKGROUND IMAGE
4.
Page 32

Thus done and signed by DRD at Johannesburg on this the 31   day of August 2005, in
st
 
the presence of the undersigned Witnesses. !
1.
For: DRDGold Limited
As
witnesses:-
2.
st
/s/ D Pretorius
Daniel Pretorius
General Manager : Corporate Services
duly authorised signatory -
Thus done and signed by S&J at Johannesburg an this the 31st day of August 2005, in
 
the presence of the undersigned witnesses.
As witnesses:-
For: Simmer & Jack Mines limited
1.
2.
Thus done and signed by S&J INV at Johannesburg on this the 31    day of August 2005, in 
 
the presence of the undersigned witnesses.
As witnesses:-
1.
For:
Simmer & Jack Investments
(Proprietary) Limited
2.
/s/ Simmer & Jack Mines limited
- director -
BACKGROUND IMAGE
EXTRACT FROM A RESOLUTION OF THE DIRECTORS OF DRDGOLD LIMITED PASSED ON 30
AUGUST 2005
Resolution No: 28/2005
DRDGOLD LIMITED
RESOLVED:
1.
THAT the Company enters into a written agreement with Simmer & Jack
Limited ("S & J) on the following terms:
(a)  That S&J acquires all of the Company's shares in Buffelsfontein Gold
Mines Limited for one rand (R1.00) as part of the offer of compromise and
scheme of arrangement in terms of section 311 of the Companies Act, 1973;
(b)  That the disposal as aforesaid is conditional upon S&J assuming all
existing and future obligations relating to the pumping and management
of underground water in the KOSH area and in particular that S&J
provides a full indemnity against liability in respect of, and an
undertaking to discharge on behalf of the Company, any award given
against the Company and in favour of AngloGold Ashanti Limited
("AngloGold") pursuant to the legal proceedings instituted by AngloGold
in the High Court of South Africa (Witwatersrand Local
Division) ;
(c)   That the agreement is further conditional; upon the Department of Water
Affairs & Forestry agreeing to substitute the Company with S&J in respect of
all future directives involving the management underground water issues in
the KOSH area.
6.
THAT either Mark Wellesley-Wood or Ian Murray in their capacities as
Directors or Niel Pretorius in his capacity as the Group Legal Counsel be
and is hereby authorized to sign the agreement on be half of the Company
or any other document intended to achieve the objectives stated under 1
above.


/s/ T Gwebu
Temba Gwebu
Company Secretary
BACKGROUND IMAGE
 
SIMMER AND JACK MINES, LIMITED
(Registration No.: 1924/007778/06)
("the Company")
RESOLUTION OF DIRECTORS
(In terms of the Articles of Association)
MEMORANDUM OF AGREEMENT BETWEEN DRDGOLD LIMITED, SIMMER AND
JACK MINES, LIMITED AND SIMMER AND JACK INVESTMENTS (PTY) LIMITED.
The Company wishes to Acquire the shares of Buffelsfontein Gold mines
Lim
i
ted (Reg. No. 1995/010072/06) (in provisional liquidation) through its wholly
owned subsidiary Simmer and Jack Investments (Pty) limited. In order to
conclude such agreement authority needs to be given to the directors to sign as
a representative of the company.
IT IS THEREFORE RESOLVED:
1.. THAT the company enters into an agreement with DRDGold Limited and Simmer and
Jack Investments (Pty) Limited upon the terms 2nd conditions contained in a draft of
such agreement which was tabled at this meeting.
2. THAT Roger Ainsley Ralph Kebble in his capacity as a director of the company be
and is hereby authorized to sign the agreement for and on behalf of the company.
/s/ R A R Kebble
R A R Kebble
/s/ G T Miller
G T Miller
/s/ B J Njenje
B J Njenje
/s/ J P Schumacher
J P Schumacher
/s/ V A Mkele
7
V A Mkele
31st August 2005
BACKGROUND IMAGE
8.
SIMMER AND JACK INVESTMENTS (PROPRIETARY) LIMITED
(Registration No.: 1981/002168/07)
("the Company")
RESOLUTION OF DIRECTORS
(In terms of the Articles of Association)
MEMORANDUM OF AGREEMENT BETWEEN DRDGOLD LIMITED:
SIMMER AND JACK MINES, LIMITED AND SIMMER AND JACK INVESTMENTS (PTY)
LIMITED.
________________________________________________________________________
The Company wishes to Acquire the shares of Buffelsfontein Gold
mines Limited (Reg. No. 1995/010072/06) (in provisional liquidation). In order
to conclude such agreement authority needs to be given to the directors to
sign as a representative of the company
.
IT IS THEREFORE RESOLVED :
1.
THAT the company enters into an agreement with DRDGold Limited and Simmer and
Jack Mines, Limited upon the terms and conditions contained in a draft of such
agreement which was tabled at this meeting
.
1. THAT Gordon Trevlyn Miller and/or John de Villiers Berry is hereby authorized to
sign the agreement for and on behalf of the company.
/s/ J Berry
/s/ G T Miller
31st August 2005
BACKGROUND IMAGE
Copy of notice of motion of ANGLOGOLD APPLICATION
(vide clause 1.1.3 supra)
Annexe "D"
BACKGROUND IMAGE
9.
IN THE HIGH COURT OF SOUTH AFRICA
(WITWATERSRAND LOCAL DIVISION) 7655/05
CASE NO.
In the matter between:
ANGLO GOLD ASHANTI LIMITED
and
DRDGOLD LIMITED
BUFFELSFONTEIN GOLD MINES
LIMITED (IN LIQUIDATION)
STILFONTEIN GOLD MINING COMPANY LIMITED
HARMONY GOLD MINING COMPANY LIMITED
THE MINISTER OF MINERALS AND
ENERGY
THE MINISTER OF WATER AFFAIRS AND FORESTRY
THE MINISTER OF ENVIRONMENTAL AFFAIRS AND
TOURISM
HARTEBEESFONTEIN GOLD MINING
COMPANY LIMITED
Applicant
First Respondent
Second Respondent
Third Respondent
Fourth Respondent
Fifth Respondent
Sixth Respondent
Seventh Respondent
Eighth Respondent
NOTICE OF MOTION

BACKGROUND IMAGE
 
Page 2
TAKE NOTICE THAT application will be made to the above Honourable Court at 10h00 on
Tuesday 12 April 2005 for an order in the following terms:

1.      Dispensing with the forms and service provided for in the rules and permitting the
Applicant to bring this application as one of urgency in terms of Rule 6(12).

2.      That a Rule Nisi be issued which Rule shall operate as an interim order, returnable
on a date to be determined by the above Honourable Court:
2.1
 
Directing the First Respondent and the" Second Respondent (duly
represented by its provisional liquidators), jointly and severally with
immediate effect to continue the pumping and extraction of underground
water at the following mines/shafts, and in the stated quantities:
2.1.1.
No 2 Shaft of Hartebeesfontein mine at the rate of 5,7
megalitres per day;
2.1.2
 
No 7 Shaft of Hartebeesfontein mine at the rate of 2,5
megalitres per day;
2.1.3.
Pioneer Shaft of Buffelsfontein at the rate of 2 megalitres per
day;

2.2.
Directing the First and Third Respondents, jointly and severally with
immediate effect to continue the pumping and extraction of underground
water at the following mines/shafts, and in the stated quantities:

BACKGROUND IMAGE
2.2.1 .
Page 3
Margaret Shaft of Stilfontein mine at the rate of 26 megalitres
per day;

2.3.
Ordering the Fifth Respondent in conjunction with the Seventh
Respondent immediately:
2.3.1.
2.3.2.
2.3.3.
To direct that the First and Second Respondents jointly and
severally, alternatively the First and Third Respondents, jointly
and severally. continue with pumping and extraction of
underground water at the mines and in the quantities set out
in paragraphs 2 and 2.2 above, such directives to be issued in
accordance with the provisions of Section 45 of the Mineral
and Petroleum Resources Development Act 28 of 2002 ("the
Minerals Act);
For the purposes of implementing the provisions of paragraph
2.1 and 2.2 above, to take the necessary steps to seize and
sell property of the First, Second and Third Respondents,
such steps to be taken in accordance with Section 45(2)(c) of
the Minerals Act;
In respect of the Second Respondent, to Instruct the Regional
Manager concerned to take necessary' measures to prevent
further pollution or degradation of the KOSH area, and to
make the area safe, in accordance with Section 46(1) of the
Minerals Act.
BACKGROUND IMAGE
2.4
Ordering the Sixth Respondent immediately in conjunction with the
Seventh Respondent
2.4.1.
To direct the First and Second Respondents jointly and
severally to continue with the pumping and extraction of
underground water at the mines and in the quantities referred
to in paragraph 2.1 above.
2.4.2.
To directing the First and Third Respondents jointly and severally to
continue with the pumping and extraction of
underground water at the mines and in the quantities referred
to in paragraph 2 above;
2.4.3.
Such directions to be in terms of Section 19 of the National
Water Act 36 of 1998 ("the Water Act").

3.     Upon the return day, directing that the relief in paragraph 2 above operate as
interim relief pending the final determination of this matter, by application or by
action (the action to be instituted within thirty days from date of grant of this order)
for final relief:

3.1.
Confirming the relief in paragraph 2;

3.2.
Directing the Fifth Respondent in conjunction with the Sixth and Seventh
Respondents, to take such steps as are necessary in terms of the
Minerals Act, the Water Act and the National Environmental Management
Act 107 of 1998 ("NEMA") to manage and control the extraction of
BACKGROUND IMAGE
Page 5

4.     Directing that the costs of this application be costs in the final relief.
5.     Granting the Applicant further and/or alternative relief.
TAKE NOTICE THAT if you intend opposing this application you are required to notify
the Applicant's attorney Mr T Dalrymple of Knowles Husain Lindsay at telephone
number (011) 269 - 7909 J 082 9041757, fax number (011) 883 -7518 by not later than
16h00 on Monday 11 April 2005;
Kindly place the matter on the ran for hearing accordingly.
DATED AT SANDTON ON THIS THE 11
th
DAY OF APRIL 2005
KNOWLES HUSAIN LINDASAY
Applicants attorneys
Ref: Mr T Dalrymple Tel: (011) 269 - 7909
Fax: (011) 883 - 7518
JOHN BROIDO
1724 Sanlam Centre
206/214 Jeppe Street
Johannesburg
Tel: 011 333 2141
TO:
THE REGISTRAR OF THE
ABOVE HONOURABLE
COURT JOHANNESBURG
AND TO:
DRDGOLD LIMITED
First Respondent
45 Empire
Road
Parktown
Johannesburg
BACKGROUND IMAGE
1
EXHIBIT 4.85
CESSION AGREEMENT
entered into between
THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA LIMITED
and
DRDGOLD LIMITED
and
BUSINESS VENTURES INVESTMENT NO. 750 (PTY) LTD
and
BUSINESS VENTURES INVESTMENT NO. 751 (PTY) LTD
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WHEREBY IT IS AGREED AS FOLLOWS:
1.
DEFINITIONS AND INTERPRETATION
1.1.
Definitions
In this Agreement, unless clearly inconsistent with or otherwise indicated by the
context –
1.1.1.
“Agreement” means the Agreement set out in this document and in the
Annexures hereto;
1.1.2.
“Business” means the business of the Companies as at the date of signature
hereof;
1.1.3.
“Business Day” means any day other than a Saturday, a Sunday or a public
holiday in the Republic of South Africa;
1.1.4.
“the Claims” means all the claims that the Seller has against Business Venture
Investments No 750 (Pty) Ltd and Business Venture Investments No 751 (Pty) Ltd
in terms of and arising out of the Guarantees (Schedule A and Schedule B
hereto);
1.1.5.
“Closing” means the completion of the cession and transfer of the Claims, and
the execution of the Pledges;
1.1.6.
“the Closing Date” means the 1st July 2005.
1.1.7.
“Companies Act” means the Companies Act (61 of 1973), as amended;
1.1.8.
“the Companies” means Business Venture Investments No 750 (Pty) Ltd,
Registration Number 2002/027241/07 and Business Venture Investments No 751
(Pty) Ltd, Registration Number 2002/030318/07;
1.1.9.
“CGR” means Crown Gold Recoveries (Pty) Ltd, Registration Number
1998/05115/07;
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1.1.10.
“the Debentures” means the debentures that the IDC have subscribed for in
ERPM in terms of the Debenture Deed dated 27 January 2003;
1.1.11.
“ERPM” means East Rand Proprietary Mines Ltd, Registration Number
1893/000773/06
1.1.12.
“The Guarantees” means the Guarantees given by the Companies to the Seller
(and the Purchaser), in terms of which the Companies acknowledged, as
principle debtor, its indebtedness to the Seller for payment of the amount owing
under the Indemnities;
1.1.13.
“The Inter-creditor Agreements” means the written agreements between the
Seller and the Purchaser governing the relationship between them in matters
provided for in the Funding Agreements;
1.1.14.
“The Funding Agreements” means the agreements that are listed in the index,
attached as Schedule “C” and Schedule “D” in terms of which the Seller and the
Purchaser:-
1.1.14.1.
advanced funds (the “Loans”) to ERPM (in terms of the
agreement in Schedule “C”) and CGR, (in terms of the
agreements in Schedule “D”);
1.1.14.2.
consolidated its respective interests in the loan finance
agreements in each of the Companies;
1.1.14.3.
procured the cession of the Loans to the Companies in
securitatem debiti of the undertakings in the Guarantees;
1.1.14.4.
ERPM issued debentures to the Seller and the Purchaser.
1.1.15.
“the Indemnities” means the indemnities given by Crown and ERPM
respectively, in terms of which they each guarantee the Companies’ performance
under the Guarantees;
1.1.16.
“The Loan(s)” means the loans advanced by the Seller to Crown and ERPM in
terms of the two Loan Agreements in Schedule C and D respectively;
1.1.17.
“Parties” means the Seller, the Purchaser and the Companies;
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1.1.18.
“the Pledge” means a Pledge executed by the Seller in favour of the Purchaser in
terms of which the Seller pledges its shares in the Companies to the Purchaser as
security for the Companies duly discharging the claims arising from the
Guarantees;
1.1.19.
“the Purchaser” means DRDGOLD Ltd, Registration Number 1895/000926/06,
or its nominee;
1.1.20.
“Sale Assets” means:-
1.1.20.1.
the Seller’s claims against CGR and ERPM in terms of the loans;
1.1.20.2.
the Seller’s claims against the each of the Companies in terms of the
Guarantees;
1.1.20.3.
the Indemnities; and
1.1.20.4.
the Debentures.
1.1.21.
“Seller” means The Industrial Development Corporation of South Africa Limited
Registration Number 1940/014201/06;
1.1.22.
“the KBH Loan” means the shareholders loan by KBH to Crown, which loan has
been pledged to the Seller, as security for Crown complying with the conditions
of the Loan;
1.1.23.
“R” or “Rand”” means the lawful currency of the Republic of South Africa.
1.2.
Interpretation
The headings of the clauses in this Agreement are for the purpose of reference and
convenience only and shall not be used in the interpretation of nor modify nor amplify the
terms of this Agreement nor any clause hereof and, unless the context otherwise requires –
1.2.1.
words indicating the singular includes the plural and vice versa;
1.2.2.
words indicating a gender include any gender;
1.2.3.
an expression indicating a natural person includes any company, partnership, trust,
joint venture, association, corporation and any other body corporate and the state;
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1.2.4.
a reference to a statute, regulation, proclamation, ordinance or by-law includes all
statutes, regulations, proclamations, ordinances or by-laws amending, consolidating or
replacing it, and a reference to a statute includes all regulations, proclamations,
ordinances and by-laws issued under that statute;
1.2.5.
a reference to a document includes all amendments or supplements to, or replacements
or novations of that document;
1.2.6.
any reference in this Agreement to "date of signature hereof" shall be read as meaning a
reference to the date of the last signature to this Agreement;
1.2.7.
any reference to an enactment is to that enactment as at the date of signature hereof and
as amended or re-enacted from time to time;
1.2.8.
if any provision in clause 1.1 is a substantive provision conferring rights or imposing
obligations on any Party, notwithstanding that it is only in such clause, effect shall be
given to it as if it were a substantive provision in the body of this Agreement;
1.2.9.
when any number of days is prescribed in this Agreement, same shall be reckoned
exclusively of the first and inclusively of the last day unless the last day falls on a day
which is not a Business Day, in which case the last day shall be the next succeeding day
which is a Business Day;
1.2.10.
where figures are referred to in numerals and in words, if there is any conflict between
the two, the words shall prevail;
1.2.11.
expressions defined in this Agreement shall bear the same meanings in any Schedules
or Annexures to this Agreement which do not themselves contain their own conflicting
definitions;
1.2.12.
the expiration or termination of this Agreement shall not affect such of the provisions
of this Agreement as expressly provide that they will operate after any such expiration
or termination or which of necessity must continue to have effect after such expiration
or termination, notwithstanding that the clauses themselves do not expressly provide
for this;
1.2.13.
the rule of construction that a contract shall be interpreted against the party responsible
for the drafting or preparation of the contract, shall not apply;
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1.2.14.
the eiusdem generis rule shall not apply and whenever a term is followed by the word
“including” which is then followed by specific example, such examples shall not be
construed so as to limit the meaning of that term; and
1.2.15.
any reference in this Agreement to a party shall, if such party is liquidated,
sequestrated or placed under judicial management, be applicable also to and binding
upon that party’s liquidator, trustee or judicial manager, as the case may be.
2.
BACKGROUND AND RECORDAL
2.1
The Seller has, in terms of the Loans, provided funds on loan to CGR and ERPM;
2.2
The Companies have given a written Indemnity to the Seller, in terms of which it, as
principal debtor, acknowledged its indebtedness to the Seller for the Loans;
2.3
CGR and ERPM have, pursuant to the Guarantees, given indemnities in favour of the
Companies, were they to be called upon to perform in terms of the Guarantees;
2.4
The Seller is the legal and beneficial owner of the Sale Shares in the Companies, holds
the unencumbered and freely transferable rights to the Claims, which are to form the
object of the Pledge.
2.5
The Seller is the holder of the Debentures in ERPM, which Debentures the Purchaser
wishes to acquire.
2.6
The Parties hereby record the terms on which the Seller has agreed to sell and transfer
the Claims, the Indemnities and the Debentures, and waive in pledge of the KBH Loan
in favour of the Purchaser.
2.7
The Parties now agree on the terms and conditions set out in this Agreement.
3.
SALE
Purchase and Transfer of Sale Assets –
3.1
The Seller hereby sells to the Purchaser, and the Purchaser hereby buys from the Seller
the Sale Assets on the terms, and subject to the conditions provided for in this
Agreement.
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3.2
To the extent required, CGR, KBH and ERPM each consent to each transaction
envisaged in this agreement.
4.
PURCHASE PRICE
4.1.
The purchase price for the Sale Assets shall be an amount equal to the aggregate
value of
4,451,219
ordinary DRDGold shares (“the Payment Shares”) reckoned at its
closing price on the Johannesburg Stock Exchange on the Closing Date 4,451,219
being the number of shares which, based on the five day volume weighted average
price of DRDGold shares in trade on the Johannesburg Stock Exchange, prior to the
29
th
of March 2005, aggregated R24 million in value).
4.2.
The Purchaser shall pay the Purchase Price to the Seller by allotting and issuing the
Payment Shares to the Seller on the Closing Date.
5.
CLOSING AND IMPLEMENTATION
5.1.
Closing in respect of the Claims shall take place at a meeting of the representatives of
the Parties at the offices of the Purchaser commencing at 10h00 on the Closing Date
in respect of the Claims, or at such other place, time and date agreed by the Parties in
writing.
5.2.
At that meeting the Purchaser shall, against compliance by the Seller with its
obligations in terms of clause 5.3 below, which it is obliged to comply with on or by
the Closing Date deliver to the Seller the original share certificate(s) in respect of the
Payment Shares in order to be registered in the name of the Seller; and
5.3.
The Seller shall, at the same meeting, against compliance by the Purchaser of its
obligations in terms of clause 5.2 above:
5.3.1.
provide the Purchaser with a written cession of the Claims, duly executed
in favour of the Purchaser, in terms of a notarial deed of cession to the
extent required;
5.3.2.
provide the Purchaser with a written deed of cession in favour of the
Purchaser of all the rights provided for in the Indemnities, notarially
executed to the extent required;
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5.3.3.
provide the Purchaser with a written waiver in favour of the Purchaser of
the pledge of the KBH Loan;
5.4.
The Seller shall further, by no later than the fifth business day after Closing, execute
a deed of Pledge, in terms of which the Seller pledges its shares in the Companies to
the Purchaser as security for the Companies complying with its obligations under
the Guarantees, on the terms in the draft deed attached in Schedule F.
5.5.
The Intercreditor Agreements shall be deemed to have been cancelled by mutual
consent between the Parties, upon Closing as envisaged in this clause 5.
6.
WARRANTIES AND REPRESENTATIONS BY THE SELLER
6.1.
The Seller gives to the Purchaser all the warranties in respect of the Companies set
out in Annexure A hereto as read with any disclosure schedule attached hereto by
the Seller when it signs.
6.2.
The Purchaser has entered into this Agreement relying on the strength of the
warranties given to the Purchaser by the Seller whether in Annexure A or elsewhere
in this Agreement and on the basis that such warranties will be correct as at the date
of signature hereof, and the various dates specified in Annexure A . All the
warranties given in terms of this Agreement shall be deemed to be material.
7.
WARRANTIES AND REPRESENTATIONS BY THE PURCHASER
7.1.
The Payment Shares shall be new, ordinary fully paid shares of DRDGOLD, duly
issued and which are listed on the Johannesburg Securities Exchange (“JSE”).
7.2.
The Purchaser warrants in respect of its capacity to effect payment as aforesaid that:-
7.2.1.
It is duly incorporated and validly existing under the laws of South Africa
and has power to enter to effect payment as aforesaid;
7.2.2.
all necessary corporate and other action to authorise the entry into and
performance of this Agreement has been taken by the Purchaser;
7.2.3.
that the Payment Shares shall be freely transferable to the Seller, wholly
unencumbered and that no person shall have any right (including any
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option or right of first refusal) to subscribe for or acquire any payment
shares in DRDGOLD other than the Seller in terms of this agreement; and
7.2.4.
The Purchaser acknowledges that the Seller has entered into this
agreement on the strength of the warranties given to it by the Purchaser.
8.
CONFIDENTIALITY
8.1.
For the purposes of this Agreement, confidential information (Confidential
Information) means any information relating to -
8.1.1.
the terms of this Agreement and the transactions and Agreements
contemplated by this Agreement;
8.1.2.
the business, assets, liabilities and affairs of the Companies and the
Purchaser and any related corporation of the Companies and the
Purchaser;
8.1.3.
the strategic and business plans of the Companies, the Purchaser, ERPM,
CGR and any related corporation of the Companies and the Purchaser;
8.1.4.
the terms of any proposed agreement which involves the Companies and
the Purchaser or any related corporation of the Companies and the
Purchaser that are the subject of discussions or negotiations with any
other party;
8.1.5.
any information which the Companies or the Purchaser or any related
corporation of the Companies or the Purchaser is required to keep
confidential under the terms of any agreement with any other party.
8.2.
The obligations of confidence in this clause 8, extend to all Confidential Information
of a Party provided to the Party or obtained by a Party before entering into this
Agreement.
8.3.
Subject to this clause 8, no Party may -
8.3.1.
disclose any Confidential Information to any person who is not a Party;
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8.3.2.
use any Confidential Information to compete with the business of the
Companies or the Purchaser or any related corporation of the Companies
or the Purchaser;
8.3.3.
use any Confidential Information in any manner which may cause or be
calculated to cause any loss to the Purchaser or any of its shareholders or
related corporation of the Purchaser; or
8.3.4.
make any public disclosure, announcement or news release containing
Confidential Information.
8.4.
PERMITTED DISCLOSURES - A Party may disclose, and permit its officers,
employees, shareholders and agents to disclose, any Confidential Information -
8.4.1.
if it is required to do so by any law, any court application, legally binding
order, government agency or recognised stock exchange, but only to the
extent necessary to comply with such requirements and only after
consulting with the Purchaser on the form and content of the disclosure
prior to disclosing any Confidential Information;
8.4.2.
with the prior written consent of the Purchaser;
8.4.3.
if the Confidential Information has come within the public domain, other
than by a breach of this Agreement by any Party;
8.4.4.
to the Party’s financiers, bankers, auditors or other professional advisers,
or to a prospective purchaser of shares in the Companies, provided that
the person to whom any disclosure of Confidential Information is to be
made first agrees in writing to be bound by and observe the obligations of
confidentiality in terms equivalent to those set out in this clause 8.
8.5.
PUBLIC ANNOUNCEMENTS - Each Party shall consult all of the other Parties and
use all reasonable endeavours to agree on the form and content of any disclosure
before making any public announcement or news release relating to or arising from
this Agreement, whether or not it contains Confidential Information.
9.
ARBITRATION
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9.1.
Save in respect of those provisions of the Agreement which provide for their own
remedies which would be incompatible with arbitration, a dispute which arises in
regard to -
9.1.1.
the interpretation of; or
9.1.2.
the carrying into effect of; or
9.1.3.
any of the Parties' rights and obligations arising from; or
9.1.4.
the termination or purported termination of or arising from the
termination of; or
9.1.5.
the rectification or proposed rectification of this Agreement, or out of or
pursuant to this Agreement or on any matter which in terms of this
Agreement requires agreement by the Parties, (other than where an
interdict is sought or urgent relief may be obtained from a court of
competent jurisdiction), shall be submitted to and decided by arbitration.
9.2.
That arbitration shall be held -
9.2.1.
with only the Parties and their representatives other than legal
representatives, present thereat;
9.2.2.
at Sandton, Johannesburg.
9.3.
It is the intention that the arbitration shall, where possible, be held and concluded in
20 (twenty) working days after it has been demanded. The Parties shall use their
best endeavours to procure the expeditious completion of the arbitration.
9.4.
Save as expressly provided in this Agreement to the contrary, the arbitration shall be
subject to the arbitration legislation for the time being in force in South Africa.
9.5.
The arbitrator shall be, if the matter in dispute is principally -
9.5.1.
a legal matter, an impartial practising advocate of not less than 15
(fifteen) years' standing, or an impartial admitted attorney of not less than
15 (fifteen) years' standing;
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9.5.2.
an accounting matter, an impartial practising chartered accountant of not
less than 15 (fifteen) years' standing;
9.5.3.
any other matter, an independent person agreed upon between the
Parties.
9.6.
If the Parties fail to agree on an arbitrator within 14 (fourteen) days after the
arbitration has been demanded, the arbitrator shall be nominated, at the request of
any one of the Parties by the President for the time being of the Law Society of the
Northern Provinces (or its successor body in Gauteng). If that person fails or refuses
to make the nomination, either party may approach the High Court of South Africa
to make such an appointment. To the extent necessary, the court is expressly
empowered to do so.
9.7.
If the Parties fail to agree whether the dispute is of a legal, accounting or other
nature within 14 (fourteen) days after the arbitration has been demanded, it shall be
considered a matter referred to in clause 9.5.1.
9.8.
The arbitrator shall have the fullest and freest discretion with regard to the
proceedings save that he shall be obliged to give his award in writing fully
supported by reasons. His award shall be final and binding on the Parties to the
dispute.
9.9.
Furthermore the arbitrator -
9.9.1.
may by notice to the Parties within 5 (five) days after his appointment,
dispense wholly or in part with formal submissions or pleadings
provided that the Parties are given the opportunity to make submissions;
9.9.2.
shall determine the applicable procedure and shall not be bound by strict
rules of evidence;
9.9.3.
shall allow any Party to the arbitration to call any witnesses he
determines and shall permit cross examination of witnesses;
9.9.4.
shall be entitled to take equity into account and shall not be bound to
decide the dispute according to the legal rights of the Parties;
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9.9.5.
may, in addition to any other award he may be able to make -
9.9.5.1.
cancel this Agreement or determine that a Party has
lawfully cancelled or is entitled lawfully to cancel this
Agreement or require specific performance, with an award
of damages but may not award cancellation of this
Agreement or determine that the Agreement was lawfully
cancelled or that a Party is lawfully entitled to cancel the
Agreement unless the breach complained of is found by
him to be a material one going to the root of the contract
which cannot be compensated for by an award of damages
or recoupment under any indemnity given in terms of this
Agreement;
9.9.5.2.
award interest with effect from any date, and on any other
basis, he considers appropriate in the circumstances;
9.9.5.3.
unless this Agreement otherwise requires, sever any
contract constituted by this Agreement between the Parties
hereto from any other contract so constituted and may
cancel one without thereby cancelling all or any of the
others;
9.9.5.4.
shall make such order as to costs as he deems just.
9.10.
Any Party shall be entitled to have the award made an order of court of competent
jurisdiction.
9.11.
Any dispute shall be deemed to have been referred or subjected to arbitration
hereunder when any Party gives written notice to the others of the dispute, demands
an arbitration and requests agreement on an arbitrator.
9.12.
The provisions of this clause are severable from the rest of this Agreement and shall
remain in effect even if this Agreement is terminated for any reason.
9.13.
The Parties shall keep the evidence in the arbitration proceedings and any order
made by any arbitrator confidential unless otherwise contemplated herein.
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9.14.
The arbitrator shall have the power to give default judgment if any Party fails to
make submissions on due date and/or fails to appear at the arbitration.
9.15.
If before the implementation date, the Purchaser becomes aware that a material
breach of a material warranty has occurred which, had the Purchaser become aware
of it after the implementation date or had it occurred after the implementation date,
would have entitled the Purchaser to cancel the Agreement, the Purchaser shall be
entitled to cancel the Agreement prior to the Closing Date without prejudice to the
Purchaser’s right to claim damages, if any.
10.
AGREEMENT, NO AMENDMENT
10.1.
This Agreement constitutes the whole agreement between the Parties relating to the
subject matter hereof.
10.2.
No amendment or consensual cancellation of this Agreement or any provision or
term hereof or of any agreement, bill of exchange or other document issued or
executed pursuant to or in terms of this Agreement and no settlement of any
disputes arising under this Agreement and no extension of time, waiver or
relaxation or suspension of or agreement not to enforce or to suspend or postpone
the enforcement of any of the provisions or terms of this Agreement or of any
agreement, bill of exchange or other document issued pursuant to or in terms of this
Agreement shall be binding unless recorded in a written document signed by the
Parties (or in the case of an extension of time, waiver or relaxation or suspension,
signed by the party granting such extension, waiver or relaxation). Any such
extension, waiver or relaxation or suspension which is so given or made shall be
strictly construed as relating strictly to the matter in respect whereof it was made or
given.
10.3.
No extension of time or waiver or relaxation of any of the provisions or terms of this
Agreement or any agreement, bill of exchange or other document issued or executed
pursuant to or in terms of this Agreement, shall operate as an estoppel against any
Party in respect of its rights under this Agreement, nor shall it operate so as to
preclude such Party thereafter from exercising its rights strictly in accordance with
this Agreement.
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10.4.
To the extent permissible by law no Party shall be bound by any express or implied
term, representation, warranty, promise or the like not recorded herein, whether it
induced the contract and/or whether it was negligent or not.
11.
DOMICILIUM CITANDI ET EXECUTANDI
11.1.
The Parties choose as their domicilia citandi et executandi for all purposes under this
Agreement, whether in respect of court process, notices or other documents or
communications of whatsoever nature, the following addresses :
11.1.1.
Purchaser:
Physical: 45 Empire Road, Parktown, Johannesburg
Postal:     PO Box 3390 Maraisburg, 1700
Telefax:   011 482 4641
E-mail:
niel.pretorius@za.drdgold.com
Attention: N Pretorius
11.1.2.
Seller
Physical: The Industrial Development Corporation ;
19 Fredman Drive, Sandton
Postal:
P O Box 784055, Sandton, 2146
Telefax:     011 269 3116
E-mail:      nicoa@idc.co.za
Attention: [N Van Aardt]
11.1.3.
The Companies
Physical: 45 Empire Road, Parktown, Johannesburg
Postal:
PO Box 3390 Maraisburg, 1700
Telefax:     011 482 4641
E-mail:
themba.gwebu@za.drdgold.com
Attention: The Company Secretary
11.2.
Any notice or communication required or permitted to be given in terms of this
Agreement shall be valid and effective only if in writing but it shall be competent to
give notice by telefax or e-mail.
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11.3.
Any Party may by notice to any other Party change the physical address chosen as
its domicilium citandi et executandi vis-à-vis that party to another physical address
where postal delivery occurs in Gauteng or its postal address or its telefax number or
e-mail address, provided that the change shall become effective vis-à-vis that
addressee on the 7th (seventh) Business Day from the receipt of the notice by the
addressee.
11.4.
Any notice to a Party -
11.4.1.
sent by prepaid registered post (by airmail if appropriate) in a correctly
addressed envelope to it at an address chosen as its domicilium citandi et
executandi to which post is delivered shall be deemed to have been
received on the fifth Business Day after posting (unless the contrary is
proved);
11.4.2.
delivered by hand to a responsible person during ordinary business
hours at the physical address chosen as its domicilium citandi et
executandi shall be deemed to have been received on the day of delivery;
or
11.4.3.
sent by telefax to its chosen telefax number stipulated in clause 11.1 shall
be deemed to have been received on the date of despatch (unless the
contrary is proved); or
11.4.4.
sent by e-mail to its chosen e-mail address stipulated in this clause, shall
be deemed to have been received on the date of despatch (unless the
contrary is proved).
11.4.5.
Notwithstanding anything to the contrary herein contained a written
notice or communication actually received by a Party shall be an
adequate written notice or communication to it notwithstanding that it
was not sent to or delivered at its chosen domicilium citandi et
executandi.
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12.
NO CESSION OR ASSIGNMENT
12.1.
The Purchaser records that it may wish, without limiting its liability to render any
performance owing under this agreement, to assign the rights it acquires in terms of
this agreement to a wholly owned subsidiary of the Purchaser.
12.2.
The Seller agrees to such assignment, provided that the Purchaser shall remain
jointly and severally liable to the Seller of all the assignee’s obligations in terms of, or
arising in terms of this agreement.
12.3.
Other than Save as expressly provided elsewhere neither the Seller on the one hand
nor the Purchaser nor the Companies on the other shall be entitled to cede their
rights or assign their rights and obligations hereunder to any third party without the
prior consent of the other of them.
13.
COSTS
13.1.
The Purchaser shall pay the stamp duty in respect of the transfer of the Sale Assets
into the Purchaser's name or the name of its nominee/s.
13.2.
Each Party shall pay its own costs in negotiating, settling and implementing this
Agreement.
SIGNED by the Parties and witnessed on the following dates and at the following places
respectively:
DATE
PLACE                         WITNESS                             SIGNATURE
1.
For: The Seller
2.
1.
For: The Purchaser
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DATE
PLACE
WITNESS
SIGNATURE
13/07/2005
/
s/ D Pretorius
Daniel Pretorius
General Manager Corporate
Services
2.
1.
For: The Companies
2.
1.
For:
CGR
2.
1.
For:
KBH
2.
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ANNEXURE A – WARRANTIES
1.
In this Annexure -
1.1.
the "Agreement" means the Agreement to which this Annexure is attached;
1.2.
the Seller will be entitled and able to give free and unencumbered title of the Claims,
the rights under the Indemnities, and the pledge of the KBH Loan to the
Purchaser;
1.3.
no person will have any right (including any option or right of first refusal) to
acquire any of the Sale Assets;
1.4.
the Seller will be the sole registered and beneficial owner of the Sale Shares;
1.5.
The Seller has not in any way encumbered its Shares in the Companies, and may
freely pledge, dispose or encumber same;
1.6.
No person will have any right to obtain an order pursuant to any representation
made by the Seller for the rectification of the register of members of the
Companies; and
1.7.
no person will have the right (including any option or right of first refusal) to
purchase any of the Sale Assets other than in terms of this agreement.
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EXHIBIT 4.86
SHARE SALE AGREEMENT
entered into between
THE INDUSTRIAL DEVELOPMENT CORPORATION OF SOUTH AFRICA LIMITED
and
DRDGOLD LIMITED
and
BUSINESS VENTURES INVESTMENT NO. 750 (PTY) LTD
and
BUSINESS VENTURES INVESTMENT NO. 751 (PTY) LTD
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WHEREBY IT IS AGREED AS FOLLOWS:
1.
DEFINITIONS AND INTERPRETATION
1.1.
Definitions
In this Agreement, unless clearly inconsistent with or otherwise indicated by the
context –
1.1.1.
“Agreement” means the Agreement set out in this document and in the
Annexures hereto;
1.1.2.
“The Bonds” means the notarial bonds and mortgage bond listed in Schedule
“C”
1.1.3.
“Business” means the business of the Companies as at the date of signature
hereof;
1.1.4.
“Business Day” means any day other than a Saturday, a Sunday or a public
holiday in the Republic of South Africa;
1.1.5.
“Closing” means completion of the sale, purchase and transfer of the Sale Shares
on the Closing Date;
1.1.6.
“the Closing Date” means the day following that upon which the conditions
which suspend the Sale are met or are deemed to have been met;
1.1.7.
“Companies Act” means the Companies Act (61 of 1973), as amended;
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1.1.8.
“the Companies” means Business Venture Investments No 750 (Pty) Ltd,
Registration Number 2002/027241/07 and Business Venture Investments No 751
(Pty) Ltd, Registration Number 2002/030318/07;
1.1.9.
“the Companies Assets” means –
1.1.9.1.
the Claims against each of ERPM and CGR arising from the Funding
Agreements; and
1.1.9.2.
The Companies Shares in rights that have been established or that are
provided for in the Funding Agreements, irrespective of whether those
rights have been perfected and which stipulate rights in favour of the
Companies in securitatem debiti of the payments provided for in the
Funding Agreements over inter alia :
(a)
The share capital of CGR and the share capital of ERPM;
(b)
The assets of CGR and ERPM.
1.1.10.
“CGR” means Crown Gold Recoveries (Pty) Ltd, Registration Number
1998/05115/07;
1.1.11.
“ERPM” means East Rand Proprietary Mines Ltd, Registration Number
1893/000773/06
1.1.12.
“the effective date” means the 1
st
of July 2005;
1.1.13.
“The Funding Agreements” means the agreements that are listed in the index,
attached as Schedule “A” and Schedule “B” in terms of which the Seller and the
Purchaser:-
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1.1.13.1.
advanced funds (the “Loans”) to ERPM (in terms of the
agreement in Schedule “A”) and CGR, (in terms of the
agreements in Schedule “B”);
1.1.13.2.
consolidated its respective interests in the loan finance
agreements in each of the Companies; and
1.1.13.3.
stipulated and established rights in securitatem debiti over
the share capital and assets of CGR and ERPM,
respectively;
1.1.14.
“Liabilities” means any liability of the Companies which arose prior to the
Closing Date;
1.1.15.
“Parties” means the Seller, the Purchaser and the Companies;
1.1.16.
“Purchaser” means DRDGOLD Ltd, Registration Number 1895/000926/06, or its
nominee;
1.1.17.
“the Sale” means the sale of Shares by the Seller to the Purchaser as envisaged in
clause 3.1;
1.1.18.
“Seller” means The Industrial Development Corporation of South Africa Limited
Registration Number 1940/014201/06;
1.1.19.
“Security Rights” means the aggregate of the Companies’ rights over the shares,
claims and/or assets of each of ERPM and CGR as are stipulated and established
in the Funding Agreements and the Bonds as security for payment of the Loans ;
1.1.20.
“Sale Shares” means 60 ordinary shares in Business Venture Investments No 750
(Pty) Ltd, representing 60% of the total issued share-capital of the said company
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and 60 ordinary shares in Business Venture Investments No 751 (Pty) Ltd, which
represents 60% of the total issued share-capital of the said company;
1.1.21.
“R” or “Rand”” means the lawful currency of the Republic of South Africa.
1.2.
Interpretation
The headings of the clauses in this Agreement are for the purpose of reference and convenience
only and shall not be used in the interpretation of nor modify nor amplify the terms of this
Agreement nor any clause hereof and, unless the context otherwise requires –
1.2.1.
words indicating the singular includes the plural and vice versa;
1.2.2.
words indicating a gender include any gender;
1.2.3.
an expression indicating a natural person includes any company, partnership, trust,
joint venture, association, corporation and any other body corporate and the state;
1.2.4.
a reference to a statute, regulation, proclamation, ordinance or by-law includes all
statutes, regulations, proclamations, ordinances or by-laws amending, consolidating or
replacing it, and a reference to a statute includes all regulations, proclamations,
ordinances and by-laws issued under that statute;
1.2.5.
a reference to a document includes all amendments or supplements to, or replacements
or novations of that document;
1.2.6.
any reference in this Agreement to "date of signature hereof" shall be read as meaning a
reference to the date of the last signature to this Agreement;
1.2.7.
any reference to an enactment is to that enactment as at the date of signature hereof and
as amended or re-enacted from time to time;
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1.2.8.
if any provision in clause 1.1 is a substantive provision conferring rights or imposing
obligations on any Party, notwithstanding that it is only in such clause, effect shall be
given to it as if it were a substantive provision in the body of this Agreement;
1.2.9.
when any number of days is prescribed in this Agreement, same shall be reckoned
exclusively of the first and inclusively of the last day unless the last day falls on a day
which is not a Business Day, in which case the last day shall be the next succeeding day
which is a Business Day;
1.2.10.
where figures are referred to in numerals and in words, if there is any conflict between
the two, the words shall prevail;
1.2.11.
expressions defined in this Agreement shall bear the same meanings in any Schedules
or Annexures to this Agreement which do not themselves contain their own conflicting
definitions;
1.2.12.
the expiration or termination of this Agreement shall not affect such of the provisions
of this Agreement as expressly provide that they will operate after any such expiration
or termination or which of necessity must continue to have effect after such expiration
or termination, notwithstanding that the clauses themselves do not expressly provide
for this;
1.2.13.
the rule of construction that a contract shall be interpreted against the party responsible
for the drafting or preparation of the contract, shall not apply;
1.2.14.
the eiusdem generis rule shall not apply and whenever a term is followed by the word
“including” which is then followed by specific example, such examples shall not be
construed so as to limit the meaning of that term; and
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1.2.15.
any reference in this Agreement to a party shall, if such party is liquidated,
sequestrated or placed under judicial management, be applicable also to and binding
upon that party’s liquidator, trustee or judicial manager, as the case may be.
2.
BACKGROUND AND RECORDAL
2.1
The Seller is the legal and beneficial owner of the Sale Shares in the Companies
which Sale Shares the Purchaser wishes to acquire.
2.2
The Parties hereby record the terms on which the Seller has agreed to sell and
transfer the Sale Shares, and the Purchaser has agreed to purchase and accept the
transfer of these, the Sale Shares .
2.3
The Parties now agree on the terms and conditions set out in this Agreement.
3.
SALE
3.1
The Seller hereby sells to the Purchaser, and the Purchaser hereby buys from the Seller
the Sale Shares (constituting the whole of the Sale Assets) on the terms, and subject to
the conditions provided for in this Agreement.
3.2
The parties note and record that:-
3.2.1    KBH has pledged to the Seller, in terms of a written Pledge (“the Pledge”) its
entire shareholding in CGR, (“the Pledge Shares”) as security for CGR complying
with its loan obligations to the Seller;
3.2.2    The Seller shall, as at the Effective Date, have ceded the Pledge to Business
Venture Investments 750 (Pty) Ltd (“BVI750”) and the Pledge shall operate to
secure the obligations of CGR to BVI750 under the Indemnity.
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3.2.3    BVI750 shall as at the Effective Date, have resolved to , upon receiving cession of
the Pledge, and on condition that:-
3.2.3.1.1     The Competition Commission approves the realisation of the
security interests under the Pledge in the manner envisaged below;
and
3.2.3.1.2    The Competition Commission approves the Sale, to occur back-to-
back with the realisation of the interests under the Pledge,
realise the security interests under the Pledge by taking transfer of the Pledge
Shares and crediting CGR with an amount equal to the fair value of the shares
against its indebtedness in terms of the Indemnity (“the Realisation of the
Security Interests”).
3.2.4    The Sale may, pursuant to the realisation of the aforementioned security interest,
if it were to occur, constitute a merger as envisaged in the Competition Act of
1998, inasmuch as in taking transfer of the Sale Shares, the Purchaser and/or
BVI750 may establish indirect control over CGR, and its wholly owned
subsidiary, ERPM (“Merger”).
3.3
In view of the fact that a Merger may occur the Sale:-
3.3.1    shall be suspended pending the Competition Commission giving notice to the
BVI750 and to the Purchaser respectively, of its decision on the application to
approve the Realisation of the Security Interests, and the Sale.
3.4
If the Competition Commission approves the Realisation of the Security Interests and
the Sale, the conditions suspending the Sale shall have been met, and the Parties shall
proceed to Closing and Implementation of the Sale as envisaged in clause 5.
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3.5
If the Competition Commission does not approve either the Realisation of the Security
Interests or the Sale,:-
3.5.1    BVI750 shall not take transfer of the Pledge Shares, but shall continue to hold
them as security for the performance of CGR under the Indemnity; and
3.5.2    the conditions suspending the operation of the Sale shall be deemed to have been
met (the Sale no longer constituting a Merger between BVI750 and/or the
Purchaser on the one hand, with CGR and ERPM, on the other hand); and
the parties shall proceed to Closing and Implementation of the Sale as envisaged in
clause 5.
3.6
If either BVI750 or the Purchaser does not submit an application to the Competition
Commission as envisaged above, before by the 30
th
of July 2005, the provisions of
clauses 3.5.13.5.2 shall apply(as though application had been made, but was refused)
and the parties shall move to Closing and Implementation of the Sale.
3.7
The Purchaser shall assist, and provide all the requisite funds to BVI750, to move
within the time limit provided above (30 July 2005) the application to the Competition
Commission to approve the Realisation of the Security Interest and the Sale.
3.8
The Seller undertakes to provide such assistance as is reasonably acquired to procure
the approval of the Competition Commission, including attending at the offices of the
Purchasers Attorneys, in Sandton to sign and execute of such documents as are
required in the normal course to compile and submit such an application.
4.
PURCHASE PRICE
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4.1.
The purchase price of the Sale Assets shall be in respect of the Sale Shares an amount
of R120,00.
4.2.
The Purchaser shall pay the Purchase Price to the Seller in respect of the Sale Shares,
on the Closing Date in respect of the Sale Shares, in cash; and
5.
CLOSING AND IMPLEMENTATION
5.1.
Closing in respect of the Sale Shares shall take place at a meeting of the
representatives of the Parties at the offices of the Purchaser commencing at 10h00 on
the Closing Date, or at such other place, time and date agreed by the Parties in
writing.
5.2.
At that meeting the Purchaser shall pay the Purchase Price of the Sale Shares in cash
to the Seller; and
5.3.
the Seller shall deliver to the Purchaser, against payment of the purchaser price:
5.3.1.
the original share certificates in respect of the Sale Shares, together with
declarations for the transfer thereof in blank as to transferee, duly signed
by the Seller on a date not being more than 10 (ten) Business Days before
the Closing Date and otherwise complying with the provisions of the
Companies' articles of association and the Stamp Duties Act, 1968;
5.3.2.
a certified copy of a resolution passed by the directors of the Companies -
(a)
approving the transfer of the Sale Shares to the Purchaser
and/or its nominee/s; and
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(b)
such other documents as are necessary in order to enable the
Purchaser to procure the registration of the Sale Shares into its
name and/or the name of its nominee/s;
(c)
the written resignations of the directors, public officer, secretary
and other officers of the Companies;
(d)
the resignations referred to in clause (c) shall be accompanied
by such documents, duly completed, as required by law to be
lodged with the relevant Companies and/or the Registrar of
Companies in connection with or as a result of such
resignations; and
(e)
all of the Companies' books, registers and records and deeds of
any nature whatsoever, pertaining to the affairs of the
Companies which the Seller has in its possession.
6.
FINANCIAL STATEMENTS & AUDITS
To the extent reasonably required to complete the auditing of the Companies’ affairs, and
the compilation of financials statements over the period of the Seller’s shareholding in the
Companies, the Seller undertakes to provide such assistance on reasonable request from the
Purchaser, and provide all information, records, documents and confirmations as are
required in the ordinary course of the such process.
7.
WARRANTIES AND REPRESENTATIONS BY THE SELLER
7.1.
The Seller gives to the Purchaser all the warranties in respect of the Companies set
out in Annexure A hereto as read with any disclosure schedule attached hereto by
the Seller when it signs.
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7.2.
The Purchaser has entered into this Agreement relying on the strength of the
warranties given to the Purchaser by the Seller whether in Annexure A or elsewhere
in this Agreement and on the basis that such warranties will be correct as at the date
of signature hereof, and the various dates specified in Annexure A . All the
warranties given in terms of this Agreement shall be deemed to be material.
8.
INDEMNITIES
Without prejudice to any rights or remedies of the Parties arising from any other provision of
this Agreement, the Seller hereby indemnifies the Purchaser against and holds it harmless all
loss, liability, damage or expense of any nature whatsoever that the Purchaser may sustain as
a result of or attributable to a failure of any of the warranties contained in this Agreement to
be true and correct.
9.
CONFIDENTIALITY
9.1.
For the purposes of this Agreement, confidential information (Confidential
Information) means any information relating to -
9.1.1.
the terms of this Agreement and the transactions and Agreements
contemplated by this Agreement;
9.1.2.
the business, assets, liabilities and affairs of the Companies and the
Purchaser and any related corporation of the Companies and the
Purchaser;
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9.1.3.
the strategic and business plans of the Companies, the Purchaser, ERPM,
CGR and any related corporation of the Companies and the Purchaser;
9.1.4.
the terms of any proposed agreement which involves the Companies and
the Purchaser or any related corporation of the Companies and the
Purchaser that are the subject of discussions or negotiations with any
other party;
9.1.5.
any information which the Companies or the Purchaser or any related
corporation of the Companies or the Purchaser is required to keep
confidential under the terms of any agreement with any other party.
9.2.
The obligations of confidence in clause 9 extend to all Confidential Information of a
Party provided to the Party or obtained by a Party before entering into this
Agreement.
9.3.
Subject to this clause 9, no Party may -
9.3.1.
disclose any Confidential Information to any person who is not a Party;
9.3.2.
use any Confidential Information to compete with the business of the
Companies or the Purchaser or any related corporation of the Companies
or the Purchaser;
9.3.3.
use any Confidential Information in any manner which may cause or be
calculated to cause any loss to the Purchaser or any of its shareholders or
related corporation of the Purchaser; or
9.3.4.
make any public disclosure, announcement or news release containing
Confidential Information.
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9.4.
PERMITTED DISCLOSURES - A Party may disclose, and permit its officers,
employees, shareholders and agents to disclose, any Confidential Information -
9.4.1.
if it is required to do so by any law, any court application, legally binding
order, government agency or recognised stock exchange, but only to the
extent necessary to comply with such requirements and only after
consulting with the Purchaser on the form and content of the disclosure
prior to disclosing any Confidential Information;
9.4.2.
with the prior written consent of the Purchaser;
9.4.3.
if the Confidential Information has come within the public domain, other
than by a breach of this Agreement by any Party;
9.4.4.
to the Party’s financiers, bankers, auditors or other professional advisers,
or to a prospective purchaser of shares in the Companies, provided that
the person to whom any disclosure of Confidential Information is to be
made first agrees in writing to be bound by and observe the obligations of
confidentiality in terms equivalent to those set out in this clause 9.
9.5.
PUBLIC ANNOUNCEMENTS - Each Party shall consult all of the other Parties and
use all reasonable endeavours to agree on the form and content of any disclosure
before making any public announcement or news release relating to or arising from
this Agreement, whether or not it contains Confidential Information.
10.
ARBITRATION
10.1.
Save in respect of those provisions of the Agreement which provide for their own
remedies which would be incompatible with arbitration, a dispute which arises in
regard to -
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10.1.1.
the interpretation of; or
10.1.2.
the carrying into effect of; or
10.1.3.
any of the Parties' rights and obligations arising from; or
10.1.4.
the termination or purported termination of or arising from the
termination of; or
10.1.5.
the rectification or proposed rectification of this Agreement, or out of or
pursuant to this Agreement or on any matter which in terms of this
Agreement requires agreement by the Parties, (other than where an
interdict is sought or urgent relief may be obtained from a court of
competent jurisdiction), shall be submitted to and decided by arbitration.
10.2.
That arbitration shall be held -
10.2.1.
with only the Parties and their representatives other than legal
representatives, present thereat;
10.2.2.
at Sandton, Johannesburg.
10.3.
It is the intention that the arbitration shall, where possible, be held and concluded in
20 (twenty) working days after it has been demanded. The Parties shall use their
best endeavours to procure the expeditious completion of the arbitration.
10.4.
Save as expressly provided in this Agreement to the contrary, the arbitration shall be
subject to the arbitration legislation for the time being in force in South Africa.
10.5.
The arbitrator shall be, if the matter in dispute is principally -
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10.5.1.
a legal matter, an impartial practising advocate of not less than 15
(fifteen) years' standing, or an impartial admitted attorney of not less than
15 (fifteen) years' standing;
10.5.2.
an accounting matter, an impartial practising chartered accountant of not
less than 15 (fifteen) years' standing;
10.5.3.
any other matter, an independent person agreed upon between the
Parties.
10.6.
If the Parties fail to agree on an arbitrator within 14 (fourteen) days after the
arbitration has been demanded, the arbitrator shall be nominated, at the request of
any one of the Parties by the President for the time being of the Law Society of the
Northern Provinces (or its successor body in Gauteng). If that person fails or refuses
to make the nomination, either party may approach the High Court of South Africa
to make such an appointment. To the extent necessary, the court is expressly
empowered to do so.
10.7.
If the Parties fail to agree whether the dispute is of a legal, accounting or other
nature within 14 (fourteen) days after the arbitration has been demanded, it shall be
considered a matter referred to in clause 10.5.1.
10.8.
The arbitrator shall have the fullest and freest discretion with regard to the
proceedings save that he shall be obliged to give his award in writing fully
supported by reasons. His award shall be final and binding on the Parties to the
dispute.
10.9.
Furthermore the arbitrator -
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10.9.1.
may by notice to the Parties within 5 (five) days after his appointment,
dispense wholly or in part with formal submissions or pleadings
provided that the Parties are given the opportunity to make submissions;
10.9.2.
shall determine the applicable procedure and shall not be bound by strict
rules of evidence;
10.9.3.
shall allow any Party to the arbitration to call any witnesses he
determines and shall permit cross examination of witnesses;
10.9.4.
shall be entitled to take equity into account and shall not be bound to
decide the dispute according to the legal rights of the Parties;
10.9.5.
may, in addition to any other award he may be able to make -
10.9.5.1.
cancel this Agreement or determine that a Party has
lawfully cancelled or is entitled lawfully to cancel this
Agreement or require specific performance, with an award
of damages but may not award cancellation of this
Agreement or determine that the Agreement was lawfully
cancelled or that a Party is lawfully entitled to cancel the
Agreement unless the breach complained of is found by
him to be a material one going to the root of the contract
which cannot be compensated for by an award of damages
or recoupment under any indemnity given in terms of this
Agreement;
10.9.5.2.
award interest with effect from any date, and on any other
basis, he considers appropriate in the circumstances;
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10.9.5.3.
unless this Agreement otherwise requires, sever any
contract constituted by this Agreement between the Parties
hereto from any other contract so constituted and may
cancel one without thereby cancelling all or any of the
others;
10.9.5.4.
shall make such order as to costs as he deems just.
10.10.
Any Party shall be entitled to have the award made an order of court of competent
jurisdiction.
10.11.
Any dispute shall be deemed to have been referred or subjected to arbitration
hereunder when any Party gives written notice to the others of the dispute, demands
an arbitration and requests agreement on an arbitrator.
10.12.
The provisions of this clause are severable from the rest of this Agreement and shall
remain in effect even if this Agreement is terminated for any reason.
10.13.
The Parties shall keep the evidence in the arbitration proceedings and any order
made by any arbitrator confidential unless otherwise contemplated herein.
10.14.
The arbitrator shall have the power to give default judgment if any Party fails to
make submissions on due date and/or fails to appear at the arbitration.
10.15.
If before the implementation date, the Purchaser becomes aware that a material
breach of a material warranty has occurred which, had the Purchaser become aware
of it after the implementation date or had it occurred after the implementation date,
would have entitled the Purchaser to cancel the Agreement, the Purchaser shall be
entitled to cancel the Agreement prior to the Closing Date without prejudice to the
Purchaser’s right to claim damages, if any.
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11.
AGREEMENT, NO AMENDMENT
11.1.
This Agreement constitutes the whole agreement between the Parties relating to the
subject matter hereof.
11.2.
No amendment or consensual cancellation of this Agreement or any provision or
term hereof or of any agreement, bill of exchange or other document issued or
executed pursuant to or in terms of this Agreement and no settlement of any
disputes arising under this Agreement and no extension of time, waiver or
relaxation or suspension of or agreement not to enforce or to suspend or postpone
the enforcement of any of the provisions or terms of this Agreement or of any
agreement, bill of exchange or other document issued pursuant to or in terms of this
Agreement shall be binding unless recorded in a written document signed by the
Parties (or in the case of an extension of time, waiver or relaxation or suspension,
signed by the party granting such extension, waiver or relaxation). Any such
extension, waiver or relaxation or suspension which is so given or made shall be
strictly construed as relating strictly to the matter in respect whereof it was made or
given.
11.3.
No extension of time or waiver or relaxation of any of the provisions or terms of this
Agreement or any agreement, bill of exchange or other document issued or executed
pursuant to or in terms of this Agreement, shall operate as an estoppel against any
Party in respect of its rights under this Agreement, nor shall it operate so as to
preclude such Party thereafter from exercising its rights strictly in accordance with
this Agreement.
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11.4.
To the extent permissible by law no Party shall be bound by any express or implied
term, representation, warranty, promise or the like not recorded herein, whether it
induced the contract and/or whether it was negligent or not.
12.
DOMICILIUM CITANDI ET EXECUTANDI
12.1.
The Parties choose as their domicilia citandi et executandi for all purposes under this
Agreement, whether in respect of court process, notices or other documents or
communications of whatsoever nature, the following addresses :
12.2.
Purchaser:
Physical:     45 Empire Road, Parktown, Johannesburg
Postal:
PO Box 3390 Maraisburg, 1700
Telefax:
011 482 4641
E-mail:
niel.pretorius@za.drdgold.com
Attention:    N Pretorius
12.3.
Seller
Physical:     The Industrial Development Corporation ;
19 Fredman Drive, Sandton
Postal:
P O Box 784055, Sandton, 2146
Telefax:       011 269 3116
E-mail:        nicoa@idc.co.za
Attention:    [N Van Aardt]
12.4.
The Companies
Physical:      45 Empire Road, Parktown, Johannesburg
Postal:
PO Box 3390 Maraisburg, 1700
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21
Telefax:
011 482 4641
E-mail:
themba.gwebu@za.drdgold.com
Attention:    The Company Secretary
12.5.
Any notice or communication required or permitted to be given in terms of this
Agreement shall be valid and effective only if in writing but it shall be competent to
give notice by telefax or e-mail.
12.6.
Any Party may by notice to any other Party change the physical address chosen as
its domicilium citandi et executandi vis-à-vis that party to another physical address
where postal delivery occurs in Gauteng or its postal address or its telefax number or
e-mail address, provided that the change shall become effective vis-à-vis that
addressee on the 7th (seventh) Business Day from the receipt of the notice by the
addressee.
12.7.
Any notice to a Party -
12.7.1.
sent by prepaid registered post (by airmail if appropriate) in a correctly
addressed envelope to it at an address chosen as its domicilium citandi et
executandi to which post is delivered shall be deemed to have been
received on the fifth Business Day after posting (unless the contrary is
proved);
12.7.2.
delivered by hand to a responsible person during ordinary business
hours at the physical address chosen as its domicilium citandi et executandi
shall be deemed to have been received on the day of delivery; or
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22
12.7.3.
sent by telefax to its chosen telefax number stipulated in clause 12.1 shall
be deemed to have been received on the date of despatch (unless the
contrary is proved); or
12.7.4.
sent by e-mail to its chosen e-mail address stipulated in this clause, shall
be deemed to have been received on the date of despatch (unless the
contrary is proved).
12.7.5.
Notwithstanding anything to the contrary herein contained a written
notice or communication actually received by a Party shall be an
adequate written notice or communication to it notwithstanding that it
was not sent to or delivered at its chosen domicilium citandi et executandi .
13.
NO CESSION OR ASSIGNMENT
13.1.
The Purchaser records that it may wish, without limiting its liability to render any
performance owing under this agreement, to assign the rights it acquires in terms of
this agreement to a wholly owned subsidiary of the Purchaser.
13.2.
The Seller agrees to such assignment, provided that the Purchaser shall remain
jointly and severally liable to the Seller of all the assignee’s obligations in terms of, or
arising in terms of this agreement.
13.3.
Other than Save as expressly provided elsewhere neither the Seller on the one hand
nor the Purchaser nor the Companies on the other shall be entitled to cede their
rights or assign their rights and obligations hereunder to any third party without the
prior consent of the other of them.
14.
COSTS
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23
14.1.
The Purchaser shall pay the stamp duty in respect of the registration of transfer of
the Sale Shares into the Purchaser's name or the name of its nominee/s.
14.2.
Each Party shall pay its own costs in negotiating, settling and implementing this
Agreement.
SIGNED by the Parties and witnessed on the following dates and at the following places
respectively:
DATE
PLACE                         WITNESS                             SIGNATURE
1.
For: The Seller
2.
1.
For: The Purchaser
13/07/2005
/s/ D Pretorius
D Pretorius
General Manager Corporate
Services
2.
1.
For: The Companies
2.
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24
1.
For: KBH
2.
1.
For: CGR
2.
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i
ANNEXURE A – WARRANTIES
1.
In this Annexure -
1.1.
the "Agreement" means the Agreement to which this Annexure is attached;
1.2.
the Seller will be entitled and able to give free and unencumbered title of the Sale
Shares;
1.3.
no person will have any right (including any option or right of first refusal) to acquire
any of the Sale Shares
1.4.
the Seller will be the sole registered and beneficial owner of the Sale Shares;
1.5.
no person will have any right to obtain an order pursuant to any representation made
by the Seller for the rectification of the register of members of the Companies; and
1.6.
no person will have the right (including any option or right of first refusal) to purchase
any of the Sale Shares other than in terms of this agreement.
BACKGROUND IMAGE
EXHIBIT 4.87
1


TERM SHEET
Concluded between
DRDGOLD LIMITED
(DRDGOLD)
and
KHUMO
BATHONG
HOLDINGS (PTY) LIMITED
(KBH)
and
DR PASEKA NCHOLO
Acting as promoter of a BEE Consortium (the
Consortium)
RECORDALS
•    DRDGOLD intends to consolidate its entire holdings in South Africa into a single
holding entity (DRDGOLD SA) and wishes to pursue the social, political and
economic objectives of the Mineral and Petroleum Resources Development Act
(MPRDA) (read with the Mining Charter) in this entity.
•    In order to achieve this, DRDGOLD has with the intention of minimising the risk of
third party debt and its impact on the balance sheet of CGR inter alia:
o
entered into an agreement (the IDC Sale) with the Industrial
Development Corporation of South Africa (IDC), in terms of which
DRDGOLD,
against
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2
payment of a purchase consideration equal to the value of 4,451,219
ordinary DRDGOLD shares as at the date of Closing ("the Closing Date")
acquired the IDC's entire interests in and respect of:-
•
loan agreements entered into between the IDC and Crown Gold
Recoveries (Pty) Limited (CGR) and East Rand Proprietary Mines
Limited (ERPM):
•
two private companies, Business Venture Investments 750 (Pty) Ltd
(BV1750) and Business Venture Investments 751 (Pty) Ltd
(BVI751), (collectively referred to as the SPV's), subject to approval
by the Competition Commission, these companies having been
established to hold the collective security interests of the IDC and
DRDGOLD toward the loan agreement obligations; and
ο    Subject to approval by the Competition Commission referred to in 2.1.2,
DRD has agreed to acquire KBH claims in respect of shareholders loans to
CGR ("the KBH shareholder loan claims") for R9,3 million, subject to
certain conditions attaching to the Options, below.
•    KBH has expressed an interest to acquire a 15% interest in DRDSA and a
consortium led by KBH, comprising of a broad based group of Historically
Disadvantaged Persons has expressed an interest to acquire a further 11 % in
DRDSA.
NOW THEREFORE the Parties record their desire to enter into an agreement on the
following terms:

1 .     THE FIRST KBH OPTION
IF the IDC Sale is concluded and closes and in the event of either:-
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3
a)
The Competition Commission notifying DRDGOLD that it does not approve
the indirect 'merger' of DRDGOLD and CGR and ERPM, through the
acquisition of the SPV's (who in turn and in terms of the transaction
documents concluded in the IDC Sale are to acquire the entire
shareholding of KBH in CGR through the realisation of a pledge in respect
of the said holdings); or
b)
The conditions subject to which DRDGOLD may be called upon by KBH to
acquire the KBH shareholder loan claims, are not met by the 31
st
of
December 2005;

1.1 .
A call option shall be established in favour of KBH in terms of which it may,
at its election acquire from DRDGOLD at a purchase price of an amount at
least equal to the purchase consideration paid by DRDGOLD to the IDC in
the IDC Sale, and reasonable holding and transaction costs, the IDC's
entire former position in the SPV's and in respect of the loans;
KBH may exercise the option by giving notice to DRDGOLD of its intention
to do so in writing before the following dates, or before any of the following
events occur:
 30 days after receipt of notice from the Competition Commission
rejecting the 'merger' as aforesaid; or
1.1.1.
1.1.2.
The nominee of KBH giving notice in writing to DRDGOLD of its
intention to exercise the option to acquire at least 15% of the
entire issued share capital of DRDGOLD SA in accordance with
the conditions set out below; or
1.1 .3.
31 December 2005
1 .2.
The Option shall lapse if:-
1.2.1.
If it is not exercised on or before the date in 1.1.3; or
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4
1.2.2. if KBH or its nominee duly gives notice of its intention to exercise
the Option, but fails to secure payment of the purchase
consideration, and payment does not occur within [90] days after
giving notice [of the intention to exercise the Option].

1.3.
Upon receipt of payment of the purchase consideration in 1.1:
1.3.1.    DRDGOLD shall, if called upon by KBH, agree to deal with KBH's shares
in CGR ("the KBH shares") as follows:

1.3.1.1.      If the KBH shares are held in pledge by BV1750, to release the KBH
shares to KBH or its nominee; or

1.3.1.2.      if the KBH shares shall have been transferred to BV1750, to transfer
the KBH shares, against payment of their nominal value, to KBH or
its nominee; and
1.3.2.    The terms and the provisions of the Intercreditor-Agreement which
applied as between the IDC and DRDGOLD in respect of the Companies
on the 30
th
of the June 2005, shall mutatis mutandis come into effect
between KBH and DRDGOLD, KBH to assume the former position of
IDC.

1.4.
The Parties record that:-

1 .4.1.
DRDGOLD has agreed to, and shall be entitled to:

1.4.1.1.      upon closing of the IDC Sale in respect of the IDC Loans to CGR
and ERPM,

1.4.1.2.      the Competition Commission approving the 'merger', and

1.4.1.3.      the transfer of the KBH shares to BVI750 having been effected
acquire the KBH shareholder loan claim for R9,3 million, payable in
cash.
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5
1.4.2.
If KBH through the exercise of this option (the First KBH Option),
restores is former position in CGR, DRDGOLD shall neither be entitled
to, nor be obliged to purchase the KBH shareholder loan claim;
1.4.3.
If as at the 31
st
of December 2005, KBH has incurred, in the opinion of
the auditors of KBH, any material liability, contingent or otherwise, other
than a liability pursuant to an acquisition of an asset or interest after the
Closing Date, DRDGOLD shall be entitled, but not obliged, to purchase
the KBH shareholder loan claim.
2.
OPTION IN FAVOUR OF KBH nominee and a KBH led BEE CONSORTIUM ("the
BEE Consortium")
If the IDC Sale closes and UPON the Competition Commission approving the
'merger' as aforesaid, DRDGOLD shall grant an option to the nominee of KBH to
acquire 15% of the entire issued share capital of DRDGOLD SA against payment of
a purchase consideration of R21.4 million (This acquisition will establish an indirect
interest also in the secured debt through the SPV holdings).

2.1 .
This option shall be capable of being exercised from the date on which the
approval as aforesaid is received AND the DRDGOLD SA structure
resembles in all material aspects the structure set out on Schedule B hereto
or any similar structure, which achieves the same strategic objectives. In
this regard DRDGOLD undertakes to, with reasonable expedition establish
a structure as aforementioned.

2.2.
The purchase consideration payable by KBH's nominee shall be vendor
financed. ;

2.3.
The nominee of KBH may exercise the option by giving written notice to
DRDGOLD to that effect, which notice must be submitted by no later than

BACKGROUND IMAGE
6
the 30 days after the last of the conditions in 2.1 are met;

2.4.
The option shall lapse if:-
2.4.1. it is not exercised by the due date; or
2.4.2. if KBH exercises the option in paragraph 1 above.

2.5.
Provided that the option in 2.1 is duly exercised and the ensuing sale
closes, DRDGOLD grants a further 3 year option (reckoned from the
signature date) to the BEE Consortium, to acquire 11 % of the issued share
capital of DRDGOLDSA, against payment of a cash consideration of R9.3
million.

2.6.
It is further envisaged that, upon closing of a transaction between
DRDGOLD and the BEE Consortium pursuant to BEE Consortium
exercising the Option in 2.5, that the DRDGOLD board shall extend a
further Option, exercisable within three years and six months after the
signature date on reasonable commercial terms to the BEE Consortium to
acquire a further 8% of DRDGOLDSA, so that the collective holdings of
KBH and the BEE Consortium shall be 34% of DRDGOLD SA.

3.
WRITTEN AGREEMENT

3.1.
The parties record that, whilst they acknowledge that this document is
essentially an "agreement to agree", the clauses above captures the
essence of their mutual understanding and intent.

3.2.
The parties accordingly express their mutual commitment to in good faith
pursue the aforementioned objectives in order to reach final agreement,
establish the structures that will achieve the same, and to record its terms in
writing.
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7
This
done and signed at Mossel Bay on this the 6
th
day of July 2005
As Witnesses
For
and on behalf of  DRDGOLD LIMITED
/s/ DJ Pretorius

1. ___________________
(sgd) D J Pretorius
Group Legal Counsel
This done and signed at
on this the __ day of ______________2005
As
Witnesses
For and on behalf of KHUMO BATHONG
(PTY) LIMITED
1.
/S/ Khumo Bathong (Pty) Limited
DIRECTOR
This done and signed at
on this the __ day of _______________2005
As
Witnesses
For and on behalf of DR PASEKA NCHOLO
Acting as promoter of a BEE Consortium

1. ___________________
/S/ Dr Paseka Ncholo
DIRECTOR
BACKGROUND IMAGE
EXHIBIT 4.88











FACILITY B LOAN AGREEMENT



Between



INVESTEC BANK (MAURITIUS) LIMITED



and



DRD (ISLE OF MAN) LIMITED

BACKGROUND IMAGE

TABLE OF CONTENTS

1.
PARTIES ................................................................................................................. 1
2.
DEFINITIONS AND INTERPRETATION......................................................... 1
3.
INTRODUCTION .................................................................................................. 5
4.
CONDITIONS PRECEDENT .............................................................................. 6
5.
APPROVAL OF TARGETS................................................................................. 8
6.
PURPOSE................................................................................................................ 9
7.
THE FACILITY ..................................................................................................... 9
8.
UTILISATION OF THE FACILITY .................................................................. 9
9.
REPAYMENT....................................................................................................... 11
10.
CESSION OF CEDED AMOUNTS.................................................................... 11
11.
PREPAYMENT .................................................................................................... 11
12.
INTEREST PERIODS ......................................................................................... 12
13.
INTEREST ............................................................................................................ 12
14.
COMMITMENT AND FACILITY FEES ......................................................... 13
15.
CANCELLATION................................................................................................ 14
16.
CHANGES TO THE CALCULATION OF INTEREST.................................. 15
17.
DESIGNATION AS A FINANCE DOCUMENT ............................................. 17
APPENDIX 1: DRAWING NOTICE ........................................................................... 18
APPENDIX 2: ADVANCE CONDITIONS PRECEDENT ..................................... 190


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FACILITY B LOAN AGREEMENT
1.
PARTIES
1.1
The parties to this Agreement are:
1.1.1
INVESTEC BANK (MAURITIUS) LIMITED ; and
1.1.2
DRD (ISLE OF MAN) LIMITED .
1.2
The parties agree as set out below.
2.
DEFINITIONS AND INTERPRETATION
2.1
Unless inconsistent with the context, any word or expression used in this
Agreement and not otherwise defined in this Agreement, shall have the meaning
ascribed to it in the CTA. In addition, unless inconsistent with the context, the
words and expressions set forth below shall bear the following meanings and
cognate expressions shall bear corresponding meanings:
2.1.1
“Advance” means any loan made or to be made under the Facility or the
principal amount outstanding for the time being of that loan;
2.1.2
“Advance Conditions Precedent” means the conditions precedent
stipulated in clause 4.2.1;
2.1.3
“Agreement” means this Facility B Loan Agreement together with all
appendices hereto, as read and implemented together with the CTA;
2.1.4
“Agreement Conditions Precedent” means the conditions precedent
stipulated in clause 4.1.1;
2.1.5
“Available Facility” means, at any time during the Availability Period,
save as otherwise provided herein, the Total Facility Amount:
2.1.5.1
less the aggregate amount of all Advances made by the Lender to the
Borrower hereunder plus all accrued and unpaid interest on such
Advances; and
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Page 2.

2.1.5.2
less in relation to any proposed Advance for which a Drawing Notice
has been received by the Lender, the amount of any Advances that
are due to be made on or before the proposed Drawing Date; and
2.1.5.3
less any portion of the Facility cancelled pursuant to the provisions
of clause 15; and
2.1.5.4
plus the aggregate amount of all Advances (or any portion thereof)
made by the Lender to the Borrower hereunder which have been
repaid by the Borrower at that time;
2.1.5.5
plus the aggregate amount of all Ceded Amounts at that time;
2.1.6
“Availability Period” means the period for which this Facility B remains
available, being the period commencing on the Effective Date and ending
on the date on which this Facility B is terminated by the Lender in writing,
provided that this Facility B may not be terminated by the Lender for any
reason (other than following the occurrence of an Event of Default which
is continuing) for a period of 3 (three) years after the Effective Date;
2.1.7
“Bank Costs” means the costs to the Lender from time to time of
maintaining or funding this Facility B pursuant to any applicable
regulatory or other applicable law (including without limitation, any stamp
duty or costs incurred in order to comply with any reserve cash ratio,
special deposit, liquidity, capital adequacy requirements or any other
similar requirements), expressed as a nominal annual compounded
monthly in arrears rate, and a certificate given by a manager of the Lender
(whose appointment and designation need not be proved) of the amount of
such costs and/or the amount of such rate shall be prima facie proof of its
contents;
2.1.8
“Borrower” means DRD (Isle of Man) Limited, company number
94445C, a company incorporated under the laws of the Isle of Man and
having its registered office at Grosvenor House, 66/67 Athol Street,
Douglas, Isle of Man;
2.1.9
“Calculation Agent” means Investec Bank;
2.1.10
“Ceded Amount” means the amount of each Advance (or any portion
thereof) specified by the Lender in any Demand Notice;
2.1.11
“Cession Date” means, in respect of each Ceded Amount, the date of the
cession by the Lender to DRDGOLD of the Lender’s claim against the
Borrower in respect of such Ceded Amount in accordance with the terms
of the Guarantee Agreement;
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Page 3.

2.1.12
“CTA” means the written Common Terms Agreement entered into
between the Borrower and the Lender dated 14 October 2004, as amended;
2.1.13
“Demand Notice” means a “Demand Notice” as defined in the Guarantee
Agreement;
2.1.14
“Drawdown Fee” means the fee as described in clause 14.3;
2.1.15
“Drawing Date” means the Business Day upon which any Advance is
made or to be made in terms of this Agreement;
2.1.16
“Drawing Notice” means a notice as envisaged in clause 8 below, duly
completed and signed by the Borrower in the form of Appendix 1 to this
Agreement;
2.1.17
“DRDGOLD” means DRDGOLD Limited (formerly Durban Roodepoort
Deep Limited), a company with limited liability registered in accordance
with the laws of South Africa under registration number 1895/000926/06;
2.1.18
“Effective Date” means, notwithstanding the Signature Date, the first
Business Day after the date of the fulfilment or waiver of all of the
Agreement Conditions Precedent in accordance with the terms of this
Agreement;
2.1.19
“Facility B” means the revolving credit facility made available to the
Borrower under this Agreement as described in clause 7;
2.1.20
“Facility Outstandings” means the Loan together with all interest and
charges due thereon in accordance with the terms of this Agreement and
all other sums due and payable by the Borrower to the Lender hereunder
(including, without limitation, any fees, costs or expenses payable by the
Borrower hereunder), which at any time and from time to time have not
been prepaid, repaid or paid irrevocably, unconditionally and in full;
2.1.21
“Final Repayment Date” means the Business Day following the
termination of the Availability Period;
2.1.22
“Guarantee Agreement” means the written agreement entitled
“Guarantee Agreement” concluded or to be concluded between
DRDGOLD, Investec Bank and the Lender on or about the Signature Date
pursuant to which DRDGOLD undertakes to pay Guaranteed Amounts
from time to time upon demand by the Lender;
2.1.23
“Guaranteed Amount” means, in respect of each Demand Notice, the
amount demanded by the Lender from DRDGOLD in that Demand Notice;
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Page 4.

2.1.24
“Guarantee Event of Default” means any event or circumstance
described as a “Guarantee Event of Default” in the Guarantee Agreement;
2.1.25
“Interest Payment Date” means the last day of the Interest Period in
which such interest accrued;
2.1.26
“Interest Period” means each period determined in accordance with
clause 13 in respect of this Facility B, for the purpose of calculating
interest on Advances;
2.1.27
“Interest Rate” in relation to each Interest Period, means the rate per
annum determined by the Calculation Agent to be the aggregate of:
2.1.27.1
the Margin; and
2.1.27.2
LIBOR for that Interest Period; and
2.1.27.3
the Bank Costs;
2.1.28
“Investec Bank” means Investec Bank Limited, a company with limited
liability registered in accordance with the laws of South Africa under
registration number 1969/004763/06;
2.1.29
“Investec Group” means Investec Limited and its Subsidiaries from time
to time;
2.1.30
“Lender” means Investec Bank (Mauritius) Limited, a company with
limited liability registered as a bank in accordance with the laws of
Mauritius under bank registration number 8752/3362, with its offices at 7
th
Floor, Harbour Front Building, John Kennedy Street, Port Louis,
Mauritius;
2.1.31
“LIBOR” means in relation to any amount owed by the Borrower
hereunder on which interest for a given period is to accrue:
2.1.31.1
the arithmetic mean, rounded upward to the nearest four decimal
places of the rates for deposits in US Dollars for a period and an
amount similar to the relevant amount and period in respect of which
the interest is being calculated on the Quotation Date, which is
published on the Reuters page LIBOR01 page (or such other page or
service as may replace it for the purpose of displaying London
interbank offered rates of prime banks for deposits in such currency)
at or about 11h00 London time on the Quotation Date; or
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Page 5.

2.1.31.2
if no quotation for US Dollars is displayed for the relevant period,
the arithmetic mean (rounded upwards to four decimal places) of the
rates quoted to the Lender by the Reference Banks in the London
Interbank Market for deposits in US Dollars for such period at or
about 11h00 on the Quotation Date for such period;
2.1.32
“Loan” means the aggregate principal amounts of all Advances made in
terms of this Agreement and for the time being outstanding hereunder;
2.1.33
“Margin” means a nominal annual compounded monthly rate of 3.00%
(three point zero percent);
2.1.34
“Quotation Date” means the date which is 2 (two) Business Days prior to
the first day of the Interest Period for which an Interest Rate is to be
determined in accordance with clause 2.1.27;
2.1.35
“Reference Banks” means the principal London offices of Citibank N.A.,
JPMorgan Chase and Barclays Bank plc or such other banks as may be
selected by the Lender in consultation with the Borrower;
2.1.36
“Repeating Warranties” means the warranties listed in Appendix 3 of the
CTA;
2.1.37
“Shares” shall have the meaning as defined in the Guarantee Agreement;
2.1.38
“Signature Date” means the date of the signature of the Party last signing
this Agreement in time;
2.1.39
“Subsidiary” means a “ subsidiary ” as defined in section 1 of the South
African Companies Act, 1973;
2.1.40
“Total Facility Amount” means the sum of US$35 000 000 (Thirty-five
Million United States Dollars).
2.2
This Agreement and the rights and obligations of the parties hereto, shall be
subject to the terms and conditions of the CTA. In the event of any
inconsistency between the terms of this Agreement and the CTA, this Agreement
shall prevail.
3.
INTRODUCTION
3.1
The Borrower wishes to obtain funding in order to acquire shares or some other
form of ownership in Targets from time to time.
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Page 6.

3.2
The Lender is prepared to make available to the Borrower this Facility B upon
the terms and conditions in this Agreement and the CTA.
4.
CONDITIONS PRECEDENT
4.1
Conditions Precedent to this Agreement
4.1.1
This entire Agreement, save for the provisions of this clause 4.1 and of
clauses 1, 2 and 5 which shall be of immediate force and effect, is subject
to the fulfilment of the following conditions precedent on or before 30
April 2005, or such later date as the Lender and the Borrower may agree in
writing on or before that date, that:
4.1.1.1
the Lender shall have notified the Borrower in writing in accordance
with clause 13.2 of the CTA that the Conditions Precedent referred
to in clause 13.1 of the CTA is also considered to have been fulfilled
or waived in respect of this Agreement;
4.1.1.2
the Guarantee Agreement shall have been executed by DRDGOLD,
in a form and in substance acceptable to the Lender and Investec
Bank (which acceptability shall be conveyed by the execution of the
Guarantee Agreement by the Lender and Investec Bank) and
delivered to the Lender;
4.1.1.3
the Lender shall have notified the Borrower in writing that the
Lender is satisfied in its sole discretion that the Guarantee
Agreement is in force and effect and has become unconditional in
accordance with its terms;
4.1.1.4
DRDGOLD shall have delivered to the Lender and Investec Bank
written proof, in a form and in substance satisfactory to each of the
Lender and Investec Bank in its sole discretion, that the board of
directors of DRDGOLD have authorised the conclusion of the
Guarantee Agreement on the terms and conditions set out therein and
have authorised a person or persons to sign the Guarantee Agreement
on its behalf;
4.1.1.5
the Lender shall have notified the Borrower in writing that each of
the Lender and Investec Bank is satisfied in its sole discretion that
DRDGOLD has received all Authorisations (if any) necessary and
required as at the Effective Date (including, without limitation, the
approval of the Exchange Control Department of the South African
Reserve Bank) in each case:
4.1.1.5.1
to render the Guarantee Agreement legal, valid, binding and
enforceable;
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4.1.1.5.2
to enable DRDGOLD lawfully to enter into, perform and
comply with its obligations under the Guarantee Agreement,
and that copies of all such Authorisations, certified as true copies by
an authorised officer of DRDGOLD, shall have been delivered to the
Lender and Investec Bank;
4.1.1.6
the Lender shall have approved the identity of the first Target in
respect of which the Borrower wishes to borrow an Advance
hereunder in order to fund the acquisition by the Borrower of shares
or some other form of ownership in that Target in accordance with
the provisions of clause 5.
4.1.2
Each party shall use its reasonable commercial endeavours, to the extent
that it is within its power to do so, to procure the fulfilment of the
Agreement Conditions Precedent as soon as reasonably possible after the
Signature Date.
4.1.3
The Agreement Conditions Precedent have been inserted in this
Agreement for the sole benefit of the Lender and accordingly may only be
waived (in whole or in part) in writing by the Lender on or before the date
specified for their fulfilment.
4.1.4
In the event that the Agreement Conditions Precedent are not fulfilled or
waived on or before 30 April 2005, or such later date as the Lender and the
Borrower may agree in writing on or before that date, then this Agreement,
save for the provisions of this clause 4.1 and of clauses 1 and 2 which shall
remain of full force and effect, shall never become of any force or effect
and neither party shall have any claim against the other party for anything
done hereunder or arising hereout, save as a result of a breach of any of the
provisions of this clause 4.1 by a party and the parties shall be restored to
the status quo ante .
4.2
Conditions Precedent to Advances
4.2.1
The obligation of the Lender to make any Advance to the Borrower under
this Agreement is subject to the conditions precedent that:
4.2.1.1
the Lender has received the requisite Drawing Notice in respect of
such Advance; and
4.2.1.2
the Lender has notified the Borrower in writing that in accordance
with clause 4.2.2 that:
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4.2.1.2.1
the Lender has received all of the agreements, documents and
evidence set out in Appendix 2 in the form and substance
satisfactory to the Lender in its sole and absolute discretion;
4.2.1.2.2
the Lender is satisfied in its sole and absolute discretion that all
of the agreements, documents and evidence set out in
Appendix 2 are in full force and effect and are unconditional or
are subject to conditions satisfactory to the Lender in its sole
and absolute discretion; and
4.2.1.2.3
the Lender is satisfied in its sole and absolute discretion as to
the other matters set out in Appendix 2; and
4.2.1.3
the first Drawing Date for this Agreement is a date which occurs
within 3
(three) months after the Effective Date.
4.2.2
The Lender shall within 3 (three) Business Days of receipt of the requisite
Drawing Notice notify the Borrower whether or not it is satisfied that the
Advance Conditions Precedent have been fulfilled or waived and the
Advance Conditions Precedent shall only be considered to have been
fulfilled or waived when such notice is given.
4.2.3
The Advance Conditions Precedent are expressed to be for the benefit of
the Lender and accordingly the Lender shall be entitled to waive (in whole
or in part) fulfilment of all or any of the Advance Conditions Precedent.
5.
APPROVAL OF TARGETS
5.1
At any time on or after the Signature Date the Borrower shall be entitled (but not
obliged) to deliver a written request (each, an “Approval Request” ) to the
Lender requesting the Lender to approve the identity of any Target (each, an
“Intended Target” ) in which the Borrower wishes to acquire (each, an
“Intended Acquisition” ) the shares or some other form of ownership interest
together which all relevant details of such Intended Acquisition available to the
Borrower at that time including, without limitation, the identity of the Intended
Target, the type of ownership interest which the Borrower wishes to acquire in
the Intended Target, the size of the ownership interest which the Borrower
wishes to acquire in the Intended Target, details of any Authorisations which the
Borrower will require in order to implement the Intended Acquisition, the
Borrower’s views on the financial effects of the Intended Acquisition and the
results of any due diligence investigation of the Intended Target conducted by or
on behalf of the Borrower.
5.2
The Lender shall be entitled to consider the Intended Acquisition for a period of
5 (five) Business Days, or such longer period as, may be agreed in writing
between the parties hereto after the receipt by the Lender of the Approval
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Request and during such period the Borrower shall be entitled (but not obliged)
to provide to the Lender all such additional information as the Lender may
require in connection with is assessment of the Intended Acquisition.
5.3
Unless the Borrower shall have withdrawn its Approval Request, the Lender
shall be entitled in its sole discretion to approve or not approve the identity of
the Intended Target and the Intended Acquisition prior to the end of the period
referred to in clause 5.2 and deliver written notice of such approval or
disapproval to the Borrower failing which the Lender shall be deemed not to
have approved the Intended Target or the Intended Target.
5.4
Should the Lender approve the Intended Target and the Intended Acquisition
pursuant to clause 5.3, the Borrower shall be entitled to deliver a Drawing
Notice to borrow (subject to the provisions of clauses 4 and 8) an Advance in
order to enable the Borrower to pay the consideration (in whole or in part)
payable by it in respect of the Intended Acquisition.
6.
PURPOSE
6.1
Facility B shall be used to fund the acquisition by the Borrower of shares or
some other form of ownership in respect of Targets approved by the Lender in
accordance with the provisions of clause 5 and the reasonable costs associated
with any such acquisition.
6.2
The Lender shall be entitled to, but is not obliged to, monitor or verify the
application of any amount borrowed by the Borrower pursuant to this
Agreement.
7.
THE FACILITY
Subject to the terms and conditions of this Agreement, the Lender agrees to make
available to the Borrower a revolving loan facility for a maximum aggregate amount
(including principal and accrued but unpaid interest) of US$35 000 0000 (Thirty-five
Million United States Dollars).
8.
UTILISATION OF THE FACILITY
8.1
Subject to the provisions of this Agreement and to the fulfilment or waiver of all
of the Agreement Conditions Precedent and the Advance Conditions Precedent,
the Borrower may utilise the Facility by delivering to the Lender, in respect of
any Advance, a duly completed Drawing Notice.
8.2
Each Drawing Notice is irrevocable and will not be regarded as having been
duly completed unless:
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8.2.1
it is delivered to the Lender no later than 11h00 (Mauritius time) and no
less than 3 (three) Business Days and no more than 5 (five) Business Days
prior to the proposed Drawing Date;
8.2.2
the proposed Drawing Date is a Business Day within the Availability
Period;
8.2.3
the currency of the proposed Advance is United States Dollars;
8.2.4
the amount of the proposed Advance must be a minimum amount of
US$2 500 000 (Two Million Five Hundred Thousand United States
Dollars) and in integral multiples of US$500 000 (Five Hundred Thousand
United States Dollars) and in any event not more than the Available
Facility.
8.3
All proceeds of an Advance will be credited to the Proceeds Account on the
relevant Drawing Date.
8.4
Only one Advance may be requested in each Drawing Notice.
8.5
No more than one Advance will be made by the Lender to the Borrower during
any 1 (one) calendar month.
8.6
Notwithstanding anything to the contrary contained herein, the Lender shall not
be obliged to make any Advance unless on the proposed Drawing Date:
8.6.1
no Event of Default or Potential Event of Default is continuing or would
result from the making of the Advance; and
8.6.2
the Repeating Warranties are true and correct in all material respects.
8.7
The Borrower acknowledges and agrees that:
8.7.1
the Lender shall not be obliged to make any payment pursuant to any
Drawing Notice unless and until the Borrower shall have complied strictly
with the requirements in respect thereof as set out in this clause 8; and
8.7.2
any Drawing Notice signed by an authorised signatory on behalf of the
Borrower shall be deemed to be a valid Drawing Notice issued by the
Borrower and any Advances made pursuant to such Drawing Notice to the
Borrower shall constitute valid Advances to the Borrower and constitute
part of the Loan:
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8.7.3
the Lender may validly act on all information, instructions and requests
contained in the Drawing Notice, without any liability or responsibility to
verify or check the accuracy of such information.
8.8
Upon the expiry of the Availability Period, the Available Facility shall be
reduced to zero and the Borrower shall not be entitled to deliver any further
Drawing Notices.
8.9
The Lender shall be entitled, in its sole discretion, to deduct the Drawdown Fee
from the particular Advance to which such Drawdown Fee relates.
9.
REPAYMENT
The Borrower shall repay the Facility Outstandings by no later than the Final
Repayment Date, into an account specified by the Lender in writing.
10.    CESSION OF CEDED AMOUNTS
10.1
The parties acknowledge that the Lender will from time to time in accordance
with the provisions of clause 6 of the Guarantee Agreement cede to DRDGOLD
the Lender’s claims in respect of Ceded Amounts and the Borrower hereby
consents to each such cession.
10.2
To the extent that any splitting of claims arises against the Borrower as a result
of any cession referred to in clause 10.1, the Borrower hereby consents to such
splitting of claims.
11.     PREPAYMENT
11.1
At any time prior to the Final Repayment Date, and subject to no Event of
Default or Potential Event of Default having occurred which is continuing, the
Borrower may, by giving to the Lender not less than 10 (ten) Business Days’
written notice to that effect, prepay the whole or part of the Facility Outstandings
on the last day of any Interest Period.
11.2
Any notice of prepayment pursuant to clause 11.1 shall:
11.2.1                 be
irrevocable;
11.2.2
specify the date upon which such prepayment is to be made;
11.2.3
specify the amount that the Borrower intends to prepay (which shall be no
less than US$2 500 000 (Two Million Five Hundred Thousand United
States Dollars) and integral multiples of US$500 000 (Five Hundred
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Thousand United States Dollars) and in any event not more than the
Available Facility); and
11.2.4
oblige the Borrower to make such prepayment on the date mentioned in
clause 11.2.2.
11.3
Any prepayment pursuant to this clause 11 shall:
11.3.1
be made without premium or penalty except for any Breakage Costs
incurred by the Lender as a consequence of such prepayment for which the
Borrower shall be liable and which shall be paid by the Borrower to the
Lender on the date of such prepayment; and
11.3.2
be allocated first towards the payment of any fees, costs, charges or
expenses due and payable to the Lender but unpaid, thereafter to the
payment of any accrued and unpaid interest, and thereafter to the
repayment of the Loan.
12.    INTEREST PERIODS
12.1
The period during which any part of the Loan is outstanding will be divided into
successive periods (each, an “Interest Period” ).
12.2
The first Interest Period relating to the Loan shall commence on the first
Drawing Date and each subsequent Interest Period shall commence on the expiry
of the preceding Interest Period.
12.3
Subject to clauses 12.4 and 12.5, each Interest Period shall be for a period of 30
(thirty) days as from and including the first day of the Interest Period.
12.4
The last Interest Period shall end on the Final Repayment Date.
12.5
Any Interest Period which would otherwise not end on a Business Day, shall end
on the next successive Business Day unless that Business Day falls in the next
calendar month, in which case the Interest Period shall end on the preceding
Business Day.
13.    INTEREST
13.1
Interest in terms of this Agreement shall accrue on each Advance at the Interest
Rate, from the Drawing Date of such Advance until such Advance is repaid by
the Borrower in full and such interest shall be calculated in accordance with the
provisions of clause 46.3 of the CTA.
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13.2
Each Interest Period shall have its own Interest Rate which shall be calculated on
the Quotation Date.
13.3
The interest referred to in this clause 13 shall be payable in arrears on the
Interest Payment Date in respect of the relevant Interest Period.
13.4
The Lender shall from time to time notify the Borrower of:
13.4.1
the rate of interest (together with details of the calculation thereof), as soon
as it is determined under this Agreement; and
13.4.2
the amount of interest payable under this Agreement on each Interest
Payment Date (together with details of the calculation thereof), no later
than 3 (three) Business Days prior to such Interest Payment Date;
provided that the Lender shall not be liable to the Borrower in respect of any
failure to so notify the Borrower and that the Borrower shall not as a result of
any such failure be relieved of any of its obligations hereunder.
13.5
Notwithstanding anything to the contrary contained in this Agreement, should
DRDGOLD discharge its obligation to pay any Guaranteed Amount demanded
by the Lender in accordance with the terms of the Guarantee Agreement by the
delivery of Shares pursuant to clause 4.5 of the Guarantee Agreement, the
Borrower shall not be liable to pay interest on an amount of the Loan equivalent
to the Ceded Amount in respect of that Guaranteed Amount for a period of 30
(thirty) days prior to the Cession Date of that Ceded Amount.
14.    COMMITMENT AND FACILITY FEES
14.1
Once–Off Facility Fee
On the Effective Date, the Borrower shall pay to the Lender a once off facility
fee equal to 1% (one percent) of the Total Facility Amount.
14.2
Commitment Fee
During the Availability Period, the Borrower shall pay to the Lender a
commitment fee which shall be:
14.2.1
calculated on the basis of actual days elapsed from the Signature Date, on
a 360 day year, at the rate of 1.25% (one point two five percent) per annum
on the Available Facility; and
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14.2.2
paid quarterly in arrears (that is, on the first day of January, April, July and
October) for so long as this fee is due, with the first payment being made
on the first of such days after the Effective Date.
14.3
Drawdown Fee
On the Drawing Date of each Advance under this Agreement, the Borrower shall
pay to the Lender, a drawdown fee equal to 4% (four percent) of the relevant
Advance.
15.    CANCELLATION
15.1
The Borrower shall not be entitled to cancel any part of this Facility B otherwise
than as specifically provided in this Agreement.
15.2
The Borrower may cancel the undrawn part of this Facility B in respect of which
no Drawing Notice has been served, without penalty, in whole or in part, at any
time provided that:
15.2.1
the Borrower shall, on demand, make payment of any Breakage Costs;
and
15.2.2
the Borrower has given the Lender not less than 30 (thirty) Business Days’
written notice stating the principal amount to be cancelled.
15.3
The Lender shall be entitled to cancel any undrawn part of this Facility B:
15.3.1
upon the occurrence of any Event of Default by written notice to the
Borrower and the undrawn portion of this Facility B shall be cancelled
with effect from the date of such written notice; or
15.3.2
at any time after the 3
rd
(third) anniversary of the Effective Date by giving
the Borrower not less than 30 (thirty) Business Days’ written notice to that
effect,
whichever occurs earlier.
15.4
During the 30 (thirty) day period referred to in clause 15.2.2 or clause 15.3.2, as
the case may be, the Borrower shall not be entitled to deliver a Drawing Notice
purporting to draw all or any part of the amount which is the subject of such
notice of cancellation.
15.5
Any amounts available but not drawn down under this Facility at the end of the
Availability Period shall automatically be cancelled and the Borrower shall, on
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demand, pay the Lender the amount of any Breakage Costs occasioned by such
cancellation.
15.6
Any cancellation notice delivered by the Borrower pursuant to clause 15.2 shall
be irrevocable. No amount cancelled under this clause 15 shall again be
available for drawing.
16.    CHANGES TO THE CALCULATION OF INTEREST
16.1
Absence of Quotations
Subject to clause 16.2.1, if LIBOR is to be determined by reference to the
Reference Banks but a Reference Bank does not supply a quotation by the time
specified in clause 16.2.1.1 on the Quotation Day, the applicable LIBOR shall be
determined on the basis of the quotations of the remaining Reference Banks.
16.2
Market Disruption
16.2.1
In this Agreement “Market Disruption Event” means:
16.2.1.1
at or about 11:00 am, London time, on the Quotation Day for the
relevant Interest Period LIBOR is not available on the Reuters page
LIBOR01 page (or such other page or service as may replace it for
the purpose of displaying London interbank offered rates of prime
banks for deposits in such currency) and none or only one of the
Reference Banks supplies a rate to the Lender to determine LIBOR
for Dollars for the relevant Interest Period; or
16.2.1.2
before close of business in London on the Quotation Day for the
relevant Interest Period, the Lender discovers that:
(a)  the cost to it of obtaining matching deposits in the London
interbank market is in excess of LIBOR; or
(b)  matching deposits are not in the ordinary course of business
available to the Reference Bank/s in the London inter-bank
market for a period equal to the forthcoming Interest Period, in
amounts sufficient to fund its or their participation in the Loan
and/or the forthcoming Advance, as the case may be.
16.3
If a Market Disruption Event occurs in respect of any Interest Period, then:
16.3.1
the Interest Rate on the Loan for that Interest Period shall be
(notwithstanding any provision to the contrary herein) the rate (expressed
as a nominal annual compounded monthly rate) which is the aggregate of:
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16.3.1.1                       the
Margin;
and
16.3.1.2
the Bank Costs; and
16.3.1.3
the rate notified to the Borrower by the Lender as soon as is
practicable and in any event before interest is due to be paid in
respect of that Interest Period, to be that which expresses as a
percentage rate per annum the cost to the Lender of funding the
relevant Advance and/or the relevant Loan from whatever source it
may reasonably select;
16.3.2
the Lender shall notify the Borrower of such event and, if the Borrower
does not agree with Interest Rate determined in accordance with clause
16.3.1, then the Borrower shall notify the Lender in writing within 2 (two)
Business Days of receipt of such written notice of its disagreement in
which event the parties shall proceed to resolve the matter in accordance
with clause 16.4 or clause 16.5 and, failing delivery by the Borrower of a
written notice as aforesaid to the Lender, the Borrower shall be deemed to
have accepted the determination of the Interest Rate in accordance with
clause 16.3.1 which shall then be binding on both parties.
16.4
If the Borrower delivers a written notice in accordance with clause 16.3.2
disagreeing with the determination of the Interest Rate in accordance with clause
16.3.1, the Lender and the Borrower shall enter into negotiations with a view to
agreeing a substitute basis for determining the Interest Rate for that Interest
Period. Any such substitute basis that is so agreed shall take effect in
accordance with its terms and be binding on the parties.
16.5
If the Lender and the Borrower fail to agree to a substitute basis as mentioned in
clause 16.4, within 5 (five) Business Days of them being required to do so, then
if the Borrower gives the Lender not less than 5 (five) Business Days notice
(which notice shall be irrevocable) it may prepay:
16.5.1
subject to clause 16.5.3, any amount of the Loan without premium or
penalty at any time during that Interest Period;
16.5.2
together with any accrued interest thereon at a rate equal to that mentioned
in clause 16.3.1.3; and
16.5.3
together with any Breakage Costs attributable to all or any part of the Loan
being prepaid by the Borrower on a day other than the last day of an
Interest Payment Date.
16.6
The Lender shall as soon as reasonable practicable provide a certificate
confirming the amount of its Breakage Costs for any Interest Period in respect of
which they occur.
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17.    DESIGNATION AS A FINANCE DOCUMENT
17.1
The parties hereby agree that this Agreement is a Finance Document as set out in
the CTA and hereby agree that the Guarantee Agreement is designated as
Finance Document in accordance with clause 2.33.5 of the CTA.
17.2
The parties hereby agree that each Guarantee Event of Default shall also be an
Event of Default for the purposes of the Finance Documents and in particular for
the purposes of clause 33.23 of the CTA.
SIGNED Port Louis, Mauritius on this the 3
rd
day of March 2005.

For and on behalf of
INVESTEC BANK (MAURITIUS) LIMITED


/s/ C Mckenzie
Craig
Mckenzi
Capacity: CEO
Who warrants his authority hereto


/s/
S
Thompson
Shawn
Thompson
Capacity:
COO
Who warrants his authority hereto

SIGNED at Isle of Man on this the 3
rd
day of March 2005.

For and on behalf of
DRD (ISLE OF MAN) LIMITED


/s/ P Matthews
Name:
P
Matthews
Capacity:
Director
Who warrants his authority hereto

/s/
M
Wellesley-Wood
Name:
Mark
Wellesley-Wood
Director
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APPENDIX 1

FORM OF DRAWING NOTICE

To:
[insert]

Date:
[insert]


Dear Sirs


Facility B Loan Agreement dated on or about [insert] 2005 between the Investec Bank
(Mauritius) Limited and DRD (Isle of Man) Limited (the “Agreement”) Drawing Notice
Number [insert].

1.
We refer to clause 8 [Utilisation of the Facility] of the Agreement. Terms defined in the
Agreement have the same meanings in this Drawing Notice.

2.        We confirm that:

2.1            on
[insert] (Drawing Date) we wish to borrow an Advance in the Amount of
[insert] ;

2.2
all Advances are to be paid into the Proceeds Account;

2.3
the proceeds of the Advance drawn pursuant to this Drawing Notice shall be applied
exclusively in accordance with the terms of the Agreement; and

2.4
on the date of this Drawing Notice, on the Drawing Date and immediately after the
making of the Advance to which this Drawing Notice relates, the Advance
Conditions Precedent have been satisfied.

Yours faithfully




[Authorised signatory]
for an on behalf of
[the Borrower]


Attachment 1: Supporting evidence that the provisions of clause 8 of the Agreement have
been complied with.
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APPENDIX 2
ADVANCE CONDITIONS PRECEDENT


1.
On both the date of the Drawing Notice and the Drawing Date of the Advance
neither:
1.1
an Event of Default; nor
1.2
a Potential Event of Default,
shall have occurred, be continuing or in the reasonable opinion of the Lender
could probably occur as a result of making such Advance.
2.
On both the date of the Drawing Notice and the Drawing Date of the relevant
Advance, the repeating warranties made in Appendix 2 of the CTA shall be
correct, in each case, in all material respects with reference to the circumstances
prevailing at the relevant time.
3.
The Lender shall have been granted Security, recorded in a Security Document
in a form and in substance acceptable to the Lender in its sole discretion, over
the shares or other form of ownership interest to be acquired by the Borrower in
the relevant Target utilising the proceeds of any proposed Advance, to secure the
Borrower’s obligations under the Finance Documents.
4.
The Lender shall have received copies, certified as true copies by an authorised
officer of the Borrower, of all Authorisations necessary and required (including,
without limitation, the approval of the Exchange Control Department of the
South African Reserve Bank):
4.1
in connection with the acquisition by the Borrower of the shares or other
form of ownership interest to be acquired by the Borrower in relevant
Target; and
4.2
to enable the borrower to legally and validly grant the Security referred to
in paragraph 3 above to the Lender.
5.
The Borrower shall have delivered to the Lender written proof, in a form and in
substance satisfactory to each of the Lender in its sole discretion, that the board
of directors of the Borrower and (if necessary) the shareholders of the Borrower
have authorised:
5.1
the acquisition by the Borrower of the shares or other form of ownership
interest to be acquired by the Borrower in relevant Target on the terms and
conditions of such acquisition; and
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5.2
the granting of the Security referred to in paragraph 3 above to the Lender.
6.
The Borrower shall have delivered to the Lender written proof, in a form and in
substance satisfactory to each of the Lender in its sole discretion, that all
conditions precedent to the acquisition by the Borrower of the shares or other
form of ownership interest to be acquired by the Borrower in relevant Target
have been fulfilled.
7.
The Lender shall have received a legal opinion from legal advisors acceptable to
it that the Security Document referred to in paragraph 3 above has been duly
executed, is legal, valid and binding and (if necessary) has been lodged for
registration or for any other purpose with the relevant authority where required.
8.
The proposed Advance will not result in the Lender or any other member of the
Investec Group breaching, contravening or being non-compliant with any
applicable Law including, without limitation, any Law relating to the holding of
regulatory capital or prudential requirements applicable to the Lender and/or any
member of the Investec Group.
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EXHIBIT 4.89
Loan Agreement
Between:
DRD (Isle of Man) Limited
Emperor Mines Limited; and
Emperor Gold Mining Company
Limited
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Table of contents
Clause
Page
1
Definitions and interpretation
4
1.1
Definitions
4
1.2
Interpretation
7
2
Conditions precedent and shareholder approval
8
2.1
Conditions precedent
8
2.2
Waiver
8
2.3
Shareholder approval
8
3
Loan Facility
9
3.1
Loan Facility
9
3.2
Pre-conditions to obligation to make an Advance
9
3.3
Amount of a draw down
9
3.4
Use of an Advance
9
4
Repayments and termination
9
4.1
Repayment of the Principal Outstanding
9
4.2
Interest
10
4.3
Outstanding amounts capitalised
10
4.4
Prepayment
10
4.5
Method of payment
10
4.6
Payments in gross
11
4.7
Appropriation of payments
11
4.8
Termination on receipt of Tuvatu Project Sale Cash Proceeds
11
5
Guarantee and Security
11
5.1
Guarantee
11
5.2
Limited Recourse
12
5.3
Execution of Security Documents
12
5.4
Form of Security
12
5.5
The Borrower’s security undertaking
13
5.6
Acknowledgement of the terms of the ASX Waiver
13
6
Conversion rights
13
6.1
Conversion of Principal Outstanding
13
6.2
Conversion calculation
13
6.3
Adjustment for Diluting Event
14
6.4
Restrictions on Conversion
14
6.5
Shares to be issued on conversion
15
7
Representations and warranties
15
7.1
Representations and warranties
15
7.2
Survival of representations and warranties
16
7.3
Reliance
16
7.4
Continuing obligation
16
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8
Undertakings by the Borrower
16
8.1
Provision of information and accounts
16
8.2
Notices to the Lender
17
8.3
Negative pledge and disposal of assets
17
8.4
Term of undertakings
17
9
Events of Default
18
9.1
Events of Default
18
9.2
Effect of Event of Default
19
10
Tax, fees, costs and expenses
20
10.1
Tax
20
10.2
Costs and expenses
20
11
Indemnity
20
11.1
General indemnity
20
11.2
Continuing indemnities and evidence of loss
20
11.3
Foreign currency indemnity
21
12
Assignment
21
13
General
21
13.1
Confidential information
21
13.2
Performance by Lender of obligations
21
13.3
Notices
22
13.4
Governing law and jurisdiction
23
13.5
Prohibition and enforceability
23
13.6
Waivers
23
13.7
Variation
24
13.8
Cumulative rights
24
13.9
Certificates of Lender
24
13.10
Further assurances
24
13.11
Entire agreement
24
13.12
Third party rights
24
13.13
Counterparts
24
13.14
Attorneys
24
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This convertible term loan agreement
is made on
2005 between the following parties:
1
DRD (Isle of Man) Limited (Company number 94445C) of Grosvenor House, 66/67 Athol Street,
Douglas, Isle of Man
( Lender )
2
Emperor Mines Limited (A.C.N. 007 508 787) of Suite 303, 3rd Floor, 50 Margaret Street, Sydney,
NSW, Australia, 2000
( Borrower )
3
Emperor Gold Mining Company Limited a company incorporated in Fiji of Vatukoula, Fiji
( Guarantor )
Recitals
The Borrower has requested the Lender, and the Lender has agreed, to make available a convertible
term loan facility to the Borrower and the Guarantor has agreed to guarantee the Borrower’s
obligations on the terms and conditions contained in this agreement.
The parties agree
in consideration of, among other things, the mutual promises contained in this agreement:
1
Definitions and interpretation
1.1
Definitions
In this agreement:
Advance means each principal amount made available by the Lender to the Borrower under the Loan
Facility by way of loan in accordance with the terms of this agreement;
ANZ Bank means Australia and New Zealand Banking Group Limited ABN 11 005 357 522 and its
subsidiaries;
ANZ Facility means the credit facility provided by ANZ Bank to the Borrower dated 18 December
2002;
ASX Waiver means the waiver from the Australian Stock Exchange to the requirements of Listing
Rule 10.1 granted on 6 July 2005.
Authorised Signatory means either the chief operating officer and general manager of the Vatakoula
Mine and any director or officer of the Borrower that is not a nominee director of the Lender each of
who are duly authorised to sign a Draw Down Request as an Authorised Signatory;
Business Day means a day on which trading banks are open for trading generally and which is not a
Saturday or Sunday or public holiday in New South Wales;
Completion Date means not more than 7 Business Days from the date of satisfaction or waiver of the
last of the conditions precedent specified in clause 2.1;
Concentrating Event means any event that, in the reasonable opinion of the Lender, may have a
concentrative effect on the value of the Shares and includes off-market buy backs, reorganisation or
reconstruction of capital (including consolidation, sub-division, reduction or reclassification);
Conversion Notice means the notice of conversion of any or all of the Principal Outstanding which is
to be in the form set out in Schedule 2 to this agreement
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Corporations Act means the Corporations Act 2001 (Cth);
Diluting Event means any event that, in the reasonable opinion of the Lender, may have a diluting
effect on the value of the Shares and includes a pro rata issue of Shares (including a bonus issue or
rights issue), issue of Shares under any dividend reinvestment plan, employee incentive scheme or a
share purchase plan, conversion of any convertible securities, return of capital, reorganisation or
reconstruction of capital;
Draw Down Request means a draw down request in the form set out in Schedule 1 to this
agreement;
Encumbrance includes an interest or power:
(a)
reserved in or over an interest in any asset including any retention of title; or
(b)
created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage,
charge, lien, pledge, trust or power,
by way of, or having similar commercial effect to, Security for the payment of a debt, any other
monetary obligation or the performance of any other obligation, and includes any agreement to grant
or create any of the above but excludes liens arising in the ordinary course of business by operation of
law and title retention in respect of stock in trade;
Event of Default means the occurrence of any event specified in clause 9.1 of this agreement;
Facility A Loan Agreement means the loan agreement between Investec and the Lender;
Free Cash Flows means the total earnings before interest less capital expenditure and provision for 3
months working capital and 3 months development capital;
Guarantee means any guarantee, suretyship, letter of credit, letter of comfort or any other obligation
(whatever called and of whatever nature):
(a)
to provide funds (whether by the advance or payment of money, the purchase of or
subscription for shares or other securities, the purchase of assets or services, or otherwise) for
the payment or discharge of;
(b)
to indemnify any person against the consequences of default in the payment of; or
(c)
to be responsible for,
any debt or monetary liability of another person or the assumption of any responsibility or obligation in
respect of the insolvency or the financial condition of any other person;
Immediately Available Funds means an electronic transfer of funds received into an Australian bank
account nominated by the Lender;
Interest Rate means 9% per annum;
Investec means Investec Bank Limited, a company with limited liability registered in accordance with
the laws of South Africa under registration number 1969/004763/06;
Lender’s Secured Assets means:
(a)
all assets forming part of the Tuvatu Project;
(b)
all rights that vest in the Guarantor in the Tuvatu Project Sale Agreements or any other
documents the purpose of which relate to sale of any assets forming part of the Tuvatu Project;
and
(c)
the Tuvatu Project Sale Funds to be received by the Guarantor;
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Listing Rules means the Listing Rules of the Australian Stock Exchange;
Loan Facility means the amount made available to the Borrower on and from the Completion Date,
being a maximum of US$7,425,000, in accordance with the terms of this agreement;
Mortgage Property means:
(a) the following Special Prospecting licence and licence applications:
•
SPL 1283;
•
SPL 1296;
•
SPL 1418;
•
SPL 1360;
(b) the Guarantor’s rights under the Tuvatu Project Sale Agreements; and
(c) any bank account opened by the Guarantor after the execution of the Subordination Deed at the
request of the Lender, at a bank or branch specified by Lender into which no deposit is made
other than of any Net Proceeds;
(d) all shares held by the Guarantor at any time in Alcaston Mining NL;
(e) all shares held by the Guarantor at any time in Tuvatu Gold Mining Company;
Net Proceeds has the meaning given to it in the Subordination Deed;
Operational Support Agreement means the agreement between the Borrower, Lender and
Guarantor dated 7 July 2005;
Permitted Encumbrance means any encumbrance granted in favour of ANZ to secure monies owed
to ANZ under the ANZ Facility;
Principal Outstanding means at any time the aggregate of all Advances that has not been repaid
plus any other Unpaid Amounts (including interest accrued as at that date);
Related Body Corporate has the same meaning as in the Corporations Act;
Security means any present or future mortgage, security by way of deposit of money or other
property, pledge, lien, charge, security by way of assignment, hypothecation, security by way of trust
arrangement, encumbrance, title retention or any other security interest or security arrangement
whatsoever;
Security Documents means the documents executed or to be executed by, inter alia, the parties to
this agreement or Related Body Corporate of the parties to this agreement the purpose of which is to
provide the Lender with first ranking Security over the Lender’s Secured Assets;
Shareholder Approval means the approval required in clause 2.3 of this agreement;
Shares means the fully paid ordinary shares in the Borrower;
Subordination Deed means the deed dated on or about 7 July between ANZ, the Borrower and the
Lender;
Tax means:
(a)
any tax, including the GST, VAT, levy, charge, impost, duty, fee, deduction, compulsory loan or
withholding; or
(b)
any income, stamp or transaction duty, tax or charge,
which is assessed, levied, imposed or collected by any government agency and includes any interest,
fine, penalty, charge, fee or other amount imposed on or in respect of any of the above;
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Tuvatu Project means the assets of and the business run by Tuvatu Gold Mining Company Limited
and includes all mining tenements, special prospecting licences, receivables and intellectual property
owned by or registered in the name of that company;
Tuvatu Project Sale Agreements means the Tuvatu Share Sale Deed, royalty deed between the
Guarantor, Tuvatu Gold Mining Company Limited and Alcaston Mining NL and the deed of assignment
debt between the Guarantor, Tuvatu Gold Mining Company Limited and Alcaston Mining NL;
Tuvatu Project Sale Funds means all consideration to be received by the Borrower from the sale of
any assets forming part of the Tuvatu Project and any subsequent royalties earned from those mining
tenements;
Tuvatu Project Sale Cash Proceeds means the cash consideration to be received by the Borrower
pursuant to the Tuvatu Share Sale Deed (which shall not include any royalty under the terms of the
royalty deed between the Guarantor, Tuvatu Gold Mining Company Limited and Alcaston Mining NL);
Tuvatu Share Sale Deed means that share sale deed between the Guarantor, Koula Mining
Company Limited, Tuvatu Gold Mining Company Limited and Alcaston Mining NL dated 27 June 2005;
and
Unpaid Amounts means any amount which has become due and payable in accordance with the
terms of this agreement and has not been paid by the Borrower.
1.2
Interpretation
(a)
In this agreement, headings and bold type are for convenience only and do not affect the
interpretation of this agreement and, unless the context otherwise requires:
(i)
words indicating the singular include the plural and vice versa;
(ii)
words indicating a gender include any gender;
(iii)
other parts of speech and grammatical forms of a word or phrase defined in this
agreement have a corresponding meaning;
(iv)
an expression importing a natural person includes any company, partnership, joint
venture, association, corporation or other body corporate and any government agency;
(v)
a reference to any thing (including, but not limited to, any right) includes a part of that
thing;
(vi)
a reference to any legislation includes any change to, consolidation or replacement of it,
whether passed by the same or another government agency with legal power to do so,
and any delegated legislation or proclamation issued under it;
(vii)       a reference to a document includes all amendments or supplements to, or replacements
or novations of, that document;
(viii)      a reference to a party to a document includes that party’s successors and permitted
assigns;
(ix)
no provision of this agreement will be construed adversely to a party solely on the
ground that the party was responsible for the preparation of this agreement or that
provision;
(x)
a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause
of, and a party, annexure, exhibit and schedule to, this agreement and a reference to
this agreement includes any annexure, exhibit and schedule;
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(xi)
a reference to an agreement other than this agreement includes an undertaking, deed,
agreement or legally enforceable arrangement or understanding whether or not in
writing; and
(xii)       a reference to a document includes any agreement in writing, or any certificate, notice,
instrument or other document of any kind.
(b)
In this agreement, specifying anything after the words “includes” or “for example” or similar
expressions do not limit what else is included unless there is express wording to the contrary.
(c)
Where the day on or by which any thing is to be done is not a Business Day, that thing must be
done on or by the next Business Day.
1.3
Acknowledgement of Subordination Deed
The Lender hereby acknowledges and agrees that the rights of the Lender and any of its successors
or assignees in this agreement are subject to the terms of the Subordination Deed
.
2
Conditions precedent and shareholder approval
2.1
Conditions precedent
The Lender is not obliged to provide the Loan Facility to the Borrower until it has received each of the
following in form and of substance satisfactory to the Lender (or waived in accordance with clause
2.2):
(a)
ANZ subordination agreement: the written consent of ANZ for the execution by the parties to
this agreement and any document completed by it including but not limited to the documents
contemplated by clauses 2.1(d) below and a waiver of certain obligations in respect of the ANZ
Facility;
(b)
Investec consent : Investec consenting to the Lender drawing down on its Facility A Loan
Agreement for the purposes of providing the Facility to the Borrower;
(c)
corporate authorisation : a certified copy of a resolution of the directors of the Borrower
approving the terms and conditions of the Loan Facility and resolving that shareholder approval
for the Borrower to enter into the Loan Facility is not required and authorising a director or other
authorised representative to execute this agreement on behalf of the Borrower;
(d)
Operational Support Agreement: executed Operational Support Agreement;
(e)
Alcaston Mining NL consent : a consent from Alcaston Mining NL to the granting of Security
over the Tuvatu project; and
(f)
Written ASX Waiver: the Borrower obtaining a written waiver from the Australian Stock
Exchange in the terms of the ASX Waiver.
2.2
Waiver
The conditions in clause 2.1 are for the benefit of the Lender and may only be waived by the Lender.
2.3
Shareholder approval
The Borrower must at its own expense as soon as reasonably practicable (and in any event no later
than 15 August 2005) take all steps necessary to obtain the approval of the requisite majority of the
holders of Shares for the execution of the terms of this agreement by the Lender and the Borrower (to
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the extent that the entry into this agreement by the Borrower constitutes an agreement to issue a
convertible security (as defined by the Listing Rules) to a related party and requires approval for the
purposes of Listing Rule 10.11) and keep the Lender fully informed of the progress of obtaining such
approval (including obtaining the Lender’s comment on all documents produced for this purpose). The
rights in clause 6 of this agreement are subject to the Borrower obtaining the approval required by this
clause.
3
Loan Facility
3.1
Loan Facility
The Lender agrees to make available to the Borrower the Loan Facility from the Completion Date on
the terms and conditions contained in this agreement.
3.2
Pre-conditions to obligation to make an Advance
The obligation of the Lender to make any Advance to the Borrower is conditional upon the satisfaction
of the Lender of the following specific pre-conditions:
(a)
the Borrower providing the Lender with a Draw Down Request signed by two Authorised
Signatories provided that at least one Authorised Signatory is either the chief operating officer
or general manager of the Vatakoula Mine;
(b)
the Borrower providing the Lender with any other information reasonably required by the
Lender, to confirm the accuracy of the representations and warranties given by the Borrower
upon draw down;
(c)
the Lender being reasonably satisfied that the Borrower has met the specific pre-conditions
specified in the Draw Down Request; and
(d)
the Lender being reasonably satisfied that the funds will be used for a use permitted under
clause 3.4.
3.3
Amount of a draw down
(a)
Unless otherwise approved by the Lender, the total amount of all Draw Down Requests
received by the Lender in any one month must not exceed the maximum amount prescribed for
that month as set out in Schedule 3 to this agreement.
(b)
All amounts requested in a Draw Down Request must be in the currency of the United States of
American and in tranches of US$100,000 or such lesser amounts agreed by the Lender.
3.4
Use of an Advance
The Borrower may use an Advance solely for the purpose specified in the relevant Draw Down
Request which purpose must be directly related to the operation of the Borrower’s gold mine at
Vatakoula and operational employee entitlements in both cases having regard to the mine plan in use
by the Borrower at that point in time or such other purpose as is agreed in writing by the Lender.
4
Repayments and termination
4.1
Repayment of the Principal Outstanding
The Borrower must repay the Principal Outstanding to the Lender on the earlier of:
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(a)
10 Business Days following the Lender giving the Borrower written notice (which notice may
only be given after the date on which the Borrower has received the Tuvatu Project Sale Cash
Proceeds) save that the Borrowers obligation to repay the Principal Outstanding will be limited
to the amount specified in that written notice which must be no more than the Tuvatu Project
Sale Cash Proceeds;
(b)
on 30 June 2007 save that the Borrowers obligation to repay the Principal Outstanding will not
exceed the greater of AUS$1,000,000 or 25% of Emperor’s Free Cash Flows and which
amount must first be satisfied out of the remaining Tuvatu Project Sale Cash Proceeds;
(c)
31 December 2007;
(d)
on the occurrence of an Event of Default; or
(e)
the end of the notice period specified in clause 4.4 save that the Borrowers obligation to repay
the Principal Outstanding will be equal to the amount specified in the notice referred to in
clause 4.4;
4.2
Interest
(a)
The Borrower must pay to the Lender interest on the Principal Outstanding calculated at the
Interest Rate on daily balances from the date of this agreement until the Principal Outstanding
is repaid in full.
(b)
Interest shall be payable by the Borrower on the last day of each calendar month ( Interest
Payment Date ). The Lender must no later than 2 Business Days prior to that Interest Payment
Date calculate and notify the Borrower of the interest accrued and payable on the Interest
Payment Date.
4.3
Outstanding amounts capitalised
Interest will accrue on all Unpaid Amounts on daily balances until such Unpaid Amounts are paid in
accordance with clause 4.5.
4.4
Prepayment
(a)
The Borrower may prepay all or part of the balance of the Principal Outstanding by giving the
Lender at least 20 Business Days’ prior written notice of its intention to do so during which
period the Lender will have the right, subject to the Borrower having obtained Shareholder
Approval, to elect to convert some or all of the Principal Outstanding to Shares by serving the
Borrower with a Conversion Notice in accordance with the requirements of clause 5.
(b)
If following the Borrower giving notice in accordance with clause 4.4(a) the Borrower receives a
Conversion Notice, the notice period referred to in clause 4.4(a) is postponed until such time as
the Borrower has fully complied with its obligations under clause 6 at which time that notice
period will recommence. The Borrower’s right in clause 4.4(a) to prepay all or part of the
balance of the Principal Outstanding is subject to compliance with this clause.
(c)
On the prepayment date specified in the notice given under clause 4.4(a), the Borrower must
pay to the Lender the amount of the Principal Outstanding in accordance with clause 4.5.
(d)
The amount of Principal Outstanding prepaid under this clause may not be redrawn.
4.5
Method of payment
All amounts payable by the Borrower under this agreement must be paid in United States Dollars and
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made to the Lender in Immediately Available Funds or any other form of payment that the Lender and
Borrower agree.
4.6
Payments in gross
The Borrower must make all payments due under this agreement without:
(a)
any set-off, counterclaim or condition; and
(b)
any deduction or withholding for any Tax or any other reason, unless the Borrower is required
to make a deduction or withholding by applicable law and the Lender has been notified of the
deduction or withholding in which case it must pay to the Lender additional amounts necessary
to enable the Lender to receive, after the deduction or withholding, a net amount equal to the
full amount which would otherwise have been payable had no deduction or withholding been
required to be made.
4.7
Appropriation of payments
(a)
All payments made by the Borrower may be appropriated as between principal, interest and
other amounts as the Lender in its absolute discretion determines, or, failing any determination,
in the following order:
(i)
first, towards reimbursement of all fees, costs, expenses, charges, damages, indemnity
payments and other like amounts incurred or owing by the Borrower under this
agreement or the Operational Support Agreement;
(ii)
next, towards payment of interest owing; and
(iii)
next, towards repayment or prepayment of the Loan Facility.
(b)
Any appropriation under clause 4.7(a) overrides any appropriation made by the Borrower.
4.8
Termination on receipt of Tuvatu Project Sale Cash Proceeds
(a)
Subject to clause 4.8(b), if for any reason all of the Tuvatu Project Sale Cash Proceeds have
been applied in repayment of the Principal Outstanding (including by repayment in accordance
with clause 4.1 or prepayment in clause 4.4), the Lender shall be entitled to terminate this
agreement by notice in writing to the Borrower.
(b)
On termination, the Borrower must immediately make any payments owing to the Lender under
this agreement and this agreement has no further effect and neither the Lender nor the
Borrower is liable to the other except:
(i)
under clauses 4, 9 and 10; and
(ii)
in respect of any breach of this agreement occurring before termination.
5
Guarantee and Security
5.1
Guarantee
In consideration of the entry by the Lender and Borrower into this agreement, the Guarantor
unconditionally and irrevocably guarantees, subject to clause5.2, to the Lender the due and punctual
performance and observance by the Borrower of all of its obligations, commitments and undertakings
under or pursuant to this agreement and agrees to indemnify the Lender against all losses, liabilities,
costs (including without limitation legal costs) charges, expenses, actions, proceedings, claims and
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demands which the Lender may suffer through or arising from any breach by the Borrower of its
obligations under this agreement. This guarantee is given for the benefit of the Lender and its
respective successors and assigns and shall be binding on the Lender and its respective successors
and assigns.
5.2
Limited Recourse
(a)
The Lender aggregate liability of the Guarantor under or in connection with this agreement or
any Security granted by the Guarantor is limited to the proceeds of realisation of the Mortgaged
Property.
(b)
If the Lender does not recover all amounts owing to it by enforcing its powers with respect to
the Lender’s Secured Assets, it is not entitled to take any other action against the Guarantor
under this agreement in its personal corporate capacity to recover the shortfall.
(c)
Nothing in this clause:
(i)
limits or reduces any amount owing to the Lender by the Borrower; or
(ii)
limits any of the powers of the Lender under this agreement, the Security Documents or
otherwise in respect of the Lender’s Security Documents to the extent permitted under
the Subordination Deed.
5.3
Execution of Security Documents
The Borrower and the Guarantor unconditionally represent, warrant, undertake and agree that as
condition for the Lender entering into the arrangement contemplated by this agreement and providing
the Facility, they will on the request of the Lender execute the Security Documents and do all things
necessary to and otherwise use their best endeavours to facilitate the grant to the Lender of first
ranking Security over the Lender’s Secured Assets. The parties to this agreement acknowledge and
agree that the first ranking Security to be granted over the Lender’s Security Assets forms part of the
consideration exchanged in respect of this agreement and is therefore part of the overall transaction
contemplated by this agreement.
5.4
Form of Security
The Security Documents may, at the Lender’s election, include (but shall not be limited to):
(a)
an obligations debenture between the Lender and Guarantor;
(b)
a direction and consent to security notice between the Lender, Guarantor, and Alcaston Mining
NL;
(c)
a fixed charge and mortgage of the rights granted to the Guarantor in the Tuvatu Project Sale
Agreements;
(d)
a fixed charge over a bank deposit to be granted by the Guarantor over the bank account into
which the Tuvatu Project Sale Cash Proceeds are to be deposited;
(e)
a share mortgage between the Guarantor and the Borrower (in respect of the shares held in the
capital of Alcaston Mining NL); and
(f)
such other Securities reasonably required by the Lender to adequately secure the Lender’s
Secured Assets,
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each of which are to be on terms reasonably acceptable to the Lender. In the event that there is a
dispute between the Lender and the Borrower as to the terms of the Security Documents, the parties
will comply with the dispute resolution procedure set out in clause 6.3(b) to 6.3(f) below.
5.5
The Borrower’s security undertaking
As a separate undertaking in consideration for the provision of the Facility and all Advances made
under that Facility, the Borrower and the Guarantor (subject to the restrictions in clause 5.2 above)
charges their interest in the Lender’s Secured Assets and on the conditions contained herein.
5.6
Acknowledgement of the terms of the ASX Waiver
The parties each acknowledge that the rights of the Lender under the Security Documents are
restricted by the terms of the ASX Waiver such that if an Event of Default occurs and the Lender
exercises its power under the Security Documents it will not acquire the assets that comprise the
Tuvatu Project in full or part satisfaction of the amounts outstanding under this agreement or
otherwise forfeit the Tuvatu Project without first having complied with any applicable ASX Listing Rules
including Listing Rule 10.1.
6
Conversion rights
6.1
Conversion of Principal Outstanding
(a)
Subject to obtaining Shareholder Approval and obtaining the approval of the Foreign
Investment Review Board for the acquisition of Shares by the Lender under this clause, the
Lender may at any time prior to the repayment of the Principal Outstanding elect to convert
some or all of the Principal Outstanding into Shares by giving the Borrower a Conversion
Notice.
(b)
Subject to clause 6.4, the Borrower must within 14 Business Days of receiving a Conversion
Notice issue to the Lender such number of Shares as is calculated in accordance with clause
6.2 and 6.3 and on receipt of title to those Shares satisfying the requirements of clause 6.5 the
Borrower’s obligation to repay that portion of the Principal Outstanding specified in the
Conversion Notice shall be extinguished.
6.2
Conversion calculation
The number of Shares to be issued on conversion shall be calculated in respect of the following
formula:
Shares issued on conversion =
]
[
 
CP
PO
Where:
CP is the lower of AUS$0.30 or VWAP
PO is the Principal Outstanding that is being converted
VWAP is the 45 day volume weighted average sale price of the Shares sold on ASX prior to and
excluding he date of the Conversion Notice but does not include any transaction defined in the
ASX Business Rules as “special crossings”, crossings prior to the commencement of normal
trading, crossings during the after hours adjust phase or any overseas trades, the exercise of
options over Shares or any transactions made by or on behalf of the Lender or any associate of
the Lender
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6.3
Adjustment for Diluting Event
(a)
Following provision of a notice by the Lender to the Borrower that in the Lender’s reasonable
opinion there has been a Diluting Event or Concentrative Event, the Lender will determine
whether such event has had a diluting or concentrative effect on the theoretical value of the
Shares that, pursuant to this clause 6, may be issued to the Lender and, if so, notify the
Borrower in writing of what corresponding adjustment is necessary to the number of Shares to
be issued to the Lender to account for that diluting or concentrative effect and particulars of
that calculation which adjustment shall, to the extent relevant, not be inconsistent with the rules
relating to the reorganisation of convertible securities in Chapter 7 of the Listing Rules
( Adjustment Determination ).
(b)
If the Borrower disputes the Adjustment Determination, it must do so within 5 Business Days of
receipt of the notice referred to in clause 6.3(a) by notifying the Provider in writing of the
particular aspects of the Adjustment Determination which are disputed and sufficient particulars
as to why the Borrower disputes those aspects. Unless the Borrower has complied with this
clause 6.3(b), it shall be bound by the Adjustment Determination.
(c)
In the event that a dispute arises, the parties will use their best endeavours to resolve the
dispute between themselves. If the parties fail to do so within 10 Business Days of receipt by
the Lender of the notice referred to in clause 6.3(b), the parties must within 5 Business Days
appoint an expert agreed by both the parties to determine the dispute. If an agreement as to
the identity of the expert cannot be agreed within that time limit, either party may request the
President of the Law Society of New South Wales from time to time to appoint an expert to
determine the dispute.
(d)
The expert appointed under clause 6.3(c) must determine the dispute within 10 Business Days
of appointment. If the expert appointed is unable to carry out the determination within that time
limit, another expert must be appointed in accordance with the requirements of clause 6.3(c).
(e)
The expert appointed under this clause acts as an expert and not an arbitrator. The dispute
resolution proceedings under this clause are not arbitration proceedings under the Commercial
Arbitration Act 1985.
(f)
All costs of the expert shall be borne by the unsuccessful party to the dispute or as otherwise
determined by the expert.
6.4
Restrictions on Conversion
(a)
The Borrower’s obligation to issue Shares on receipt of a Conversion Notice is subject to it
obtaining all authorisations required to enable it to lawfully issue the Shares to the Lender to
discharge its obligation to pay the Principal Outstanding (including, without limitation the
requirement to obtain shareholder approval) in accordance with the terms of this agreement.
(b)
To the extent that any authorisation is required to lawfully issue the Shares, the Borrower must
at its own expense as soon as reasonably practicable (and in any event no later than 60 days
from the date of receipt of either a notice from the Lender requesting it to do so or receipt of a
Conversion Notice) take all necessary steps necessary to seek to obtain the required
authorisation and keep the Lender fully informed of the progress of obtaining such
authorisation (including obtaining the Lender’s comment on all documents produced for this
purpose).
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6.5
Shares to be issued on conversion
(a)
From the date of issue of the Shares, each Share issued by the Borrower to the Lender will
rank in all respects pari passu with the other then existing issued Shares and will be listed on
the Australian Stock Exchange.
(b)
Within 5 Business Days of the issue of the Shares to the Lender, the Borrower will prepare and
issue all documents and do all things reasonably required to ensure that the Shares issued to
the Lender are freely transferable.
7
Representations and warranties
7.1
Representations and warranties
The Borrower represents and warrants at the date of execution of this agreement and at the date of
issue of any Draw Down Request that:
(a)
authority : it has full power and authority to enter into and perform its obligations under this
agreement to which it is a party;
(b)
authorisations : it has taken all necessary action to authorise the execution, delivery and
performance of this agreement to which it is a party in accordance with their terms;
(c)
binding obligations : this agreement to which it is a party constitutes legal, valid and binding
obligations and, subject to any necessary stamping and registration, are enforceable in
accordance with their terms subject to laws generally affecting creditors’ rights and to principles
of equity;
(d)
transaction permitted : the execution, delivery and performance by it of this agreement to
which it is a party do not and will not violate, breach, or result in a contravention of:
(i)
any law, regulation or authorisation;
(ii)
its constitution or other constituent documents; or
(iii)
any Encumbrance or document which is binding upon it or on any of its assets,
and does not and will not result in:
(1)
the creation or imposition of any Encumbrance (other than the Permitted
Encumbrance) or restriction of any nature on any of its assets; or
(2)
the acceleration of the date of payment of any obligation existing under any
Encumbrance or document which is binding upon it or on any of its assets;
(e)
no default or breach :
(i)
it is not in breach (or where it is, such breach has been waived) in any material respect
under any agreement binding on it;
(ii)
nothing has occurred which constitutes, or which, with the giving of notice, lapse of time,
satisfaction of some other condition, or any combination of the above, constitutes an
event which causes or enables:
(1)
the acceleration of any payment to be made under any agreement binding on it;
or
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(2)
the enforcement, termination or rescission of any agreement binding on it;
(f)
no Event of Default : no event has occurred which is or may constitute an Event of Default;
and
(g)
solvency : it is solvent and is able to pay its debts as and when they become due.
The Guarantor represents and warrants at the date of execution of this agreement that the matters in
clauses 7.1(a), 7.1(b), 7.1(c) and 7.1(d) are true and correct.
7.2
Survival of representations and warranties
The representations and warranties in, or given under, this agreement including those outlined in
clause 7.1 of this agreement, survive this agreement.
7.3
Reliance
The Borrower and Guarantor acknowledge that:
(a)
they have not entered into this agreement in reliance on any representation, warranty, promise
or statement of the Lender or of any person on behalf of the Lender; and
(b)
the Lender has entered into this agreement in reliance on the representations and warranties
in, or given under, this agreement including those outlined in clause 7.1 of this agreement.
7.4
Continuing obligation
If during the term of this agreement any event shall occur or matter shall arise which results or may
result in any of the representations and warranties being unfulfilled, untrue, misleading or incorrect in
any respect, the Borrower shall immediately notify the Lender in writing of all information relating to
such event. A notification under this clause does not affect or in any way limit the liability of the Lender
in respect of any breach of any of the representations and warranties contained in this Agreement.
8
Undertakings by the Borrower
8.1
Provision of information and accounts
(a)
The Borrower must give to the Lender, by electronic means where possible:
(i)
monthly management accounts, audited annual accounts, annual budgets and business
plans, mine plans, trial balance sheets, notices of meetings of shareholders, minutes of
meetings of shareholders, board papers and minutes of meetings of directors for the
Borrower; and
(ii)
audited annual accounts of the Borrower,
from the date of execution of this agreement to the date until the date on which the
Principal Outstanding is repaid;
(b)
If the Lender so requests, the Borrower shall provide to the Lender any documents and
relevant information in respect of the Borrower’s operations, financial performance and position
from the date of execution of this agreement to the date until the date on which the Principal
Outstanding is repaid;
(c)
Upon reasonable notice by the Lender, the Lender shall have reasonable access to the
Borrower’s chief financial officer, auditors and senior management for the sole purpose of
discussing and investigating operational and financial aspects of the Borrower.
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8.2
Notices to the Lender
The Borrower must give notice to the Lender as soon as it becomes aware of any Event of Default
occurring.
8.3
Negative pledge and disposal of assets
The Borrower must not and must ensure that its subsidiaries do not, without the prior written consent
of the Lender such consent not to be unreasonably withheld:
(a)
deal with, sell or otherwise dispose of or part with possession of any of its assets other than in
the ordinary course of the Borrower’s business, in accordance with the Tuvatu Project Sale
Agreements or as otherwise approved by the Lender;
(b)
create, permit, suffer to exist, or agree to, any interest or Encumbrance, other than the
Permitted Encumbrance or an Encumbrance in favour of the Lender over any of its assets;
(c)
issue, transfer or otherwise dispose of Shares;
(d)
borrow any funds from a third party or incur any other form of indebtedness (other than where
such indebtedness is incurred in the ordinary course of the Borrower’s business or as
otherwise approved by the Lender);
(e)
undertake any new activities or business opportunities such that there is a material change to
the nature and scope of the Borrowers business operations acquired from the Lender;
(f)
enter into any contract (including employment contract) or commitment for capital expenditure
or acquisition of assets requiring the Borrower to pay more than AUS $50,000 or an aggregate
amount of AUS $200,000 in any financial year (other than where such amounts are contained
in the mine plan in place as at the date of execution of this agreement);
(g)
change, modify or otherwise alter the terms of the Tuvatu Project Sale Agreements or the ANZ
Facility;
(h)
change or otherwise deviate from the current mine plan;
(i)
undertake any corporate activities or enter into any contract or commitment which may have a
material effect on the financial position of the Borrower or impair the ability of the Borrower to
repay the Loan Facility or fulfil any of its obligations under this agreement, the Security
Documents or the Operational Support Agreement;
(j)
perform any act that breaches any contract to which it is a party to (including the Tuvatu Project
Sale Agreements) or any applicable law of a jurisdiction in which it carries on a business; or
(k)
declare, appropriate or pay any dividend or make a distribution to all or any of the shareholders
of the Borrower.
8.4
Term of undertakings
The undertakings given by the Borrower in this clause 8 continue in full force and effect from the date
of execution of this agreement to the date until the date on which the Principal Outstanding is repaid in
full.
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9
Events of Default
9.1
Events of Default
It is an Event of Default if, whether or not it is within the control of the Borrower:
(a)
failure to obtain shareholder approval or change of the terms or withdrawal of the ASX
Waiver : the Borrower fails to obtain the approval required in clause 2.3 of this agreement to the
terms of the ASX Waiver are changed or the ASX Waiver is otherwise withdrawn;
(b)
failure to execute the Security Documents : the Security Documents are not executed within
30 days of execution of this agreement or such longer period agreed to by the Lender or if, the
Lender’s opinion, the Borrower fails to perform or observe any obligation or undertaking in
clause 5;
(c)
failure to pay : the Borrower fails to pay or repay any amount due under this agreement or the
Operational Support Agreement when due (other than in circumstances where there is
evidence that the failure is due to a technical or administrative error or failure in the banking
system wholly outside the control of the Borrower);
(d)
breach of obligations : the Borrower fails to perform or observe any obligation or undertaking
under this agreement, the Security Documents or the Operational Support Agreement (other
than an obligation to make a payment that is due and payable or if shareholders do not
approve the proposal put to them as contemplated by clause 6.4(b)), and does not remedy the
failure within 5 Business Days, or a longer period determined by the Lender, after receipt by the
Borrower of a notice from the Lender specifying the failure;
(e)
misrepresentation : any warranty, representation or statement by the Borrower is or becomes
materially false, misleading or incorrect when made or regarded as made under this agreement
or under any document contemplated by this agreement;
(f)
acceleration of payments : the Borrower does anything which constitutes an event, whatever
called, which causes or enables the enforcement, termination or rescission of, this agreement;
(g)
cross default : any present or future, or actual, prospective or contingent, indebtedness of the
Borrower in respect of any financial accommodation (including, without limitation, under the
ANZ Facility) including moneys payable under a Guarantee:
(i)
is or becomes due and payable or is or becomes capable of being declared due and
payable before the due date for payment; or
(ii)
is not paid when due,
and remains due and payable for 5 Business Days after that amount first becomes due or
payable;
(h)
material adverse change : any event or series of events, whether related or not, occurs
(including a material adverse change in the business, assets or financial condition of the
Borrower or the value of its assets) which in the reasonable opinion of the Lender is likely to
have a material adverse effect on the Borrower or its assets;
(i)
Encumbrance : any Encumbrance is or becomes enforceable against any asset of the
Borrower;
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(j)
receiver : a receiver, receiver and manager, official manager, trustee, administrator, other
controller or similar official is appointed, or steps taken for such appointment, over any of the
assets or undertaking of the Borrower;
(k)
suspends payment : the Borrower suspends payment of its debts generally;
(l)
insolvency : the Borrower is or becomes unable to pay its debts when they are due or is or
becomes unable to pay its debts or is presumed to be insolvent or commits an act of
insolvency in terms of the Corporations Act;
(m)       arrangements : the Borrower enters into or resolves to enter into any arrangement,
composition or compromise with, or assignment for the benefit of, its creditors or any class of
them;
(n)
administrator : an administrator is appointed or a resolution is passed or any steps are taken to
appoint, or to pass a resolution to appoint, an administrator to the Borrower;
(o)
winding up : an application or order is made for the winding-up or dissolution of the Borrower
or a resolution is passed or any steps are taken to pass a resolution for the winding-up
otherwise than for the purpose of an amalgamation or reconstruction which has the prior written
consent of the Lender;
(p)
analogous events : anything analogous to the events described in clauses 9.1(j) to 9.1(o)
(inclusive) occurs in relation to any Related Body Corporate of the Borrower under the laws of
the jurisdiction of incorporation of that Related Body Corporate.
9.2
Effect of Event of Default
(a)
On or after the occurrence of an Event of Default, the Lender may by notice to the Borrower:
(i)
declare that the Principal Outstanding is immediately due and payable (save that where
the Event of Default arises due to a breach of clause 9.1(a), the notice must specify that
the amount and any amounts drawn down under the Facility prior to the service of a
Advance Suspension Notice (defined below) has and will become immediately owing
but are payable on a date no earlier than 270 days from the date of that initial Event of
Default. If such a notice is served on the Borrower, the Lender may, on no less than 60
days notice, suspend all future Advances ( Advance Suspension Notice ) until further
notice and, on expiration of that 60 day notice period, the Lender will not be obliged to
make any further Advances to the Borrower); and
(ii)
take any action or proceeding necessary or desirable in order to protect its ability to
recover the Principal Outstanding,
or a combination of any of those things, provided that the Borrower is first afforded the period of
5 Business Days to remedy an Event of Default that relates to a failure to pay an amount owing
to the Lender or 10 Business Days to remedy any other Event of Default.
(b)
The Borrower must, following receipt of a notice under clause 9.2(a)(i), immediately repay in full
the Principal Outstanding to the Lender. Until such repayment is made, but strictly without
prejudice to the rights of the Lender arising on an Event of Default and/or to require immediate
repayment as aforesaid, interest shall accrue at the Interest Rate on both the Principal Sum as
well as all outstanding interest.
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10 Tax, fees, costs and expenses
10.1     Tax
The Borrower must pay any Tax payable in relation to this agreement (other than any income tax
payable by the Borrower or unless expressly stated otherwise).
10.2     Costs and expenses
(a)
Subject to clause 10.1, each party must pay its own costs and expenses in respect of the
negotiation, preparation, execution and delivery of this agreement.
(b)
Any action to be taken by the Borrower or Lender in performing its obligations under this
agreement must be taken at its own cost and expense unless otherwise provided in this
agreement.
11 Indemnity
11.1      General indemnity
(a)
The Borrower indemnifies the Lender against any claim, action, damage, loss, liability, cost,
charge, expense, outgoing or payment which the Lender pays, suffers, incurs or is liable for, in
respect of any of the following:
(i)
the occurrence of any Event of Default; or
(ii)
the Lender exercising its powers consequent upon or arising out of the occurrence of
any Event of Default.
(b)
Any amount payable to the Lender under this indemnity is payable on demand.
11.2      Continuing indemnities and evidence of loss
(a)
Each indemnity of the Borrower contained in this agreement is a continuing obligation of the
Borrower despite:
(i)
a settlement of account; or
(ii)
the occurrence of any thing,
and remains in full force and effect until:
(iii)
all monies owing, contingently or otherwise, under this agreement have been paid in full;
and
(iv)
the Loan Facility and interest payable is finally and fully repaid.;
(b)
Each indemnity of the Borrower contained in this agreement is an additional, separate and
independent obligation of the Borrower and no one indemnity limits the generality of another
indemnity.
(c)
Each indemnity of the Borrower contained in this agreement survives the termination of this
agreement.
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(d)
A certificate signed by a director or authorised representative of the Lender detailing the
amount of damage, loss, liability, cost, expense or payment covered by any indemnity in this
agreement is conclusive evidence of the matter certified unless proved wrong.
11.3     Foreign currency indemnity
If at any time:
(a)
the Lender receives or recovers any amount payable by the Borrower for any reason including,
but not limited to:
(i)
any judgment or order of any governmental agency;
(ii)
any breach of this agreement;
(iii)
the liquidation or bankruptcy of the Borrower or any proof or claim in that liquidation or
bankruptcy; or
(iv)
any other thing into which the obligations of the Borrower may have become merged;
and
(b)
the currency in which any payment is made is not United States Dollars,
the Borrower indemnifies the Lender against any shortfall between the amount payable in United
States Dollars and the amount actually received or recovered by the Lender.
12       Assignment
The Borrower may not transfer or assign any of its rights or obligations under this agreement without the prior
written consent of the Lender.
13      General
13.1      Confidential information
(a)
Subject to clause 13.1(b), the parties must not make any announcement or otherwise disclose
the provisions of or any matters relating to this agreement unless the other party to this
agreement has consented in writing to the terms and circumstances of the announcement or
disclosure.
(b)
Each party shall keep all information provided to the other under this agreement confidential.
(c)
A party may disclose anything in this agreement as required by:
(i)
applicable law; or
(ii)
any recognised stock exchange on which its shares are listed,
but to the extent possible, it must consult with the other party before making the disclosure and
use its best endeavours to agree on the form and content of the disclosure.
13.2     Performance by Lender of obligations
If the Borrower defaults in fully and punctually performing any obligation contained or implied in this
agreement, the Lender may, without prejudice to any power that it may have under this agreement or
any other document, do all things necessary or desirable, in the opinion of the Lender, to make good
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or attempt to make good that default to the satisfaction of the Lender.
13.3     Notices
(a)
Any notice or other communication including any request, demand, consent or approval, to or
by a party to this agreement:
(i)
must be in legible writing and in English addressed as follows:
(1)
if to the Lender:
Address: 45 Empire Road, Parktown, Johannesburg, Republic of South Africa
Attention: Company Secretary
Facsimile: (27) 11 482 1022
(2)
if to the Borrower:
Address: Suite 303, 3rd Floor, 50 Margaret Street, Sydney, NSW, Australia, 2000
Attention: Company Secretary
Facsimile: +61 2 9299 7433
(3)
if to the Guarantor:
Address: Vatukoula, Fiji
Attention: General Manager
Facsimile: +679 668 0779
or as otherwise specified by a party by notice in writing to the other party;
(ii)
must be signed or in the case of a facsimile, appear to have been signed, by an
authorised representative of the sender;
(iii)
is regarded as given and received:
(1)
if by delivery by hand, when delivered to the addressee;
(2)
if sent by post, 10 Business Days from and including the date of postage; or
(3)
if sent by facsimile transmission, when the transmission is successfully
transmitted as reported by the sender’s machine
(4)
if sent by email, when the message is successfully sent as reported by the
sender’s machine,
but if the delivery or receipt is on a day which is not a Business Day or is after
4.00pm (addressee’s time) it is regarded as received at 9.00am (addressee’s
time) on the following Business Day; and
(iv)
can be relied on by the addressee and the addressee is not liable to any other person
for any consequences of that reliance if the addressee believes it to be genuine, correct
and authorised by the sender.
(b)
A facsimile transmission is not regarded as successfully transmitted if the addressee
telephones the sender within 4 hours after the transmission is received or regarded as received
under clause 13.3(a)(iii) and informs the sender that it is not legible or is incomplete.
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(c)
Unless requested by the Lender or specified otherwise in this agreement, a notice or
communication under this agreement may not be given by email.
(d)
In this clause 13.3, a reference to an addressee includes a reference to an addressee’s
directors, secretary, agents or employees and any person reasonably believed by the sender to
be a director, secretary, agent or employee of the addressee.
13.4     Governing law and jurisdiction
(a)
This agreement is governed by the laws of New South Wales.
(b)
The Borrower irrevocably and unconditionally:
(i)
submits to the non-exclusive jurisdiction of the courts of New South Wales; and
(ii)
waives any objection to the venue of any legal process on the basis that the process
has been brought in an inconvenient forum.
13.5     Prohibition and enforceability
(a)
Any provision of, or a right or remedy arising under, this agreement which are prohibited or
unenforceable in any jurisdiction is ineffective in that jurisdiction only to the extent of that
prohibition or unenforceability.
(b)
If any provision of this agreement is void, illegal or unenforceable in any jurisdiction, it does not
affect the validity, legality or enforceability of that provision in any other jurisdiction or of the
remaining provisions in that or any other jurisdiction.
(c)
This clause 13.5 is not limited by any other provision of this agreement in relation to
severability, prohibition or enforceability.
13.6     Waivers
(a)
Waiver of any right arising from a breach of this agreement or of any power arising upon default
under this agreement or upon the occurrence of an Event of Default must be in writing and
signed by the party granting the waiver.
(b)
A failure or delay in exercise, or partial exercise, of:
(i)
a right arising from a breach of this agreement or the occurrence of an Event of Default;
or
(ii)
a power created or arising upon default under this agreement or upon the occurrence of
an Event of Default,
does not result in a waiver of that right or power.
(c)
A party is not entitled to rely on a delay in the exercise or non-exercise of a right or power
arising from a breach of this agreement or on a default under this agreement or on the
occurrence of an Event of Default as constituting a waiver of that right or power.
(d)
A party may not rely on any conduct of another party as a defence to exercise of a right or
Power by that other party.
(e)
This clause may not itself be waived except by writing.
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13.7     Variation
A variation of any term of this agreement must be in writing and signed by both the parties.
13.8     Cumulative rights
The powers are cumulative and do not exclude any other right, power, authority, discretion or remedy
of the Lender.
13.9     Certificates of Lender
(a)
A certificate signed by a director or authorised representative of the Lender detailing the
amount of the Principal Outstanding due and payable under this agreement whether currently
due and payable or not is sufficient evidence unless the contrary is proved.
(b)
A certificate under the hand of a director or authorised representative of the Lender stating the
opinion of the Lender as to any thing is sufficient evidence of that opinion at the date stated on
the certificate or failing that as at the date of that certificate unless the contrary is proved.
13.10   Further assurances
Each party must do all things reasonably necessary to give full effect to this agreement and the
transactions contemplated by this agreement.
13.11  Entire agreement
This agreement and any agreements referred to in it the entire agreement between the Lender and the
Borrower with respect to the subject matter of this agreement and supersedes any prior negotiation,
arrangement, understanding or agreement with respect to the subject matter of any term of this
agreement.
13.12   Third party rights
No person other than the Lender or Borrower has or is intended to have any right, power or remedy or
derives or is intended to derive any benefit under this agreement.
13.13  Counterparts
This agreement may be signed in any number of counterparts and all those counterparts taken
together make one instrument.
13.14   Attorneys
Each of the attorneys executing this agreement states that the attorney has no notice of the revocation
of the power of attorney appointing that attorney.
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Schedule 1 – Draw down request
[Date]
DRD (Isle of Man) limited
Grosvenor House
66/67 Athol Street,
Douglas, Isle of Man
( Lender )
Attention:
[ name ]

Draw Down Request
In accordance with clause 3.2 of the convertible term loan facility ( Loan Facility ) between DRD (Isle of Man) Limited
and Emperor Mines Limited ( Emperor ), Emperor hereby makes the following draw down request:
Amount of Advance
Intended Use of Funds
Supporting Information*
AUS$ [insert amount]
[insert intended use]
[describe support information provided
e.g. quote for machinery number 3094
attached or invoice number 2340
attached]
AUS$ [insert amount]
[insert intended use]
Total Advance requested:
AUS$ [insert amount]
* Any request in excess of [ AUS$10,000 ] must be supported by written evidence of the intended use of those funds.
Pre-conditions to draw down
Emperor hereby confirms that at the date of this draw down request, having made all necessary enquiries, it satisfies
the following conditions:
1.
the representations and warranties set out in clause 7 of the Loan Facility remain true and accurate in all
respects and not misleading in any respect;
2.
represents and warrants that the amounts requested in this draw down request will only be used by the
Borrower for the purposes as specified in this draw down request and the accompanying supporting
information; and
3.
confirms that it is not is breach of any provision of the Loan Facility.
Capitalised terms used in this notice have the same meaning as in the Loan Facility.
Signed by an Authorised Signatory
Signed by an Authorised Signatory
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Schedule 2 – Conversion Notice
[Date]
To: The Directors
Emperor Mines Limited
Suite 303,
3rd Floor , 50 Margaret Street,
Sydney, NSW, Australia, 2000
Attention:
[ name ]
By Facsimile:
[ fax ]

Conversion Notice
Notice is given by DRD (Isle of Man) Limited of the conversion of AUS$[ insert number ] of Principal Outstanding into
Shares in accordance with clause 6 of the convertible term loan facility between DRD (Isle of Man) Limited and
Emperor Mines Limited ( Loan Facility ).
Capitalised terms used in this notice have the same meaning as in the Loan Facility.
Signed by
DRD (Isle of Man) Limited
by:
______________________________________
_______________________________________
Director
Director/Secretary
______________________________________
_______________________________________
Name (please print)
Name (please print)
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Schedule 3 – Maximum Monthly Draw Down Amounts
Month
Maximum Draw Down (expressed in AUS$)
July 2005
$2,800,000
August 2005
$2,000,000
September 2005
$1,000,000
October 2005
$2,000,000
November 2005
$500,000
December 2005
$1,700,000
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Executed as an agreement:

Signed by DRD (Isle of Mann) Limited
by or in the presence of:
/s/ M Wellesley-Wood
Mark Wellelsley-Wood
Signature of authorised representative
Signature of witness
______________________________________
_______________________________________
Name of authorised representative in full
Name of witness in full
Signed by
Emperor Gold Mining Limited
by:
/s/ TS Sean O’Connor
Terrence Sean O’ Connor _________________
_______________________________________
Director/Secretary
______________________________________
_______________________________________
Name (please print)
Name (please print)

Emperor Mines Limited
by:
/s/ JA Wall
Director
Director/Secretary
______________________________________
_______________________________________
Name (please print)
Name (please print)
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Exhibit 4.90

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CONTENTS

1.
DEFINITIONS .................................................................................................................................... PAGE 3
2.
APPOINTMENT/EMPLOYMENT ................................................................................................... PAGE 5
3.
DUTIES ................................................................................................................................................ PAGE 6
4.
REMUNERATION PACKAGE ......................................................................................................... PAGE 7
5.
HOME & CELLULAR TELEPHONE AND SECURITY ............................................................. PAGE 8
6.
BONUS SCHEME ............................................................................................................................... PAGE 9
7.
LEAVE ................................................................................................................................................ PAGE 10
8.
SICK LEAVE AND INCAPACITY ................................................................................................. PAGE 11
9.
INSURANCE COVER ..................................................................................................................... PAGE 11
10.
BREACH ............................................................................................................................................ PAGE 12
11.
RESTRAINT AGREEMENT .......................................................................................................... PAGE 13
12.
DISPUTES .......................................................................................................................................... PAGE 13
13.
APPLICATION OF PROVISIONS OF COMPANY PROCEDURES ....................................... PAGE 14
14.
TERMINATION ............................................................................................................................... PAGE 14
15.
ELIGIBLE TRANSACTION ......................................................................................................... PAGE 15
16.
THE RIGHT OF THE EXECUTIVE TO TERMINATE THIS
AGREEMENT FOR AN ELIGIBLE TRANSACTION ............................................................. PAGE 15
17.
ELIGIBLE TERMINATION ......................................................................................................... PAGE 16
18.
BENEFITS PAYABLE FOR AN ELIGIBLE TERMINATION ................................................ PAGE 16
19.
THE RIGHT OF THE COMPANY TO ASSIGN THIS AGREEMENT .................................. PAGE 16
20.
DIRECTORSHIPS .......................................................................................................................... PAGE 17
21.
GENERAL ........................................................................................................................................ PAGE 17
22.
STATUS OF THIS AGREEMENT ................................................................................................ PAGE 17
23.
DOMICILIUM CITANDI ET EXECUTANDI ........................................................................... PAGE 17
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AGREEMENT
BETWEEN
DRDGOLD LIMITED
(
A COMPANY DULY INCORPORATED UNDER THE
C
OMPANIES
A
CT
, 1973,
REGISTRATION NUMBER
1895/00926/06)
(
HEREINAFTER CALLED
“THE COMPANY” )
AND
JOHN WILLIAM CORNELIUS SAYERS
(D
ATE OF
B
IRTH
17.03.1946 )
(
HEREINAFTER CALLED
“THE EXECUTIVE” )
PREAMBLE
THE EXECUTIVE and THE COMPANY wish to enter into an agreement to regulate the relationship between THE
EXECUTIVE and THE COMPANY.
NOW THEREFORE THE PARTIES AGREE THAT:-
1.
DEFINITIONS
For the purposes of this Agreement, unless the context indicates otherwise, the Parties defined in the heading
of this Agreement shall retain such definitions and the words and expressions set out below shall have the
meaning assigned to them, namely:-
1.1
“Auditors”
Means the auditors of THE COMPANY for the time being;
1.2
“Board”
Means the board of directors of THE COMPANY for the time
being;
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1.3
“Business”
Means the business of the Group of mining and exploration of gold
and other minerals and metals;
1.4
“Closing Date”
In relation to an Eligible Transaction, means the date on which the
Eligible Transaction, having become wholly unconditional, is
actually carried into effect and implemented in accordance with its
terms so that the Eligible Transaction ceases to be executory;
1.5
“Code”
Means the Securities Regulation Code promulgated in terms of
section 440(C)(5) of the Companies Act;
1.6
“Commence-/Engagement Date”
Means the 1 September 2005 ;
1.7
“Companies Act”
Means the Companies Act, 1973 (as amended);
1.8
“the Company”
Means DRDGOLD LIMITED, a company duly incorporated under
the Companies Act, 1973, Reg ? 1895/00926/06;
1.9
“Confidential Information”
Means all information which may be imparted in confidence or is
of a confidential nature relating to the Group, including without
being limited to business plans, trade secrets, financial information,
technical information and/or commercial information;
1.10
“Documents”
Means documents of any nature, including disks, notebooks, tapes
or any other medium, whether or not eye-readable, on which
information may be recorded from time to time;
1.11
“Eligible Termination”
Means a termination of this Agreement as contemplated in
clause 17;
1.12
“Eligible Transaction””
Means an “Eligible Transaction” as defined in clause 15;
1.13
“the Executive”
Means John William Cornelius Sayers;
1.14
“Financial Year”
Means the financial year of THE COMPANY as determined by it
from time to time;
1.15
“Group Life Assurance Scheme"
Means the “Group Life Assurance Scheme” as defined in clause 9;
1.16
“Labour Laws”
Means the Labour Relations Act, 1995 and the Basic Conditions of
Employment Act, 1997, as amended from time to time, and the
South African common law;
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1.17
“Group”
Means THE COMPANY and all its Subsidiaries;
1.18
“Group Remuneration Committee”
Means the committee of directors of the Company or of directors of
companies within the Group who constitute a committee for the
purposes of determining the remuneration of executives employed
by companies within the Group:
1.19
“Parties”
Means the Parties to this Agreement;
1.20
“Remuneration Package”
Means, in relation to each year, the aggregate of all amounts
payable by THE COMPANY to and on behalf of THE
EXECUTIVE for the calendar year in question as a fee for all the
services rendered by THE EXECUTIVE to THE COMPANY and
the Group during the calendar year in question as is more fully set
out in clause 4.1;
1.21
“Restraint Agreement”
Means the Restraint of Trade Agreement entered into between the
Parties;
1.22
“Subsidiary”
Shall have the meaning assigned to it in the Companies Act, 1973;
as amended from time to time;
1.23
“Termination Effective Date”
Means the date on which this Agreement terminates pursuant to an
Eligible Termination; and
1.24
"this Agreement"
Means this Agreement and all its appendices, which shall form part
of it.
2.
APPOINTMENT/EMPLOYMENT
2.1
THE EXECUTIVE is appointed as Chief Financial Officer.
2.2
Notwithstanding the provisions of this Agreement or any other agreement entered into between the Parties,
the employment of THE EXECUTUVE as an employee of THE COMPANY shall be deemed to have
commenced on the Commencement Date.
2.3
Subject to clauses 8, 10 and 16, this Agreement, which period shall be deemed to have commenced on 1
September 2005 , shall continue for a period of 2 (two) years provided that:-
2.3.1
either party may be entitled to cancel the agreement on 6 (six) months’ written notice; and
2.3.2
in the event of a termination based on the operational requirements of THE COMPANY, THE COMPANY
may with due regard to the provisions of the Labour Laws terminate the services of THE EXECUTIVE.
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2.4
The provisions of clause 2.3 to 2.3.2 shall not in any way limit or inhibit THE COMPANY’s rights to rely
and to act on (including the right to terminate this agreement) for reasons based on breach of this Agreement,
or based on the conduct or the capacity of THE EXECUTIVE.
3.
DUTIES
3.1
THE EXECUTIVE shall:-
3.1.1
carry out such duties and exercise such powers in relation to THE COMPANY and the Group as the Board
shall from time to time assign to or vest in him/her;
3.1.2
in the discharge of such duties and in the exercise of such powers referred to in clause 3.1.1, observe and
comply with all resolutions, regulations and directives from time to time made or given by the Board;
3.1.3
use his/her best endeavours properly to conduct, improve, extend, develop, promote, protect and preserve the
business interests, reputation and goodwill of THE COMPANY and the Group and not do anything which is
harmful to it; and
3.1.4
not be in the employment of any other employer other than within the Group.
3.2
It shall be part of the normal duties of THE EXECUTIVE at all times to consider in what manner and by
what new methods or devices the products, services, processes, equipment or systems of THE COMPANY or
Group might be improved, and promptly to give to the Company Secretary of THE COMPANY full details
of any invention or improvement which he may from time to time make or discover in the course of his
duties, and to further the interest of THE COMPANY and the Group in this regard. THE EXECUTIVE
acknowledges that any invention or improvement referred to in this clause 3.2 shall be the property of THE
COMPANY or the relevant entity within the Group and THE EXECUTIVE shall take all steps as may be
necessary and reasonably required by THE COMPANY or relevant entity within the Group, at the sole
expense of THE COMPANY or relevant entity within the Group, to procure that THE COMPANY or
relevant entity obtains complete and exclusive legal title to any such invention or improvement.
3.3
It is specifically recorded and agreed that due to the changing nature of the Group and the evolving nature of
its business interests, it may be necessary to assign additional duties to THE EXECUTIVE as envisaged in
clause 3.1 above or to re-assign those duties from THE EXECUTIVE to other persons from time to time and
to add to and delete responsibilities of THE EXECUTIVE from time to time. The Parties agree that this
flexible work requirement is part of the Contract of Employment and amendments as envisaged can be made
within the terms of the Agreement without constituting a breach.
3.4
THE EXECUTIVE shall not, either during his/her employment within the Group or thereafter, use or
disclose or attempt to use or disclose to any third parties any Confidential Information.
3.5
THE EXECUTIVE shall promptly whenever so requested by THE COMPANY and, in any event, upon the
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termination of his/her appointment with THE COMPANY, deliver to THE COMPANY all lists of clients or
customers, correspondence and all other Documents, papers and records which may have been prepared by
him/her or have come into his possession in the course of his/her affiliation with THE COMPANY, and THE
EXECUTIVE shall not be entitled to and shall not retain any copies thereof. THE EXECUTIVE
acknowledges that all title and copyright in the Confidential Information and Documents shall vest in THE
COMPANY.
4.
REMUNERATION PACKAGE
4.1
THE EXECUTIVE shall, with effect from the Commencement Date, be entitled to a gross all-inclusive
remuneration package of R2,000,000.00 (Two Million Rand) per annum, paid in 12 (twelve) equal
instalments monthly in arrears, for all the services to be rendered by him in terms of this Agreement.
4.2
THE EXECUTIVE will be responsible for all personal income tax obligations.
4.3
The Remuneration Package referred to in clause 4.1 above, includes:-
4.3.1
any allowances for vehicles, water, electricity, entertainment, subsistence and accommodation to which THE
EXECUTIVE is entitled in accordance with the policies of THE COMPANY from time to time and as agreed
with THE COMPANY from time to time, including any business travel in a private vehicle;
4.3.2
all contributions by THE COMPANY to the pension or provident fund of which THE EXECUTIVE is a
member, made in accordance with the relevant rules of the fund in question; and
4.3.3
all contributions by THE COMPANY to the Medical Aid Scheme of which THE EXECUTIVE and his
dependants are members.
4.4
Notwithstanding anything to the contrary, the payment by THE COMPANY of the premiums on behalf of
THE EXECUTIVE for the Group Life Assurance Scheme as referred to in clause 9, shall not constitute part
of the Remuneration Package.
4.5
THE COMPANY will refund, or will procure the refunding, to THE EXECUTIVE of all reasonable
expenses properly incurred by him in performing his duties under this Agreement in accordance with
Company policy. This will include expenses related to entertainment and travelling. THE COMPANY
required THE EXECUTIVE to submit official receipts or other documents as proof that he has incurred any
expenses he claims.
4.6
THE COMPANY undertakes to reimburse the following costs to be incurred by THE EXECUTIVE for the
benefit of THE COMPANY:-
4.6.1
membership subscriptions payable by THE EXECUTIVE for membership of relevant work related
associations and/or societies approved in writing in advance by THE COMPANY and of which THE
EXECUTIVE is a member by virtue of his/her employment with THE COMPANY;
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4.6.2
in light of THE COMPANY requiring THE EXECUTIVE to be a member of 1 (one) or more clubs, the
annual membership fees payable by THE EXECUTIVE of any 2 (two) such clubs which will be subject to
the normal fringe benefits tax payable in terms of the relevant tax legislation; and
4.6.3
any cost of insurance cover for any 2 (two) of the motor vehicles owned by THE EXECUTIVE during the
term of this Agreement which will be subject to the normal fringe benefits payable in terms of the relevant
legislation.
4.7
THE EXECUTIVE shall be entitled to use any travel miles allocated on any business credit cards and flying
membership cards issued to him/her by THE COMPANY for his/her family and personal use.
4.8
THE COMPANY will require THE EXECUTIVE to undergo a medical examination at the cost of THE
COMPANY on an annual basis and THE EXECUTIVE agrees to give effect to this requirement.
4.9
The date of payment of the salary portion of the Remuneration Package of THE EXECUTIVE shall be the
25
th
day of each calendar month.
5.
HOME & CELLULAR TELEPHONE AND SECURITY
5.1
It is recorded that THE COMPANY requires that THE EXECUTIVE maintain an adequately furnished study
or work area at his residences for the purpose of business meetings, out of hours work and work preparation,
reading and study. It is further recorded that THE EXECUTIVE is, at all times, required to remain in
communication with the office, other offices of THE COMPANY world wide, colleagues, stock exchanges
on which THE COMPANY is listed and shareholders, both during and after business hours. Access to a
home and cellular telephone would facilitate this communication and is regarded by THE COMPANY as
being in the interests of its business. Accordingly, THE COMPANY undertakes that:-
5.1.1
it shall provide and bear all costs of telephones at the residences of THE EXECUTIVE;
5.1.2
THE EXECUTIVE will be issued with a cellular telephone which can be used for personal and business
purposes and the monthly costs of this cellular phone and the installation of car kits and other costs incurred
on this cellular telephone, shall be for the account of THE COMPANY; and
5.1.3
THE COMPANY shall at its own cost provide appropriate security and security services at 1 (one) residential
premises within South Africa nominated by THE EXECUTIVE for term of contract.
5.2
For the purposes of this clause “appropriate security” shall include at least an appropriate alarm, motion
detectors, lighting, electric fencing, gates, provision of 24 (twenty four) hour a day, 7 (seven) days a week,
armed security at the premises, alarm monitoring with armed response.
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6.
BONUS SCHEME
In addition to the Remuneration Package and other benefits stipulated in this Agreement, THE EXECUTIVE
shall be eligible for the bonuses set out in this clause subject to the conditions set out herein.
6.1
THE EXECUTIVE shall be entitled to bonuses to be determined with reference to targets set in terms of key
performance indicators. Such key performance indicators shall be:-
6.1.1
share price versus gold index;
6.1.2
gold production versus budget;
6.1.3
costs versus CPI;
6.1.4
growth;
6.1.5
safety; and
6.1.6
special projects.
6.2
Should THE EXECUTIVE meet all the targets set in terms of the key performance indicators as determined
by the Board, bonuses shall be calculated and be payable in respect of 2 (two) annual bonus cycles, i.e.
6.2.1
receive up to 50% (fifty percent) of his Remuneration Package within 30 (thirty) business days of the end of
the first annual cycle commencing on the Commencement Date; and
6.2.2
receive payment of up to 75% (seventy five percent) of THE EXECUTIVE’s Remuneration Package at the
end of the second annual bonus cycle.
6.3
Should THE EXECUTIVE not fully meet all the targets set in terms of the key performance indicators as
agreed, he shall be entitled to such lesser bonus as determined by the Group Remuneration Committee. The
bonus will be determined with reference to the extent that the targets have been met.
6.4
Prior to THE EXECUTIVE meeting the key performance criteria as referred to in clause 6.1, THE
EXECUTIVE shall have no entitlement or right to receive a bonus.
6.5
The bonuses referred to in clause 6 shall be paid in the following manner:-
6.5.1
THE COMPANY shall pay to THE EXECUTIVE the amount due to THE EXECUTIVE in respect of each
bonus cycle less 25% (twenty five percent) of that amount;
6.5.2
an amount equivalent to the amount deducted in terms of clause 6.6.1 shall be retained by THE COMPANY
for the benefit of THE EXECUTIVE; and
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6.5.3
THE EXECUTIVE shall, provided that THE EXECUTIVE meets the targets agreed with the Group
Remuneration Committee and accordingly qualifies for a bonus during the next bonus cycle, be entitled to
receive payment of the amount retained by THE COMPANY during the previous bonus cycle.
6.6
Notwithstanding the above, if this Agreement is not extended or renewed, any bonus payable in respect of the
final bonus cycle shall be payable in full within 30 (thirty) business days of the end of the final bonus cycle.
6.7
The provisions of this clause 6 shall be applicable to each bonus cycle.
7.
LEAVE
7.1
THE EXECUTIVE shall be entitled to 30 (thirty) working days’ paid leave in each successive period of
12 (twelve) months of work commencing on the Commencement Date.
7.2
With affect from the Commencement Date, THE EXECUTIVE shall not be entitled to accumulate any
further working days’ leave not taken, unless the Board has specifically requested THE EXECUTIVE in
writing not to take leave in such year. Any leave not taken will be converted into cash annually on 1 July of
each year and be payable to THE EXECUTIVE. Accumulated leave will not be allowed to be carried
forward without the prior approval of the Chief Executive Officer of THE COMPANY.
8.
SICK LEAVE AND INCAPACITY
8.1
THE EXECUTIVE will be entitled to 12 (twelve) days’ paid sick leave per annum accumulated to 24 (twenty
four) days over a period of 24 (twenty four) months commencing on the Commencement Date.
8.2
If THE EXECUTIVE is at any time prevented by illness, injury, accident or any other circumstances beyond
his/her control from discharging his/her full duties under this Agreement (hereafter referred to as
“incapacity”) for a total of 180 (one hundred and eighty) or more days in any 12 (twelve) consecutive
calendar months’ cycle commencing on the Commencement Date, THE COMPANY may, by giving 1 (one)
month’s written notice of termination to THE EXECUTIVE, terminate this Agreement, in which event THE
EXECUTIVE shall be paid an amount equal to half his Remuneration Package calculated on the basis of the
Remuneration Package payable to THE EXECUTIVE on the date of termination of employment.
Notwithstanding the incapacity and absence from work, THE COMPANY shall be required to pay THE
EXECUTIVE his full remuneration during any period of absence from work prior to termination of
employment in terms of this clause.
9.
INSURANCE COVER
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9.1
THE COMPANY will apply for and maintain a reasonable level of Directors’ and Officers’ Liability
Insurance, with THE EXECUTIVE covered as an insured and THE COMPANY will maintain, at its expense,
the same cover for THE EXECUTIVE for a period of 7 (seven) years after termination of this Agreement by
either party for any reason whatsoever.
9.2
THE COMPANY undertakes to pay on the behalf of THE EXECUTIVE the premiums payable by THE
EXECUTIVE under the Group Life Scheme of THE COMPANY. The cover under the Group Life
Assurance Scheme shall include temporary and permanent disability and trauma insurance. The Life
Assurance cover for THE EXECUTIVE will be an amount equivalent to 4 (four) years’ gross annual
Remuneration Package of THE EXECUTIVE calculated on the basis of the Remuneration Package payable
to THE EXECUTIVE at the date of his death.
9.3
On termination of this Agreement, for whatsoever reason by either THE COMPANY or THE EXECUTIVE,
THE EXECUTIVE shall, subject to the rules of the Group Life Scheme, be entitled to remain a member of
the Group Life Scheme and to enjoy the same benefits and coverage as those he enjoyed immediately prior to
the termination of employment. The benefits and coverage shall be based on the Remuneration Package that
THE EXECUTIVE received immediately prior to the date of termination of employment. THE COMPANY
shall pay all premiums and contributions payable to maintain such membership and coverage for a period of
5 (five) years calculated from the date of termination of this Agreement. Should THE EXECUTIVE, as a
result of the termination of his employment, not be entitled to retain the benefits and coverage contained in
the Group Life Scheme, and he decides to exercise the right to effect whole life or endowment insurance as
envisaged in clause 4 of the Group Life Scheme, all premiums and contributions for such benefits and
coverage shall be borne by THE COMPANY for a period of 5 (five) years calculated from the date of the
termination of this Agreement. THE COMPANY shall take all such steps, and provide all such assistance, as
may be necessary to ensure that THE EXECUTIVE is entitled to exercise his rights in terms of this clause.
For the purposes of this clause 9.3 the Group Life Scheme is the Sanlam Scheme ? 18740 (Policy ?
18681100X6) or any other similar scheme that is in effect at the date of termination of employment.
9.4
THE COMPANY undertakes:-
9.4.1
in the event of THE EXECUTIVE not being an employee as defined in the Compensation for Occupational
Injuries and Diseases Act 130 of 1993 (as amended), to insure THE EXECUTIVE with the Rand Mutual
Assurance Limited or any other insurance company against risk, death, permanent disablement or temporary
disablement caused by an accident arising out of and in the course of his employment; and
9.4.2
to keep the policy of insurance referred to in clause 9.4.1 in force and pay the premiums thereon on time, and
THE EXECUTIVE agrees that the amount payable under the said policy of insurance shall be taken and
deemed to be and represent the total and entire claim, demand and right of action of THE EXECUTIVE , his
executors or administrators or legal representatives or assigns against THE COMPANY or its employees for
damages or compensation for injury suffered by THE EXECUTIVE as a result of the negligence of THE
COMPANY or its employees or otherwise and the payment of the said compensation in terms of the said
policy of insurance shall free and discharge any claim or liability in respect of THE COMPANY and its
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employees of and from all and any claim of liability in respect of such injury, and to waive any right of
claiming on THE COMPANY or its employees for any compensation other than that which he is entitled to
recover under the said policy of insurance effected by THE COMPANY.
10.
BREACH
Notwithstanding any provision to the contrary, this Agreement may be terminated by THE COMPANY with
or without notice if THE EXECUTIVE:-
10.1
commits any serious or persistent breach of any of the provisions contained in this Agreement, provided that
the inability of THE EXECUTIVE to perform his duties due to incapacity as envisaged in clause 8 shall not
constitute a breach of contract for the purposes of this Agreement;
10.2
is found guilty of theft, fraud or any gross irregularity; or
10.3
is found guilty of gross misconduct, serious malperformance or wilful neglect in the discharge of his duties
whether in terms of this Agreement or in terms of any other Agreement between THE EXECUTIVE and a
member of the Group.
11.
RESTRAINT AGREEMENT
It is recorded that the Parties have entered into a Restraint Agreement with the Group.
12.
DISPUTES
12.1
In the event that any dispute arises out of the interpretation, application or termination of this Agreement or
in the event that any dispute arises out of any alleged unfair dismissal or unfair labour practice as defined in
the Labour Relations Laws, the Parties shall refer such dispute to private arbitration in accordance with the
provisions of this clause.
12.2
The arbitration shall be conducted by an arbitrator selected by agreement from the panel of arbitrators of
AMSSA (The Arbitration and Mediation Services of South Africa) or the labour panel of AFSA (Arbitration
Foundation of Southern Africa). The date of the arbitration will be mutually agreed upon by the Parties. In
the event that the Parties are unable to mutually agree upon the arbitrator and a date for the arbitration within
10 (ten) days of the dispute arising, then the director of AMSSA will be asked to appoint a suitable arbitrator
and nominate a date for the hearing of the arbitration.
12.3
The arbitration shall be conducted by an arbitrator selected by agreement from the panel of arbitrators of
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AMSSA (The Arbitration and Mediation Services of South Africa) or the labour panel of AFSA (Arbitration
Foundation of Southern Africa). The date of the arbitration will be mutually agreed upon by the Parties. In
the event that the Parties are unable to mutually agree upon the arbitrator and a date for the arbitration within
10 (ten) days of the dispute arising, then the director of AMSSA will be asked to appoint a suitable arbitrator
and nominate a date for the hearing of the arbitration.
12.4
The arbitrator will be entitled to determine the appropriate procedure for determining the dispute.
12.5
The costs of the arbitrator will be borne equally by THE EXECUTIVE and THE COMPANY.
12.6
The finding of the arbitrator will be final and binding on the Parties.
12.7
The Parties record that:-
12.7.1
it is the desire of both parties that any dispute which may arise as envisaged in clause 12.1 is to be
determined by private arbitration;
12.7.2
neither party will refer any such dispute to arbitration or adjudication before the CCMA; and
12.7.3
the jurisdiction of the CCMA to adjudicate any such dispute is by mutual agreement between the parties
expressly concluded.
13.
APPLICATION OF PROVISIONS OF COMPANY PROCEDURES
13.1
THE EXECUTIVE’s entitlement to any benefit other than those recorded in this Agreement shall be
governed by the appropriate procedure manuals of THE COMPANY in force at any given time.
13.2
THE COMPANY is entitled from time to time to amend the terms and conditions of its Company procedure
manuals.
13.3
In the event of a conflict between the provisions of company procedure manuals and the provisions of this
Agreement, the provisions of this Agreement shall prevail.
14.
TERMINATION
14.1
Notwithstanding any provision to the contrary, this Agreement may be terminated by THE COMPANY with
or without notice if THE EXECUTIVE:-
14.1.1
commits any serious and/or persistent breach of any of the provisions contained in this Agreement;
14.1.2
is found guilty of theft, fraud or any gross irregularities; or
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14.1.3
is found guilty of gross misconduct or wilful neglect in the discharge of his duties.
14.2
If THE EXECUTIVE:-
14.2.1
resigns as an Employee of THE COMPANY, this Agreement may be terminated by THE COMPANY and
the normal rules of resignation applicable to employees of THE COMPANY will apply;
14.2.2
is sequestrated, this Agreement shall be terminated by THE COMPANY and the normal rules of THE
COMPANY applicable to retrenchments will apply; or
14.2.3
dies, this Agreement may be terminated subject to the provisions of clause 9 and any other applicable
provision of this Agreement.
14.3
THE COMPANY’s right to terminate this Agreement shall be subject to the applicable provisions in the
Labour Laws as may apply from time to time.
15.
ELIGIBLE TRANSACTION
For the purposes of this Agreement an “Eligible Transaction” means any agreement, including any agreement
forming part of a series of other agreements, which either by itself or together with any of the other
agreements, constitutes or results in a transaction involving a change of control of THE COMPANY, of a
kind which falls within the ambit of clause 1(a) of the definition of “affected transaction” in Section B of the
Code, read with clause 5 of the same Section of the Code.
16.
THE RIGHT OF THE EXECUTIVE TO TERMINATE THIS AGREEMENT FOR AN ELIGIBLE
TRANSACTION
If an Eligible Transaction is duly entered into, THE EXECUTIVE shall be entitled to terminate this
Agreement, subject to the following provisions:-
16.1
THE EXECUTIVE may exercise this right of termination by giving written notice to this effect to THE
COMPANY at any time from the date on which the announcement of a firm intention to make an offer in
respect of the Eligible Transaction, as contemplated in Rule 2.3 of Section D of the Code (“the
Announcement Date”), is made in accordance with the requirements of the Code, until the Closing Date of
that Eligible Transaction;
16.2
any notice of termination given by THE EXECUTIVE in terms of clause 16.1 shall be conditional upon, and
shall therefore take effect only if, the Eligible Transaction itself becomes wholly unconditional and is
actually carried into effect and implemented in accordance with its terms and accordingly ceases to be
executory;
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16.3
any notice of termination given in terms of clause 16.1 may not be withdrawn or revoked by THE
EXECUTIVE, even before the notice takes effect in terms of clause 16.2, without the written consent of THE
COMPANY; and
16.4
if any notice of termination given by THE EXECUTIVE in terms of clause 16.1 takes effect in terms of
clause 16.2, this Agreement shall terminate on the Closing Date of the Eligible Transaction.
17.
ELIGIBLE TERMINATION
This Agreement shall be regarded as having been terminated pursuant to an Eligible Termination if THE
EXECUTIVE exercises his right in terms of clause 16 to terminate this Agreement as an employee of THE
COMPANY, as a result of the occurrence of an Eligible Transaction, and the termination duly takes effect as
contemplated in clause 16.
18.
BENEFITS PAYABLE FOR AN ELIGIBLE TERMINATION
18.1
If this Agreement is terminated pursuant to an Eligible Termination, THE EXECUTIVE shall, subject to
compliance with the relevant company laws, be entitled to receive payment from THE COMPANY as a
termination benefit and amount equal to:-
TS X TE
12
Where:
TS =
means the portion left over from the 2 (two) year contract; and
TE =
means the Remuneration Package as set out in clause 4.1.
18.2
The total amount which becomes payable to THE EXECUTIVE in terms of clause 18.1 shall accrue to him
on the date that employment terminates, and shall be payable to him within 30 (thirty) days after the amount
has been determined by the Auditors in accordance with clause 18.3.
18.3
The total amount and all the separate amounts making up that total amount, payable to THE EXECUTIVE in
terms of clause 18.1, including any pro rata adjustments made, shall be determined by the Auditors as soon as
possible after the date of termination, and their certificate as to each of those amounts shall, in the absence of
manifest or clerical error, be final and binding on all the Parties.
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19.
THE RIGHT OF THE COMPANY TO ASSIGN THIS AGREEMENT
19.1
THE COMPANY shall be entitled, without the consent of THE EXECUTIVE, to assign all its rights and all
its obligations under this Agreement to any company which, at the time of the assignment, is a member of the
Group.
19.2
For the avoidance of any doubt it is expressly recorded that the provisions of clause 19.1 shall apply mutatis
mutandis to any succeeding assignee of this Agreement.
20.
DIRECTORSHIPS
20.1
Should this Agreement terminate in terms of any of the provisions thereof, THE EXECUTIVE shall resign
his directorship within 2 (two) days of the termination of this Agreement unless the Board agrees in writing
to THE EXECUTIVE continuing to act as a director.
20.2
Nothing contained in this Agreement shall be construed as according THE EXECUTIVE any entitlement to
compensation for loss of office as director of THE COMPANY or any company within the Group.
21.
GENERAL
21.1
This document contains the entire agreement between the Parties in regard to its subject matter.
21.2
No party shall have any claim or right of action arising from any undertaking, representation or warranty not
included in this Agreement.
21.3
No failure by a party to enforce any provision of this Agreement shall constitute a waiver of such provision
or affect in any way a party's right to require performance of any such provision at any time in the future, nor
shall the waiver of any subsequent breach nullify the effectiveness of the provision itself.
21.4
No agreement to vary, add to or cancel this Agreement shall be of any force or effect unless reduced to
writing and signed by or on behalf of the Parties to this Agreement.
21.5
Save as permitted in terms of clause 19, no party may cede any of its rights or delegate any of its obligations
under this Agreement.
21.6
If any of the clauses of this Agreement are found to be unenforceable, contra bona mores or void, that clause
shall be deemed to be severable from this Agreement. The enforceability of the remainder of the Agreement
shall be unaffected by the exclusion of such clause.
22.
STATUS OF THIS AGREEMENT
If there is any conflict between the provisions of this Agreement and those of the Restraint Agreement, then
the provisions of this Agreement shall prevail.
BACKGROUND IMAGE
A
GREEMENT
:-
JWC SAYERS
P
AGE
17
OF
18



23.
DOMICILIUM CITANDI ET EXECUTANDI
23.1
The parties choose as their domicilium citandi et executandi for all purposes under this agreement the
following addresses:-
THE COMPANY:-
THE EXECUTIVE:-
DRDGOLD Limited
Mr John William Cornelius Sayers
DRD Building
18 Nel Street
45 Empire Road
Randpark Ridge
Parktown
Johannesburg
23.2
THE EXECUTIVE is obliged to advise THE COMPANY of his/her address upon commencement of
employment and again within 7 (seven) days of any change of address.
23.3
Each of the parties shall be entitled from time to time, by written notice to the other, to vary its domicilium to
any other address which is not a post office box or poste restante.
23.4
Any notice or communication required or permitted to be given by either party to the other in terms of this
Agreement shall be valid and effective only if in writing.
23.5
A written notice or communication actually received by either party from the other shall be valid and
effective notwithstanding that it was not sent to or delivered at the chosen domicilium address.
23.6
Any communication or notice required to be given or made under this Agreement between the parties shall
be deemed to have been received by the intended addressee:
23.6.1
on the day of delivery if delivered by hand, facsimile, telex or telegram; or
23.6.2
on the tenth day after posting, if mailed by prepaid registered post.
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A
GREEMENT
:-
JWC SAYERS
P
AGE
18
OF
18



THUS DONE AND SIGNED AT
ON THE
26
DAY OF October 2005
2005.
For:- DRDGOLD LIMITED
S
IGNATORY
:-
/s/ M Wellesley-Wood
Mark Wellesley-Wood
C
APACITY
:-
Chief Executive Officer
A
UTHORITY
:-
THUS DONE AND SIGNED AT
ON THE
27
DAY OF October
2005.
/s/ JWC Sayers
JOHN WILLIAM CORNELIUS SAYERS



CHERYL ROOS
10 AUGUST 2005
BACKGROUND IMAGE
EXHIBIT 4.91


OPTION AGREEMENT
entered into by and between





DRDGOLD LIMITED
(“DRD”)

on the first part
AND




M5 DEVELOPMENTS (PTY) LIMITED
(“M5”)


on the second part




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JHM/maf/3044
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15 July 2005
PREAMBLE

DRD is the registered owner of the Land, willing to give M5 an option to purchase the Land.
1 DEFINITIONS
The headings of the clauses in this agreement are for the purpose of convenience and
reference only and shall not be used in the interpretation of nor modify nor amplify
the terms of this agreement nor any clause hereof. In this agreement, unless a
contrary intention clearly appears -
1.1
words importing -
1.1.1
any one gender include the other gender;
1.1.2
the singular include the plural and vice versa; and
1.1.3
natural persons include created entities (incorporated or unincorporated) and
vice versa.
1.2
If any provision in a definition is a substantive provision conferring rights or
imposing obligations on any party, effect shall be given to it as if it were a
substantive clause in the body of the agreement, notwithstanding that it is only
contained in the interpretation clause.
1.3
If any period is referred to in this agreement by way of reference to a number of
days, the days shall be reckoned exclusively of the first and inclusively of the last
day unless the last day falls on a Saturday, Sunday or a public holiday, in which
case the last day shall be the next succeeding day which is not a Saturday, Sunday
or a public holiday.
1.4
This agreement shall be governed by and construed and interpreted in accordance
with the law of the Republic of South Africa.
1.5
The following terms shall have the meanings assigned to them hereunder and
cognate expressions shall have a corresponding meaning, namely:
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15 July 2005
1.5.1
“DRD” means DRDGold Limited (Company Registration No. 1895/000926/06 ),
herein represented by William Thomas Beer in his capacity as the duly
authorised representative of DRD;
1.5.2
“M5” means M5 Developments (Pty) Limited (Company Registration No.
2000/004586/07), herein represented by Deon Meyer, in his capacity as Director
of the company, him having been duly authorised thereto by a Company
Resolution;
1.5.3          “the Land ” means the area demarcated as area A, B, C, D, E and F on Annexure
A the Draft Deed of Sale being:-
•    the Remaining Extent of Portion 5 of the Farm Roodepoort, 237 IQ
(T261/1934); and
•    the Remaining Extent of Portion 1 of the Farm Roodepoort, 237 IQ
(T15456/1955);
1.5.4          “Option Period” means a period commencing on the Effective Date and
terminating of 19 September 2005;
1.5.5          “Due Diligence” means that which M5 requires to do to establish, with
reasonable certainty, the capability of the Land being used for land
development purposes;
1.5.6          “Purchase Price” means R15 000 000 (Fifteen Million Rand) (excluding VAT);
1.5.7
“Option Fee” means an amount of R500 000 (Five Hundred Thousand
Rand)(excluding VAT) per month, calculated monthly from the Effective Date,
or a proportion thereof, calculated up and until the exercise of the option date;
1.5.8
“Effective Date” means the date of signature of the last party signing this
Agreement;
1.5.9
“Exercise of Option Date” means the date upon which M5 exercises the option;
1.5.10
“the Parties” means DRD and M5;
1.5.11
“this Agreement” means this Option Agreement and include all schedules
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15 July 2005
which form and integral part of this Agreement.
1.5.12
“the Draft Sale Agreement” shall be the Agreement of Sale attached as
Annexure “B”.
2
GRANT OF OPTION
DRD grants M5 an option to purchase the Land at the Purchase Price for the duration
of the Option Period, which option M5 accepts on the terms and conditions, as
described in this Agreement.
3
EXERCISE OF OPTION
M5 shall be entitled to exercise the option granted by giving DRD written notice
during the option period of the exercise of the option, and by providing it with a
guarantee as envisaged under clause 3.2 of the Draft Deed of Sale, in which event a
purchase of the Land shall come into place and stead, as described in the Draft Deed
of Sale.
4
PAYMENT OF OPTION FEES
M5 shall, during the Option Period, pay to DRD the Option Fee, provided that as from
the date of the exercise of the option, Option Fees shall no longer be payable and M5
shall accept the responsibility and become liable for the costs and expense pertaining
to the upkeep of the Land, which DRD would otherwise be responsible for; provided
that a portion of the option shall be reimbursed to M5, in accordance with the date of
the exercise of the option in relation to that period for which the Option Fee has
been paid.
5        NOMINEE
5.1
M5 reserves the right to nominate a third party to take transfer of the Land,
against the exercise of the option, by advising DRD of the identification of such
third party, and DRD shall pass transfer to that third party if so required provided
that M5 shall remain liable to DRD as co-principal debtor with that nominee
(Jointly and Severely) for the due performance of the nominee’s obligation in
terms of the Sale Agreement.
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5
15 July 2005
6
SALE AGREEMENT
6.1
Upon the exercise of the option, M5 purchases and DRD sells the Land to M5 at the
Purchase Price on the terms of Draft Deed of Sale.
6.2
The Purchase Price shall be guaranteed as at the date of exercise of the option in
terms of a financial guarantee issued by a bank or financial institution, in favour of
DRD (as provided under clause 3.2 of the Draft Deed of Sale), for payment to DRD
against registration of transfer, and from which date of transfer the full risk to the
Land shall pass to M5 or its nominee taking transfer.
7    TRANSFER
Transfer of the Land shall be passed by the conveyancers appointed by DRD at the
cost of M5 and both parties shall do all that is necessary and required to be done to
effectuate such transfer, without any unreasonable delays being caused.
8    OCCUPATION
M5 shall, from the exercise of the option date take occupation of the Land, provided
that M5 shall, as from the Effective Date have access to the Land for purposes of
carrying out the Due Diligence and DRD undertakes to provide M5 with whichever
information DRD has in its possession or under its control, to assist M5 carrying out
the Due Diligence, without warranting the correctness of such information, and DRD
shall grant whichever consents, approvals and/or authorities are reasonably necessary
to enable M5 to carry out an unrestricted/unprohibited Due Diligence exercise, at the
sole cost and expense of M5, provided further DRD shall not make claim or charge or
be entitled to any compensation for information granted to M5, nor become
responsible to pay professionals and/or consultants for work done on the instructions
of M5.
9
NOTICES AND DOMICILIA
9.1
The Parties choose as their domicilia citandi et executandi their respective
addresses set out in this clause for all purposes arising out of or in connection with
the agreement at which addresses all processes and notices arising out of or in
connection with this Agreement, its breach or termination may validly be served
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6
15 July 2005
upon or delivered to the Parties.
9.2
For purposes of this Agreement, the Parties' respective addresses shall be:
9.2.1
M5 at –
539 Ontdekkers Road,
FLORIDA NORTH
Fax No.: (011) 472-2643
DRD at -
DRD Building
45 Empire Road
Parktown
JOHANNESBURG
Fax No.: 011 482 6280
or at such other address of which the party concerned may notify the other/s in
writing provided that no street address mentioned in this sub-clause shall be
changed to a post office box or poste restante .
9.3
Any notice given in terms of this agreement shall be in writing and shall –
9.3.1
if delivered by hand be deemed to have been duly received by the addressee on
the date of delivery;
9.3.2
if posted by prepaid registered post be deemed to have been received by the
addressee on the 8
th
(eighth) day following the date of such posting;
9.3.3
if transmitted by facsimile be deemed to have been received by the addressee
on the day following the date of dispatch,
unless the contrary is proved.
9.4
Notwithstanding anything to the contrary contained or implied in this agreement, a
written notice or communication actually received by one of the Parties from
another including by way of facsimile transmission shall be adequate written
notice or communication to such party.
10     DISPUTE RESOLUTION
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7
15 July 2005
Any dispute arising under this Agreement shall be mediated between the Parties by a
mutually agreed and suitably skilled mediator. Should the mediator be unsuccessful
and the Parties fail to reach agreement, then the dispute may be referred by the
aggrieved party to the arbitration of a single arbitrator, to be agreed between the
Parties, or failing agreement to be nominated on the application of any party by the
President for the time being of the South African Association of Arbitrators. The
decision of the single arbitrator shall be final and binding on the Parties.
11    BREACH AND CANCELLATION
If a party (“the defaulting party”) commits a breach and/or fails to meet its
obligations in terms of this agreement and fails to remedy such breach after having
received not less than 30 (thirty) days written notice, or where the 30 (thirty) day
period is patently inappropriate, then a reasonable notice period, from the other
party (“the innocent party”) to do so, then the innocent party shall be entitled to
cancel this agreement without any further notice being given to the defaulting party
and without prejudice to the innocent party’s other rights which the innocent party
may have in law. The innocent party may claim from the defaulting party specific
performance without notice being required or been given, as aforestated. This clause
shall not apply to the payment of Option Fees owing under this Agreement and the
Option shall be suspended for any period that it remains unpaid, and become
cancelled if not paid within 5 days of its due date.
12     WAIVER
No latitude or extension of time or other indulgence which may be given or allowed
by either party to the other in respect of any payment or obligation or performance in
terms of this agreement, shall in any way or circumstance be an implied consent by
any party or operate as a waiver or a novation or otherwise effect any of such party’s
rights in terms of or arising out of this agreement or estop such party from enforcing
at any time and without notice strict and punctual compliance with each and every
provision or term hereof.
13      ENTIRE AGREEMENT
This agreement reflects the entire agreement between the Parties and no variation,
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8
15 July 2005
amendment or addendum shall be of any force and effect between the Parties unless
contained in writing and signed by them.
14     INDIVISIBILITY
This agreement and the transaction herein contemplated shall be indivisible, save
that should it transpire that any part or parts thereof are invalid or unenforceable,
such invalid or unenforceable parts shall be severable so that the remaining parts
which are valid and enforceable shall remain valid and shall not also be tainted by
such invalidity or unenforceability.

THUS DONE AND SIGNED at ROODEPOORT on this 21
st
of July 2005 in the presence of
the undersigned witnesses.

AS WITNESSES :

1.         ............................…….

2.
..................…………….
/s/ WT Beer
William Beer
Regional General Manager : Assets and Commercial
for and on behalf of
DRDGOLD LIMITED


THUS DONE AND SIGNED at ROODEPOORT on this the 21
st
of July 2005 in the presence
of the undersigned witnesses.

AS WITNESSES :

1.         ............................…….

2.
..................…………….
/s/ M5 DEVELOPMENTS (PTY) LIMITED
______________________________
for and on behalf of
M5 DEVELOPMENTS (PTY) LIMITED
BACKGROUND IMAGE
EXHIBIT 4.92
Share Sale Agreement
Between DRD(Offshore) Limited, DRDGold Limited
and Emperor Mines Limited
BACKGROUND IMAGE
Table of contents
Clause
Page

1 Definitions and interpretation ................................................................................... . ................................ 1

1.1 Definitions ............................................................................................................. .... ........................ 1

1.2 Interpretation ................................................................................................. . ................................. 5

2
Conditions ................................................................................................................... ... .........................6

2.1 Conditions .................................................................................................................. . ..................... 6

2.2 Use reasonable endeavours ....................................................................................................... 7

2.3 Waiver .............................................................................................................................. .. ............... 7

2.4 Notice of conditions ....................................................................................................................... 8

2.5 Failure of conditions precedent ........................................................................... . ....................... 8

2.6 Effect of termination ....................................................................................................................... 8

2.7 Effect of conditions ......................................................................................................................... 8

3
Sale of Sale Shares ..............................................................................................................................9

3.1 Sale Shares ......................................................................... . ............................. . ............................. 9

3.2 Associated rights ........................................................................................................................... 9

3.3 Title and risk .................................................................................................................................... 9

4
Purchase Price .....................................................................................................................................9

4.1 Purchase Price ............................................................................................... . ................................ 9

4.2 Payment of the Purchase Price ................................................................................................... 9

4.3 Issue of the Share Consideration ............................................................................................... 9

4.4 Payment of the Cash Consideration .......................................................................................... 9

5
Conduct before Completion .............................................................................................................10

5.1 Conduct of DRD (IOM) Group ......................................................................................................10

5.2 Permitted acts by DRD(Offshore) or DRD (IOM) Group .........................................................10

5.3 Conduct of Emperor Group .........................................................................................................10

5.4 Permitted acts by Emperor Group ............................................................................................. 11

5.5 Notice of breach .................................................................................................... . ....................... 11

6
Completion ................................................................................................................... .. ..................... 11

6.1 Time and Place ...................................................................................................... . ...................... 11

6.2 DRD(Offshore)'s obligations at Completion ...........................................................................12

6.3 Emperor's obligations at Completion .......................................................................................12

6.4 Completion Board meetings ......................................................................................................12

6.5 Conditions of Completion ...........................................................................................................13

6.6 Completion ....................................................................................................................................13

6.7 Reference to clause 11.5 ............................................................................................................13

7
Post Completion Adjustment ..........................................................................................................13
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BACKGROUND IMAGE

7.1 Post Completion Adjustment .........................................................................................................13

7.2 Emperor Adjustment ....................................................................................................................... 14

7.3 DRD (IOM) Adjustment ................................................................................................................... 14

7.4 Adjustment Statement .....................................................................................................................14

7.5 Assistance ........................................................................................................................................ 14

7.6 Review by Emperor ......................................................................................................................... 14

7.7 Dispute Notice ...................................................................................................................................15

7.8 Dispute resolution ............................................................................................................................15

7.9 Payment of Adjustment Amount .....................................................................................................15

8
Period after Completion ........................................................................................................................16

8.1 Appointment of proxy .........................................................................................................................16

8.2 Access to records ............................................................................................................................. 16

8.3 Branding ............................................................................................................................................. 16

8.4 Pre-Completion tax returns ............................................................................................................ 16

9
DRDGold Guarantee ................................................................................................................................17

9.1 Guarantee ...........................................................................................................................................17

9.2 Performance ......................................................................................................................................17

9.3 Extent of guarantee and indemnity ................................................................................................17

9.4 Principal and independent obligation ...........................................................................................17

9.5 Guarantor's Liability ..........................................................................................................................18

9.6 Payments by Guarantor ...................................................................................................................18

10
DRD(Offshore)'s Warranties ................................................................................................................ 18

10.1 Giving of DRD(Offshore)'s Warranties ........................................................................................18

1 0.2 Awareness ......................................................................................................................................18

10.3 No reliance other than on DRD(Offshore)'s Warranties .........................................................18

10.4 Monetary and time limitations for DRD(Offshore)'s Warranties ............................................18

1 0.5 Disclosures ....................................................................................................................................19

1 0.6 Further limitations ..........................................................................................................................19

1 0.7 Statutory Claims .............................................................................................................................20

1 0.8 Right to reimbursement ................................................................................................................20

1 0.9 Reduction of Purchase Price .......................................................................................................20

10.10 Independent Limitations .............................................................................................................20

1 0.11 Sole remedy .................................................................................................................................20

11
Emperor's Conduct of Claims .............................................................................................................. 21

11.1 Notification of Claims .................................................................................................................... 21

11.2 Conduct of Claims ......................................................................................................................... 21

11.3 Reimbursement and indemnity ................................................................................................... 21

11.4 Material personal interest ..............................................................................................................22
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11.5 Constitution of Emperor Board ......................................................................................................... 22

12
Emperor's Warranties ................................................................................................................................ 22

12.1 Giving of Emperor's Warranties ........................................................................................................ 22

12.2 Awareness ............................................................................................................................................ 22

12.3 No reliance other than on Emperor's Warranties ......................................................................... 22

12.4 Monetary and time limitations for Emperor's Warranties ............................................................ 23

12.5 Disclosures .......................................................................................................................................... 23

12 .6 Further limitations .............................................................................................................................. 23

12.7 Statutory Claims .................................................................................................................................. 24

12.8 Right to reimbursement ..................................................................................................................... 24

12.9 Increase of Purchase Price ............................................................................................................... 24

12.10 Independent Limitations ................................................................................................................. 25

12.11 Sole remedy ...................................................................................................................................... 25

13
DRD(Offshore) Conduct of Claims ...........................................................................................................25

13.1 Notification of Claims ........................................................................................................................ 25

13.2 Conduct of Claims ............................................................................................................................. 25

13.3 Reimbursement and indemnity ...................................................................................................... 26

14
Announcements ..........................................................................................................................................26

14.1 Agreed announcement ..................................................................................................................... 26

14.2 Further publicity and confidentiality ................................................................................................. 26

14.3 Legal requirements ........................................................................................................................... 26

15
General ......................................................................................................................................................... 26

15.1 Further Acts ......................................................................................................................................... 26

15.2 Notices ................................................................................................................................................. 27

15.3 Stamp duty and Expenses ............................................................................................................... 28

15.4 Amendments ...................................................................................................................................... 28

15.5 Assignment. ........................................................................................................................................ 28

15.6 Waiver ................................................................................................................................................... 28

15.7 Consents ............................................................................................................................................. 28

15.8 Counterparts ....................................................................................................................................... 28

15.9 Indemnities ......................................................................................................................................... 29

15.1 0 No merger ........................................................................................................................................ 29

15.11 Entire agreement ............................................................................................................................. 29

15.12 Governing law .................................................................................................................................. 29

15.13 Jurisdiction ....................................................................................................................................... 29

Schedule 1 – DRD(Offshore)'s warranties .......................................................................................................30

Schedule 2 - Emperor's warranties ...................................................................................................................35

Schedule 3 - DRD (IOM) Reorganisation ............................................................................................................37
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Part A to Schedule 3 -DRD (IOM) Reorganisation ..................................................................................................37

Part B to Schedule 3 - Post DRD (IOM) Reorganisation structure ..................................................................... 39

Schedule 4 - Permitted Encumbrances ...................................................................................................................41

Schedule 5 - Tolukuma Gold Mine Tenements ....................................................................................................... 42

Schedule 6 - Additional confirmatory due diligence matters ............................................................................ 43
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BACKGROUND IMAGE
This share sale agreement
is made on
2005 between the following parties:
1
DRD(Offshore) Limited (114729C) of 14/15 Mount Havelock, Douglas, 1M 1 2QG, Isle of Man
(DRD(Offshore)
2
Emperor Mines Limited (A.C.N. 007 508 787) of Level 1 , 490 Upper Edward Street, Spring Hill 4004,
Brisbane,
Queensland
(Emperor)
3
DRDGold Limited a company registered in South Africa whose address is EBSCO House 4, 299
Pendoring Avenue, Blackheath, 2195, South Africa
(DRDGold)
Recitals
A.
DRD(Offshore) owns the Sale Shares.
B.
DRD(Offshore) has agreed to sell and Emperor has agreed to purchase the Sale Shares on the terms set
out in this agreement.
C.
DRDGold has agreed to guarantee the performance by DRD(Offshore) of its obligations contained in
this agreement.
The parties agree
in consideration of, among other things, the mutual promises contained in this agreement:
1
Definitions and interpretation

1.1 Definitions
In this agreement:
"Accounts Date" means 30 September 2005.
"Adjustment Statement " means the statement to be prepared in accordance with the requirements of
clause 7.4.
"ANZ Bank" means Australia and New Zealand Bank Limited and its subsidiaries and Related Bodies
Corporate.
"ANZ Facility Agreement " means the credit facility agreement between Emperor, Emperor Gold Mining
Company Limited, Koula Mining Company Limited and ANZ Bank dated 18 December 2002 (as amended).
"ASX" means the Australian Stock Exchange.
"Authorisation" includes:
(a)        any consent, registration, filing, agreement, notice of non-objection, notarisation, certificate,
licence, approval, permit, authority or exemption from, by or with a Government Agency; and
(b)        in relation to anything which a Government Agency may prohibit or restrict within a specific
period, the expiry of that period without intervention or action or notice of intended intervention or
action.
"Authorised Dealer " means an authorised dealer as defined in the Exchange Control Regulations, 1961
(SA), promulgated in terms of the Currency and Exchanges Act, Act 9 of 1933 (SA).
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BACKGROUND IMAGE
"BDA" means Behre Dolbear Australia pty Ltd.
"Business" means, in respect of an entity, the primary business carried on by an entity.
"Business Day" means a day which is not a Saturday, Sunday or public holiday in New South Wales.
"Business Records" means all original and certified copies of the books, records, documents, information,
accounts and data (whether machine readable or in printed form) owned by or relating to an entity or the
property of an entity and any source material used to prepare them.
"Cash Consideration" means $30,000,000.
"Claim" means any claim, demand, legal proceedings or cause of action including, but not limited to, any
claim, demand, legal proceedings or cause of action:

(a)
based in contract (including but not limited to breach of warranty);

(b)
based in tort (including but not limited to misrepresentation or negligence);

(c)
under common law; or

(d)
under statute (including but not limited to Part V or VI of the Trade Practices Act 1974 (Cth) or
like provisions in any state or territory legislation),
in relation to DRD(Offshore) or DRDGold, which is in respect of the acquisition of DRD (IOM) or this
agreement including, but not limited to, any claim for breach of warranty given by DRD(Offshore) under
this agreement and in relation to Emperor, which is in respect of the issue of the Share Consideration to
DRD(Offshore) or this agreement including, but not limited to, any claim for breach of warranty given by
Emperor under this agreement.
"Completion" means completion of the sale and purchase of the Sale Shares in accordance with
clause 6.6 of this agreement.
"Completion Date" means the date on which Completion occurs as more particularly described in
clause 6.1.
"Confidentiality Agreement" means the confidentiality and protocol agreement between DRDGold
and Emperor dated 18 August 2005.
"Corporations Act" means the Corporations Act 2001.
"Cut Off Date" means 28 February 2006 or such later date as Emperor and DRD(Offshore) agree.
"DRD Convertible Loan Facility" means the loan agreement between DRD (IOM), Emperor and
Emperor Gold Mining Company Limited dated 8 July 2005.
"DRD(Offshore)'s Disclosure Letter" means the disclosure letter from DRD(Offshore) to Emperor
dated the same date as this agreement.
"DRD(Offshore)'s Warranties" means those warranties set out in Schedule 1 to this agreement.
"DRDGold Group" means DRDGold and all of its Related Bodies Corporate.
"DRD (IOM)" means DRD (Isle of Man) Limited (number 94445C) of Grosvenor House, 66/67 Athol
Street, Douglas, Isle of Man.
"DRD (IOM) Accounts" means the pro forma management accounts of the DRD (IOM) Group as at the
Accounts Date after adjusting for the DRD(IOM) Reorganisation which are initialled for identification
purposes by each party.
"DRD (IOM) Adjustment" means the adjustment amount calculated in accordance with clause 7 .3.
"DRD (IOM) Entities" means DRD (Porgera) Limited, Tolukuma Gold Mines Limited, DRD Australasia
Services Company Pty Limited and Fortis Limited as represented in the structure diagram set out in
specified in Part B of Schedule 3 to this agreement.
"DRD (IOM) Group" means DRD (IOM) and the DRD (IOM) Entities.
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BACKGROUND IMAGE

"DRD (IOM) Reorganisation " means the reorganisation of DRD (IOM) prior to Completion the key
steps of which are described in Schedule 3;
" Duty " means any stamp, transaction or registration duty or similar charge imposed by a Government
Agency and includes any interest, fine, penalty, charge or other amount imposed in respect of the above.
"Effective Date " means 1 October 2005.
" EGMC " means Emperor Gold Mining Company Limited.
" Emperor Accounts " means the management accounts of Emperor as at the Accounts Date which are
initialed for identification purposes by each party.
"Emperor Adjustment " means the adjustment amount calculated in accordance with clause 7.2.
"Emperor Group " means Emperor and all of its Related Bodies Corporate (including the DRD (IOM)
Group following Completion).
" Emperor Share " means a fully paid ordinary share in the capital of Emperor.
"Emperor's Disclosure Letter " means the disclosure letter from Emperor to DRD(Offshore) dated the
same date as this agreement.
" Emperor's Warranties " means those warranties set out in Schedule 2 to this agreement.
"Encumbrance" means any mortgage, charge, pledge, lien, encumbrance, assignment, hypothecation,
security interest, title retention, preferential right, trust arrangement, contractual right of set-off or any
other security agreement or arrangement in favour of any person.
"Foreign Acquisitions and Takeovers Act " means the Foreign Acquisitions and Takeovers Act 1975
(Cth).
" Government Agency" means any government or governmental, administrative, monetary, fiscal or
judicial body, department, commission, authority, tribunal, agency or entity.
" Immediately Available Funds " means an electronic transfer of funds received in a bank account
nominated by the party entitled to receive those funds.
"Interest Rate " means 2% plus LIBOR.
" Investec " means Investec Bank Limited (Reg No 1969/004763/06) of 100 Grayston Drive, Sandown,
Sandton, 2196, Republic of South Africa.
"Investec Facility Agreements " means the facility A loan agreement between Investec Bank (Mauritius)
Limited and DRD (IOM) dated 13 October 2004, facility B loan agreement between Investec Bank
(Mauritius) Limited and DRD (IOM) dated 3 March 2005 and associated guarantee agreement between
DRDGold, Investec Bank (Mauritius) Limited and Investec dated 3 March 2005.
" LIBOR " means the London Inter Bank offering rate.
" Listing Rules" means the listing rules of the ASX.

" Loss " means a loss, liability, damages, cost, charge and expense.

"Material Adverse Effect " means:

(a)
in relation to DRD (IOM) Group, an event which is reasonably likely to diminish the value of the
net assets of the DRD (IOM) Group by $500,000 or more or to diminish the earning before
interest, tax, depreciation and amortisation of the DRD (IOM) Group by $500,000 or more; and

(b)
in relation to the Emperor Group, an event which is reasonably likely to diminish the value of
the net assets of the Emperor Group by $500,000 or more or to diminish the earning before
interest, tax, depreciation and amortisation of the Emperor Group by $500,000 or more.
" Material Adverse Change " means a change to the Business or the financial or trading position of the
entities or the operations or assets of the entities which has, or is reasonably likely to:
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(a)
in relation to DRD (IOM) Group, diminish the value of the net assets of the DRD (IOM) Group by
more than $10,000,000; and

(b)
in relation to the Emperor Group, diminish the value of the net assets of the Emperor Group by
more than $5,000,000,
other than a change resulting from:

(a)
general economic, regulatory or political conditions or changes in those conditions (including
financial market fluctuations, changes in interest rates and changes in tax, securities or other
applicable laws);

(b)        this agreement, the transactions, acts, omissions or circumstances contemplated by this
agreement or the execution, performance or announcement of this agreement;

(c)
acts of terrorism, war (whether or not declared) or the like; or

(d)
conditions affecting any or all of the gold mining companies industries generally.
"Official Quotation" means quotation on ASX.
"Operational Support Agreement" means the operational support agreement between DRD (IOM),
Emperor and Emperor Gold Mining Company Limited dated 8 July 2005.
"Permitted Encumbrance" means:

(a)
in relation to DRD(IOM) Group, the encumbrances described in Part A of Schedule 4; and

(b)
in relation to the Emperor Group, the encumbrances described in Part B of Schedule 4.
"PNG Facility Agreement" means the agreement for a debt facility for not less than $37,000,000 from a
reputable banking institution the key commercial terms of which are the same or not more materially
disadvantageous to the borrower than those set out in the terms sheet initialed for identification purposes
by each party. In determining whether an increase in the costs, charges, fees or interest rate of the PNG
Facility Agreement from those specified in that term sheet is materially disadvantageous to the borrower,
regard must be given to the availability of funds identified for this purpose in the contingency provision in
the DRD (IOM) Accounts.
"PNG Security Documents" means the security documents reasonably required by the bank
providing the loan facility under the PNG Facility Agreement, the purposes of which are to secure
funds lent to DRD (IOM) by the lender pursuant to the terms of the PNG Facility Agreement.
"Porgera Joint Venture Agreement" means the joint venture agreement dated 21 March 1990
between Placer Dome (PNG) Limited, Highlands Gold Properties Limited, Goldfields Porgera Limited
and Orogen Minerals (Porgera) Limited as amended.
"Porgera Joint Venture Interest" means the 20% interest held by DRD (Porgera) Limited in the
unincorporated joint venture established pursuant to the Porgera Joint Venture Agreement carrying on
the business of owning and operating a gold mine at Porgera, Papua New Guinea.
"Post Completion Adjustment Amount" means the adjustment to the Purchase Price calculated in
accordance with the requirements set out in clause 7 of this agreement.
"Prescribed Occurrences" means those prescribed occurrences set out in section 652C of the
Corporations Act.
"Purchase Price" means the Share Consideration and the Cash Consideration.
"Related Body Corporate" has the same meaning as in section 50 of the Corporations Act.
"Sale Shares" means all of the issued fully paid shares in the capital of DRD (IOM).
"Security" means any present or future mortgage, security by way of deposit of money or other
property, pledge, lien, charge, security by way of assignment, hypothecation, security by way of trust
arrangement, encumbrance, title retention or any other security interest or security arrangement
whatsoever.
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"Share Consideration " means 751,879,699 Emperor Shares having an agreed value for the
purposes of this agreement of $200,000,000.
" Tax " means income tax (including capital gains tax), franking deficit tax, franking additional tax, pay-as-
you-earn remittances, prescribed payments, withholding tax (including deductions pursuant to the royalty
withholding obligation), fringe benefits tax, goods and services tax, customs duty, sales tax, payroll tax,
land tax, stamp duty, financial institutions duty, debits tax, municipal rates and all other taxes, charges,
imposts, duties and levies and any penalties, interest, fines or other costs relating thereto.

"Tax Law " means any law relating to Tax.
"Third Party Claim " means any claim, demand or cause of action asserted by a third party (including
any Government Agency) against Emperor, in respect of which DRD(Offshore) may be liable to Emperor
under this agreement or against DRD(Offshore), in respect of which Emperor may be liable to
DRD(Offshore) under this agreement.
"Tolukuma Gold Mine Assets " means the assets owned by Tolukuma Gold Mines Limited which are
used to conduct the gold mining operations at Tolukuma, including without limitation, the tenements
listed in Schedule 5 to this agreement.
" Warranties " means DRD(Offshore)'s Warranties and Emperor's Warranties.

1.2        Interpretation
In this agreement:
(a)
headings are for convenience only and do not affect interpretation;
(b)
no provision of this agreement will be construed adversely to a party solely on the ground that
the party was responsible for the preparation of this agreement or that provision;
and unless the context indicates a contrary intention:
(c)
an obligation or liability assumed by, or a right conferred on, two or more parties binds or
benefits all of them jointly and each of them severally;
(d)        the expression " person " includes an individual, the estate of an individual, a corporation, an
authority, an association or a joint venture (whether incorporated or unincorporated), a
partnership and a trust;
(e)        a reference to any party includes that party's executors, administrators, successors and
permitted assigns, including any person taking by way of novation;
(ij
a reference to any document (including this agreement) is to that document as varied, novated,
ratified or replaced from time to time;
(g)        a reference to any statute or to any statutory provision includes any statutory modification or re-
enactment of it or any statutory provision substituted for it, and all ordinances, by-laws,
regulations, rules and statutory instruments (however described) issued under it;
(h)        words importing the singular include the plural (and vice versa), and words indicating a gender
include every other gender;
(i)
references to parties, clauses, schedules, exhibits or annexures are references to parties,
clauses, schedules, exhibits and annexures to or of this agreement, and a reference to this
agreement includes any schedule, exhibit or annexure to this agreement;
U)
where a word or phrase is given a defined meaning, any other part of speech or grammatical
form of that word or phrase has a corresponding meaning;
(k)
the word " includes " in any form is not a word of limitation;
(I)
a reference to "$" or "dollar " or "USD$" is to the currency of the United States of America unless stated otherwise and a reference to "AUD$" is to the lawful currency of the Commonwealth of Australia;
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(m)      references to payments to any party to this agreement will be construed to include payments to
another person upon the direction of such party; and

(n)
if any day appointed or specified by this agreement for the payment of any money or doing of
any thing falls on a day which is not a Business Day, the day so appointed or specified will be
deemed to be the next Business Day.
2
Conditions

2.1      Conditions
This agreement is subject to the following conditions:
(a)
( FIRB Approval ): to the extent that the provisions of the Foreign Acquisitions and Takeovers
Act apply to the transaction contemplated by this agreement:
(i)
DRDGold and DRD(Offshore) have received a written notice under the Foreign
Acquisitions and Takeovers Act, by or on behalf of the Treasurer of the Commonwealth of
Australia stating that the Commonwealth Government does not object to the transactions
contemplated by this agreement, either unconditionally or on terms that are acceptable to
DRDGold and DRD(Offshore); or
(ii)
the Treasurer of the Commonwealth of Australia becomes precluded from making an
order in relation to the subject matter of this agreement and the transactions
contemplated them under the Foreign Acquisitions and Takeovers Act; or
(iii)       if an interim order is made under the Foreign Acquisitions and Takeovers Act in respect
of the transactions contemplated by this agreement, the subsequent period for making a
final order prohibiting the transactions contemplated by this agreement elapses without a
final order being made;

(b)
( SARB approval ): receipt by DRDGold of a certified copy of the document from the South
African Reserve Bank and/or the Authorised Dealer confirming that DRDGold has been granted
exchange control approval (as required under the South African Currency and Exchanges Act
1933 (as amended) and any exchange control regulations passed in terms of that Act) for
entering into and fulfilling its obligations under this agreement and, if that approval is subject to
conditions, those conditions are reasonably acceptable to DRDGold;

(c)
( Emperor shareholder approval ): the sale and purchase of DRD (IOM), the issue of the Share
Consideration and the performance of the obligations under this agreement has been approved
by the necessary majority at a meeting of the shareholders of Emperor;

(d)
(DRDGold shareholder approval ): to the extent required by law or the rules of any exchange
on which the DRDGold is listed, the DRD (IOM) Reorganisation, the sale and purchase of DRD
(IOM)
and the performance of the DRDGold Group's obligations under this agreement has been
approved by the necessary majority at a meeting of the shareholders of DRDGold;

(e)
( ANZ Bank Waiver ): ANZ Bank confirms no earlier than 5 Business Days prior to Completion
that the waiver under the ANZ Facility Agreement to be given by ANZ Bank on the terms set out
in the draft waiver terms a copy of which has been signed by the parties by way of identification or
otherwise on terms reasonably acceptable to DRD(Offshore) remains in full force and effect up
and until Completion and that after due enquiry it is not aware of any breach of any conditions to
that waiver, or if there has been a breach that ANZ Bank has waived that breach;

(ij
( PNG Facility available ): the PNG Facility Agreement and the PNG Security Documents have
been duly executed by the relevant signatories and is available for drawdown;

(g)
( DRD (IOM) Reorganisation ): the DRD (IOM) Reorganisation has been completed (save for any
component of the DRD
(IOM)
Reorganisation which is itself conditional on Completion of this
agreement);
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(h)       ( No Emperor Material Adverse Change ): no Material Adverse Change has occurred in
respect of the Emperor Group taken as a whole;
(i)
( No DRD (IOM) Material Adverse Change ): no Material Adverse Change has occurred in
DRD (IOM) Group taken as a whole;
(j)
( Confirmatory Due diligence by Emperor ): confirmatory due diligence investigation by
Emperor identifies no matter in respect of any of the matters specified in Schedule 6 that a
reasonable person would expect will diminish the value of the net assets of the DRD (IOM)
Group by more than $5,000,000;
(k)
( No Emperor Prescribed Occurrence ): no Prescribed Occurrence has occurred in respect of
any member of the Emperor Group;
(I)
( No DRD (IOM) Prescribed Occurrence ): no Prescribed Occurrence has occurred in respect of
any member of the DRD (IOM) Group other than as contemplated by the DRD
(IOM) Reorganisation;
(m)      ( ANZ Bank Approval ): the sale and purchase and the performance of Emperor's obligations
under this agreement have been approved by ANZ Bank under the ANZ Facility Agreement to
the extent required and, if that approval is subject to conditions, those conditions are
reasonably acceptable to DRD(Offshore);
(n)       ( Variation to the ANZ Facility ): ANZ Banks agree on terms reasonably acceptable to
DRD(Offshore) to vary the terms of the ANZ Facility Agreement and other facilities provided by
ANZ Bank to Emperor and its subsidiaries so that, provided the aggregate amount of such debt
does not exceed $20 million, that debt is repayable solely by recourse to the assets of Emperor
and its subsidiaries;
(0)       (Investec Approval ): the sale and purchase and the performance of the obligations under this
agreement have been approved by Investec under the Investec Facility Agreements to the
extent required and, if that approval is subject to conditions, those conditions are reasonably
acceptable to DRDGold;
(p)       ( No New Emperor debt ): Emperor does not borrow any funds from a third party or incur any
other form of indebtedness (other than as approved by DRD(Offshore)); and
(q)       ( Emperor hedge book exposure ): the marked to market position of Emperor's hedging does
not exceed negative AUD$12,500,000 for any period of more than six consecutive Business
Days before the date which the last condition precedent (other than this clause 2.1 (q) is waived
or fulfilled in accordance with clause 2.3(b) of this agreement.

2.2       Use reasonable endeavours

(a)
DRD(Offshore) is responsible for and must use its reasonable endeavours to ensure that the
conditions in clause 2.1 (a), 2.1 (b), 2.1 (d), 2.1 (ij, 2.1 (g), 2.1 (n), and 2.1 (0) are
satisfied as expeditiously as possible and in any event on or before the Cut Off Date;
(b)
Emperor is responsible for and must use its reasonable endeavours to ensure that the
conditions in clause 2.1(c), 2.1(e), 2.10), 2.1(m), 2.1(n) and 2.1(p) are satisfied as expeditiously
as possible and in any event on or before the Cut Off Date;
(c)
Each party must expeditiously provide all reasonable assistance and all information as may be
reasonably requested to the others as is necessary to satisfy the conditions in clause 2.1.

2.3       Waiver

(a)       The conditions in clauses 2.1 (i), 2.10) and 2.1 (I) are for the benefit of Emperor and may be
waived by Emperor by notice to DRD(Offshore). A notice of waiver of condition precedent 2.1(j)
must specify any fact or matter identified by Emperor during the confirmatory due diligence that
may give rise to a Claim.
(b)       The conditions in clauses 2.1 (h), 2.1 (k) ,2.1 (n), 2.1 (p) and 2.1 (q) are for the benefit of
DRD(Offshore) and may be waived by DRD(Offshore) by notice to Emperor.
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(c)
All other conditions in clause 2.1 are for the benefit of both Emperor and DRD(Offshore) and
may be waived only by agreement between Emperor and DRD(Offshore).

2.4
Notice of conditions
Each party agrees to notify each other party immediately upon becoming aware that a condition in
clause 2.1:
(a)
has been satisfied; or
(b)       is incapable of being satisfied on or before their respective due dates.
A notice of waiver of condition precedent 2.1(j) must specify any fact or matter identified by Emperor
during the confirmatory due diligence that may give rise to a Claim.

2.5
Failure of conditions precedent

(a)
Emperor may, by not less than 2 Business Days' notice in writing to the other parties, terminate
this agreement at any time prior to 30 November 2005 if the condition in clause 2.1 (j) is not
satisfied by 25 November 2005.
(b)        A party may, by not less than 2 Business Days' notice to the other parties, terminate this
agreement at any time prior to Completion if:
(i)
the conditions in clause 2.1 (other than clause 2.1 (j) are not satisfied, or waived in
accordance with clause 2.3, by the Cut Off Date; or
(ii)
following receipt of a notice served pursuant to clause 2.4(b), the parties each agree in
writing that any of the conditions in clause 2.1 (other than clause 2.1 (j)
are incapable of
being satisfied.

2.6
Effect of termination
If this agreement is terminated under clause 2.5, then:
(a)        each party is released from its obligations to further perform its obligations under this
agreement except those expressed to survive termination;
(b)        each party retains the rights it has against the others in respect of any breach of this agreement
occurring before termination;
(c)
Emperor must return to DRD(Offshore) and DRDGold all documents and other materials
obtained from them in accordance with the terms of the Confidentiality Agreement; and
(d)       the rights and obligations of each party under each of clauses 14.2, 14.3, 15.1, 15.2, 15.3,
15.12 and 15.13 will continue independently from the other obligations of the parties and
survive termination of this agreement.

2.7
Effect of conditions

(a)       The conditions in clauses 2.1 (a) and 2.1 (b) are conditions precedent to the operation of clause
3 (Sale of Sale Shares) and clause 6 (Completion) and for the avoidance of doubt, nothing in this
agreement will cause a binding agreement for the transfer of shares to arise unless and until
those conditions have been satisfied or waived in accordance with clause 2.3 and no person will
obtain rights in relation to shares as a result of this agreement unless and until those conditions
have been satisfied.
(b)       The other conditions are conditions to Completion and do not prevent this agreement from
creating binding obligations on the parties which are capable of being terminated prior to
Completion in accordance with clause 2.5.
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3
Sale of Sale Shares

3.1
Sale Shares
On the Completion Date, DRD(Offshore) will sell to Emperor and Emperor will purchase from
DRD(Offshore) for the Purchase Price the Sale Shares free of all Encumbrances and third party rights.
3.2
Associated rights
DRD(Offshore) must sell the Sale Shares together with all rights attached to them as at Completion.
For the avoidance of doubt, nothing in this clause will limit the rights of DRD(Offshore) or DRDGold to
implement the DRD (10M) Reorganisation.
3.3
Title and risk
Title to and risk in the Sale Shares pass to Emperor on Completion.
4
Purchase Price

4.1
Purchase Price
The Purchase Price comprises the Share Consideration plus the Cash Consideration as adjusted
under clauses 7 and 10.9.
4.2
Payment of the Purchase Price
The Purchase Price is payable in the following manner:
(a)
Share Consideration must be issued on the Completion Date in accordance with clause 4.3;
(b)
Cash Consideration must be paid on the Completion Date without counter-claim or set-off in
accordance clause 4.4; and
(c)
Post Completion Adjustment Amount (if any) is payable within 5 Business days after its
calculation in accordance with clause 7.
4.3
Issue of the Share Consideration
(a)        The Share Consideration will rank in all respects pari passu with the other then existing issued
Emperor Shares from the date of issue.
(b)
Emperor will deliver holding statements in respect of the Share Consideration to DRD(Offshore)
and update its shareholder register to reflect the allotment and issue of Emperor Shares with
effect from Completion.
(c)
Emperor will apply for and use its best endeavours to obtain Official Quotation of the Share
Consideration by the ASX as soon as possible after the date of issue.
(d)        The Share Consideration will, when listed, be and remain freely tradeable by
DRD(Offshore)(which Emperor acknowledges will require it to issue a notice under s.708A of
the Corporations Act within 5 Business Days of the issue of these shares).
(e)
DRD(Offshore) agrees to comply with and be bound by Emperor's constitution in force from
time to time in relation to the Share Consideration.
4.4
Payment of the Cash Consideration
The Cash Consideration is to be paid at Completion by Emperor to DRD(Offshore) in Immediately
Available Funds.
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5
Conduct before Completion

5.1
Conduct of DRD (10M) Group
Subject to clause 5.2, between the date of this agreement and the earlier of Completion and termination of
this agreement, DRD(Offshore) must use reasonable endeavours to ensure that the business of the DRD
(IOM) Group is conducted materially in the ordinary course and, in particular, that no member of the DRD
(IOM) Group:
(a)        creates an Encumbrance over any of its assets;
(b)
issues any shares, options or securities which are convertible into shares in that entity;
(c)
employs any new employee or consultant, changes the terms of any existing employment or
consultancy arrangements having any annual cost of more than $100,000;
(d)
breaches the terms of the Porgera Joint Venture Agreement;
(e)        fails to pay its creditors in accordance with its usual credit terms;
(ij
breaches the material terms on which the material mining tenements owned by the DRD (IOM)
Group as at the date of execution of this agreement are held;
(g)        sells or acquires any assets the terms of which sale or acquisition requires the entity to receive
or incur a liability in excess of $500,000 other than in the ordinary course of business;
(h)        enters into any contract or commitment requiring it to pay more than $500,000 or more than
$500,000 per annum for more than 3 years other than in the ordinary course of business;
(i)
re-organises its share capital;
U)
amends its constitution; or
(k)
declares or pay any dividends.
5.2
Permitted acts by DRD(Offshore) or DRD (IOM) Group
Nothing in clause 5.1 restricts DRD(Offshore), or a member of the DR D (IOM) Group from doing
anything:
(a)        expressly contemplated in this agreement;
(b)        expressly contemplated or required by the DRD (IOM) Reorganisation;
(c)
expressly contemplated or required in respect of the PNG Facility Agreement, PNG Security
Documents or the Investec Facility Agreements or associated security documents;
(d)         to reasonably and prudently respond to an emergency or disaster (including a
situation giving rise to a risk of personal injury or damage to property);
(e)        which is necessary to meet its legal or contractual obligations including, without limitation, the
Porgera Joint Venture Agreement; or
(f)
approved by Emperor such approval not to be unreasonably withheld or delayed.
5.3       Conduct of Emperor Group
Subject to clause 5.4, between the date of this agreement and the earlier of Completion and termination
of this agreement, Emperor must use its best endeavours to ensure that the business of the Emperor
Group is conducted materially in the ordinary course and, in particular, that no member of the Emperor
Group:
(a)        creates an Encumbrance over any of its assets;
(b)
issues any shares, options or securities which are convertible into shares in that entity;
(c)
employs any new employee or consultant, changes the terms of any existing employment or
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consultancy arrangements having an annual cost of more than $100,000; or
(d)       breaches the terms of the ANZ Facility Agreement (except where such breach is waived);
(e)       breaches the terms of the DRD Convertible Loan Facility (except where such breach is waived);
(f)
breaches the terms of the Operational Support Agreement;
(g)       fails to pay its creditors in accordance with its usual credit terms;
(h)       breaches the material terms on which the material mining tenements owned by the Emperor
Group as at the date of execution of this agreement are held;
(i)
sells or acquires any assets the terms of which sale or acquisition requires the entity to receive
or incur a liability in excess of $1 00,000 other than in the ordinary course of business;
(j)
enters into any contract or commitment requiring it to pay more than $100,000 or more than
$100,000 per annum for more than 3 years other than in the ordinary course of business;

(k)
re-organises its share capital;

(I)
amends its constitution; or

(m)      declares or pay any dividends.

5.4      Permitted acts by Emperor Group
Nothing in clause 5.3 restricts a member of the Emperor Group from doing anything:
(a)        as expressly contemplated in this agreement;
(b)        to reasonably and prudently respond to an emergency or disaster (including a
situation giving rise to a risk of personal injury or damage to properly);

(c)        which is necessary to meet its legal or contractual obligations;

(d)        approved by DRD(Offshore) such approval not to be unreasonably withheld or delayed.

5.5      Notice of breach
(a)
If on or before Completion, a party becomes aware that it has breached or may potentially
breach this clause 5 it must:
(i)
notify the other party of the breach or the potential breach and provide the other party
with reasonable details of the alleged breach or potential breach; and
(ii)
consult with the other party as to the effect of the alleged breach or potential breach.
(b)       The other party must allow the party serving the notice a reasonable and adequate opportunity
to remedy the alleged breach or potential breach.
6
Completion

6.1
Time and Place
Completion must take place:
(a)       on the day which is 5 Business Days after satisfaction or waiver of the conditions precedent in
clause 2.1;
(b)       at the offices of Gadens, Skygarden Building, 77 Castlereagh Street, Sydney, New South
Wales at 2pm Sydney time,
or such other place, time and date as the parties agree.
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6.2 DRD(Offshore)'s obligations at Completion
At Completion, DRD(Offshore) must deliver to Emperor:
(a)       share certificates for the Sale Shares;
(b)       completed transfer forms in registrable form (subject only to the payment of stamp duty) for the
Sale Shares, executed by DRD(Offshore);
(c)
custody or control of:
(i)
the certificate of registration, common seal (if there is one), and all statutory, minute and
share certificate books of each member of the DRD (IOM) Group;
(ii)
ledgers, journals, books of account, contracts and other records of each member of the
DRD (IOM) Group; and
(iii)      cheque books of each member of the DRD (IOM) Group; and
(d)       a list of all bank accounts maintained by each member of the DRD (IOM) Group; and
(e)       written consents to act from the persons nominated by DRD(Offshore) as the directors,
secretaries and public officers of members of the Emperor Group.

6.3       Emperor's obligations at Completion
At Completion, Emperor must deliver to DRD(Offshore):
(a)       a holding statement for the Share Consideration;
(b)       $30,000,000 of the Cash Consideration in Immediately Available Funds;
(c)
the written resignations of those directors, secretaries and public officers of any member of the
Emperor Group that DRD(Offshore) nominates not less than 5 Business Days prior to
Completion to be effective from close of the board meetings to be convened under clause 6.4
and which are to include written acknowledgements signed by those persons that the person
has no claim of any nature against any member of the Emperor Group for salary, fees,
compensation for loss of office or otherwise;
(d)       written confirmation from ANZ Bank dated no earlier than 5 Business Days prior to Completion
that the waiver under the ANZ Facility Agreement to be given by ANZ Bank on the terms in the
draft waiver terms a copy of which has been signed by the parties by way of identification or
otherwise on terms reasonably acceptable to DRD(Offshore) remains in full force and effect and
that after due enquiry it is not aware of any breach of any conditions to that waiver, or if there has
been a breach that ANZ Bank has waived that breach; and

(e)
a list of all bank accounts maintained by each member of the Emperor Group.

6.4       Completion Board meetings

(a)
At or before Completion, DRD(Offshore) must ensure that a meeting of the directors of DRD
(IOM) is convened and conducts the following business:
(i)
approval of the registration of Emperor as the holder of the Sale Shares in the books of
DRD (IOM) subject only to the stamping of the transfer;
(ii)
the cancellation of the old share certificates and the issue of new share certificates for
the Sale Shares in the name of Emperor,
to take effect from the later of Completion and the close of the meeting.
(b)
At or before Completion, Emperor must ensure that a meeting of the directors of Emperor is
convened and conducts the following business:
(i)
approval of the registration of DRD(Offshore) as the holder of the Share Consideration;
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(ii)
the issue of the holding certificates for the Share Consideration;
(iii)       to the extent requested by DRD(Offshore) no later than 5 Business Days prior to
Completion, existing mandates for the operation of all bank accounts by the members the
Emperor Group are revoked and replaced with mandates approved by
DRD( Offshore);
(iv)       resignation of any directors, secretaries and public officers of Emperor nominated by
DRD(Offshore) under clause 6.3(c); and
(v)
appointment of any persons nominated by DRD(Offshore) not less than 5 Business Days
prior to Completion to act as directors, secretaries and public officers of Emperor subject
to the receipt of written consents from those persons to act under clause 6.2(e),
to take effect from the later of Completion and the close of the meeting.

6.5
Conditions of Completion

(a)       The transactions to take place as contemplated by this clause 6 are to take place
simultaneously, so that if one transaction does not take place, then without prejudice to any
rights available to any party as a consequence:
(i)
there is no obligation on any party to undertake or perform any of the other transactions;
and
(ii)
to the extent that such transactions have already been undertaken, the parties must do
everything reasonably required to reverse those transactions.
(b)        Without limiting clause 6.5(a), if a party fails to fully comply with its obligations on the date set
under clause 6, and Completion does not occur on the relevant date then:
(i)
DRD(Offshore) and Emperor must each return to the other all documents delivered to it
under this agreement;
(ii)
DRD(Offshore) and Emperor must each repay to the other all payments received by it
under this clause 6,
without prejudice to any other rights any party may have in respect of that failure.

6.6
Completion
Completion is taken to have occurred when each party has performed all its obligations under this
clause 6.

6.7
Reference to clause 11.5
Clauses 6.3(c) and 6.4(b)(iv) are subject to clause 11.5.
7
Post Completion Adjustment

7.1
Post Completion Adjustment
The parties agree to adjust the Purchase Price to reflect:
(a)        the net outflow or inflow of capital from or to the Emperor Group which is not reflected in the
Emperor Accounts by the Emperor Adjustment under clause 7.2; and
(b)        the net outflow or inflow of capital from or to the DRD (10M) Group which is not reflected in the
DRD
(10M)
Accounts by the DRD
(10M)
Adjustment under clause 7.3,
between the Effective Date and Completion.
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7.2
Emperor Adjustment
The Emperor Adjustment is the amount in AUD$ of any pro rata dividend, capital return or other
distribution made to Emperor shareholders.

7.3        DRD (IOM) Adjustment
The DRD (IOM) Adjustment will be calculated by applying the following formula:
DA = DC - DD
Where:
DA is the DRD(IOM) Adjustment;
DC is the amount in USD$ of capital which is received by the DRD (IOM) Group during the period from
the Effective Date to the date of Completion (inclusive) and which shall include:
•
the capitalisation or extinguishment of any liability owed by any member of the DRD (IOM)
Group under a debt facility or loan; and
•
any issue of or agreement to issue new securities by DRD (IOM) prior to Completion,
other than an issue or agreement to issue new securities or capitalisation or extinguishment of debt
provided for in the DRD(IOM) Accounts or implemented under the DRD (IOM) Reorganisation; and
DD is the amount in USD$ of any pro rata dividend, capital return or other distribution made to DRD
(IOM) shareholders other than an issue or agreement to issue new securities or capitalisation or
extinguishment of debt provided for in the DRD(IOM) Accounts or implemented under the DRD (IOM)
Reorganisation.

7.4        Adjustment Statement
DRD(Offshore) must prepare the Adjustment Statement setting out:
(a)        the Emperor Adjustment (which amount is to be converted to USD$ using the mid market spot
price for the AUD$ : USD$ foreign exchange rate on the Completion Date as published on
Bloomberg page 'AUD Currency'), which if positive will be payable by Emperor to
DRD(Offshore) and if negative will be payable by DRD(Offshore) to Emperor;
(b)        the DRD (IOM) Adjustment which if positive will be payable by Emperor to DRD(Offshore) and if
negative will be payable by DRD(Offshore) to Emperor;
(c)
the aggregate or net adjustment to be made to the Purchase Price as a result of the Emperor
Adjustment and the DRD (IOM) Adjustment ( Adjustment Amount ),
within 10 Business Days after Completion.

7.5        Assistance
Emperor must provide reasonable assistance requested by DRD(Offshore) in the preparation of the
draft Adjustment Statement, including giving DRD(Offshore) and its advisers full access to the
documents, records and accounts of the DRD (IOM) Group and the Emperor Group. The period for
providing the Adjustment Statement will be extended by the period that Emperor delays providing
information requested by more than 2 Business Days after the request.

7.6       Review by Emperor

(a)
Emperor has 10 Business Days from the date it receives the Adjustment Statement to agree or
dispute the Adjustment Statement. If Emperor does not dispute the Adjustment Statement
within that period, Emperor is taken to have accepted the Adjustment Statement.
(b)
DRD(Offshore) must ensure that Emperor has reasonable access to the working papers of
DRD(Offshore) and any other supporting information reasonably required and requested in the
conduct of their review of the Adjustment Statement. The period for disputing the draft
Adjustment Statement will be extended by the period that DRD(Offshore) delays providing
information requested by more than 2 Business Days after the request.
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7.7       Dispute Notice

(a)
If Emperor wishes to dispute the Adjustment Statement, it must deliver a notice (Dispute
Notice) to DRD(Offshore) within the period specified in clause 7.6 specifying in reasonable
detail the items it disputes, the reason it disputes those items and the adjustments it considers
must be made to the Adjustment Statement to correct the disputed items.
(b)
Emperor is not entitled to dispute any item in the Adjustment Statement unless the amount
disputed in relation to that item is greater than $100,000 other than where DRD(Offshore) can
show no reasonable basis for inclusion of that item in the Adjustment Statement.

7.8       Dispute resolution

(a)
If Emperor delivers a Dispute Notice in accordance with clause 7.7(a), the parties must, in good
faith and for a period of 10 Business Days after Emperor gives the Dispute Notice, attempt to
resolve the dispute and agree upon each disputed item in the Adjustment Statement.
(b)
If the parties fail to reach agreement in accordance with clause 7.8(a) within that period, either
Emperor or DRD(Offshore) may within 5 Business Days refer the disagreement to an
independent accountant agreed between the parties or if the identity of the independent
accountant cannot be agreed within that time limit, either party may request the President of the
Law Society of New South Wales from time to time to appoint an independent accountant to
determine the dispute ( Independent Accountant ).
(c)
The Independent Accountant must be instructed to decide on the disagreement as soon as
practicable after receiving any submissions from the parties (which must be made no later than
5 Business Days after the appointment of the Independent Accountant) and, in any event, no
later than 10 Business Days after those submissions are received.
(d)       The parties must provide (and Emperor must ensure that the DRD (10M) provides) all
reasonable assistance requested by the Independent Accountant, including access to the
documents described in clause 7.5.
(e)       The Independent Accountant's decision is, in the absence of manifest error, conclusive and
binding on the parties for the purposes of determining adjustments to the Adjustment
Statement.
(ij
The parties must each pay half of the Independent Accountant's costs and expenses.
(g)       The Independent Accountant will be appointed as an expert and not as an arbitrator.
(h)       The procedures for deciding any dispute concerning the draft Adjustment Statement are to be
decided by the Independent Accountant in his or her absolute discretion.

7.9       Payment of Adjustment Amount

(a)       Within 5 Business Days after the date on which the Adjustment Statement is finally agreed by
Emperor and DRD(Offshore) or determined in accordance with clause 7.8:
(i)
if the Adjustment Amount requires an increase in the Purchase Price, Emperor must pay
the Adjustment Amount in Immediately Available Funds together with interest on that
amount at the Interest Rate from the Completion Date to the date of payment by paying
that amount to the Lender; and
(ii)
if the Adjustment Amount requires a decrease in the Purchase Price, DRD(Offshore)
must pay the Adjustment Amount in Immediately Available Funds together with interest
on that amount at the Interest Rate from the Completion Date to the date of payment by
paying that amount to the Lender.
(b)      The amount of any adjustment will be deemed to be an adjustment to the Purchase Price.
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8
Period after Completion

8.1       Appointment of proxy

(a)
From Completion until the Sale Shares are registered in the name of Emperor, DRD(Offshore)
must:
(i)
appoint Emperor as the sole proxy of the holders of Sale Shares to attend shareholders'
meetings and exercise the votes attaching to the Sale Shares;
(ii)
not attend and vote at any shareholders' meetings;
(iii)       take all other actions in the capacity of a registered holder of the Sale Shares as
Emperor directs.
(b)
Emperor indemnifies DRD(Offshore) against all Losses suffered or incurred by it arising out of
the implementation of any action taken pursuant to the proxy referred to in clause 8.1 (a).

8.2       Access to records

(a)        After Completion Emperor must, on reasonable notice by DRD(Offshore):

(i)
provide DRD(Offshore) and its advisers with reasonable access to the Business Records
and allow DRD(Offshore) to inspect and obtain copies or certified copies of the Business
Records at DRD(Offshore)'s expense; and
(ii)
provide DRD(Offshore) and its advisers with reasonable access to the personnel and
premises of the members of the DRD (IOM) Group,
for the purpose of assisting the DRD(Offshore) and DRDGold to prepare tax returns, accounts
and other financial statements, discharge statutory obligations or comply with Tax, Duty or other
legal requirements for financial disclosure or to conduct legal or arbitration proceedings.
(b)
Emperor agrees that DRD(Offshore) and DRDGold may retain copies of any Business Records
which it may require to enable it to comply with any applicable law after the Completion Date.

8.3      Branding
On and from the Completion Date or such later date agreed to by DRD(Offshore), Emperor must not, and
must ensure that each member of the Emperor Group and the DRD (IOM) Group does not without the prior
consent of DRDGold, use any trade mark, logo (either on its own or in combination with other material),
get up or business, domain or company name containing any reference to DRDGold or Durban
Roodepoort Deep or expressions, letters, logos or marks which are similar to those used by DRDGold or
Durban Roodepoort Deep, including the reference to "DRD" in any company or business name.

8.4      Pre-Completion tax returns
(a)        The parties will co-operate in connection with the preparation and filing of any Tax return or Tax
statement of a member of the DRD (IOM) Group with respect to a period or part period before the
Completion Date and any administrative proceeding involving any such Tax return or Tax
statement.
(b)
DRDGold shall have the sole conduct and control of the preparation and filing of all Tax returns,
forms or statements of each member of the DRD (IOM) Group to the extent they relate to any periods
(or part periods) ending on or before the Completion Date ("Pre Completion Returns ") and may, if
it elects to do so have the sole control of the preparation and filing of all Tax returns, forms or
statements of each member of the DRD (IOM) Group for any period that includes, but does not end
on or before the Completion Date ("Straddle Returns ").
(c)
Provided they are prepared and provided to Emperor in a timely manner, Emperor must procure
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that each Straddle Return and each Pre Completion Return is filed by the due date for filing.
(d)       The parties agree that it is the intention for DRDGold to have the right to determine, control and
where appropriate participate in the disclosure (including manner of disclosure) of any material
or information to a Government Agency and any other dealings with the Government Agency in
relation to Tax to the extent such disclosure or other dealings is in respect of any event, act,
matter or transaction or amount derived (or deemed to be derived) or expenditure incurred
before, on, or as a result of, Completion ("Pre Completion Tax Event ").
(e)
From and after Completion Emperor agrees that it will, and will procure that each member of the
DRD (IOM) Group will:
(i)
not disclose any information or material to a Government Agency in relation to a Pre
Completion Tax Event without the prior written consent of DRDGold (which consent will
not be unreasonably withheld or delayed), except as required by law;
(ii)
not make any admission of liability, or any agreement, compromise or settlement with a
Government Agency in relation to a Pre Completion Tax Event without the prior written
consent of DRDGold (such approval not to be unreasonably withheld or delayed); and
(iii)      promptly provide DRDGold with copies of any correspondence with, or material provided
to or by, a Government Agency and keep the Seller informed of any oral discussions
with a Government Agency in relation to a Pre Completion Tax Event.

9
DRDGold Guarantee

9.1       Guarantee
Subject to clause 9.5, in consideration of the entry by Emperor into this agreement, DRDGold
unconditionally and irrevocably guarantees to Emperor the due and punctual performance and
observance by DRD(Offshore) of all of its obligations, commitments and undertakings under or
pursuant to this agreement and, as a separate and principal obligation, agrees to indemnify Emperor
against all losses, liabilities, costs (including without limitation legal costs) charges, expenses, actions,
proceedings, claims and demands which Emperor may suffer through or arising from any breach by
DRD(Offshore) or DRDGold of any obligation, commitment and undertaking under or pursuant to this
agreement. This guarantee is given for the benefit of Emperor and its respective successors and
assigns and shall be binding on DRDGold and its respective successors and assigns.
9.2       Performance
Subject to clause 9.5, if DRD(Offshore) fails to perform its obligations under this agreement when they
are due, DRDGold must immediately on demand from Emperor cause DRD(Offshore) to perform its
obligations under this agreement.
9.3       Extent of guarantee and indemnity
(a) This clause 9 applies to DRD(Offshore)'s present and future obligations under this agreement;
(b) This clause 9 applies irrespective of any rule of law or equity to the contrary.
9.4       Principal and independent obligation
(a)       This clause 9 is a principal obligation and is not to be treated as ancillary or collateral to any
other right or obligation.
(b)       This clause 9 is enforceable against DRDGold whether or not Emperor has;
(i)
made demand on DRD(Offshore);
(ii)
given notice to DRD(Offshore) or any other person in respect of any thing; or
(iii)      taken any other steps against DRD(Offshore) or any other person.
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9.5       Guarantor's Liability
DRDGold's liability in respect of any Claim shall not exceed DRD(Offshore)'s liability in respect of that
Claim.
9.6       Payments by Guarantor
All payments by the Guarantor to the purchaser in relation to a Claim shall be in reduction to the
Purchase Price.
10
DRD(Offshore)'s Warranties
10.1 Giving of DRD{Offshore)'s Warranties
(a)        Subject to the qualifications and limitations in this clause 10 and in DRD(Offshore)'s Disclosure
Letter, DRD(Offshore) gives DRD(Offshore)'s Warranties in favour of Emperor on the date of
this agreement and on the Completion Date.
(b)
DRD(Offshore) acknowledges that Emperor has entered into this agreement in reliance on
DRD( Offshore)'s Warranties.
(c)
Each of DRD(Offshore)'s Warranties are to be construed independently of the others and is not
limited by reference to any other DRD(Offshore) Warranty.
10.2    Awareness
Where any of DRD(Offshore)'s Warranties are qualified by reference to DRD(Offshore)'s awareness,
DRD(Offshore) undertakes that it has made due inquiries with M. Wellesley-Wood, I. Murray, R.
Johnson, M. Marriot and A. Labuschagne.
10.3    No reliance other than on DRD(Offshore)'s Warranties
Emperor acknowledges and agrees that:
(a)        review : it has entered into this agreement after an inspection and limited due diligence
investigation of the operations and affairs of the DRD (IOM) Group and business conducted by
its advisers;
(b)        prior statements : any statement, representation, term, conduct, warranty, condition, promise
or undertaking made, given, implied or agreed to by DRD(Offshore), DRDGold or any of their
respective representatives or advisers in any prior negotiation, arrangement, understanding,
discussion, correspondence or agreement (including without limitation statements made by
DRDGold nominees on the board of Emperor) has no effect except to the extent expressly set
out in this agreement; and
(c)
reliance : except for DRD(Offshore)'s Warranties, no other statement, representation or other
conduct of DRD(Offshore) or any representative or adviser of DRD(Offshore) has been relied
on by Emperor or has induced or influenced Emperor to enter into this agreement.
10.4     Monetary and time limitations for DRD(Offshore)'s Warranties
Emperor's right to make a Claim is limited as follows:
(a)
DRD(Offshore) is not liable in respect of any Claim if:
(i)
Emperor has not given written notice to DRD(Offshore) in accordance with clause 11.1
on or before 15 October 2006.
(ii)
within 3 months of the date Emperor is required to notify DRD( Offshore) of the Claim
under clause 10.4(a)(i):
(1) the Claim has not been agreed, compromised or settled; and
(2) the Purchaser has not issued or served legal proceedings against the Seller in
respect of the Claim.
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(b)
DRD(Offshore) is not liable under a Claim unless the amount finally agreed or adjudicated to be
payable in respect of that Claim (or all Claims relating to the same or substantially similar facts,
matters or circumstances) exceeds USD$500,000 and the aggregate amount of all Claims
against DRD(Offshore) exceeds USD$1, 150,000.
(c)
The maximum aggregate amount which DRD(Offshore) may be required to pay in respect of all
Claims whenever made is USD$25,300,000.
10.5    Disclosures
Each warranty is subject to, and no Claim may be made in respect of, any fact, matter or circumstance:
(a)
provided for in this agreement;
(b)       disclosed in DRD(Offshore)'s Disclosure Letter;
(c)
that was contained or ought to have been contained in a notice prepared by Emperor for the
purposes of clauses 2.3(a) and 2.4; or
(d)       where the Claim arises in respect of a matter which is within the actual knowledge of Emperor
or its advisers as at the date of this agreement; or
(e)        where the Claim arises in respect of a matter related to the operations of DRD (IOM) Group and
that information is within the actual knowledge of Emperor as at the date of this agreement; or
(ij
where the Claim arises in respect of a matter which was known or ought to have been known by
BDA having made the enquiries that it had (including the physical inspection conducted by BDA
of the gold mines at Porgera and Tolukuma) as at the date of this agreement.
10.6    Further limitations
DRD(Offshore) is not liable for any Claim, and Emperor must not make any Claim, to the extent that:
(a)       Emperor has or is entitled have the Claim made good, offset (including as a result of
expenditure being tax deductible to the extent the proceeds under the claim are not taxable) or
compensated for by any other means, including any loss which is recoverable by Emperor
under a policy of insurance;
(b)       the Claim arises as a result of:
(i)
the enactment or amendment of any legislation or regulation (including legislation which
has a retrospective effect or any increase in the rates of Tax announced);
(ii)
a change in the judicial interpretation of any law; or
(iii)      a change in the administrative practice of any Government Agency,
after the date of this agreement;
(c)
the matter giving rise to the Claim is remediable and, within 30 Business Days after receiving
written notice of the Claim in accordance with clause 11.1, DRD(Offshore) remedies the matter
to the satisfaction of Emperor, acting reasonably;
(d)       the Claim is for loss of profits, economic loss or special, indirect or consequential loss or
damage;
(e)        the Claim arises out of or relates to the accuracy or completeness of any forecast, opinion,
estimate, model, budget, projection or any other statement relating to future events;
(ij
the Claim arises out of or is increased as a result of an act or omission by or on behalf of
DRD(Offshore) after Completion where Emperor has consented to that act or omission;
(g)       the DRD (IOM) Group have ceased to be wholly owned subsidiaries of Emperor, or the member
of the DRD (IOM) Group in respect of which the Claim arises has ceased to be a wholly owned
subsidiary, of Emperor;
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(h)
all or a majority of the business, or the assets of the member of the DRD (IOM) Group in respect
of which the Claim arises, has or have ceased to be owned and controlled Emperor;
(i)
the Claim has been included as a provision, allowance, reserve or accrual in the DRD (IOM)
Accounts or adjusted for in the DRD (IOM) Adjustment or which arises in respect of a matter
which has been noted in the accounts;
U)
the Claim is contingent, unless and until the Loss becomes an actual Loss and is due and
payable; or
(k)
the Claim arises from an act or omission of a member of the DRD (IOM) Group which occurred
before that entity became a related body corporate of DRDGold.
10.7    Statutory Claims
Recognising the representations and warranties given by DRD(Offshore) and to the extent permitted by
law, Emperor must not make, and waives any right it may have to make, any Claim against
DRD(Offshore), or any member of the DRDGold Group or any of their respective officers, employees,
agents or advisers under:
(a)       section 52 of the Trade Practices Act 1974, section 120A of the Australian Securities and
Investments Commission Act 2001 or section 1041 H(1) of the Corporations Act or the
corresponding provision of any state or territory enactment,
(b)
any similar provision of any other enactment in any other jurisdiction.
10.8     Right to reimbursement
(a)
Emperor must reimburse to DRD(Offshore) an amount equal to any amount paid by
DRD(Offshore) in respect of any Claim which is subsequently recovered by or paid to Emperor
by any third party (including any insurer).
(b)       Any money paid in respect of an assessment of Tax by or on behalf of a member of the DRD
(IOM) Group in respect of a period before Completion must be repaid to DRD(Offshore) (as an
adjustment to the Purchase Price) if repaid by the Government Agency to a member of the DRD
(IOM) Group following Completion.
10.9    Reduction of Purchase Price
Any monetary compensation received by Emperor as a result of any breach of any DRD(Offshore)'s
Warranty is in reduction and refund of the Purchase Price.
10.10   Independent Limitations
Each qualification and limitation in this clause 10 is to be construed independently of the others and is
not limited by any other qualification or limitation.
10.11  Sole remedy
(a)
It is the intention of the parties that Emperor Group's sole remedies in respect of the acquisition
of DRD (IOM) Group and this agreement will be as set out in this agreement.
(b)
Emperor must not, and must procure that each member of the Emperor Group does not, make
a Claim:
(i)
which Emperor would not be entitled to make under this agreement or which is otherwise
inconsistent with Emperor's entitlement to make a Claim under this agreement;
(ii)
against any current or former director, officer or employee of DRDGold, DRD(Offshore)
or any member of the DRD (IOM) Group; or
(iii)       against a member of the DRD (IOM) Group which is not a party to this agreement,
and Emperor acknowledges that to do so would be to seek to circumvent the parties' intention
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expressed in this clause 10.
11
Emperor's Conduct of Claims
11.1 Notification of Claims
If Emperor becomes aware of any circumstances which constitute or are likely (whether alone or with
any other circumstances or with the passage of time) to give grounds for a Claim by Emperor, Emperor
must (and must cause the members of the DRD (IOM) Group to):
(a)
notice : promptly give DRD(Offshore) notice of the circumstances and the breach or potential
breach, setting out full details as then known to Emperor Group. Emperor must also, on an on-
going basis, keep DRD(Offshore) informed of all developments in relation to the matter;
(b)
mitigation : take all reasonable steps, and ensure that any relevant member of the Emperor
Group takes all reasonable steps, to mitigate any loss which may give rise to a Claim by
Emperor; and
(c)
access : without prejudice to the validity of any Claim, give DRD(Offshore) and its advisers
reasonable access (at DRD(Offshore)'s cost) to:
(i)
the employees of the Emperor Group; and
(ii)
the documents, records and accounts of the Emperor Group,
during normal business hours (and permit DRD(Offshore) and its advisers to take copies of any
documents, records or accounts) to enable DRD(Offshore) and its advisers to obtain information
relating to the Claim or potential Claim.
11.2 Conduct of Claims
(a)
Following receipt of a notice under clause 11.1 (a) which involves a Third Party Claim,
DRD(Offshore) may, by written notice to Emperor, assume the conduct of the defence of the
Third Party Claim at DRD(Offshore)'s own cost and upon security for costs being furnished to
the reasonable satisfaction of Emperor.
(b)
If DRD(Offshore) assumes the conduct of the defence of a Third Party Claim under clause
11.2(a), Emperor must ensure that it:
(i)
does not accept, compromise or pay any Claim or demand, agree to arbitrate,
compromise or settle any legal proceedings or make any admission or take any action,
which may in any way prejudice the defence or challenge of the Third Party Claim without
DRD(Offshore)'s prior written approval (which approval may not be unreasonably
withheld); and
(ii)
takes any action, executes any documents and provides any assistance DRD(Offshore)
reasonably requires to avoid, contest, compromise or defend any claim, demand or legal
proceedings relating to the Third Party Claim, including providing witnesses and
documentary or other evidence and allowing DRD(Offshore) and its advisers to inspect
and take copies of all relevant documents, records and accounts.
11.3 Reimbursement and indemnity
(a)
Emperor is entitled to charge DRD(Offshore) for all reasonable costs and expenses (including a
fee charged for management time at a reasonable hourly rate for its employees) incurred by it
in complying with this clause which amounts will be payable within 5 Business Days of receipt
by DRD(Offshore) of a written invoice.
(b)
DRD(Offshore) indemnifies and holds Emperor harmless against all losses, claims, costs,
demands, liabilities and expenses (including legal costs) which may be suffered, sustained or
incurred by Emperor as a result of any act or omission of DRD(Offshore) performed by reason
of clause 11.2.
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11.4 Material personal interest
(a)
In assessing whether Emperor has a Claim against DRD(Offshore), any member of the board of
Emperor who has a material personal interest in relation to whether Emperor has such a Claim
will not attend the board meeting while the issue is being considered or vote on the relevant
resolutions unless permitted to do so under section 195 of the Corporations Act.
(b)
For the avoidance of doubt, the parties agree that a director of Emperor who is at the time the
matter is being considered:
(i)
a board member of DRD(Offshore) or DRDGold; or
(ii)
a full time employee of DRD(Offshore) or DRDGold,
is a person who has a material personal interest in relation to whether Emperor has such a
Claim.
11.5 Constitution of Emperor Board
DRDGold and DRD(Offshore) agree with Emperor that it will use its voting power in regard to Emperor
to ensure that at all times prior to 15 October 2006 (and at all times thereafter during which Emperor
maintains a Claim against either DRDGold and/or DRD(Offshore) under this agreement) to ensure that
the board of Emperor is so constituted that it has a quorum of directors qualified to consider the Claim
having regard to the provisions of clause 11.4 of this agreement.
12
Emperor's Warranties
12.1 Giving of Emperor's Warranties
(a)       Subject to the qualifications and limitations in this clause 12 and in the Emperor Disclosure
Letter, Emperor gives Emperor's Warranties in favour of DRD(Offshore) on the date of this
agreement and on the Completion Date.
(b)
Emperor acknowledges that DRD(Offshore) has entered into this agreement in reliance on
Emperor's Warranties.
(c)
Each of Emperor's Warranties is to be construed independently of the others and is not limited
by reference to any other Emperor Warranty.
12.2 Awareness
Where any of Emperor's Warranties are qualified by reference to Emperor's awareness, Emperor
undertakes that it has made due inquiries with M. Wellesley-Wood, R. Johnson, M. Marriot, J. Wall, R.
Willcocks, D Ballhausen, S. O'Connor, A. Cooke and A. Labuschagne.
12.3 No reliance other than on Emperor's Warranties
DRD(Offshore) acknowledges and agrees that:
(a)
review : it has entered into this agreement after an inspection and due diligence investigation of
the operations and affairs of the Emperor Group and business conducted by its advisers;
(b)
prior statements: any statement, representation, term, conduct, warranty, condition, promise
or undertaking made, given, implied or agreed to by Emperor or its representatives or advisers in
any prior negotiation, arrangement, understanding, discussion, correspondence or agreement
(including without limitation statements made to DRDGold nominees on the board of Emperor)
has no effect except to the extent expressly set out in this agreement; and
(c)
reliance : except for Emperor's Warranties, no other statement, representation or other conduct
of Emperor or any representative or adviser of Emperor has been relied on by DRD(Offshore)
or has induced or influenced DRD(Offshore) to enter into this agreement.
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12.4 Monetary and time limitations for Emperor's Warranties
DRD(Offshore)'s right to make a Claim is limited as follows:
(a)
Emperor is not liable in respect of any Claim if:
(i)
DRD( Offshore) has not given written notice to Emperor in accordance with clause 13.1
on or before 15 October 2006.
(ii)
within 3 months of the date DRD( Offshore) is required to notify Emperor of the Claim
under clause 12.4(a)(i):
(1)       the Claim has not been agreed, compromised or settled; and
(2)
DRD(Offshore) has not issued or served legal proceedings against Emperor in
respect of the Claim.
(b)
Emperor is not liable under a Claim unless the amount finally agreed or adjudicated to be
payable in respect of that Claim (or all Claims relating to the same or substantially similar facts,
matters or circumstances) exceeds $500,000 and the aggregate amount of all Claims against
Emperor exceeds $1,150,000.
(c)
The maximum aggregate amount which Emperor may be required to pay in respect of all
Claims whenever made is $25,300,000.
12.5 Disclosures
Each warranty is subject to, and no Claim may be made in respect of, any fact, matter or circumstance:
(a)
provided for in this agreement;
(b)       disclosed in Emperor's Disclosure Letter; or
(c)
where the Claim arises in respect of a matter which is within the actual knowledge of
DRD(Offshore) or its advisers as at the date of this agreement but disregarding any information
received by a member of the board of Emperor nominated by DRDGold who received that
information in his capacity as a director of Emperor and has not been specifically authorised to
disclose that information to DRDGold and DRD( Offshore) at least 10 Business Days prior to the
date of this agreement.
(d)       where the Claim arises in respect of a matter related to the operations of Emperor Group and
that information is within the actual knowledge of DRD(Offshore) or its advisers as at the date of
this agreement but disregarding any information received by a member of the board of Emperor
nominated by DRDGold who received that information in his capacity as a director of Emperor
and has not been specifically authorised to disclose that information to DRDGold and
DRD( Offshore) at least 10 Business Days prior to the date of this agreement; or
(e)       where the Claim arises in respect of a matter which was known or ought to have been known by
BDA having made the enquiries that it had (including the physical inspection conducted by BDA
of the gold mine at Vatakoula) as at the date of this agreement.
12.6 Further limitations
Emperor is not liable for any Claim, and DRD(Offshore) must not make any Claim, to the extent that:
(a) DRD(Offshore) has or is entitled to have the Claim made good, offset (including as a result of
expenditure being tax deductible to the extent the proceeds under the claim are not taxable) or
compensated for by any other means, including any loss which is recoverable by DRD(Offshore) under
a policy of insurance;
(b)        the Claim arises as a result of:
(i)
the enactment or amendment of any legislation or regulation (including legislation which
has a retrospective effect or any increase in the rates of Tax announced);
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(ii)
a change in the judicial interpretation of any law; or
(iii)      a change in the administrative practice of any Government Agency,
after the date of this agreement;
(c)
the matter giving rise to the Claim is remediable and, within 30 Business Days after receiving
written notice of the claim in accordance with clause 13.1, Emperor remedies the matter to the
satisfaction of DRD(Offshore), acting reasonably;
(d)       the Claim is for loss of profits, economic loss or special, indirect or consequential loss or
damage;
(e)       the Claim arises out of or relates to the accuracy or completeness of any forecast, opinion,
estimate, model, budget, projection or any other statement relating to future events;
(ij
the Claim arises out of or is increased as a result of an act or omission by or on behalf of
Emperor after Completion where DRD(Offshore) or DRDGold has consented to that act or
omission;
(g)       the member of the Emperor Group in respect of which the Claim arises has ceased to be a
wholly owned subsidiary, of Emperor;
(h)       all or a majority of the business, or the assets of the Emperor Group in respect of which the
Claim arises, has or have ceased to be owned and controlled Emperor;
(i)
the Claim has been included as a provision, allowance, reserve or accrual in the Emperor
Accounts or adjusted for in the Emperor Adjustment or which arises in respect of a matter which
has been noted in the accounts;
U)
the Claim is contingent, unless and until the Loss becomes an actual Loss and is due and
payable; or
(k)
the Claim arises from an act or omission of a member of the Emperor Group which occurred
before that entity became a related body corporate of Emperor.
12.7 Statutory Claims
Recognising the representations and warranties given by Emperor and to the extent permitted by law,
DRD(Offshore) must not make, and waives any right it may have to make, any Claim against Emperor,
or any member of the Emperor Group or any of their respective officers, employees, agents or advisers
under:
(a)       section 52 of the Trade Practices Act 1974, section 12DA of the Australian Securities and
Investments Commission Act 2001 or section 1041 H(1) of the Corporations Act or the
corresponding provision of any state or territory enactment,
(b)       any similar provision of any other enactment in any other jurisdiction.
12.8 Right to reimbursement
DRD(Offshore) must reimburse to Emperor an amount equal to any amount paid by Emperor in
respect of any Claim which is subsequently recovered by or paid to DRD(Offshore) by any third party
(including any insurer).
12.9 Increase of Purchase Price
Any monetary compensation received by DRD(Offshore) as a result of any breach of any Emperor's
Warranty is in addition to the Purchase Price.
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12.10 Independent Limitations
Each qualification and limitation in this clause 12 is to be construed independently of the others and is
not limited by any other qualification or limitation.
12.11 Sole remedy
(a)
It is the intention of the parties that DRD(Offshore)'s sole remedies in respect of the acquisition
of shares in Emperor and this agreement will be as set out in this agreement.
(b)
DRD(Offshore) must not make a Claim:
(i)
which DRD(Offshore) would not be entitled to make under this agreement or which is
otherwise inconsistent with DRD(Offshore)'s entitlement to make a Claim under this
agreement;
(ii)
against any current or former director, officer or employee of Emperor or any member of
the Emperor Group (other than any current or former director, officer or employee the
DRD (10M) Group prior to Completion); or
(iii) against a member of the Emperor Group which is not a party to this agreement,
and DRD(Offshore) acknowledges that to do so would be to seek to circumvent the parties'
intention expressed in this clause 12.
13
DRD(Offshore) Conduct of Claims
13.1 Notification of Claims
If DRD(Offshore) becomes aware of any circumstances which constitute or are likely (whether alone or
with any other circumstances or with the passage of time) to give grounds for a Claim by
DRD(Offshore), DRD(Offshore) must:
(a)       notice : promptly give Emperor notice of the circumstances and the breach or potential breach,
setting out full details as then known to DRD(Offshore). DRD(Offshore) must also, on an on-
going basis, keep Emperor informed of all developments in relation to the matter;
(b)       mitigation : take all reasonable steps to mitigate any loss which may give rise to a Claim by
DRD(Offshore); and
(c)
access : without prejudice to the validity of any Claim, give Emperor and its advisers reasonable
access (at Emperor's cost) to:
(i)
the employees of the DRD(Offshore); and
(ii)
the documents, records and accounts of DRD(Offshore),
during normal business hours (and permit Emperor and its advisers to take copies of any
documents, records or accounts) to enable Emperor and its advisers to obtain information
relating to the Claim or potential Claim.
13.2 Conduct of Claims
(a)
Following receipt of a notice under clause 13.1 (a) which involves a Third Party Claim, Emperor
may, by written notice to DRD(Offshore), assume the conduct of the defence of the Third Party
Claim at Emperor's own cost and upon security for costs being furnished to the reasonable
satisfaction of Emperor.
(b)
If Emperor assumes the conduct of the defence of a Third Party Claim under clause 13.2(a),
DRD(Offshore) must ensure that it:
(i)
does not accept, compromise or pay any claim or demand, agree to arbitrate,
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compromise or settle any legal proceedings or make any admission or take any action,
which may in any way prejudice the defence or challenge of the Third Party Claim
without Emperor's prior written approval (which approval may not be unreasonably
withheld); and
(ii)
takes any action, executes any documents and provides any assistance Emperor
reasonably requires to avoid, contest, compromise or defend any claim, demand or legal
proceedings relating to the Third Party Claim, including providing witnesses and
documentary or other evidence and allowing Emperor and its advisers to inspect and take
copies of all relevant documents, records and accounts.
13.3 Reimbursement and indemnity
(a)
DRD(Offshore) is entitled to charge Emperor for all reasonable costs and expenses (including a
fee charged for management time at a reasonable hourly rate for its employees) incurred by it in
complying with this clause which amounts will be payable within 5 Business Days of receipt by
Emperor of a written invoice.
(b)
Emperor indemnifies and holds DRD(Offshore) and DRDGold harmless against all losses,
claims, costs, demands, liabilities and expenses (including legal costs) which may be suffered,
sustained or incurred by DRD(Offshore) or DRDGold as a result of any act or omission of
Emperor performed by reason of clause 13.2(a).
14
Announcements
14.1 Agreed announcement
Immediately after this agreement has been signed, the parties will make an announcement to the
media in a form agreed between them.
14.2 Further publicity and confidentiality
Subject to clause 14.3:
(a)
no party may disclose the provisions of this agreement, the terms on which the Sale Shares are
sold or any information received as part of this agreement without the prior written consent of
the other party; and
(b)
each party must ensure that its directors, officers, employees, agents and advisers comply in all
respects with this clause 14.2.
14.3 Legal requirements
A party and any related corporation of a party may disclose anything in respect of this agreement as
required by:
(a)        applicable law; or
(b)        any recognised stock exchange on which its shares or the shares of any related corporation are
listed;
(c)
any security undertaking given by it in relation to the Sale Shares or DRD (10M),
but to the extent possible, it must consult with the other party before making the disclosure and use
reasonable endeavours to agree on the form and content of the disclosure.
15
General
15.1 Further Acts
Each party will promptly do and perform all further acts and execute and deliver all further documents (in
form and content reasonably satisfactory to that party) required by law or reasonably requested by any
other party to give effect to the obligations to be performed by the first party under this agreement.
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15.2 Notices
Any communication under or in connection with this agreement:
(a)
must be in writing;
(b)
must be addressed as shown below:
(i)
DRD( Offshore)
Name:
DRD( Offshore)
Address:
14/15 Mount Havelock
Douglas
1M 1 2QG
Isle of Man
Facsimile:
+(44) 01624 676315
For the attention of: Company Secretary
(ii)
Emperor
Name:
Emperor Mines Limited
Address:
Level 1 ,490 Upper Edward Street, Spring Hill, Brisbane,
Queensland 4004
Facsimile:
+(61) 7 3007 8080
For the attention of: Company Secretary
(iii)      DRDGold
Name:
DRDGold Limited
Address:
EBSCO House 4
299 Pendoring Avenue
Blackheath 2195
South Africa
Facsimile:
+27 11 467 2711
For the attention of: Company Secretary

(c)
must be signed by the party making the communication or (on its behalf by the solicitor for, or
by any attorney, director, secretary, or authorised agent of, that party;

(d)       must be delivered or posted by prepaid post to the address, or sent by fax to the number, of the
addressee, in accordance with clause 15.2(b); and

(e)       will be deemed to be received by the addressee:
(i)
(in the case of prepaid post) on the third Business Day after the date of posting to an
address within Australia, and on the fifth Business Day after the date of posting to an
address outside Australia;
(ii)
(in the case of fax) at the local time (in the place of receipt of that fax) which then
equates to the time at which that fax is sent as shown on the transmission report which is
produced by the machine from which that fax is sent and which confirms transmission of
that fax in its entirety, unless that local time is a non Business Day, or is after 5.00 pm on
a Business Day, when that communication will be deemed to be received at 9.00 am on
the next Business Day; and
(iii)      (in the case of delivery by hand) on delivery at the address of the addressee as provided
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in clause 15.2(b), unless that delivery is made on a non Business Day, or after 5.00 pm
on a Business Day, when that communication will be deemed to be received at 9.00 am
on the next Business Day.
15.3 Stamp duty and Expenses
(a)
Except as otherwise provided in this agreement, each party will pay its own costs and expenses
in connection with the negotiation, preparation, execution, and performance of this agreement.
(b)
Emperor will pay any stamp duty assessed on this agreement and any agreement entered into
or signed as required by this agreement.
(c)
If any goods and services tax (" GST ") becomes payable by a party (" Supplier ") in relation to a
supply that it makes under, in connection with or resulting from this agreement to any other
party (" Recipient "), the parties agree that:
(i)
any consideration provided for that supply under this agreement or any value deemed
for GST purposes in relation to that supply (" Agreed Amount ") is exclusive of GST;
(ii)
an additional amount will be payable by the Recipient to the Supplier equal to the
Agreed Amount for that supply multiplied by the applicable rate of GST; and
(iii)       the additional amount is payable at the same time and in the same manner as the
Agreed Amount is to be provided for that supply. However, the additional amount is not
payable by the Recipient unless and until that Supplier provides a valid tax invoice to the
Recipient for that supply. All invoices issued under this agreement which include an
additional amount payable must qualify as tax invoices.
15.4 Amendments
This agreement may only be varied by a document signed by or on behalf of each of the parties.
15.5 Assignment
This agreement may only be varied by a document signed by or on behalf of each of the parties.
15.6 Waiver
(a)
Failure to exercise or enforce or a delay in exercising or enforcing or the partial exercise or
enforcement of any right, power or remedy provided by law or under this agreement by any
party will not in any way preclude, or operate as a waiver of, any exercise or enforcement, or
further exercise or enforcement of that or any other right, power or remedy provided by law or
under this agreement.
(b)        Any waiver or consent given by any party under this agreement will only be effective and
binding on that party if it is given or confirmed in writing by that party.
(c)
No waiver of a breach of any term of this agreement will operate as a waiver of another breach
of that term or of a breach of any other term of this agreement.
15.7 Consents
(a)        Any consent referred to in, or required under, this agreement from any party may not be
unreasonably withheld, unless this agreement expressly provides for that consent to be given in
that party's absolute discretion.
(b)         Any consent required from DRD(Offshore) may be given by a duly authorised representative or
director of person who is not also a director of Emperor.
15.8 Counterparts
This agreement may be executed in any number of counterparts and by the parties on separate
counterparts. A facsimile of an executed copy will be taken to be a counterpart of this agreement in
accordance with this clause 15.8. Each counterpart constitutes an original of this agreement, all of
which together constitute one agreement.
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15.9 Indemnities
(a)
Each indemnity in this agreement is a continuing obligation, separate and independent from the
other obligations of the parties, and survives termination, completion or expiration of this
agreement.
(b)
It is not necessary for a party to incur expense or to make any payment before enforcing a right
of indemnity conferred by this agreement.
15.10 No merger
No right or obligation of any party will merge on completion of any transaction under this agreement.
All rights and obligations under this agreement survive the execution and delivery of any transfer or
other document which implements any transaction under this agreement.
15.11 Entire agreement
To the extent permitted by law, in relation to the subject matter of this agreement, this agreement and
the other documents contemplated by this agreement:
(a)       embodies the entire understanding of the parties, and constitutes the entire terms agreed on
between the parties; and
(b)       supersedes any prior written or other agreement between the parties.
15.12 Governing law
This instrument will be governed by and construed in accordance with the laws of New South Wales.
15.13 Jurisdiction
(a)
Each party to this agreement irrevocably submits to and accepts generally and unconditionally
the non-exclusive jurisdiction of the courts of New South Wales with respect to any legal action
or proceedings which may be brought at any time relating in any way to this agreement.
(b)
Each party to this agreement irrevocably waives any objection it may now or in the future have
to the venue of any action or proceedings and any claim it may now or in the future have that
any action or proceeding has been brought in an inconvenient forum.
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1
Title to Sale Shares

(a)
Title
At Completion, DRD(Offshore) will be the legal and beneficial owner of the Sale Shares
.
Schedule 1 - DRD(Offshore)'s warranties
(b)
Issued capital
The Sale Shares will be all the issued shares in the capital of DRD (IOM).
(c)
No Encumbrances
At Completion, Emperor will acquire the Sale Shares free and clear of all Encumbrances other than the
Permitted Encumbrances, subject to registration of Emperor in the register of shareholders
.
(d)
Sale Shares fully paid
The Sale Shares are fully paid and no money is owing in respect of them
.
(f)
No obligation to issue new shares
(i)
At Completion, DRD(IOM) will not be under an obligation to issue, and no person has the right to
call for the issue or transfer of, any shares or other securities in it at any time.
(ii)
DRD(IOM) has not issued securities with conversion rights to shares or securities in it and there
are no agreements or arrangements under which options or convertible notes have been issued by it.

2
Power and authority of DRD(Offshore)

(a)
Incorporation
DRD(Offshore) is validly incorporated, organised and subsisting in accordance with the laws of its place
of incorporation.
(b)
Authorisations
DRD(Offshore) has taken all necessary action to authorise the execution, delivery and performance of
this agreement in accordance with its terms.
(c)
Power to sell
DRD(Offshore) has full power to enter into and perform its obligations under this agreement and can
do so without the consent of any person and free of any pre-emptive rights or rights of first refusal.
(d)
No legal impediment
The execution, delivery and performance by DRD(Offshore) of this agreement will, at Completion,
comply with:
(i)
any applicable law, regulation, authorisation, ruling, judgment, order or decree of any
Government Agency; and

(ii)
the constitution or other constituent documents of DRD(Offshore) .

3
Power and authority of DRD (10M) and DRD (10M) Entities

(a)
Corporate existence
DRD (IOM):
(i)
has the power to own its assets and carry on the Business; and
(ii)
is registered and validly existing under Isle of Man law and is not required to be registered in
any other place;
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(
b)
Compliance with constituent documents
The affairs of DRD (IOM) have been conducted in accordance with the constitution of that company.
(c)
DRD (IOM) Entities
Each DRD (IOM) Entity:
(i)
is duly incorporated under the laws of the place of its incorporation;
(ii)
has the power to own its assets and carry on the Business;
(iii)       is duly registered and authorised to carry on the Business in those jurisdictions which, by the
nature of its Business and assets, makes registration or authorisation necessary; and
(iv)       has conducted its Business in compliance with the constitution or other constituent documents
of that DRD (IOM) Entity.

4
Accounts

(a)
Basis of preparation
The DRD (IOM) Accounts fairly represent and are true and accurate statements of the financial situation
of DRD (IOM) and its subsidiaries on the Accounts Date after adjusting for the DRD(IOM)
Reorganisation, transaction costs and making a reasonable provision for contingencies and have been
prepared in accordance with South African Standards of Generally Accepted Accounting Principles and,
to the extent possible, on a basis consistent with that of preceding periods
.
(
b)
Position since Accounts Date
Since the Accounts Date, each member of the DRD(IOM) Group has been conducted materially in the
ordinary course of ordinary business.

5
Assets

(a)      Group Structure

(i)
On Completion, the DRD (IOM) Reorganisation will have been completed by the DRD (IOM)
Group substantially in accordance with the process described in Part A of Schedule 3.
(ii)
The structure diagram of the DRD (IOM) Group set out in Part B Schedule 3 is accurate and
complete representation of the DRD (IOM) Group post Completion and, except where indicated,
shareholdings are 100%.
(iii)       No DRD (IOM) Entity is under an obligation to issue, and no person has the right to call for the
issue or transfer of, any shares or other securities in it at any time.
(iv)       No DRD (IOM) Entity has issued securities with conversion rights to shares or securities in it and
there are no agreements or arrangements under which options or convertible notes have been
issued by it.
(b)
DRD(IOM) Entities• Encumbrances
Other than for the Permitted Encumbrance, for each DRD(IOM) Entity at Completion, all of its shares are
free and clear of all Encumbrances.
(c)
Ownership of Porgera Joint Venture Interest and Tolukuma Gold Mine Assets
(i)
DRD (IOM) Group owns the Porgera Joint Venture Interest free and clear of all Encumbrances,
other than the Permitted Encumbrances.
(ii)
DRD (IOM) Group owns the Tolukuma Gold Mine Assets free and clear of all Encumbrances,
other than the Permitted Encumbrances
.
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6
Material Contracts

(a)
Default
No member of the DRD(IOM) Group is in default, or would be in default but for the requirements of
notice or lapse of time, under any material contract to which it is a party, where such default will, or
would reasonably be likely to, have a Material Adverse Effect.
(b)        Notices
As at the date of this agreement no member of the DRD (IOM) Group has received, or given, any
notice of termination of any material contract to which it is a party which will, or would reasonably be
likely to, have a Material Adverse Effect.

7
Employees

(a)        Payments made
Each member of the DRD (IOM) Group has paid all amounts which are due in respect of the
employees other than accrued payments in the ordinary course of the Business.
( b)        Industrial disputes
No member of the DRD(IOM) Group is currently involved in any material industrial dispute with
employees.
(c)        Compliance
No member of the DRD(IOM) Group is in breach in any material respect of any employment contract
relating to any senior executives or any award or enterprise agreement relating to the employees.

8
Intellectual Property Rights and Information Technology

(a)        Right to use
Each member of the DRD(IOM) Group has an enforceable right to use all intellectual property rights
which are necessary for the conduct of its business, where failure to have such rights will, or would
reasonably be likely to, have a Material Adverse Effect ("Business IP Rights").
(b)         No other circumstances
So far as DRD(Offshore) is aware, there are no circumstances which might adversely affect a member of
the DRD(IOM) Group's right to use any Business IP Rights.
(c)         No claims
No member of the DRD(IOM) Group has received any demand from any person in relation to the use of
any Business IP Rights.

9
Insurance

(a)        Disclosure
The DRD(Offshore) Disclosure Letter contains complete and accurate particulars of all current insurances
and cover notes taken out in respect of the business of the DRD(IOM) Group as at the date of this
agreement.
(b)        No Voiding
Nothing has been done or omitted to be done which would make any policy of insurance void or voidable
or which would permit an insurer to cancel the policy or refuse or materially reduce a Claim or materially
increase the premiums payable under the policies.
(c)         Insurance required by law
Each member of the DRD(IOM) Group has effected all insurances required by law to be effected by it,
subject to deductibles.
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1
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10 Compliance with legislation and laws

(a)       Compliance with laws
As far as DRD(Offshore) is aware, each member of the DRD(IOM) Group has complied in all material
respects with applicable laws where non-compliance will or would reasonably be likely to have a
Material Adverse Effect.
(b)        Authorisations obtained
As far as DRD(Offshore) is aware, each member of the DRD(IOM) Group has all necessary
Authorisations material to the conduct of its Business and have complied in all material respects with
the terms of those Authorisations.

11        Litigation

(a)        Company not a party to any litigation
As far as DRD(Offshore) is aware, no member of the DRD(IOM) Group are, or have in the last 2 years
been:
(i)
a party to any material prosecution or litigation; or
(ii)
subject to any material investigation by any Government Agency.
(b)         No litigation pending or threatened
As far as DRD(Offshore) is aware, no investigation, prosecution or litigation is pending or threatened
against a member of the DRD(IOM) Group.
(c)         No claims against Emperor Officers
At the date of this agreement, neither DRD(Offshore) nor DRDGold is aware of any circumstances or
information which gives or may give rise to any claim, demand, legal proceedings or cause of action
(whether actual or contingent) against any officer (as defined in the Corporations Act) of Emperor.

12 Solvency

(a)        No liquidation or winding up
Neither DRD(Offshore) nor any member of the DRD(IOM) Group is insolvent, has gone into liquidation
or passed a winding up resolution or received a deregistration notice or applied for deregistration, or
have been placed under judicial management.
(b)         No petition
No petition or other process for winding up has been presented or threatened against a member of the
DRD(IOM) Group and so far as DRD(Offshore) is aware there are no circumstances justifying such a
petition or other process.
(c)         No writ of execution
No writ of execution has been issued against a member of the DRD(loM) Group.
(d)         No receiver
No receiver or receiver and manager of any part of the undertaking or assets of a member of the
DRD(loM) Group have been appointed.

13 Taxes and duties

(a)        Tax Laws
So far as DRD(Offshore) is aware, each member of the DRD(loM) Group has complied with all
applicable Tax Laws.
(b)         Accuracy of provisions
(i)
So far as DRD(Offshore) is aware, the provision for income tax liability of USD$5,268,000 that
will be included in the 2005 audited accounts prepared in respect of DRD (porgera) Limited is
adequate.
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(
ii)
So far as DRD(Offshore) is aware, the provision for tax liability (the materiality of which does not
require separate disclosure in the 2005 audited accounts of T olukuma Gold Mining Limited)
included in the provision of "Other Creditors and Accruals" of Kina 1 ,075,000 is adequate.
(c)        Withholding tax
So far as DRD(Offshore) is aware, any obligation on a member of the DRD(loM) Group under any Tax
Law to withhold amounts at source has been complied with.
(d)
Records
So far as DRD(Offshore) is aware, each member of the DRD(loM) Group has maintained proper and
adequate records to enable it to comply in all material respects with its obligations to:
(i)
prepare and submit any information, notices, computations, returns and payments required in
respect of any Tax Law;
(ii)
prepare any accounts necessary for compliance with any Tax Law; and
(iii)        retain necessary records as required by any Tax Law.
(e)
Returns submitted
So far as DRD(Offshore) is aware, each member of the DRD(loM) Group has, submitted any
necessary information, notices, computations and returns to the relevant Government Agency in
respect of any Tax or any Duty relating to that member of the DRD(loM) Group and any such
information, notices, computations and returns are so far as DRD(Offshore) is aware, correct and in
accordance with the relevant Tax Laws.
(f)
No Tax audit
DRD(Offshore) is not aware of any pending or threatened Tax or Duty audit relating to member of the
DRD(IOM) Group.
(g)
No disputes
DRD(Offshore) is not aware of any disputes between a member of DRD (IOM) Group and any
Government Agency in respect of any Tax or Duty.
(h)        Anti-avoidance
So far as DRD(Offshore) is aware, no member of the DRD(loM) Group has entered into or been a
party to any transaction which contravenes the anti-avoidance provisions of any Tax Law.

14
Information

(a)        Accuracy and completeness
As far as DRD(Offshore) is aware, the information disclosed in writing to Emperor is accurate and
complete in all material respects as at the date that it was produced and is not misleading
.
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Schedule 2 - Emperor's warranties

1
Consideration Shares

(a)
Issued capital
Full
details of the issued securities in Emperor are set out in the relevant note to Emperor's 2005
annual report and accounts.
(b)       No obligation to issue new shares
Other than issued securities set out in the relevant note to Emperor's 2005 annual report and
accounts:
(i)
Emperor is not under any obligation to issue securities in Emperor, and no person has the right
to call for the issue or transfer of, any shares or other securities in Emperor at any time;
(ii)
Emperor has not issued securities with conversion rights to shares or securities in it and there
are no agreements or arrangements under which options or convertible notes have been issued
by it.
(c)      No Encumbrances
The Consideration Shares will be issued free and clear of all Encumbrances.

2
Emperor authorised
Emperor has taken all necessary action to authorise the execution, delivery and performance of this
agreement in accordance with its terms.

3
Power to buy
Emperor has full power to enter into and perform its obligations under this agreement and can do so without
the consent of any other person.

4
No legal impediment
The execution, delivery and performance by Emperor of this agreement comply with:

(a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Government Agency;

(b) the constitution or other constituent documents of Emperor; and

(c)
any Encumbrance which is binding on Emperor.

S
Accounts

(a)
Basis of preparation
The Emperor Accounts fairly represent and are true and accurate statements of the financial situation of
Emperor as of the Accounts Date and have been prepared in conformity with Accounting Standards of
the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the
Corporations Act 2001 and on a basis consistent with that of preceding periods.
(b)
Position since Accounts Date
Since the Accounts Date, each member of the Emperor Group has been conducted materially in the
ordinary course of ordinary business.

6
Compliance with legislation and laws

(a)        Compliance with laws
As far as Emperor is aware, each member of the Emperor Group has complied in all material respects
with applicable laws where non-compliance will or would reasonably be likely to have a Material Adverse
Effec
t.
22892-1
BACKGROUND IMAGE
(
b)       Authorisations obtained
As far as Emperor is aware, each member of the Emperor Group has all necessary Authorisations
material to the conduct of its business and have complied in all material respects with the terms of
those Authorisations
.
7
Litigation

(
a)
Company not a party to any litigation
As far as Emperor is aware, no member of the Emperor Group is, or have in the last 2 years been:
(i)
a party to any material prosecution or litigation; or
(ii)
subject to any material investigation by any Government Agency.
(b)
No litigation pending or threatened
As far as Emperor is aware, no investigation, prosecution or litigation is pending or threatened against a
member of the Emperor Group.
(c)
No claims against Emperor Officers
So far as Emperor is aware, at the date of this agreement, no member of the Emperor Group is aware of
any circumstances or information which give or may give rise to any claim, demand, legal proceedings
or cause of action (whether actual or contingent) against any officer (as defined in the Corporations Act)
of Emperor.

S
No liquidation or winding up
No member of the Emperor Group is insolvent, has gone into liquidation or passed a winding up resolution or
received a deregistration notice or applied for deregistration, or has been placed under judicial management.

9
No petition
No petition or other process for winding up has been presented or threatened against any member of the
Emperor Group and there are no circumstances justifying such a petition or other process.

10
No writ of execution
No writ of execution has been issued against any member of the Emperor Group.

11
No receiver
No receiver or receiver and manager of any part of the undertaking or assets of any member of the Emperor
Group has been appointed.

12
Compliance with Continuous Disclosure Obligations
So far as Emperor is aware:
(a)
it has complied with its continuous disclosure obligations under the Listing Rules;
(b)       there is no information, matter or circumstance in relation to which Emperor is relying on Listing Rule
3.1 A to withhold disclosure to the market as required under Listing Rule 3.1
.
22892-1
BACKGROUND IMAGE
Schedule 3 - DRD (IOM) Reorganisation
Part A to Schedule 3 -DRD (10MIOM Reorganisation
Pre•DRD (IOM) Reoraanisation structure
Key Steps of DRD (IOM) Reorgainsation

1
Assets to be transferred out of the DRD IOM) Group -

(a)        shares in White Rock Insurance Company (PCG) Limited;

(b)        shares in Emperor Mines Limited; and

(c)
shares in Net-Gold Services Limited.

2
Material contracts to be novated out of the DRD (IOM) Group -

(a)
DRD Convertible Loan Facility;

(b)        Obligations debenture between DRD (IOM) and EGMC dated 22 September 2005;

(c)
Mortgage of rights deed between EGMC and DRD (IOM) dated 22 September 2005;

(d)
Mortgage of property deed between EGMC and DRD (IOM) dated 22 September 2005; and

(e)        Subordination Deed entered into between ANZ Bank, Emperor and DRD (IOM) dated 8 July 2005.

3
Material contracts to be terminated -

(a)        Andisa treasury management agreement between DRD (IOM) and Andisa Treasury Solutions
(undated); and

(b)       Chess Sponsorship agreement between DRD (IOM) and ANZ Bank. Dated 6 November 2004.

4
Treatment of inter-company loans - To be repaid or capitalised so that following the DRD (IOM)
Reorganisation there
are no loans owing to or by DRD (IOM) to a member of the DRDGold Group.

S
Encumbrances - Other than the Encumbrances listed in Part B of Schedule 4, there will be no other material
Encumbrances in the DRD (IOM) Group following completion of the DRD (IOM) Reorganisation.

6
Treatment of Investec Facility - The Investec Facility and associated Encumbrances will either be repaid and
terminated or will be varied to remove any recourse to DRD(Offshore) or DRDGold and remain as an
undrawn facility available for DRD(IOM) after Completion, subject to the terms of that facility and related
security.

7
Residual liabilities - Other than as disclosed in the DRD (IOM) Accounts (including without limitation, the
contingency
provision as provided for in those accounts, provisions for payment of management fees to DRDGold and
provision for interest payable on the Convertible Bonds issued by DRDGold payable in November 2005, there
will be no material liabilities or contingent liabilities created (including warranties, indemnities and guarantees)
as part of the DRD (IOM) Reorganisation.
22892-1
BACKGROUND IMAGE
8
Tax and stamp duty - Other than as disclosed in the DRD (IOM) Accounts including the contingency provision as
provided for in those accounts, no material adverse tax or stamp duty liability or charges will arise within the DRD
(IOM) Group as a result of the DRD (IOM) Reorganisation.

9
Approvals - All necessary shareholder and regulatory approvals (including SARB Approval) will be obtained as
part of
the DRD (IOM) Reorganisation.

10        Transaction costs and adviser mandates. DRD (IOM) is responsible for the transaction costs associated with the
transactions contemplated by this agreement and the related debt facilities to be established for use by DRD
(IOM) at or after Completion. A provision has been included in the DRD(IOM) Accounts for the transaction costs
which have been paid by or on behalf of DRDGold and for anticipated future costs payable after the date of this
agreement. The reimbursement of costs paid by or on behalf of DRDGold will form a debt due to DRDGold which
will remain with
DRD (IOM) after Completion. The Contingency provision in the DRD(IOM) Accounts provides, among other things,
for further unanticipated costs. Certain of the costs are to be satisfied by the issue of shares in Emperor after
completion and DRD (IOM) must procure the issue of those shares by Emperor after completion. In addition, DRD
(10M) will take an assignment of the rights of DRDGold under the ANZ Bank mandate for provision of investment
banking services relating to the transaction. That mandate engages ANZ Bank to perform certain services and
entitles ANZ bank to certain fees in relation to the potential listing of Emperor on a northern hemisphere stock
exchange.
22892-1
BACKGROUND IMAGE
Share capital- 400,000 redeemable preference shares held by DRD (10M)
Registered office - Level 5, Defens House, Cnr Hunter Street & Champion Pde,
Port Moresby, NCD 121 PNG
Directors* J Key employees - M Wellesley-Wood*; S O'Brien*, R Johnson*, F Hart*
Material contracts - Transporting and refining or ore agreement with AGR Matthey,
helicopter support agreement wit Heli New Guinea, explosives supply agreement with
Orica, fuel supply agreement with Shell, catering contract with Crocodile Catering,
vehicle lease with ANZ Bank
Encumbrances - Charges in favour of MRDC and Rothschild / CDC. All monies
owing to those parties have been repaid and charges are in the process of being
removed. Permitted Encumbrances .. Material Contingent Liabilities - None
Part B to Schedule 3 - Post DRD (10M) Reorganisation structure
Directors* J Key employees - M Wellesley-Wood*, M Gisborne* (alternate C
Tushingham), P Matthews*, Geoffrey Campbell*, I Murray, M Marriott
Registered Office -14/15 Mount Havelock, Douglas, Isle of Man
Material contracts - Operational Support Agreement, DRDA Service Agreement, Deed of
Amalgamation, ANZ Project American Eagle Engagement Letter, Questco Project American
Eagle Engagement Letter, DRDGold Cost Re-Imbursement Agreement, Macquarie Bank Limited
engagement letter
Encumbrances - Permitted
Encumbrances. Material Contingent
Liabilities - None.
Share capital- 2,315,001 held by DRD (10M)
Registered office - Level 5, Defens House, Cnr Hunter Street & Champion
Pde, Port Moresby, NCD 121 PNG
Directors* J Key employees - M Wellesley-Wood*; S O'Brien*, R Johnson*, F
Kowas* Material contracts - Facultative Reinsurance Arrangements with Swiss
Re. Encumbrances - None.
Material Contingent Liabilities - Normal insurance claims not yet paid, provision for
IBNR, PGK 160,000
Share capital- 2 ordinary shares held by DRD (IOM)
Registered office - Level 1 , 490 Upper Edward St, Spring Hill, 4004, Brisbane,
Australia
Directors* J Key employees - M Wellesley-Wood*; I Murray*, Richard Johnson*, A
Labuschagne, F Hart, R Niewoudt, G MacDonald, K Pidik, Q Brand, S Millard, S
O'Connor, S Solanki, S Spencer, A Thin
Material contracts - DRDA Service Agreement, employment contracts with key
employees mentioned, office lease for premises in Brisbane
Encumbrances - None. Material Contingent Liabilities - None.
Share capital- 50,000,000 ordinary shares held by DRD (10M)
Registered office - Level 5, Defens House, Cnr Hunter Street & Champion
Pde, Port Moresby, NCD 121 PNG
Directors* J Key employees - S O'Brien*, R Johnson*, M Wellesley-Wood* and F
Kowas Material contracts - Porgera Joint Venture Agreement, Mining Development
Contract, Porgera Joint Venture Operating Agreement, Compensation and Occupation
Fee Agreement, Transporting and refining or ore agreement with AGR Matthey,
equipment and spare parts contract with Caterpillar, gas supply contract with Oil
Search, explosives supply agreement with Dyno Nobel 22892-1
BACKGROUND IMAGE
_
N_o_te_s:
1. The majority of the material contracts form part of Part 3 of the DRD(Offshore) Disclosure Letter.
2.
Material contingent liabilities listed are in addition to those liabilities disclosed in the DRD (IOM) Accounts and
in the DRD(Offshore) Disclosure Letter
.
22892-1
BACKGROUND IMAGE
Schedule 4 - Permitted Encumbrances
Part A - DRD{loM) Group
PNG Facility Agreement and the PNG Security Documents Investec Facility
Agreements and associated security documents
(a)
Notice of Assignment dated 13 October 2004 and Acknowledgement of Receipt.
(b)        Common Terms Agreement between Investec Bank (Mauritius) Limited and DRD (Isle of Man) Limited (undated).
(c)
Facility A Loan Agreement between Investec Bank (Mauritius) Limited and DRD (Isle of Man) Limited (undated).
(d)        Shareholder's Guarantee between Durban Roodepoort Deed Limited and Investec Bank (Mauritius) dated 13
October 2004.
(e)
Borrower's Certificate to Investec Bank (Mauritius)
(ij
Subordination Agreement between Investec Bank (Mauritius), DRD (Isle of Man) Limited, Durban Roodepoort
Deed Limited, Dome Resources Pty Limited and DRD Australasia Pty Limited (undated).
(9)
Equitable Mortgage of Shares between Investec Bank (Mauritius) Limited and DRD (Isle of Man) Limited
(undated).
(h)
Memorandum of Deposit between Investec Bank (Mauritius) Limited and DRD (Isle of Man) Limited (undated).
(i)
Assignment of Accounts between Investec Bank (Mauritius) Limited and DRD (Isle of Man) Limited (13 October
2004).
Part B - Emperor Group
ANZ Facility Agreement and any security documents associated with that facility including those forwarded to Franklyn Legal
by Andrew Cooke by email on 16 November 2005
DRD Convertible Loan Agreement and associated security documents
(a)        Obligations debenture between DRD (IOM) and EGMC dated 22 September 2005;
(b)
Mortgage of rights deed between EGMC and DRD (IOM) dated 22 September 2005;
(c)
Mortgage of property deed between EGMC and DRD (IOM) dated 22 September 2005; and
(d)       Subordination Deed entered into between ANZ Bank, Emperor and DRD (IOM) dated 8 July 2005
.
22892-1
BACKGROUND IMAGE
Schedule 5 - Tolukuma Gold Mine Tenements
Exploration Licences
EL No
683
580
1264
1327
894
1297
1379
1284
1271
1352
1366
Mining Licences
ML
104
22892-1
BACKGROUND IMAGE
Schedule 6 - Additional confirmatory due diligence matters
In accordance with the requirements of clause 2.1 (j) of this agreement, Emperor hereby specifies the following items
as being the subject of ongoing due diligence investigation:
(a)         Accounting due diligence on the DRD (IOM) Accounts
(b)         A legal review of the important agreements referred to or attached to the DRD Disclosure Letter
(c)
Claim by the Central Provincial Government challenging the validity of the extension of Mining
Lease 1 04
22892-1
BACKGROUND IMAGE
Executed as an agreement:
Signed by DRD{Offshore) Limited
by:
Authorised Representative
Witness
Name (please print)
Name (please print)
Signed by DRDGold Limited
by:
Authorised Representative
Witness
Name (please print)
Name (please print)
Signed by Emperor Mines Limited
by:
Secretary/Director
Director
Name (please print)
Name (please print)
22892-1
BACKGROUND IMAGE
EXHIBIT 8.1
LIST OF SUBSIDIARIES

SUBSIDIARY NAME
JURISDICTION OF INCORPORATION
Blyvooruitzicht Gold Mining Company Limited
South Africa
West Witwatersrand Gold Holdings Limited
South Africa
Crown Consolidated Gold Recoveries Limited
South Africa
Stand 752 Parktown Extension (Pty) Limited
South Africa
DRD International Aps (Pty) Limited
Denmark
DRD Australasia Services Company (Pty) Limited
Australia
DRD Australia APS
Denmark
DRD (Isle of Man) Limited
Isle of Man
DRD (Porgera) Limited
Papua New Guinea
Tolukuma Gold Mines Limited
Papua New Guinea
Fortis (Pty) Limited
Papua New Guinea
Net-Gold Services Limited
Bermuda
BACKGROUND IMAGE
 
 
Exhibit 12.1
CERTIFICATION

I, Mark Michael Wellesley-Wood, certify that:

1)
I have reviewed this Annual Report on Form 20-F of DRDGOLD Limited.

2)
Based on my knowledge, this Annual Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this Annual Report;

3)
Based on my knowledge, the financial statements, and other financial information included in
this Annual Report, fairly present in all material respects the financial condition, results of
operations and cash flows of the Company as of, and for, the periods presented in this Annual
Report;



4)
The Company's other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this Annual Report is being prepared;

b)
Evaluated the effectiveness of the Company's disclosure controls and procedures and
presented in this Annual Report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
Annual Report based on such evaluation; and

c)
Disclosed in this Annual Report any change in the Company's internal control over
financial reporting that occurred during the period covered by this Annual Report that
has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and

5)
The Company's other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Company's auditors and the audit
committee of the Company's board of directors (or persons performing the equivalent
functions):

a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
control over financial reporting.

Date: December 15, 2005
/s/ Mark Michael Wellesley-Wood
Mark Michael Wellesley-Wood
Chief Executive Officer
BACKGROUND IMAGE
 
 
 
Exhibit 12.2
CERTIFICATION

I, John William Cornelius Sayers, certify that:

1)
I have reviewed this Annual Report on Form 20-F of DRDGOLD Limited.

2)
Based on my knowledge, this Annual Report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the
period covered by this Annual Report;

3)
Based on my knowledge, the financial statements, and other financial information included in
this Annual Report, fairly present in all material respects the financial condition, results of
operations and cash flows of the Company as of, and for, the periods presented in this Annual
Report;



4)
The Company's other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) for the Company and have:

a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the Company, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which
this Annual Report is being prepared;

b)
Evaluated the effectiveness of the Company's disclosure controls and procedures and
presented in this Annual Report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
Annual Report based on such evaluation; and

c)
Disclosed in this Annual Report any change in the Company's internal control over
financial reporting that occurred during the period covered by this Annual Report that
has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting; and

5)
The Company's other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the Company's auditors and the audit
committee of the Company's board of directors (or persons performing the equivalent
functions):

a)
All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial information; and

b)
Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal
control over financial reporting.

Date: December 15, 2005
/s/John William Cornelius Sayers
John William Cornelius Sayers
Chief Financial Officer
BACKGROUND IMAGE
 
 
Exhibit 13.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 20-F of DRDGOLD Limited (the
"Company") for the fiscal year ended June 30, 2005, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), Mark Michael Wellesley-Wood, as
Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002, that, to the best of
his knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.
/s/Mark Michael Wellesley-Wood
By:
Mark Michael Wellesley-Wood
Title:     Chief Executive Officer
Date:      December 15, 2005
BACKGROUND IMAGE
 
 
 
Exhibit 13.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 20-F of DRDGOLD Limited (the
"Company") for the fiscal year ended June 30, 2005, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), John William Cornelius Sayers, as
Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act 2002, that, to the best of his
knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the
financial condition and results of operations of the Company.

/s/John William Cornelius Sayers
By:
John William Cornelius Sayers
Title:     Chief Financial Officer
Date:     December 15, 2005

BACKGROUND IMAGE
Exhibit 14.1
Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Amendment No. 4 to the Registration Statement, No. 333-102800, of DRDGOLD Limited on Form F-3 and Registration Statement, No. 333-121386, of DRDGOLD Limited on Form F-4 of our report dated December 15, 2005 with respect to the consolidated balance sheet of DRDGOLD Limited and its subsidiaries as of June 30, 2005 and June 30, 2004 and the related consolidated statements of operations, stockholders' equity, cash flows and notes thereto for each of the years in the three-year period ended June 30, 2005, which report appears in the Annual Report on Form 20-F of DRDGOLD Limited for the year ended June 30, 2005.




/s/ KPMG Inc
KPMG Inc
Registered Accountants and Auditors
Chartered Accountants (SA)

Johannesburg, Republic of South Africa
December 15, 2005

BACKGROUND IMAGE
Exhibit 14.2





Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in Amendment No.4 to the Registration
Statement, No.333-102800, of DRDGOLD Limited on Form F-3 and Registration Statement,
No.333-121386, of DRDGOLD Limited on Form F-4 of our report dated November 26, 2004
with respect to the consolidated balance sheets of Crown Gold Recoveries (Proprietary)
Limited and its subsidiaries as of June 30, 2004 and June 30, 2003 and the related
consolidated income statements, statements of changes in equity, cash flow statements and
notes thereto for the years then ended, which report appears as an exhibit to the Annual
Report on Form 20-F of DRDGOLD Limited for the year ended June 30, 2004.


/s/ KPMG Inc
KPMG Inc
Registered Accountants and Auditors
Chartered Accountants (SA)

Johannesburg, Republic of South Africa
December 15, 2005
BACKGROUND IMAGE
Exhibit 14.3





Consent of Independent Registered Public Accounting Firm

The Board of Directors
Emperor Mines Limited:
We consent to the incorporation by reference in Amendment No.4 to the Registration
Statement, No.333-102800, of DRDGOLD Limited on Form F-3 and Registration Statement,
No.333-121386, of DRDGOLD Limited on Form F-4 of our report dated December 13, 2005,
with respect to the consolidated statements of financial position of Emperor Mines Limited
and subsidiaries as of June 30, 2005 and 2004, and the related consolidated statements of
financial performance and cash flows for each of the years in the two-year period ended
June 30, 2005, which report appears in the Annual Report on Form 20-F of DRDGOLD
Limited for the year ended June 30, 2005.
/s/ KPMG
KPMG
Sydney, Australia
December 13, 2005
BACKGROUND IMAGE
Exhibit 15.2





























Crown Gold Recoveries (Proprietary) Limited
(Registration number: 1988/005115/07)
Consolidated financial statements
for the year ended 30 June 2005, 2004 and 2003
BACKGROUND IMAGE
2


Report of the Independent Registered Public Accounting Firm to the Board of Directors and
Stockholders of Crown Gold Recoveries (Proprietary) Limited

We have audited the accompanying consolidated balance sheets of Crown Gold Recoveries (Proprietary)
Limited and its subsidiaries as of June 30, 2004 and 2003, and the related consolidated income statements,
statements of changes in equity and cash flow statements for each of the years in the two-year period ended
June 30, 2004. These consolidated financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, based on our audits, the consolidated financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Crown Gold Recoveries (Proprietary) Limited
and its subsidiaries at June 30, 2004 and 2003, and the consolidated results of its operations and its cash
flows for each of the years in the two-year period ended June 30, 2004, in conformity with South African
Statements of Generally Accepted Accounting Practice.

The accompanying financial statements have been prepared assuming that the Group will continue as a
going concern. As discussed in Note 18 to the financial statements, the Group has suffered recurring
losses from operations and has a net capital deficiency and its current liabilities exceed its current assets.
These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans
in regard to these matters are also described in Note 18. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty

KPMG Inc
Registered Accountants and Auditors
Chartered Accountants (SA)



/s/ W van der Merwe
W van der Merwe
Director

Johannesburg, Republic of South Africa
November 26, 2004
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
3
Consolidated income statement
for the year ended 30 June
Notes
2005
2004
2003
(Unaudited)            (Audited)                  (Audited)
R’000
R’000
R’000
Revenue
2
589,474
643,610
571,894
Cost of sales
(624,617)                (646,760)                 (582,808)
Cash costs
(561,439)                 (599,338)                 (522,231)
Depreciation
5
(18,289)
(19,637)
(45,266)
Retrenchment costs
(4,388)
(56)
-
Movement in provision for
environmental rehabilitation
12
(41,292)
(28,094)
(15,958)
Movement in gold-in-process
791
365
647
Operating loss from gold
(35,143)
(3,150)
(10,914)
Other income
-
9,212
15,728
Administration expenses
(12,812)
(29,372)
(27,149)
Impairment of mining assets
-
(44,964)               (204,987)
Profit on disposal of mining assets
7,518
-
-
Impairment of loan to subsidiary
-
Loss from operations
3
(40,437)
(68,274)               (227,050)
Interest received
475
1,124
1,619
Interest paid
(51,427)
(53,368)
(50,769)
Loss before taxation
(91,389)               (120,518)               (276,472)
Taxation
4
(166)
(166)
(586)
Net loss for the year
(91,555)               (120,684)                 (277,058)
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
4
Consolidated balance sheet
at 30 June
Assets
Notes
2005
2004
(Unaudited)
(Audited)
R’000
R’000
Non-current assets
102,167
108,576
Mining assets
5
92,218
100,639
Investments
6
9,949
7,937
Current assets
61,735
54 669
Inventories
7
19,998
18,536
Accounts receivable
26,393
15,156
Taxation
-
128
Cash and cash equivalents
15,344
20,849
Total assets
163,902
163,246
Equity and liabilities
Capital and reserves
Share capital
8
-*
-*
Accumulated loss
(688,552)
(596,997)
Shareholders' deficit
(688,552)
(596,997)
Non-current liabilities
639,346
590,737
Shareholders’ loans
9
367 262
364,345
Long-term liabilities
10
130,306
130,306
Provision for post-retirement medical benefits
11
13,839
9,577
Provision for environmental rehabilitation
12
127,939
86,509
Current liabilities
213,108
169,506
Taxation
32
-
Amounts owing to Group companies
-
44
Leave pay provision
13
11,799
12,612
Accounts payable and accrued liabilities
197,702
153 104
Bank overdraft
3,575
3,746
Total equity and liabilities
163,902
163,246
* Less than R1,000.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
5
Consolidated statement of changes in equity
for the year ended 30 June
Number
of
ordinary
shares
Share
capital
Accumulated
loss
Total
R’000
R’000
R’000

Balance at 30 June 2002
100
-*            (199,255)             (199,255)
Net loss for the year
-
(277,058)             (277,058)
Balance at 30 June 2003
100
-*            (476,313)             (476,313)
Net loss for the year
-
(120,684)             (120,684)
Balance at 30 June 2004
100
-*            (596,997)             (596,997)
Net loss for the year
(91,555)
(91,555)
Balance at 30 June 2005
100
-*            (688,552)              (688,552)
* Less than R1 000.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
6
Consolidated cash flow statement
for the year ended 30 June
Notes
2005
2004
2003
(Unaudited)            (Audited)             (Audited)
R’000
R’000
R’000
Cash flow from operating activities
Cash received from sales of precious
metals
589,474
643,610
571,894
Cash paid to suppliers and employees
(542,362)            (642,024)               (463,522)
Cash generated by / (applied to)
operations
A
47,112
1,586
108,372
Interest received
475
1,124
1,619
Taxation paid
(6)
(310)
(581)
Interest paid
(51,427)
(53,368)
(25,334)
Net cash flow from operating activities
(3,846)
(50,968)
84,076
Cash flow from investing activities
Net purchase of mining assets
(10,024)
(79,832)
(65,619)
Proceeds on disposal of mining assets
7,673
769
2,347
Contributions to rehabilitation trust fund
(2,011)
(518)
(767)
Payments from rehabilitation trust fund
-
30
23
Purchase of non-current investments and
other assets
-
(9)
-
Acquisition of subsidiary net of cash
acquired
B
-
-
(99,065)
Net cash flows from investing activities
(4,362)
(79,560)               (163,081)
Cash flow from financing activities
Proceeds from long-term borrowings
-
64,038
17,613
Proceeds from Group Company and
shareholders' loans
2,874
42,616
77,574
Net cash flows from financing activities
2,874
106,654
95,187
Net (decrease)/increase in cash and cash
equivalents
(5,334)
(23,874)
16,182
Cash and cash equivalents - at beginning
of year
17,103
40,977
24,795
Cash and cash equivalents - at end of
year
C
11,769
17,103
40,977
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
7
Notes to the consolidated cash flow statement
for the year ended 30 June
2005
2004
2003
(Unaudited)                   (Audited)            (Audited)
R’000
R’000
R’000
A. Reconciliation of loss before taxation to
cash (applied to)/ generated by operations
Loss before taxation
(91,389)            (120,518)               (276,472)
Adjusted for:
105,811
154,879
316,793
Depreciation
18,289
19,637
45,266
Movement in environmental rehabilitation
provision
41,430
28,094
15,958
Movement in leave pay provision
(813)
6,192
Movement in gold-in-process
(791)
(365)
(647)
Impairment of mining assets and
investments
-
44,963
204,987
Interest received
(475)
(1,124)
(1,619)
Interest paid
51,427
53,368
50,769
Provisions for employee benefits raised
during the year
4,262
4,114
2,089
Profit on sale of mining assets
(7,518)
-
(10)
Working capital changes:
32,690
(32,775)
68,051
Inventories
(671)
1,192
(1,683)
Accounts receivable
(11,237)
5,591
5,736
Accounts payable and accrued liabilities
44,598
(39,558)
63,998
Cash (applied to) / generated by operations
47,112
1,586
108,372
B. Acquisition of subsidiary net of cash
acquired
Mining assets
179,862
Inventories
1,682
Accounts receivable
17,110
Cash and cash equivalents
5,307
Provision for environmental rehabilitation
(21,469)
Accounts payable
(69,897)
Leave pay provisions
(8,223)
Total net book value at date of acquisition
104,372
Less cash and cash equivalents of acquired
entity
(5,307)
Net consideration
99,065
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
8
Notes to the consolidated cash flow statement
for the year ended 30 June
C. Cash and cash equivalents
Cash and cash equivalents
15,344
20,849
40,977
Bank overdraft
(3,575)
(3,746)
-
11,769
17,103
40,977
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
9
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.
Principal accounting policies
1.1
Basis of preparation
The financial statements are prepared on the historical cost basis modified for the revaluation of
certain financial instruments to fair value and incorporate the following principal accounting
policies, which are consistent with those applied the previous year and comply with South African
Statements of Generally Accepted Accounting Practice.
1.2
Consolidation
The Group annual financial statements incorporate the annual financial statements of the Company,
its subsidiaries and their associated environmental rehabilitation trust funds. The results of the
subsidiaries are included from the date on which effective control was acquired up to the date
control ceased to exist.

All inter-company transactions and balances have been eliminated. Unrealised profits that arise
between Group entities are also eliminated.
1.3
Goodwill
Goodwill represents the excess of the purchase consideration over the Group's interest in the fair
value of the identifiable assets and liabilities of the acquired subsidiary.

The carrying amount of goodwill is reviewed annually and written down for impairment where
considered necessary.
1.4
Mining assets
1.4.1    Mine development
Development costs relating to major programmes at existing mines and plants are capitalised.
Development costs consist primarily of expenditures to initially establish a mine and to expand the
capacity of operating mines and plants. Ordinary development costs to maintain production are
expensed as incurred.
Initial development and pre-production costs relating to a new facility, including interest on
borrowed funds used to develop the facility, are capitalised until the facility is brought into
production, at which time the costs are amortised.
1.4.2    Plant and machinery
Plant and machinery are recorded at cost of acquisition less sales, recoupments and amounts
written off. Depreciation of plant facilities is computed principally by the life of mine method
based on estimated proven and probable ore reserves. Proven and probable ore reserves reflect
estimated quantities of economically recoverable reserves, which can be recovered in the future
from known sand, slime and archive material from previously worked out mines.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
10
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.4
Mining assets (continued)
1.4.3     Equipment and vehicles
Equipment and vehicles are shown at cost less accumulated depreciation. Depreciation is
calculated using the straight line method, principally over estimated useful lives of 2 to 5 years.
1.4.4    Impairment
Recoverability of the mining assets of the Group, which include development costs, is reviewed
annually. Estimated future net cash flows are calculated using estimates of proven and probable ore
reserves, estimated future sales (considering historical and current prices, price trends and related
factors), cash operating costs, development costs and rehabilitation costs. Reductions in the
carrying value of the mining assets of the Group are recorded to the extent that the carrying value
exceeds the estimate of future discounted net cash flows.

Management's estimates of future cash flows are subject to risks and uncertainties. Therefore, it is
reasonably possible that changes could occur which may affect the recoverability of the Group's
mining assets.
1.5
Operating leases
Leases where the lessor retains the risks and rewards of ownership of the underlying asset are
classified as operating leases. Payments made under operating leases are charged against income on
a straight line basis over the period of the lease.
1.6
Investments
Investments are accounted for at fair value or at cost where fair value cannot be reliably measured.
Gains and losses are included in the income statement.
1.7
Investment in subsidiaries
Investments are carried at cost at date of acquisition. Where directors are of the opinion that the
carrying value of the investment is in excess of the net asset value of the subsidiaries, the
investment value is impaired to the net asset value of the subsidiaries.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
11
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.8
Inventories
Inventories, which include gold work-in-process and consumables, are stated at the lower of cost
and net realisable value. The cost of gold work-in-process is based on related production costs,
which include amortisation. The cost of consumables is determined by the weighted average cost
method. Where necessary, provision is made for obsolete, slow moving or defective inventory.
1.9
Environmental rehabilitation
Long-term environmental obligations, comprising decommissioning and restoration, are based on
the Group's environmental management plans, in compliance with the current environmental and
regulatory requirements.
1.9.1    Decommissioning costs
Provision is made for the net present value of the estimated future decommissioning costs at the
end of operating life of the facilities, with a corresponding increase in the carrying value of the
related asset. The unwinding of the decommission obligation is included in the income statement.
The estimated future costs of decommission obligations are regularly reviewed and adjusted as
appropriate for new circumstances or changes in law or technology. The estimates are discounted
at a pre-tax rate that reflects current market assessments of the time value of money.
1.9.2    Restoration costs
Estimated restoration costs are accrued based on present obligations, as environmental damage is
incurred. Estimated costs are regularly reviewed and adjusted as appropriate for changed
circumstances. Expenditure on ongoing rehabilitation costs is brought to account when incurred.
1.9.3    Environmental rehabilitation trust
Periodic contributions are made to rehabilitation trust funds, created in accordance with South
African statutory requirements, to fund the estimated cost of rehabilitation during and at the end
of the life of the facility.
1.10     Revenue recognition
Gold bullion revenue (and revenue from related by-products) is recognised when it is delivered to
the relevant refinery, at which stage all risks and rewards of ownership pass from the Group.

Dividends are recognised when the right to receive payment is established. Interest is recognised
on a time proportion basis taking account of the principal outstanding and the effective rate to
maturity on the accrual basis.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
12
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.11      Retirement and other employee benefits
Defined contribution plans
The Group contributes to a defined contribution fund. Contributions to defined contribution
funds are charged against income as incurred.
Post-retirement medical benefits
The expected costs of post-retirement medical benefits are assessed in accordance with the
advice of qualified actuaries and contributions to the relevant fund, including the costs of
improved benefits or experience adjustments, are charged to income over the service lives of
employees entitled to those benefits.
The Projected Unit Credit Method is used to determine the present value of the post-retirement
medical benefit and related current service cost and, where applicable, past service cost.
Actuarial gains or losses in respect of the post-retirement medical benefit is recognised as income or
expense if the net cumulative unrecognised actuarial gains and losses at the end of the previous
reporting period exceeded the greater of:
·
10% of the present value of the obligation at that date before deducting plan assets, and
·
10% of the fair value of any plan assets at that date.
The amount recognised is the excess determined above, divided by the expected average remaining
working lives of the employees participating in the plan.
Past service costs are recognised as an expense on a straight line basis over the average period until
the benefits vest. To the extent that the benefits have already vested, past service costs are recognised
immediately.
1.12      Taxation

Current tax comprises tax payable calculated on the basis of the expected taxable income for the
year, using the tax rates enacted at the balance sheet date, and any adjustment of tax payable for
previous years. Deferred tax is provided using the balance sheet liability method, based on temporary
differences. Temporary differences are differences between the carrying amounts of assets and
liabilities for financial reporting purposes and their tax base.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of
the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the
balance sheet date.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
13
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.12      Taxation (continued)
Deferred tax is charged to the income statement except to the extent that it relates to a transaction
that is recognised directly in equity, or a business combination that is an acquisition. The effect on
deferred tax of any changes in tax rates is recognised in the income statement, except to the extent
that it relates to items previously charged or credited directly to equity. A deferred tax asset is
recognised to the extent that it is probable that future taxable profits will be available against which
the associated unused tax losses and deductible temporary differences can be utilised. Deferred tax
assets are reduced to the extent that it is no longer probable that the related tax benefit will be
recognised.
1.13     Financial instruments
Financial instruments recognised on the balance sheet include investments, accounts receivable, cash
and cash equivalents, long-term and short-term liabilities, accounts payable and accrued liabilities,
and bank overdrafts.
Measurement
Financial instruments are initially measured at cost, including transaction costs, when the Group
becomes a party to the contractual arrangements. The subsequent measurement of financial
instruments is dealt with in the individual policy statements associated with the relevant item.
Investments
Investments are classified as held for trading and are accounted for at fair value or at cost where fair
value cannot be reliably measured. Realised and unrealised investment gains and losses are included
in earnings for the relevant period.
Accounts receivable
Accounts receivable are carried at anticipated realisable value. Estimates are made for doubtful debts.
Irrecoverable amounts are written off during the year in which they are identified.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and metals on consignment. The carrying amount
of cash and cash equivalents is stated at cost, which approximates fair value.
Financial liabilities
Non-derivative financial liabilities are recognised at amortised costs, comprising original debt less
principal payments and amortisations.
Derivative instruments
Derivative instruments are measured at fair value.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
14
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
1.13      Financial instruments (continued)
Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of financial instruments that are not part of a
hedging relationship are included in net profit or loss in the period in which the change arises.
Gains and losses from measuring the hedging instruments relating to a fair value hedge at fair value
are recognised immediately in net profit or loss.
Gains and losses from remeasuring the hedging instruments relating to a cash flow hedge to fair
value are initially recognised directly in equity. If the hedged firm commitment or forecast
transaction results in the recognition of an asset or a liability, the cumulative amount recognised in
equity up to the transaction date is adjusted against the initial measurement of the asset or liability.
For other cash flow hedges, the cumulative amount recognised in equity is included in net profit or
loss in the period when the commitment or forecast transaction affects profit or loss.
Where the hedging instrument or hedge relationship is terminated but the hedged transaction is still
expected to occur, the cumulative unrealised gain or loss at that point remains in equity and is
recognised in accordance with the above policy when the transaction occurs. If the hedged
transaction is no longer expected to occur, the cumulative unrealised gain or loss is recognised in
the income statement immediately.
1.14      Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange ruling at the transaction
date. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of
exchange ruling at the balance sheet date. Gains and losses arising on translation are credited to or
charged against income.
1.15      Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events, for which it is probable that an outflow of economic benefits will occur, and where a
reliable estimate can be made of the amount of the obligation. Where the effect of discounting is
material, provisions are discounted. The discount rate used is a pre-tax rate that reflects current
market assessments of the time value of money, and where appropriate, the risks specific to the
liability.
1.16      Comparative figures
Where necessary comparative figures have been reclassified to comply with the current year’s
disclosure.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
15
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
2003
(Unaudited)             (Audited)            (Audited)
R’000
R’000
R’000
2.
Revenue
Gold revenue
574,573
639,527
559,035
By-product revenue
18,646
7,007
1,061
Hedging loss
(3,745)
(2,924)
11,798
Total revenue
589,474
643,610
571,894
3.
Loss from operations
Loss from operations includes the following:
Auditors’ remuneration
(687)
(603)
(679)
- audit fees
(555)
(558)
(297)
- audit fees in respect of previous years
(132)
35
12
- fees for other services
-
(80)
(394)
Royalties paid
(6,549)
-
(2,538)
Employment remuneration
(173,178)               (212,581)             (224,269)
- salaries and wages
(146,402)               (191,620)             (133,574)
- pension fund contributions
(8,642)
(8,818)
(6,921)
- contracted employees
(18,134)
(12,143)
(83,774)
Management, technical, administrative and
secretarial service fees paid to DRDGOLD
Limited and Khumo Bathong Holdings
Limited
(7,849)
(23,967)
(25,626)
Profit on the sale of mining assets
7,518
7
10
Profit on sale of listed investments
-
-
2,080
Dividends received
-
-
580
Pumping subsidy received from government
(14,904)
(20,439)
-
Depreciation
18,289
19,637
45,266
Impairment of mining assets and investments
-
44,963
204,987
Increase / (decrease) in provisions
44,741
38,400
18,465
- Environmental rehabilitation
41,292
28,094
15,958
- Post retirement medical benefits
4,262
4,114
-
- Leave pay
(813)
6,192
2,507
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
16
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
2003
(Unaudited)              (Audited)           (Audited)
R’000
R’000
R’000
4.     Taxation
South African normal tax
– current non-mining tax
166
166
586
Mining tax on mining income is determined on
a formula which takes into account the profit
and revenues from mining operations during
the year. The statutory tax rate, which is
determined by the formula, varies.
Estimated tax losses available for off-set
against future taxable income of
377,845
357,840
338,724
Income other than from mining operations is
taxable at a rate of 38%, since the Company
has, in terms of tax legislation, opted for a tax
regime which does not require the deduction of
Secondary Tax on Companies (STC) on
dividends declared.

Unredeemed capital expenditure allowances
available for set-off against future mining
income
1,081,830
987,463
887,135
No deferred tax asset has been raised as it is
uncertain whether future taxable profits will be
earned against which the assessed tax losses
and unredeemed capital expenditure could be
utilised.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
17
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)              (Audited)
R’000
R’000
5. Mining assets
Total
Cost
Opening balance
1,280,709
1,201,704
Additions
10,024
79,832
Disposals
(415)
(827)
Closing balance
1,290,318
1,280,709
Accumulated depreciation
Opening balance
(1,180,071)            (1,115,528)
Depreciation
(18,289)
(19,637)
Impairment charge
-
(44,963)
Disposals
260
58
Closing balance
(1,198,100)             (1,180,070)
Net carrying value
92,218
100,639
Mine development
Cost
Opening balance
892,471
878,242
Additions
-
14,914
Disposals
-
(685)
Closing balance
892,471
892,471
Accumulated depreciation
Opening balance
(892,471)
(878,242)
Depreciation
-
(1,660)
Impairment charge
-
(12,569)
Disposals
-
-
Closing balance
(892,471)
(892,471)
Net carrying value
-
-

BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
18
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
5. Mining assets (continued)
2005
2004
(Unaudited)
(Audited)
R’000
R’000
Plant and machinery
Cost
Opening balance
363,052
298,808
Additions
10,024
64,244
Disposals
-
-
Closing balance
373,076
363,052
Accumulated depreciation
Opening balance
(265,321)
(216,094)
Depreciation
(17,459)
(16,983)
Impairment charge
-
(32,244)
Disposals
-
-
Closing balance
(282,780)
(265,321)
Net carrying value
90,296
97,731
Equipment and vehicles
Cost
Opening balance
7,184
6,652
Additions
-
674
Disposals
(415)
(142)
Closing balance
6,769
7,184
Accumulated depreciation
Opening balance
(4,995)
(4,118)
Depreciation
(657)
(785)
Impairment charge
-
-
Disposals
-
-
Closing balance
(5,652)
(4,903)
Net carrying value
1,117
2,281
The group and company’s assets are encumbered (refer notes 9 and 10) .
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
19
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
5.      Mining assets
(continued)
2005
2004
(Unaudited)
(Audited)
R’000
R’000
Rehabilitation asset
Cost
Opening balance
18,003
18,003
Additions at cost
-
-
Closing balance
18,003
18,003
Accumulated amortisation
Opening balance
(17,285)
(17,075)
Amortisation
(173)
(209)
Closing balance
(17,458)
(17,284)
Net book value
545
719

The group assets are encumbered (refer notes 9 and 10).
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
20
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
5.1    Impairment of mining assets
In assessing the recoverability of the mining assets, the estimated cash flows have been calculated by using
the following estimates:-
·
Proven and probable reserves as included in the company’s reserve statement. This reserve statement
was reviewed and signed off by an independent technical expert who is of the opinion that the reserves
were calculated in accordance with the SAMREC code. These reserves were included in the company’s
life of mine plan which formed the basis of assessing the recoverability of the company’s mining assets.
·
The selling price of gold has been estimated at R97 644/kg for year 1, which is calculated as follows:
-      an exchange rate of 6,69 between the South African Rand and US Dollar;

-      a gold bullion price of US$ 454 per ounce.

Thereafter, the sales price is increased with an average of 7.92% per annum for the remaining life of
mine.
·
Working costs are based on management’s estimates taking into account historical costs, the level of
future activities, etc. These costs are escalated at 6% per annum for the remaining life of mine.
·
Furthermore, capital expenditure is based on management’s best estimates of expected expenditure which
will be required to economically mine the proven and probable reserved as included in the life of mine
plan.
·
The recoverable amount of the company’s mining assets is dependent upon achieving the budgeted gold
production as included in the life of mine plan. Although these levels are higher than past production,
management is confident that future production is achievable.
·
Future cash flows were discounted at a rate of 10% per annum, which is consistent with previous years.
Management’s estimates of future cash flows are subject to risks and uncertainties. It is therefore possible
that changes could occur which may affect the recoverability of the company’s mining assets. The directors
are of the view that the life of mine plan, on which the impairment calculations are based, is achievable and
that any impairment adjustment would be premature at this stage.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
21
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)              (Audited)
R’000
R’000
6.       Investments
Investments in unlisted mining companies at
fair value and directors' valuation
2,010
2,010
Investment in environmental rehabilitation
trust funds
Opening balance
5,927
5,439
Growth in environmental rehabilitation trust
fund
597
518
Rehabilitation payments from funds
-
(30)
Contributions to the fund
1,415
-
Closing balance
7,939
5,927
Total
9,949
7,937



7.       Inventories
Gold-in-process at net realisable value
6,950
6,159
Consumables and engineering spares
13,048
12,377
19,998
18,536
8.       Share capital
Authorised:
4,000 ordinary shares of R1 each
4
4
Issued:
100 ordinary shares of R1 each
-*
-*
Until the forthcoming annual general meeting the directors have the power to issue the unissued shares
on such terms and conditions as they may determine, subject to Section 222 of the Companies Act.
* Less than R1,000.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
22
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)            (Audited)
R’000
R’000
9. Shareholders' loans
Secured
151,327
149,838
DRDGOLD Limited
a.
49,603
49,603
DRDGOLD Limited
b.
14,848
13,359
DRDGOLD Limited
c.
36,667
36,667
DRDGOLD Limited
d.
34,209
34,209
DRDGOLD Limited
e.
16,000
16,000
The loans are secured by a general notarial bond over assets of the Group.
Unsecured
215,935
214,507
Crown Consolidated Gold
f.
74,232
74,232
Crown Consolidated Gold
g.
23,246
23,245
DRDGOLD Limited
h.
3,871
2 444
Khumo Bathong Holdings (Pty) i.
114,556
114,556
Khumo Bathong Holdings (Pty) j.
30
30
367,262
364,345
a.
The loan bears interest at the publicly quoted basic rate of interest per annum at which the Standard Bank
of South Africa Limited lends on overdraft to its first class corporate borrowers. Interest is calculated
monthly in arrear. The lender has agreed to an indefinite suspension of all payments of principle and
interest.
b.
The loan bears interest at the publicly quoted basic rate of interest per annum at which the Standard Bank
of South Africa Limited lends on overdraft to its first class corporate borrowers. Interest is calculated
monthly in arrear. the loan is repayable on demand. The lender has agreed to an indefinite suspension of
all payments of principle and interest.
c.
The loan bears interest at the publicly quoted basic rate of interest per annum at which the Standard Bank
of South Africa Limited lends on overdraft to its first class corporate borrowers. Interest is calculated
monthly in arrear. The lender has agreed to an indefinite suspension of all payments of principal and
interest.
d.
The loan has no fixed repayment terms. Interest is calculated at prime less 0.5% overdraft rate. The lender
has agreed to an indefinite suspension of all payments of principal and interest.
e.
The loan has no fixed repayment terms. Interest is calculated at 2.5% below prime overdraft rate. The
lender has agreed to an indefinite suspension of all payments of principal and interest.
f.
The loan bears interest at the publicly quoted basic rate of interest per annum at which the Standard Bank
of South Africa Limited lends on overdraft to its first class corporate borrowers. Interest is calculated
monthly in arrear. The lender has agreed to an indefinite suspension of all payments of principal and
interest.
g.
The loan is interest free and repayable on demand. The lender has agreed to an indefinite suspension of all
payments of principal and interest.
h.
The loan is interest free and repayable on demand.
i.
The loan bears interest at the publicly quoted basic rate of interest per annum at which the Standard Bank
of South Africa Limited lends on overdraft to its first class corporate borrowers. Interest is calculated
monthly in arrear. The lender has agreed to an indefinite suspension of all payments of principal and
interest.
j.
The loan is interest free and repayable on demand.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
23
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)
(Audited)
10.
Long-term liabilities
R’000
R’000
Secured
Industrial Development Corporation of
South Africa Limited
55,000
55,000
Industrial Development Corporation of
South Africa Limited
75,306
75,306
130,306
130,306
Responsibility for settlement of this loan was assumed by DRDGOLD Limited after year end
(refer note 18) .

DRDGOLD Limited has agreed to indefinitely suspend all repayments in respect of this loan.
Interest is calculated at the prime overdraft rate.

The loan is secured by a session over mining assets with a net book value of R92.2 million (refer
note 5) .
11.     Employee benefit plans
Defined contribution plans
The Company participates in a number of industry-based retirement plans for the benefit of its
employees. Certain employees participate in the Sentinel Mining Industry Retirement Fund, a
defined contribution fund. Other employees participate in the Crown Employee Benefit Plan and
the Mineworkers’ Provident Fund, both of which are defined contribution plans.
All funds are independently managed and governed by the Pension Funds Act, 1965.
Skilled workers participate in multi-employer plans, which pay certain medical costs. Employer
contributions are determined on an annual basis by the funds. Qualifying dependants receive the
same benefits as active employees other than as discussed below. The Company has no legal
obligation to retirees and their qualifying dependants for any contributions towards these medical
funds.
Provision for post-retirement medical benefits

The Company has an obligation to fund a portion of the medical aid contributions of its employees
after they have retired. A provision for post-retirement medical benefits amounting to
R13.8 million (2004:R9.6 million) has been raised in the balance sheet based on the latest
calculations of independent actuaries performed as at 30 June 2003. Post-retirement medical
benefits are actuarially valued every three years.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
24
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)                (Audited)
R’000
R’000
12.    Provision for environmental rehabilitation
Analysis of rehabilitation provision:
Opening balance
86,509
58,415
Adjustment to provision
138
-
Charge to the income statement
41,292
28,094
Closing balance
127,939
86,509
The provision for rehabilitation comprises:
Provision for decommissioning
54,630
48,318
Provision for restoration
73,309
38,191
Amounts provided for in the balance sheet
127,939
86,509
The Group's estimated cost of closure is
reviewed annually and the directors are
satisfied that adequate provision is made to
meet future obligations. Ongoing
rehabilitation expenditure is included in
working costs.

The trust funds available for future
rehabilitation are included as part of
investments (refer note 6). The monies in
the Trust Fund are invested primarily in
interest-bearing debt securities and may be
used only for environmental rehabilitation
purposes. The group intends to fund the
ultimate rehabilitation costs from the money
invested with the trust fund as well as, at the
time of mine closure, the proceeds on sale
of the remaining assets and gold from plant
clean-up.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
25
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
2005
2004
(Unaudited)          (Audited)
R’000
R’000
13.    Leave pay provision
Balance at the beginning of the year
12,612
6,420
Additional provision made
-
6,192
Amounts incurred and charged to provision
(813)
-
Balance at the end of the year
11,799
12,612
14.   Commitments
Capital expenditure
Capital expenditure approved but not yet
contracted for
1,510
2
This expenditure will be financed from
available cash resources and banking
facilities.
15.    Financial instruments and risk management
In the normal course of its operations the Group is exposed to credit, foreign currency, commodity
price, interest rate and liquidity risk.
15.1 Concentration of risk
The Group's financial instruments do not represent a concentration of credit risk because the Group
deals with major banks and a reputable refinery, and its debtors and loans are regularly monitored.
An adequate level of provision is maintained where necessary.
Because of the international market for gold, the Group believes that no concentration of credit risk
exists with respect to the selected refinery, which refines and sells gold on behalf of the Group.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
26
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
15.     Financial instruments and risk management (continued)
15.2 Foreign currency and commodity price risk
Generally, the Group does not hedge its exposure to gold price fluctuation risk and sells at market
spot prices.
The Group sells its gold in US Dollars. As a result, the Group is subject to transaction exposure from
fluctuations in the foreign currency exchange rates. It is the Group's current policy not to hedge
foreign currency exchange rate risk. The Group is not subject to any other foreign currency exposure.
15.3 Interest rates and liquidity risk
Fluctuations in interest rates impact on the value of short-term cash investments and financing
activities, giving rise to interest rate risk.
In the ordinary course of business, the Group receives cash from its operations, and shareholders
where necessary, and it is required to fund working capital and capital expenditure requirements.
This cash is managed to ensure surplus funds are invested to achieve maximum returns while
minimising risks.
15.4 Fair value
The fair value of a financial instrument is defined as the amount at which the instrument could be
exchanged in a current transaction between willing parties, other than in a liquidation sale.
The carrying amounts of investments, accounts receivable, cash and cash equivalents, bank overdraft,
amounts owing to group companies and accounts payable and accrued liabilities are reasonable
estimates of their fair values because of the short-term maturity of such investments.
Fair values for the long-term liabilities and shareholders’ loans are not determinable as the lenders
have agreed to an indefinite suspension of all payments of principal and interest. These loans are
carried at amortised cost.
16.     Derivative instruments
The Group has entered into hedging transactions which mature in the year ended 30 June 2005. The
transactions consist of forward gold sales of 1700 ounces per month until February 2005 at an
average strike price of US$376.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
27
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
17.
Related parties
The Group has related party relationships with its shareholders, directors and senior management.
Related party transactions are at arm’s length.
17.1
Identity of related parties
·
40% of the company’s shares are held by Crown Consolidated Gold Recoveries Limited and 60%
by Khumo Bathong Holdings Limited.
·
Crown Consolidated Gold Recoveries Limited is a wholly owned subsidiary of DRDGOLD
Limited.
·
Blyvooruitzicht Gold Mining Company Limited is a wholly owned subsidiary of DRDGOLD
Limited.
·
Crown Mines Limited and Main Reef Mines Estate Limited are wholly owned subsidiaries of
Crown Gold Recoveries (Pty) Limited.
17.2
Material related party transactions
2005
2004
Interest        Management
fees
Total
Interest
Management
fees
Total
R’000
R’000
R’000
R’000
R’000
R’000
Crown
Consolidated Gold
Recoveries Limited
8,137
-
8,137
9,319
-
9,319
DRDGOLD
Limited
15,967
6,889
22,856
15,717
21,087
36,804
Khumo Bathong
Holdings Limited
12,557
960
13,517
14,379
2,880
17,259
36,661
7,849
44,510
39,415
23,967
63,382
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
28
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
17.2
Material related party transactions
(continued)
Dr. M.P. Ncholo Funeral Assistance

During 2004, financial assistance was provided by ERPM to the family of Dr. M.P. Ncholo, a
director, with regards to funeral expenses relating to the death of a family member who was a
temporary employee of ERPM. This assistance amounted to R90,447 and was still outstanding at 30
June 2005.
17.3
Material related party balances
2005
2004
R’000
R’000
Included in accounts (payable) /
receivable are the following:
-     Blyvooruitzicht Gold Mining
Company Limited
(125)
-
Amounts owing to group companies
consist of accounts (payable) /
receivable from:
-      Khumo Bathong Holdings
Limited
-
(44)
Details of shareholders’ loans are
disclosed in note 9.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
29
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
18.    Going concern basis
The company and group incurred losses of R80 million and R92 million respectively during the
year ended 30 June 2005 and continued to incur losses after year end. At year end the company's
current liabilities exceeded its current assets by R130 million and R155 million and its total
liabilities exceeded its total assets by R528 million and R689 million respectively. These facts
give rise to significant doubt as to the company's and group’s ability to realise its assets and to
settle its obligations in the normal course of business. Based on the following, the directors
believe that the company and group would be able to continue as a going concern for the year
ahead:
·
East Rand Proprietary Mines Limited was awarded a state pumping subsidy of R1 million
per month from 1 April 2004 to 30 June 2005 plus an additional R7 million as a first phase
to install eight high pressure concrete plugs to isolate the Far East Vertical and South East
Vertical shafts. Government will be assessing the pumping subsidy on a year by year basis
and the payment towards the plugs at the end of each phase of the work. The total project is
planned to be completed by August 2008.
Application for a state pumping subsidy is submitted on a monthly basis for consideration.
East Rand proprietary Mines Limited has no guarantee that the subsidy will be awarded
beyond June 2005. The directors believe that the pumping subsidy remains in place and that
Government assists with providing funds for the eight remaining plugs to be installed.
·
The directors have obtained a letter of financial support from a major shareholder,
DRDGOLD Limited.
·
The forecast cash flows indicate that the company and group will be able to meet its
obligations as and when they fall due.
·
As indicated in note 11, on 20 July 2005, DRDGOLD Limited assumed responsibility for the
Industrial Development Corporation debt which amounted to R55 million and R130 million
for the company and group respectively at year end. The directors of DRDGOLD Limited
have agreed to the indefinite suspension of all repayments in respect of these balances;
·
As indicated in note 10, Crown Consolidated Gold Recoveries Limited and DRDGOLD
Limited have issued guarantees that they will not call for repayment of the amounts due to
them, until such time as the creditors have been paid in full or the company and group are
restored to solvency.

Accordingly, the financial statements have been prepared on the basis of accounting policies
applicable to a going concern.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
30
Notes to the consolidated annual financial statements
for the year ended 30 June 2005, 2004 and 2003
19.       Subsequent events
Khumo Bathong Holdings (Pty) Ltd of KBH have signed a memorandum of understating with
DRDGOLD, Limited regarding the acquisition by KBH of 15% stake in DRDGOLD’s South
African operations. The transaction comprises the exchange of 75% of KBH’s 60% stake in East
Rand Proprietary Mines Limited.
Due to the fact DRDGOLD Limited’s chairman, Dr Paseka Ncholo is also a director of the
company, the transaction will be a related party transaction. It will therefore be subject to
regulatory approvals.
In addition, on the 20 July 2005, DRDGOLD Limited acquired the Industrial Development
Corporations debt. (see note 11).


20.
Contingent liabilities
The company issued an unlimited suretyship in favour of the group’s bankers as security for
overdraft facilities.


21.
Accounting principles generally accepted in the United States of America (US GAAP)
The financial statements have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice (SA GAAP). SA GAAP differs, in certain respects,
from US GAAP. The following is a summary description of these differences:
21.1      Impairment of assets
Under SA GAAP, mining assets are evaluated for impairment based on the latest available
information. For US GAAP purposes, in accordance with the provisions of Statement of
Financial Accounting Standards (
SFAS) No. 144, Accounting for Impairment of Disposal of
Long-Lived Assets
, only impairment indicators in existence at the balance sheet date, are
considered. Accordingly, there is a timing difference of when impairments are recorded under SA
GAAP and US GAAP.
21.2      Post-retirement medical benefits
Under SA GAAP, only the contractual liability for post-retirement medical benefits is accounted
for. Under US GAAP these benefits are accounted in accordance with the provisions of SFAS
No. 106, Employer’s Accounting for Post Retirement Benefits Other Than Pensions, which states
that both the contractual liability and the liability in excess of contributions made by plan
members are accounted for. The result is therefore an increased liability under US GAAP.
21.3      By-product revenue
Under SA GAAP, revenue includes by-product revenue which is an amount generated from the
sale of silver (refer to note 2 to the financial statements). Under US GAAP, by-product revenue is
excluded from the revenue amount and is offset against production costs.
BACKGROUND IMAGE
Crown Gold Recoveries (Proprietary) Limited
31

Notes to the consolidated financial statements
for the year ended 30 June 2005, 2004 and 2003
21.
Accounting principles generally accepted in the United States of America (US GAAP)
(continued)
21.4    Other Comprehensive Income
Under SA GAAP, unrealized gains or losses on investments are included in earnings for the year.
Under US GAAP , SFAS No. 130, Comprehensive Income , unrealized gains or losses are
included as other comprehensive income in the Statement of Stockholders’ Equity.
21.5      Bank overdraft
Under SA GAAP, the bank overdraft balance is offset against cash and cash equivalents in the
cash flow statement. Under US GAAP , SFAS No. 95, Statement of Cash Flows , the movement in
the bank overdraft balance is disclosed under net cash generated in financing activities in the
statement of cash flows.


BACKGROUND IMAGE
1
Exhibit 16.1











EMPEROR MINES LIMITED
Financial Report for the years ended 30 June 2005 and 30 June 2004
(Presented in Australian Dollars)








Contents
Page
Statements of financial performance
2
Statements of financial position
3
Statements of cash flows
4
Notes to the financial statements
5-54
Directors’ declaration
55
Report of Independent Registered Public Accounting Firm
56
BACKGROUND IMAGE
2
Emperor Mines Limited
Statement of Financial Performance
For the years ended 30 June 2005 and 30 June 2004
(In Australian Dollars)
Un-audited

Notes
2005
$'000
2004
$'000
2003
$'000
Revenue from operating activities
66,345
66,716
65,329
Provision for hedging redesignation
22
(1,524)
(2,155)
(4,864)
64,821
64,561
60,465
Revenue from outside operating activities
473
866
725
Revenue from ordinary activities
3
65,294
65,427
61,190
Changes in inventories of finished goods and work in progress
(4,295)
3,923
342
Raw materials and consumables used
(39,188)
(33,217)
(35,251)
Employee expenses
(22,340)
(22,301)
(23,892)
Exploration
4
(318)
(159)
(829)
Administrative expenses
(1,792)
(1,888)
(1,665)
Other expenses from ordinary activities
(4,664)
(5,181)
(3,991)
Earnings/(loss) before interest expense, tax, depreciation and
amortisation
(7,303)
6,604
(4,096)
Borrowing costs
4
(103)
(166)
(138)
Depreciation, amortisation and rehabilitation expense
4
(10,909)
(11,350)
(11,058)
Impairment of mine assets
4
(15,248)
-
-
(Loss) from ordinary activities before income tax

(33,563)
(4,912)
(15,292)
Income tax (expense)
5
(171)
(18)
(337)
(Loss) from ordinary activities after tax expense
(33,734)
(4,930)
(15,629)
Net exchange differences on translation of financial report of
foreign controlled entity
(1,811)
63
(1,681)
Total changes in equity other than those resulting from
transactions with owners as owners

25
(35,545)
(4,867)
(17,310)
$
$
$
Basic earnings/(loss) per share
38
(0.23)
(0.04)
(0.14)
Diluted earning/(loss) per share
38
(0.23)
(0.04)
(0.14)

The above Statements of Financial Performance should be read in conjunction with the accompanying Notes.
BACKGROUND IMAGE
3
Emperor Mines Limited
Statement of Financial Position
As at 30 June 2005 and 30 June 2004
(In Australian Dollars)

Notes
2005
$'000
2004
$'000
Current assets
   Cash assets
6
3,733
3,658
   Receivables
7
3,210
3,396
   Inventories
8
7,413
11,768
   Other
9
643
303
   Deferred debt issue costs
10
183
187
Total current assets
15,182
19,312
Non-current assets
   Restricted cash
6
3,195
3,594
   Inventories
11
140
140
   Property, plant and equipment
12
49,066
65,365
   Deferred tax assets
13
398
340
   Deferred debt issue costs
14
417
624
   Unrealised commodity loss
26
4,388
7,192
Total non-current assets
57,604
77,255
Total assets
72,786
96,567
Current liabilities
   Payables
15
11,278
13,501
   Interest bearing liabilities
16
16,318
5,067
   Current tax liabilities
204
206
   Provisions
17
1,459
1,600
Total current liabilities
29,259
20,374
Non-current liabilities
   Payables
18
500
-
   Interest bearing liabilities
19
152
16,995
   Deferred tax liabilities
20
7
9
   Provisions
21
2,127
1,433
   Provision for hedging redesignation
22
8,542
7,019
   Unrealised commodity loss payable to counter party
26
4,388
7,192
Total non-current liabilities
15,716
32,648
Total liabilities
44,975
53,022
Net assets
27,811
43,545

Contributed Equity
23
163,011
143,200
   Foreign currency translation reserve
24
(22,243)
(20,432)
   Accumulated losses
24
(112,957)
(79,223)
Total equity
25
27,811
43,545

The above Statements of Financial Position should be read in conjunction with the accompanying Notes.












BACKGROUND IMAGE
4
Emperor Mines Limited
Statement of Cash Flows
For the years ended 30 June 2005 and 30 June 2004
(In Australian Dollars)

Notes
2005
$'000
2004
$'000
Un-audited
2003
$'000
Receipts from customers
(inclusive of goods and services tax)
66,561
65,974
66,074
Payments to suppliers and employees (inclusive of goods and
services tax)
(69,473)
(59,913)
(62,512)
Interest received
404
324
604
Settlement of legal action
-
432
-
Borrowing costs
(51)
(208)
(22)
Income tax paid
(233)
(435)
-
Net cash (outflow)/inflow from operating activities
35
(2,792)
6,174
4,144
Payments for property, plant and equipment
(12,171)   (21,473)
(21,889)
Payments made for exploration
(318)
(412)
(676)
Proceeds from sale of property, plant and equipment
38
50
72
Net cash (outflow) from investing activities
(12,451)    (21,835)
(22,493)
Proceeds from issues of shares, net of transaction costs
19,811
17
10,660
Proceeds from borrowings
-
5,199
14,933
Proceeds from/ (Payments for) restricted cash
399
1,331
(2,067)
Repayment of long term loan
(2,442)
-
-
Payments for loan related fees
(22)
(31)
(1,077)
Repayment of capital lease liabilities
(54)
(76)
(89)
Net cash inflow from financing activities
17,692
6,440
22,360
Net increase/(decrease) in cash held
2,449     (9,221)
4,011
Cash at the beginning of the financial year
1,327
10,311
6,350
Effects of exchange rate changes on cash
(43)
237
(50)
Cash at the end of the financial year
6
3,733
1,327
10,311

The above Statements of Cash Flows should be read in conjunction with the accompanying Notes.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the years ended 30 June 2005 and 30 June 2004
(In Australian Dollars unless otherwise stated)
5

1.
Summary of significant accounting policies

This general purpose financial report has been prepared in accordance with Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board and Urgent Issues Group Consensus
Views. All amounts in this financial report are presented in Australian dollars unless otherwise specifically noted.
It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at
valuation. Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year.

The financial report has been prepared on a going concern basis but at the date of this report there remains a
significant uncertainty about the Consolidated entity’s ability to continue as a going concern. This matter is
discussed in Note 1(w).


(a) Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Emperor
Mines Limited ("Company" or "parent entity") as at 30 June 2005 and 30 June 2004, and the results of all controlled
entities for the years ended 30 June 2005, 2004 and 2003 (un-audited). Emperor Mines Limited and its controlled
entities together are referred to in this financial report as the consolidated entity. The effects of all transactions
between entities in the consolidated entity are eliminated in full.
Where control of an entity is obtained during a financial year, its results are included in the consolidated statement
of financial performance from the date on which control commences. Where control of an entity ceases during a
financial year its results are included for that part of the year during which control existed.


(b) Income tax
The consolidated entity adopts the income statement liability method of tax effect accounting.

Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and
accounting income. The tax effect of timing differences, which arise from items being brought to account in
different periods for income tax and accounting purposes, is carried forward in the statement of financial position as
a future income tax benefit or a provision for deferred income tax. Future income tax benefits are not brought to
account unless realisation of the asset is assured beyond reasonable doubt, or if relating to tax losses when
realisation is virtually certain.

To the extent that dividends are proposed by controlled entities incorporated overseas, the consolidated entity has
provided for withholding tax. A provision is also made for the withholding tax on the balance of unremitted profits
that eventually will be remitted to the Company.

Capital gains tax, if applicable, is provided for in establishing period income tax expense when as asset is sold.

As of 1 July 2003 Emperor Mines Limited and its wholly-owned Australian controlled entities are part of a tax
consolidation group.


(c) Foreign currency translation

(i)            Transactions
Foreign currency transactions are initially translated into Australian currency at the rate of exchange ruling at the
dates of the transactions. At balance sheet date amounts payable and receivable in foreign currencies are translated
to Australian currency at rates of exchange current at that date and resulting exchange differences are brought to
account in the statement of financial performance in the year in which the exchange rates change.

(ii)          Foreign controlled entities
As the foreign controlled entities are self sustaining, their assets and liabilities are translated into Australian
currency at rates of exchange ruling at balance date, while revenues and expenses are translated at the average of
rates ruling during the year and equity items at historical rates. Exchange differences arising on translation are taken
directly to the foreign currency translation reserve.


BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
6

1. Summary of significant accounting policies (continued)

(d) Derivatives
The consolidated entity is exposed to changes in interest rates, foreign exchange rates and community prices from
its activities. The consolidated entity uses the following derivative financial instruments to hedge these risks:
interest rate swaps and futures commodity price contracts. Derivative financial instruments are not held for
speculative purposes.

(i)
Anticipated transactions
When anticipated purchase or sale transactions have been hedged, actual purchases or sales which occur during the
designated hedged period are accounted for as having been hedged until the amounts of those transactions in the
designated period are fully allocated against the hedged amounts.

If the hedged transaction is not expected to occur as originally designated, or if the hedge is no longer expected to be
effective, any previously deferred gains or losses are recognised as revenue or expense immediately.

If the hedging transaction is terminated prior to its maturity date and the hedge transaction is still expected to occur
as designated, deferral of any gains and losses which appear prior to termination continue to be deferred and are
included in the measurement of the hedge transaction when it occurs.

In circumstances where a hedging transaction is terminated prior to maturity because the hedged transaction is no
longer expected to occur as designated, any previously deferred gains and losses are recognised in the statement of
financial performance on the date of termination.

Where a hedge is redesignated as a hedge of another transaction, gains or losses arising on the hedge prior to its
redesignation are only deferred where the original anticipated transaction is still expected to occur as designated.
When the original anticipated transaction is no longer expected to occur as designated, any gains or losses relating to
the hedge instrument are included in the statement of financial performance for the period.

Gains or losses that arise prior to and upon maturity of transactions entered into under hedge rollover strategies are
deferred and included in the measurement of the hedged transaction if the transaction is still expected to occur as
designated. If the transaction is no longer expected to occur as designated, the gains or losses are recognised
immediately in the statement of financial performance.

(ii)           Commodity price hedging
Hedging is undertaken in order to minimise the potential for erosion of margin from unfavourable movements in
commodity prices. Gains or costs arising at the time of entering into such hedging transactions are brought to account
in the statement of financial performance over the life of the hedge.

The net amounts receivable or payable under commodity contracts and the associated deferred gains or losses are
recorded in the statement of financial position from the date of inception of the hedge transaction. Refer Note 26.

(iii)          Interest rates swaps
The amounts receivable or payable under interest rate swaps are not recorded in the statement of financial position until
the hedge transaction occurs.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
7

1.   Summary of significant accounting policies (continued)

(e) Revenue recognition
Amounts are recognised as sales revenue when, there has been a passing of risk to the customer, and:
(i)
the product is in a form suitable for delivery and no further processing is required by, or on behalf, of the
producer;
(ii)
the quantity and quality of the product can be determined with reasonable accuracy;
(iii)
the product has been dispatched to the customer and is no longer under the physical control of the
producer; and
(iv)
the selling price can be determined with reasonable accuracy. Sales revenue represents the net proceeds
receivable from the customer.
Other revenues earned by the Consolidated entity are recognised on the following basis:

(i)            interest income as it accrues taking into account the effective yield on the asset;
(ii)
dividend income when the shareholder’s right to receive payment is established;
(iii)
sale of non-current assets at the date control of the goods passes to the buyer, usually when an
unconditional contract of sale is signed; and
(iv)
sub-lease rental income on a straight line basis over the term of the lease.

(f)   Trade and other receivables
Trade and other receivables are carried at amounts due less an estimate made for doubtful receivables based on a
review of all outstanding amounts at year end.

(g)   Inventories

(i)            Bullion in transit for sale is valued lower of cost or net realisable value.
(ii)
Consumable stores are valued at weighted average cost after providing for obsolescence.
(iii)
Gold in Circuit (“GIC”) and ore stock pile, consists of stocks on which further processing is required to
convert them to bullion, and is valued at the lower of cost and net realisable value. The cost of GIC and ore
stock pile is measured on a First in First out (FIFO) basis and includes raw materials, direct labour,
depreciation, amortisation and other direct costs. Net realisable value is the estimate of the selling price in the
ordinary course of business, less the costs of completion and selling expenses.

At the year end the GIC and ore stock pile was valued at net realisable value.

(h)    Recoverable amount of non-current assets
The carrying amounts of non-current assets other than exploration and evaluation expenditure carried forward, are
reviewed to determine whether they are in excess of their recoverable amount at reporting date.

The recoverable amount of non-current asset is the net amount expected to be recovered through the net cash
inflows and outflows arising from its continued use and subsequent disposal.

Where the carrying amount of a non-current asset is greater than its recoverable amount the asset is written down to
its recoverable amount. Where net cash inflows are derived from a group of assets working together, recoverable
amount is determined on the basis of the relevant group of assets. The decrement in the carrying amount is
recognised as an expense in the net profit or loss in the reporting period in which the recoverable amount write-
down occurs.

The expected net cash flows included in determining recoverable amounts of non-current assets are discounted to
their present values using a market-determined, risk-adjusted discount rate. The discount rate used in 2005 was 9%.










BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
8

1.   Summary of significant accounting policies (continued)

(i)   Property, plant and equipment
All assets acquired are initially recorded at their cost of acquisition at the date of acquisition, being fair value of
consideration provided plus incidental costs directly attributable to the acquisition.

All property, plant and equipment assets have limited useful lives and are depreciated, with the exception of
freehold land. Depreciation is on a straight line basis over their estimated useful lives, taking into account estimated
residual values, with the exception of plant and equipment with a deemed useful life equal to the life of the mine. In
this case depreciation uses a units of production basis, charged proportional to current delineated mineable product
of the operation.

Estimates of remaining useful lives used for depreciation of assets which are not expected to last the life of the mine
are as follows:

Mine Buildings                    10 years
Plant and Equipment           5-15 years

Major spares purchased specifically for particular plant are capitalised and depreciated on the same basis as the
plant to which they relate.

(j)    Mine properties and development
Mine properties and development represent the accumulation of all exploration, evaluation and development
expenditure incurred by or on behalf of the entity in relation to areas of interest in which mining of a mineral
resource has commenced or expected to be commenced.

Mine development expenditure incurred by or on behalf of the entity is accumulated separately for each area of
interest in which economically recoverable reserves have been identified to the satisfaction of the directors. Such
expenditure comprises net direct costs and appropriate portion of related overhead expenditure having a specific
nexus with the development property.

When further development expenditure is incurred in respect of a mine property after the commencement of
production, such expenditure is carried forward as part of the mine property only when substantial future economic
benefits are thereby established, otherwise such expenditure is classified as part of the cost of production.

No amortisation is provided until they are reclassified as “Mine properties and development” following a decision to
commence mining.

Amortisation of costs is provided on the unit-of-production method with separate calculations being made for each
mineral resource. The unit-of-production basis results in an amortisation charge proportional to depletion over the
expected life of the operations.

The net carrying value of each mine property and development is reviewed regularly and, to the extent to which this
value exceeds its recoverable amount, that excess is either fully provided against or written off in the financial year
in which this is determined.

Depreciation cost associated with heavy vehicles working on capital development is included in mine properties and
development expenditure.

Revision of accounting estimates
From 1 July 2004, the estimated total life of the mine for the purpose of amortisation and depreciation calculation has
been extended from 10 to 15 years. The net effect of the change in the current financial year was a decrease the
amortisation and depreciation expense of the consolidated entity of $1,150,000. The amortisation and depreciation to
be expensed in the future years will be calculated based on a 15 year mine life.







BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
9


1. Summary of significant accounting policies (continued)

(k) Exploration
Exploration and evaluation expenditure is accumulated separately for each area of interest. Such expenditure
comprises net direct costs and an appropriate portion of related overhead expenditure, but does not include general
overheads or administrative expenditure not having a specific nexus with a particular area of interest.

Each area of interest is limited to a size related to a known or probable mineral resource capable of supporting a
mining operation. Exploration expenditure for each area of interest, other than that acquired from the purchase of
another mining company, is carried forward as an asset provided that one of the following conditions is met:

(i)             such costs are expected to be recouped through successful development and exploitation of the Vatukoula
               area of interest, or

(ii)           exploration activities in the Vatukoula area of interest have not yet reached a stage which permits a
               reasonable assessment of the existence or otherwise of recoverable mineral resources, and active and
              significant operations in relation to the area are continuing.

Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Exploration
expenditure on areas of interest outside of the Vatukoula region are fully provided for. Expenditure is not carried
forward in respect of any area of interest/mineral resource unless the consolidated entity’s rights of tenure to that
area of interest is current.

(l)    Leased non-current assets
A distinction is made between finance leases which effectively transfer from the lessor to the lessee substantially all the
risks and benefits incidental to ownership of leased non-current assets, and operating leases under which the lessor
effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability are established at the present value of minimum lease
payments. Lease payments are allocated between the principal component of the lease liability and the interest
expense.

The lease asset is depreciated on a straight line basis over the shorter of the lease term or the life of the asset. Lease
assets held at the reporting date are being depreciated over a period not exceeding 5 years.

(m)    Cash
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and
cash equivalents comprise cash in hand, deposits held at call with banks, and investments in money market
instruments, net of bank overdrafts. In the balance sheet, bank overdrafts are included in borrowings in current
liabilities.

(n)    Trade and other creditors
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid.

(o)    Interest bearing liabilities
Loans are carried at their principal amounts which represent the value of future cash flows associated with servicing
debt. Interest expense is accrued at the contracted rate.

(p)    Deferred costs
Deferred costs relate to ancillary costs incurred in connection with arrangement of ANZ Bank loan facility. The
deferred costs are amortised from the commencement of the first loan drawdown (February 2003) over the life of
the loan (final repayment due October 2008). The amortisation of deferred cost is recognised as borrowing costs.

(q)    Maintenance and repairs
The costs of maintenance, repair costs and minor renewals are charged as expenses as incurred, except where they
relate to the replacement of a component of an asset, in which case the costs are capitalised and depreciated in
accordance with Note 1(k).


BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
10


1.   Summary of significant accounting policies (continued)

(r)   Employee entitlements

(i)           Wages and salaries, annual leave and sick leave
Liabilities for wages, salaries, annual leave and sick leave and other employee benefits are measured at their
nominal amounts, using the remuneration rates expected to be paid when these liabilities are settled.

(ii)          Long service leave
A liability for long service leave is recognised, and is measured as the present value of expected future payments to
be made in respect of services provided by employees up to the reporting date. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future payments
are discounted using interest rates on national government guaranteed securities with terms to maturity that match,
as closely as possible, the estimated future cash outflows.

(iii)         Superannuation
Superannuation contributions are provided on the basis as described in Note 31.

(s)    Borrowing costs
Borrowing costs are recognised as expenses in the period in which they are incurred, except where they are included
in the cost of qualifying assets.

Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these
circumstances, borrowing costs are capitalised to the cost of the assets. Where funds are borrowed specifically for
the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those
incurred in relation to that borrowing. Where funds are borrowed generally, borrowing costs are capitalised using a
weighted average capitalisation rate.

Exploration and evaluation expenditure carried forward relating to areas of interest which have not reached a stage
permitting reliable assessment of economic benefits are not qualifying assets.

Borrowing costs includes:
·
interest;
·
foreign exchange differences, net of the effect of hedges of borrowings;
·
amortisation of ancillary costs incurred in connection with arrangement of the borrowing; and
·
finance lease charges.

Where interest rates are hedged or swapped, the borrowing costs are recognised net of any effect of the hedge or swap.

(t)     Earnings per share
Basic earnings per share is determined by dividing net profit after income tax attributable to members of the
Company by the weighted average number of ordinary shares outstanding during the financial year, adjusted for the
bonus element in the Company’s rights issue.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares adjusted for the bonus element in the Company’s rights issue.











BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
11

1.    Summary of significant accounting policies (continued)

(u)   Rehabilitation and restoration costs
Expenditures relating to ongoing rehabilitation and restoration programs, including for exploration areas on non-
freehold land, are provided for or charged to costs of production as incurred. A provision for future rehabilitation and
restoration relating to mine closure is accrued based on the estimated mine life.

(v)   Royalties and other mining imposts
Ad valorem royalties and other mining imposts are accrued and charged against earnings when the liability from
production or sale of the mineral crystallises.

(w)   Going concern
The financial report has been prepared on the basis of going concern. This basis presumes that funds will be
available to finance future operations and that the realisation of assets and settlement of liabilities will occur in the
normal course of business. Despite the consolidated entity suffering recurring losses from operations and having a
working capital deficit of $14,077,000 as at 30 June 2005 the directors believe that the consolidated entity will be
able to fund future operations through revised strategic plans and additional funding sourced from DRD Gold
Limited (“DRD Gold”), ANZ bank and intended share placements.

Revised strategic plans
The revised strategic plan has been approved by the Emperor Board with the intention to return Emperor to positive
cashflows from operations. This plan includes the following initiatives:
·
Changes to work practices and shift rosters which are expected to reduce problems associated with
absenteeism, increase fleet utilisation and reduce power consumption;
·
Increase development expenditure and reduce dilution of ore grades by better control of mining heights; and
·
Acceleration of the heavy vehicle rebuild program.

Additional funding
Subsequent to 30 June 2005 Emperor finalised a $10,000,000 convertible loan facility with its major shareholder,
DRD Gold. As at 13 December 2005 Emperor has fully drawn down the $10,000,000 facility (refer Note 37(a) for
more information regarding this facility).

As a part of the proposed transaction between Emperor and DRD (Offshore) Limited (“DRD Offshore”), as
described in Note 37(c), and in addition to the current loan arrangements ANZ Bank has provided Emperor with a
term sheet to establish a new US$42,000,000 loan facility. This facility is expected to fund the cash consideration
payable to DRD Offshore and provide additional working capital. Details of the proposed terms included in ANZ
Bank’s term sheet are described in Note 37(f).

On 5 December 2005 Emperor placed $8,800,000 of new shares with institutional investors and private
shareholders. This placement forms part of Emperor’s intention to raise US$15,000,000 through the placement of
new shares following relevant approvals of the sale and purchase transaction with DRD Offshore as described in
Note 37(c).

On 12 December 2005 the ANZ Bank and Emperor concluded a standstill agreement that has deferred repayment of
Emperor’s existing loan to 30 November 2006. The terms and conditions of this standstill are detailed in Note 19.

The Board acknowledges that until such time as the sale and purchase transaction with DRD Offshore receives
unconditional approval from all relevant parties, the new ANZ Bank loan facility is negotiated, the placement of
new Emperor shares is completed and Emperor satisfies all conditions of the ANZ standstill agreement there
remains uncertainty as to whether Emperor will continue as a going concern and, therefore, whether it will realise its
assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

The financial report has been prepared on the basis of going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
12

2. Segment information

The consolidated entity operates primarily in one business segment being gold mining. The consolidated entity’s
business segment operates in Fiji, with Australia being the home country of the parent company:
Fiji*
Australia
Other
countries
TOTAL
2005 ($'000)
Revenue
64,853
440
1
65,294
Segment Result
(34,325)
448
143
(33,734)
Total Assets
69,852
2,827
107
72,786
Total Liabilities
43,667
1,306
2
44,975
Acquisition of property, plant and equipment
12,164
7
0
12,171
2004 ($'000)
Revenue
65,049
377
1
65,427
Segment Result
(5,325)
249
146
(4,930)
Total Assets
92,688
3,763
116
96,567
Total Liabilities
52,218
802
2
53,022
Acquisition of property, plant and equipment
22,548
8                      -
22,556
2003 Un-audited ($'000)
Revenue
60,556
633
1
61,190
Segment Result
(15,965)
190
146
(15,629)
Total Assets
80,204
9,397
129
89,730
Total Liabilities
40,265
1,062
8
41,335
Acquisition of property, plant and equipment
21,179
6                      -
21,185
*includes unrealised provision for hedging re-structure of $1,524,000 (2004 $2,155,000, 2003 $4,864,000)

With the exception of Fiji no other individual country contributed more than 10% of consolidated revenues and
consolidated assets.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the years ended 30 June 2005 and 30 June 2004
(In Australian Dollars unless otherwise stated)
13
Un-
audited

2005
$'000
2004
$'000
2003
$'000
3.    Revenue
Revenue from operating activities
Gold sales
66,345
66,716
65,329
Less Provision for hedge redesignation
(1,524)
(2,155)       (4,864)
64,821
64,561
60,465
Revenue from outside the operating activities
Interest received
409
324
594
Sale of non-current assets
38
50
72
Sub-lease rentals
26
60
59
Settlement of legal action
-
432
-
473
866
725
Revenue from ordinary activities
65,294
65,427
61,190

4.    Profit/(loss) from ordinary activities
(Loss) from ordinary activities before income tax expense
includes the following specific net gains and expenses:
(a) Net gains and expenses
Net gains on disposal of property, plant and equipment
-
6
-
Other foreign exchange gain
-
4
95
(b) Expenses
Cost of goods sold
81,264
68,125
62,792
Depreciation
   Buildings
   Plant and equipment

136
141
139

4,926
4,780
4,290
Insurance spares
37
53
66
Total depreciation
5,099
4,974
4,495
Amortisation
   Mine property and development
   Plant and equipment under finance leases
 
5,924
7,096
6,852

32
58
151
Total amortisation
5,956
7,154
7,003
Total depreciation and amortisation
11,055
12,128
11,498
Less depreciation capitalised (Note 40)
(279)
(778)
(440)
Total depreciation and amortisation
10,776
11,350
11,058
Mine Rehabilitation
133
-
-
Total Depreciation, amortisation and rehabilitation expense
10,909
11,350
11,058
Exploration and evaluation expenditure written off
Vatukoula
281
117
687
Tuvatu
37
42
142
318
159
829
Write down of inventories to net realisable value
1,843
-
-
Borrowing costs
Interest on ANZ working capital facility
51
30
-
Interest and finance charges paid/payable
952
883
203
Deferred borrowing cost amortisation
166
187
78
Exchange loss/(gain) on foreign currency borrowings
(1,066)
(834)
-
Amount capitalised
-
(100)
(143)
Borrowing cost expensed
103
166
138
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
14
Un-
audited

2005
$'000
2004
$'000
2003
$'000
4.     Profit/(loss) from ordinary activities
(continued)
Net loss on disposal of property, plant and equipment
47
190
10
Provisions
Employee entitlements
2,460
2,094
2,104
Government taxes
Gold tax
1,768
1,949
1,037
Import duty on fuel
333
2,013
1,294
Total government taxes
2,101
3,962
2,331
Rental expense relating to operating leases
      Minimum lease payments
      Sub-lease
104
32
160
(26)
(15)
(74)
Total rental expense relating to operating leases
78
17
86


(c) Individually significant expenses included
in profit from ordinary activities

During the year the consolidated entity has written down its mining asset (Mine properties and development) by
$15,248,000 to its recoverable amount of $12,708,000. The Board resolved this as a result of recent poor
performance, continuing high oil prices and the mine’s discounted cash-flow model supporting the value of the
related asset.
5.
Income tax
(a) The aggregate amount of income tax attributable to the financial
year differs from the amount calculated on the operating (loss). The
differences are reconciled as follows:
(Loss) from ordinary activities before income tax expense
(33,563)
(4,912)      (15,292)
Income tax calculated @ 30%
(10,069)
(1,474)
(4,588)
Tax effect of permanent differences:
Non deductible expenses
61
75
1,763
Export profit deductions
-
(83)
(632)
Equity raising costs
(78)
(43)
-
Sundry items
308
66
57
Deferred tax assets not brought to account (valuation allowance)
10,328
1,647
3,968
Effect of different tax rates on overseas income
(378)
(107)
(264)
Under/(over) provision in previous year
(1)
(63)
33
Aggregate income tax expense
171
18
337
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
15
Un-audited
2005
$'000
2004
$'000
2003
$'000
5.
Income tax (continued)
(b) The directors estimate that the potential future income tax
benefit at 30 June 2005 in respect of tax losses and timing
differences not brought to account is
56,795
47,404
45,363

Gross tax losses of $91,635,000 as at 30 June 2005 expire as follows

Year of expiry
Gross tax loss
$'000
2010
39,053
2011
44,384
2013
8,197
TOTAL
91,634


This benefit for tax losses will only be obtained if:
(i)
the consolidated entity derives future assessable income of a nature and of an amount sufficient to enable
the benefit from the deductions for the losses to be realised, and
(ii)
the consolidated entity continues to comply with the conditions for deductibility
imposed by tax legislation, and
(iii)
no changes in tax legislation adversely affect the consolidated entity in realising the benefit from the
deductions for the losses.
6.
Cash assets

Cash at bank and on hand – current
3,733
3,658
10,311
Restricted cash at bank – non-current
3,195
3,594
4,925
Cash at the end of the financial year as shown in the statement of
cash flows is as follows:
Cash at bank and on hand
3,733
3,658
10,311
Less: Bank overdraft (Note 16)
- (2,331)
-
Balances per statement of cash flows
3,733
1,327
10,311

Restricted cash at bank
The funds held as restricted cash include the following:
(i)
An amount of US$1,700,000 was held at balance date as insurance reserve account with ANZ Bank where
the Bank can make withdrawals from the funds to meet reparation costs in the event of loss or damage to
mine assets which are subject to the consolidated entity’s self insurance policy.
(ii)
Cash deposits held as security.

The deposits are bearing floating interest rates between 1.00% and 5.70% (2004 –1.00% and 5.48%).
2005
$'000
2004
$'000
7.
Current assets – Receivables
Trade debtors
742
1,480
Other debtors
2,542
2,003
Less: Provision for doubtful debts
(74)
(87)
Total Receivables
3,210
3,396
Other debtors are carried at notional amounts and are normally settled on 30 days terms. Other debtors, net of
provisions, approximate net fair value. Other debtors are non interest bearing.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
16
2005
$'000
2004
$'000
8.
Current assets – Inventories
Consumable stores - at cost less provision
4,542
4,378
Gold in circuit - at cost
-
7,390
Gold in circuit - at net realisable value
2,871
-
7,413
11,768
9.
Current assets – Other
Prepayments
643
303

10.
Current assets-Deferred costs
Deferred borrowing costs
183
187

11.
Non-current assets – Inventories
Consumable stores - at cost less provision
140
140

12.
Non-current assets – Property, plant
and equipment
Land and building
Freehold land-at cost
1,833
1,909
Building on freehold land-at cost
1,906
1,460
Less accumulated depreciation
(563)
(447)
1,343
1,013
Total land and buildings
3,176
2,922
Plant and equipment
Plant and equipment-at cost
45,866
44,836
Less: Accumulated amortisation
(12,944)     (8,925)
32,922
35,911
Plant and equipment under finance lease
348
164
Less: Accumulated amortisation
(88)
(59)
260
105
Total plant and equipment
33,182
36,016
Total property, plant and equipment
36,358
38,938
Mine properties and development
Mine properties and development- at cost
-
46,870
Less: Accumulated amortisation
-     (20,680)
Mine properties and development- at recoverable amount
12,708
-
12,708
26,190
Exploration property- at cost
-
237
Total mine properties and development, property, plant and
equipment
49,066
65,365
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
17

12.
Non-current assets – Property, plant and equipment (continued)

Reconciliation - 2005
Reconciliation of the carrying value for each class of property, plant and equipment is set out below:
Freehold
Land
$'000
Mine
buildings
$'000
Plant and
equipment
$'000
Leased
plant and
equipment
$’000
Mine prop.
and dev.
$'000
Exploration

$’000
Total

$'000
Carrying amount at 1 July 2004
1,909
1,013
35,911
105
26,190
237
65,365
Additions
-
509
3,387
191
8,166
155
12,408
Disposals
-
(3)
(102)
-
-
-
(105)
Transfers
-
-
-
-
227
(227)
-
Expenditure Written off/
Impairment
-
-
-
-    (15,248)
(155)     (15,403)
Depreciation/
Amortisation (Note 4)
-
(136)      (4,926)
(32)       (5,924)
-    (11,018)
Exchange differences on translation
of self sustaining foreign operation
(76)
(40)      (1,348)
(4)
(703)
(10)      (2,181)
Carrying amount at 30 June 2005
1,833
1,343
32,922
260
12,708
-
49,066

Reconciliation - 2004
Reconciliation of the carrying value for each class of property, plant and equipment is set out below:
Freehold
Land
$'000
Mine
buildings
$'000
Plant and
equipment
$'000
Leased
plant and
equipment
$’000
Mine prop.
and dev.
$'000
Exploration

$’000
Total

$'000
Carrying amount at 1 July 2003
1,909
1,125
30,925
273
20,837
-
55,069
Additions
-
39
9,972
-
12,545
254
22,810
Disposals
-
(7)
(214)
(13)
-
-
(234)
Transfers
-
-
94
(94)
17
(17)
-
Depreciation/Amortisation
(Note 4)
-
(141)       (4,780)
(58)       (7,096)
-    (12,075)
Exchange differences on translation
of self sustaining foreign operation
-
(3)
(86)
(3)
(113)
-
(205)

Carrying amount at 30 June 2004
1,909
1,013
35,911
105
26,190
237
65,365
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
18
2005
$'000
2004
$'000
13.
Non-current assets – Deferred tax assets
Future income tax benefit of parent
398
340

14.      Non-current assets – Deferred cost
Deferred borrowing costs
417
624

15.       Current liabilities – Payables
Trade creditors
9,786
11,553
Other creditors and accruals
1,492
1,948
11,278
13,501

16.      Current liabilities – Interest bearing
liabilities Secured
Bank overdraft
-
2,331
Bank loan (Note 19)
16,231
2,694
Lease liabilities (Note 30)
87
42
16,318
5,067
Details of the security relating to each of the secured liabilities are set out in Note 19.

17.      Current liabilities – Provisions
Employee entitlements (Note 31)
1,166
1,350
Other
293
250
1,459
1,600
18.
Non- current liabilities - Payables
Loan restructure fees
500
-

Relates to restructure fees payable in September 2006 to ANZ Bank.

19.
Non-current liabilities – Interest bearing liabilities (secured)
Secured
Bank loan
-
16,942
Lease liabilities (Note 30)
152
53
Total secured non-current interest bearing
liabilities
152
16,995

Financing arrangements
Unrestricted access was available at balance
date to the following lines of credit:
Bank overdraft
-
3,603
Bank loan
-
21,032
Total facilities
-
24,635
Used at balance date
16,231
21,967
Unused at balance date
-
2,668
16,231
24,635
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
19

19.
Non-current liabilities – Interest bearing liabilities (secured) (continued)

The loan from ANZ Banking Group Limited (“ANZ Bank”), used by the consolidated entity to fund its Phase 2
Capital Expansion Project relating to infrastructure, development and underground fleet replacement, is secured by
Emperor Gold Mining Company Limited as follows:
(i)
a first registered deed of charge over all present and future assets and undertakings of the controlled entity
other than excluded assets (SPL’s 1283, 1296, 1418, 1360, 1411 and CX 626 and all the shares in Tuvatu
Gold Mining Company Limited);
(ii)
a first registered mortgage over all freehold and leasehold land;
(iii)
a first registered mortgage over Special Site Rights (SSR) 6, 7, 8 and Special Mining Leases (SPL 54, 55
and 56); and
(iv)
a first registered Bill of Sale over its motor vehicles.

The interest rate relating to the loan is based on the London Inter Bank Offered Rate (LIBOR) plus a margin of
2.5% and the principle covenants include the requirement for:

(i)
The consolidated entity to retain an Insurance Buffer Amount of $5,000,000 (2004: $5,000,000) in
immediately available cash (including an Insurance Reserve Amount of US$1,700,000); and
(ii)
Emperor Mines Limited to unconditionally and irrevocably guarantee the obligations of Emperor Gold
Mining Company (Fiji), a controlled entity, until completion of the Phase 2 Capital Expansion Project. On
completion, additional financial covenants would be implemented. As at 12 December 2005 Emperor had
not achieved completion and the guarantee over Emperor Gold Mine Limited’s (Fiji) obligations remains
in place.

In relation to the existing financial arrangements and original loan covenants Emperor has entered a Standstill
agreement with ANZ Bank that postpones all principal repayments until 30 November 2006.

This standstill is conditional on the transaction with DRD Offshore Limited (as described on Note 37 (c) )
proceeding in accordance with a predetermined timetable that will include shareholder approval by 14 February
2006, regulatory approval by 28 February 2006 and completion by 31 March 2006. In addition, ANZ must be
provided with reports in May 2006, July 2006 and September 2006 that satisfy ANZ that Emperor is moving
towards obtaining additional fundraising from share placements.

The standstill agreement also allows ANZ Bank to conduct a formal review of all Vatukoula loan facilities on 30
November 2006 and if it is not satisfied with the results of that review those facilities shall be repayable within 90
days.

Due to the conditional nature of the waivers granted in the standstill agreement by the ANZ Bank the non-current
portion of the ANZ Bank debt amounting to $11,600,000 has been reclassified as a current liability rather than non-
current, resulting in the total loan balance of $16,231,000 being classified as current.

The overdraft facility negotiated with the ANZ Bank in 2004 of FJD$8,000,000 ($6,400,000) was available as a
general overdraft facility. Upon completion of the Company’s rights issue in November 2004, the amounts drawn
down against the facility of $2,800,000 were repaid and the facility extinguished.

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
20
2005
$'000
2004
$'000
20.
Non-current liabilities – Deferred
tax liabilities
Provision for deferred income tax
7
9

21.
Non-current liabilities – Provisions
Employee entitlements (Note 31)
861
633
Withholding tax liabilities
1,135
800
Mine rehabilitation
131
-
2,127
1,433

22.
Provision for hedging redesignation

Provision for hedging redesignation
8,542
7,019

Following Emperor’s hedge book redesignation during the June 2003 year, in accordance with the consolidated
entity’s accounting policy a provision for hedging redesignation was recorded in relation to each of the financial
years upon which the redesignation has an impact. The provision for hedging redesignation reflected in the
Consolidated Statement of Financial Performance in the amount of $1,524,000 is a non cash unrealised loss in
respect of 18,800 ounces (18,800 x $81 dollars per ounce) that were originally planned for delivery during the 2005
financial year which were rescheduled for delivery in later periods in line with loan facility requirements.

The provision for hedging redesignation reflected in the Consolidated Statement of Financial Position in the amount
of $8,543,000 represents an unrealised loss in respect of 105,390 ounces at $81 per ounce had the gold price
remained at $627/oz. As this provision relates to an unrealised loss, it will be reversed over a 7 year period
corresponding to the period of the redesignation. The table below shows the net movement in ounces as a result of
the redesignation and the corresponding provisions recorded and reversed in future years. Over a 7 year period this
adjustment has a net zero effect.
Financial Year ending
30 June
Ounces (deferred)/
additional
Unrealised
(loss)/gain
$’000
Provision cum.
Balance
$’000
2003
(60,010)
(4,864)
(4,864)
2004
(26,580)
(2,155)
(7,019)
2005
(18,800)
(1,524)
(8,543)
2006
(19,020)
(1,541)
(10,084)
2007
45,155
3,660
(6,424)
2008
66,380
5,380
(1,044)
2009
12,875
1,044
-
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
21
2005
$000
2004
$000
(un-audited)
2003
$000
23.
Contributed equity
(a)
Share capital

Ordinary Shares Fully paid
163,011
143,200
143,183

(b) Movements in ordinary share capital
Date
Details
Notes
Number of
shares
Issue
price
$'000

1 July 02
Balance
98,374,132
132,523
2 July 02
Share placement
(e)
12,500,000
$0.81
10,125
18 Aug 02
Share purchase plan
(f)
1,246,113
$0.77
960
13 June 03     Exercise of 2001 options
(d)
91,667
$0.34
31
11,116
Less: Transaction cost
          arising on share issues
(456)
30 June 03    Balance
112,211,912
143,183
22 Sept 03
Exercise of 2001 options
(d)
50,000
$0.34
17
30 June 04    Balance
112,261,912
143,200
1 July 04
Exercise of 2001 options
(d)
308,333
$0.34
105
1 July 04
Exercise of 2001 options
(d)
500,000
$0.30
150
1 July 04
Exercise of 2001 options
(d)
116,666
$0.62
72
15 Nov 04
Rights Issue
44,578,668
$0.45
20,061
20,388
Less: Rights issue cost
(577)
30 June 05  Balance
157,765,579
163,011

(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in
proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary
shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to
one vote.

At 30 June 2005 all ordinary shares were fully paid.

(d) Share options
During the financial year 924,999 (2004- 50,000 and 2003 – 91,667) shares were issued by the Company as a result
of exercise of options.

Outstanding options are detailed in Note 27.

(e) Share placement
In July 2002, the Company arranged a placement of 12,500,000 shares at 81cents per share raising $10,125,000.
The shares were placed with institutional clients of BNP Paribas Equities, both overseas and in Australia.

(f) Share purchase plan
In July 2002 the Company undertook a Share Purchase Plan (“SPP”) to provide eligible shareholders with the
opportunity to participate in a further capital raising associated with the Phase 2 expansion plan. The price for the
SPP was set at 77 cents, representing a 15% discount to the weighted average traded price of the Company’s shares
for the 5 trading days ended 21 June 2002. As a result, the Company was successful in raising some $960,000.

BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
22
Un-audited
2005
$'000
2004
$'000
2003
$'000
24.
Reserves and Accumulated losses
(a)
Reserves :
Foreign currency translation reserve
(22,243)    (20,432)
(20,495)
Movements:
Foreign currency translation reserve
Balance at beginning of year
(20,432)   (20,495)
(18,814)
Net exchange differences on translation
of foreign controlled entity
(1,811)
63
(1,681)
Balance at end of year
(22,243)   (20,432)        (20,495)
(b)
Accumulated losses
Accumulated losses at beginning of
year
(79,223)   (74,293)
(58,664)
Net (loss) attributable to members of
Emperor Mines Limited
(33,734)     (4,930)
(15,629)
Accumulated losses at end of year
(112,957)   (79,223)
(74,293)
(c)
Nature and purpose of reserves
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity, Emperor Gold Mining Company
Limited, Jubilee Mining Company Limited, Koula Mining Company Limited are taken to the foreign
currency translation reserve, as described in accounting policy Note 1(c)(ii).
Un-audited
2005
$'000
2004
$'000
2003
$'000
25.
Equity
Total equity at the beginning of the
financial year
43,545
48,395
55,045
Total changes in equity recognised in the
statement of financial performance
(35,545)     (4,867)
(17,310)
Transactions with owners as owners:
Contribution of equity, net of
transaction fees
23(b)
19,811
17
10,660
Total equity at the end of the financial
year
27,811
43,545
48,395
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
23

26.
Financial instruments

The consolidated entity is party to derivative financial instruments in the normal course of business in order to
hedge exposure to fluctuation in interest rates and gold price.

(i)          Interest rate swap
Bank loans of the consolidated entity currently bear an average variable rate of 4.93%. In order to minimise
fluctuation in interest rates, 70% of the loan has been hedged by entering into interest rate swap contracts under
which the Company is obliged to receive interest at variable rates and pay interest at fixed rates until October 2008.
The contracts are settled on a net basis and the net amount receivable or payable at the reporting date is included in
the term loan. The following table sets out the fair values of interest rate swaps.
Un-audited
2005
$'000
2004
$'000
2003
$'000

Fair value of interest rate swap-(payable)
(302)
(200)
(509)

The fixed interest rate payable on the hedged 70% of the loan was 4.34% (2004: 2.18%) and the average variable
rate received was 2.32% (2004: 1.11%).

(ii)          Commodity contracts
As part of the loan facility requirements, the consolidated entity’s forward gold under sales contracts was
redesignation to align with the period of loan facility. At 30 June 2005 the consolidated entity was committed to
delivering 221,815 ounces of gold under forward sales contracts at an average price of $599 per ounce by 31
December 2008.
Maturity
Date
Ounces to be delivered
Exercise price
2005
2004
2005
$
2004
$
2003-2004
-
-
-
599
2004-2005
-
66,340
-
599
2005-2006
66,120
66,120
599
599
2006-2007
66,440
66,440
599
599
2007-2008
66,380
66,380
599
599
2008-2009
12,875
12,875
599
599
211,815
278,155

Mark-to-market position of Commodity contracts
2005
$'000
2004
$'000
Unrealised commodity loss
4,388
7,192
Unrealised commodity loss payable to
counter party
4,388
7,192

At 30 June 2005, the net unrealised mark-to-market loss on the total open commodity position of 211,815 ounces
was $4,388,000 based on an A$ gold price of $573 per ounce (June 2004: $7,192,000 loss based on A$ gold price of
$569).

(iii) Credit risk
The credit exposure of derivatives is represented by the net fair values of the contracts disclosed. The consolidated
entity has a credit risk in relation to derivative financial instruments in the event of non-performance by counter
parties. To counter this risk, financial instruments are only entered into with counter parties with high credit ratings.

Emperor delivers its gold to AGR Matthey (Australia), who refines the gold and then sells the gold on to third
parties. All proceeds are received within a week of delivery. The concentration of credit risk in Australia is
mitigated by the reputable nature of the sales agent and their customers and the settlement of proceeds within 6
days.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
24

26.
Financial instruments (continued)

(iv)
Interest rate risk exposure
The consolidated entity’s exposure to interest rate risk and the effective weighted average interest rate for each class
of financial assets and financial liabilities is set out in the table below.
Fixed Interest
Maturing in:
Floating
Interest
rate
1 Year
or less
1 Year to
5 years
Non-
Interest
Bearing
Total
Notes
$’000
$’000
$’000
$’000
$’000
2005
Financial assets
Cash
6
6,884
-
-
44
6,928
Receivables
7
-
-
-
3,210
3,210
6,884
-
-
3,254
10,138
Weighted average interest rate
4.71%
Financial liabilities
Bank loan
16
16,231
-
-
-
16,231
Payables
15, 18
-
-
-
11,778
11,778
Lease liabilities
16, 19
-
87
152
-
239
Interest Rate Swap*
(11,393)
3,255
8,138
-
-
4,838
3,342
8,290
11,778
28,248
Weighted average interest rate
4.93%
4.43%
4.43%
2004
Financial assets
Cash
6
7,247
-
-
5
7,252
Receivables
7
-
-
-
3,396
3,396
7,247
-
-
3,401
10,648
Weighted average interest rate
4.14%
Financial liabilities
Bank overdraft
16
2,331
-
-
-
2,331
Bank loan
16, 19
19,636
-
-
-
19,636
Payables
15, 18
-
-
-
13,501
13,501
Lease liabilities
16, 19
-
42
53
-
95
Interest Rate Swap*
(16,773)
4,233
12,540
-
-
5,194
4,275
12,593
13,501
35,563
Weighted average interest rate
4.72%
2.36%
2.36%
*Notional principal amount
The net fair value of monetary financial assets and financial liabilities of the consolidated entity approximates their
carrying values.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
25

27.
Director and executive disclosures

Directors
The following persons were directors of Emperor Mines Limited during the financial year.

Chairman-non-executive
J A Wall

Executive Directors
M Wellesley-Wood (Managing Director- appointed on 4 August 2004)
G B Starr (resigned as managing Director and CEO on 4 August 2004)
M Jacobsen (appointed as a Director on 11 January 2005 and resigned on 31 May 2005)
Non-executive directors
D A Ballhausen
D C Baker (resigned 11 January 2005)
R M Willcocks
C D Patterson (Removed on 9 September 2004)
R Johnson (re-elected 9 September 2004)
S W G Elliott (Removed on 9 September 2004)
M Marriott (appointed 6 October 2005)
I Murray (appointed 11 January 2005)
                  (resigned 6 October 2005)

Executives (other than directors) with the greatest authority for strategic direction and management

The following persons were the five executives with the greatest authority for the strategic direction and
management of the consolidated entity (“specified executives”) during the financial year.
Name
Position
Employer
M Marriott
Chief Operations Officer (starting from 1
June 05)
DRD Gold-
seconded to
Emperor
S O'Connor
Acting General Manager (starting from 1
May 05)
DRD Gold-
seconded to
Emperor
T Woodward
Manager Technical Services
Emperor Gold Mining Co. Ltd
S Solanki
Financial Controller
Emperor Australia Pty Ltd.
T Strydom
Manager Operations
Emperor Gold Mining Co. Ltd

Not all of the above persons were specified executives during the year ended 30 June 2004.

T Woodward resigned from Emperor Gold Mining Co. Ltd on 12 August 2005.
S Solanki resigned from Emperor Australia Limited on 31 July 2005. From that date he has become a DRD Gold
Australasia employee and has been seconded to Emperor.
T Strydom resigned from Emperor Gold Mining Co. Ltd on 31 August 2005.

Remuneration of directors and executives

Principals used to determine the nature and amount of remuneration

The remuneration committee, consisting of three non-executive directors, advises the board on remuneration
policies and practices generally taking into account the performance of the consolidated entity and, and makes
specific recommendations on remuneration packages and other terms of employment for executive directors, other
senior executives and non-executive directors.

The objective of the remuneration committee is to ensure reward for performance is competitive and appropriate for
the results delivered with achievement of strategic objectives and the creation of value for shareholders, and
conforms with market best practice for delivery of reward. The Board (through remuneration committee) ensures
that executive rewards are appropriate on an industry basis, are structured to meet retention objectives, have
reference to suitable production outcomes and satisfy the following criteria for good reward governance practices:
•               competitiveness and reasonableness
•               acceptability to shareholders
•               performance linkage alignment of executive compensation
•               transparency
•               capital management.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
26

27        Director and executive disclosures (continued)

Non-executive directors
Fees and payments to non-executive directors reflect the demands which are made on and the responsibilities of the
directors. Non-executive directors' fees and payments are reviewed annually by the Board.

The current non-executive directors fees are determined within an aggregate directors’ fee limit, which was
approved by shareholders in November 1999. The maximum current aggregate Non-executive directors’ fee limit
stands at $250,000.

Retirement allowance for directors
J A Wall, R M Willcocks and D A Ballhausen have retirement benefits in accordance with their letters of
appointments.

Executive pay
Executive remuneration is reviewed annually having regard to performance against mine based production goals set at
the start of the year, relevant comparative information and independent expert advice.

The executive pay and reward has four components:
·
base pay and benefits comparable with industry norms and benchmarked against other mining companies
within the region
·
short-term performance incentives relating to mine performance - achievement of production outcomes (Key
Performance Indicators)
·
long-term incentives through participation in the Share-based compensation-Emperor’s Employees and
Directors Incentive Share option Plan. and
·
other remuneration such as superannuation.

The combination of these comprises the executive's total remuneration.

Base pay
Structured as a total employment cost package which may be delivered as a mix of cash and salary sacrifice
arrangement at the executives’ discretion.

Base pay for senior executives is benchmarked against other mining companies within the region and are reviewed
annually to ensure executive's pay is competitive with the market. An executives’ pay is also reviewed on
promotion.
There are no guaranteed base pay increases fixed in any senior executives' contracts.
Benefits
Executives receive benefits including health insurance and car parking.

Short term incentives

Key performance indicators (KPI) are measured by the Board for Chief Executive Officer and by the Chief
Executive Officer for other senior executives by which the performance of executives can be monitored.

KPI’s are set annually and are structured to reflect the Board’s expectations regarding the performance of the
consolidated entity and its operations and activities. Parent level executives KPI’s are awarded based on a number
of factors including share price performance and achievement of budgeted total cash cost per ounce.

KPI’s at operations level are set by Chief operations officer based on Board’s expectations. Senior executives at
operations level are awarded KPI’s based on achievement of factors such:
·
Gold production above budgeted levels
·
Achievement of budgeted production cost
·
Achievement of budgeted cash cost per ounce
·
Achievement of development above budgeted levels
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
27

27           Director and executive disclosures (continued)

Emperor Mines Employee Option Plan

As part of strategy to retain senior employees through long-term incentives share options were issued to employees
under the terms of Emperor Mines Limited Employees and Directors Incentive Share Option Plan during the year.

Information on the Emperor Mines option plan is set out in Note 31.

Remuneration of directors and executives (continued)

Details of remuneration
Details of the remuneration of each director of Emperor Mines Limited and each of the five specified executives of
consolidated entity are set out in the following tables.
Directors of Emperor Mines Limited
2005
Primary
Post-employment
Equity
Name
Cash
salary
and fees
Cash
bonus
Non-
monetary
benefits
Super-
annuation
Retirement
benefits
Options
Total
$
$
$
$
$
$
$
J A Wall
80,000
-
-
7,200
-
-
87,200
M Wellesley-Wood*
153,595
-
-
-
-
-
153,595
D A Ballhausen
50,000
-
-
4,500
-
-
54,500
R M Willcocks
40,000
-
-
3,600
-
-
43,600
I Murray ***
-
-
-
-
-
-
-
R Johnson**
-
-
-
-
-
-
-

D C Baker ***
15,916
-
-
1,433
-
-
17,349
M Jacobsen ****
219,489
85,779
10,585
20,642
-
30,660
367,155
G B Starr*
49,452
80,000
3,105
3,439
-
-
135,996
S W G Elliott**
5,788
-
-
-
-
-
5,788
C D Patterson**
5,788
-
-
521
-
-
6,309

Total
620,028
165,779
13,690
41,335
-
30,660
871,492
*G B Starr resigned from the position of managing director and chief executive officer and M Wellesley-Wood was
appointed as managing director on 4 August 2004.
** C D Patterson and S W G Elliott were removed as directors of the Company and R Johnson was re-elected as a
director of the Company at the General Meeting held on 9 September 2004.
*** I Murray was appointed as non-executive directors of the Company 11 January 2005. He resigned on 6 October
2005. D C Baker resigned as director on 11 January 2005.
****M Jacobsen was appointed as operations director on 11 January 2005. Before this appointment he was the
Company’s Chief operations officer. Amount shown above include all Mr Jacobsen’s remuneration during the
period whether as a director or as the Chief operations officer. Amounts received in his position as an executive
director amounted to $113,914, made up of cash salary and fees of $92,669, non-monetary benefits of $4,811,
superannuation of $8,601 and options of $7,833. M Jacobsen resigned as director on 31 May 2005.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
28

27.
Director and executive disclosures (continued)

Remuneration of directors and executives (continued)
2004
Primary
Post-employment
Equity
Name
Cash
salary
and fees
Cash
bonus
Non-
monetary
benefits
Super-
annuation
Retirement
benefits
Options
Total
$
$
$
$
$
$
$
G B Starr
286,631
60,000
21,771
49,542*
275,229*
-
693,173
J A Wall
80,000
-
-
28,460
240,000
-
348,460
C D Patterson
30,000
-
-
2,700
-
-
32,700
D A Ballhausen
50,000
-
-
18,000
150,000
-
218,000
R M Willcocks
40,000
-
-
14,400
120,000
-
174,400
S W G Elliott
30,000
-
-
-
-
-
30,000
M Wellesley-Wood
40,000
-
-
-
-
-
40,000
D C Baker
30,000
-
-
2,700
-
-
32,700

Total
586,631
60,000
21,771
115,802
785,229
-
1,569,433
*As part of GB Starr’s resignation package his post employment benefit was paid out on 4 of August 2004.

Other executives of consolidated entity
Specified executives of consolidated entity
2005
Primary
Post-employment
Equity
Name
Cash
salary
and fees
Cash
bonus
Non-
monetary
benefits
Super-
annuation
Retirement
 
benefits
Options
Total
$
$
$
$
$
$
$
M Marriott
24,149
-
-
-
-
-
24,149
S O'Connor
36,333
-
-
-
-
-
36,333
T Woodward
161,734
30,858
7,200
15,711
-
17,347
232,849
T Strydom
169,031
8,135
3,854
13,550
-
6,854
201,423
S Solanki
157,038
31,768
-
13,417
-
16,134
218,357

Total
548,285
70,761
11,054
42,678
-
40,335
713,111
2004
Primary
Post-employment
Equity
Name
Cash
salary
and fees
Cash
bonus
Non-
monetary
benefits
Super-
annuation
Retirement
benefits
Options
Total
$
$
$
$
$
$
$
M Jacobsen
260,790
50,000
11,320
20,642
-
14,106
356,858
F Hart
154,578
3,375
20,052
14,226
-
13,908
206,139
S Kenworthy
111,913
4,427
10,156
10,109
-
-
136,605
T Woodward
135,246
31,802
16,835
14,646
-
7,694
206,223
S Solanki
154,697
12,188
-
12,385
-
5,130
184,400

Total
817,224
101,792
58,363
72,008
-
40,838
1,090,225

Service agreements

M Marriott, Chief Operating Officer
·
DRD Gold employee, seconded to Emperor -No fixed term commencing 1 June 2005.
·
Recharged by DRD Gold of the total remuneration package plus 10% relocation allowance for the portion of
services provided to Emperor.

S O'Connor, Mine General Manager
·
DRD Gold employee, seconded to Emperor on a full time basis -No fixed term commencing 1 May 2005.
·
Recharged by DRD Gold of the total remuneration package plus 10% relocation allowance for the portion of
services provided to Emperor.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
29

27.
Director and executive disclosures (continued)

Remuneration of directors and executives (continued)

T Woodward, Technical Services Manager
·
Term of agreement- No fixed term commencing 11 October 1995.
·
Base Salary, inclusive of superannuation, for the year ending 30 June 2005 of $166,000.
·
No termination benefits.
·
Resigned on 12 August 2005.

T Strydom, Mine Operations Manager
·
Term of agreement- No fixed term commencing 2 October 2003.
·
Base Salary, inclusive of superannuation, for the year ending 30 June 2005 of $166,000.
·
No termination benefits.
·
Resigned on 31 August 2005.

S Solanki, Financial Controller
·
Term of agreement-No fixed term commencing 29 September 1999.
·
Base Salary, inclusive of superannuation, for the year ending 30 June of $150,000.
·
No termination benefits.
·
Resigned on 31 July 2005, from that date he has become a DRD Gold Australasia employee and has been
seconded to Emperor.

Share-based compensation-Employees and Directors Incentive Share option Plan

The establishment of the Emperor Mines Limited Employees and Directors Incentive Share Option Plan was
approved by shareholders at the 1995 annual general meeting. Eligible participants of the Plan are employees (as
determined by the Board) with not less than six months service and Directors upon appointment.

The terms and conditions of each grant of options affecting remuneration in this or future reporting periods are as
follows:
Grant
date
Expiry
date
Exercise
price
Value per
option at
grant date
Date exercisable
29-11-01
28-11-06
$0.29
$0.16
33% after 30 Nov 02; 33% after 30 Nov 03;
34% after 30 Nov 04.
31-10-02
30-10-07
$0.57
$0.28
33% after 1 Nov 03; 33% after 1 Nov 
04; 34% after 1 Nov 05.
02-12-04
02-12-09
$0.63
$0.235
33% after 2 Dec 05; 33% after 2 Dec 06;
34% after 2 Dec 07.


Options are granted under the plan for no consideration. Options are granted for a five year period, however may
only be exercised as to 33.33% after 1 year of service from the date of grant, as to 66.66% after 2 years of service
from the date of grant and 100.00% after 3 years of service from the date of grant.

Options granted under the Plan lapse after 5 years from the date of grant and after 90 days of the of the holder
ceasing to be an eligible participant for any reason.

Options granted under the plan carry no dividend or voting rights.

The exercise price of options is determined at the absolute discretion of the Board giving consideration to share
price on the day of issue.

Options terms altered
As per rule 6.8 of Emperor Mines Limited Employees and Directors Incentive Share Option Plan, the exercise price
of all the unissued options was altered as a result of the Rights issue in November 2004.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
30

27.
Director and executive disclosures (continued)
Remuneration of directors and executives (continued)

Rule 6.8 requires the exercise price of unissued options be reduced by a calculated theoretical value if the Company
carry out Rights issue and
·
makes an offer of shares pro-rata to all or substantially all shareholders for a subscription price less than the
market price and
·
no shares have been allocated to option holders.

The alteration details are as follows:
(a)    date of alteration: 12 November 2004
(b)    share price at grant date:$0.63
(c)    the terms of the options immediately prior to alteration
Option Class
No of Options
Exercise price
Expiry date
Vesting terms
EMP-AAD
225,000
0.34
28-Nov-06
33% after 30 Nov 02; 33%
after 30 Nov 03;
 34% after 30 Nov 04.
EMP-AAE
383,333
0.62
30-Oct-07
33% after 1 Nov 03; 33%
after 1 Nov 04; 
34% after 1 Nov 05.
(d)    the terms of the options after alteration
Option Class
No of Options
Exercise price
Expiry date
Vesting terms
EMP-AAD
225,000
0.29
28-Nov-06
33% after 30 Nov 02; 33%
after 30 Nov 03; 
34% after 30 Nov 04.
EMP-AAE
383,333
0.57
30-Oct-07
33% after 1 Nov 03; 33%
after 1 Nov 04; 
34% after 1 Nov 05.
(e)    Difference in value per share
Option Class
Fair value per share
immediately before
alternation
Fair value per share
immediately after
alternation
Difference
EMP-AAD
$0.16
$0.30
$0.14
EMP-AAE
$0.28
$0.23
($0.05)
Fair value at alternation date are determined using a Black-Scholes option pricing model that takes into account the
exercise price, the terms of the option, the vesting and criteria, the impact if dilution, the non-tradable nature of the
option, the share price at the alteration date and expected price volatility of the underlying share, the expected
divided yield and the risk free interest rate for the remainder term of the option.

The model inputs for options altered during the year ended 30 June 2005 included:
Option class–
EMP-AAD
Option class–
EMP-AAE
(a) exercise price
0.29
0.57
(b) grant date
29-Nov-01
31-Oct-02
(c) expiry date
28-Nov- 06
30-Oct 07
(d) alteration date
12-Nov-04
12-Nov-04
(e) share price at alteration date
$0.63
$0.63
(f) expected volatility of the Company’s
shares
60%
60%
(g) expected dividend yield
0%
0%
(h) risk-free interest rate:5.067%
5.067%
5.067%
(i) expected vesting probability :80%
80%
80%
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
31

27.
Director and executive disclosures (continued)
Remuneration of directors and executives (continued)

Options provided as remuneration
Details of options over ordinary shares in the Company provided as remuneration to each director of Emperor
Mines Limited and each of the five specified executives of the consolidated entity are set out below. When
exercised, each option is convertible into one ordinary share of Emperor Mines Limited. Further information on the
options is set out in Note 31.
Name
Number of options granted
during the 2005 year
Number of options vested
during the 2005 year
Directors of Emperor Mines Limited
M Jacobsen
250,000
91,666

Specified executives of the consolidated entity
M Marriott
-
-
S O'Connor
-
-
T Woodward
150,000
50,000
S Solanki
200,000
33,334
T Strydom
150,000
-

Shares provided on exercise of remuneration options
Name
Date or exercise of options
Number of ordinary shares
issued on exercise of
options during the 2005
year
Directors of Emperor Mines Limited
G B Starr
01-July-2004
500,000
M Jacobsen
01-July-2004
91,667

Specified executives of the consolidated entity
M Marriott
-
-
S O'Connor
-
-
T Woodward
01-July-2004
100,000
S Solanki
01-July-2004
66,666
T Strydom
-
-

The amounts paid per ordinary share by each director and executive on the exercise of options at the date of exercise
were as follows:
Exercise date
Amounts paid per
share
01 July 2004
$0.30
01 July 2004
$0.34
01 July 2004
$0.62

No amounts are unpaid on any shares issued on the exercise of options.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
32

27.
Director and executive disclosures (continued)

The numbers of options over ordinary shares in the Company held during the financial year by each director of
Emperor Mines Limited and each of the five specified executives of the consolidated entity are set out below.

Remuneration of directors and executives (continued)
Name
Balance at 1
July 2004
Granted
during the
year
Exercised
during the
year
Balance at
30 June
2005
Vested and
exercisable at
30 June 2005
Directors of Emperor Mines Limited
G B Starr
500,000
-
(500,000)
-
-
M Jacobsen
183,333
250,000
(91,667)
341,666
91,666

Specified executives of the consolidated entity
M Marriott
-
-
-
-
-
S O'Connor
-
-
-
-
-
T Woodward
150,000
150,000
(100,000)
200,000
50,000
S Solanki
100,000
200,000
(66,666)
233,334
33,334
T Strydom
-
150,000
-
150,000
-

All options vested were exercisable at the end of the year. 2,383,333 options issued were not vested at reporting
date.

Share holdings
The numbers of shares in the Company held during the 2005 financial year by each director of Emperor Mines
Limited and each of the five specified executives of the consolidated entity, including personally-related entities, are
set out below.
Name
Balance at 1
July 2004
Received during
the year on the
exercise of
options
Other
changes
during the
year
Balance at
30 June
2005
Directors of Emperor Mines Limited
Ordinary shares
J A Wall
112,792
-
(112,792)
-
D A Ballhausen
2,000
-
(2,000)
-
R M Willcocks
102,000
-
(102,000)
-
M Wellesley-Wood
-
-
-
-
R Johnson
-
-
-
-
I Murray
-
-
-
-

M Wellesley-Wood, and I Murray are Chief Executive officer and Chief Financial and Corporate Development
officer of DRD Gold respectively. R Johnson is Divisional Director Australasia, of DRD Gold. DRD Gold held
71,511,904 shares in the Company at 30 June 2005 (30 June 2004: 29,413,015).
Name
Balance at 1
July 2004
Received
during the
year on the
exercise of
options
Other
changes
during the
year
Balance at
30 June
2005
Specified executives of the consolidated entity
Ordinary Shares
M Marriott
-
-
-
-
S O'Connor
-
-
-
-
T Woodward
-
100,000
(100,000)
-
S Solanki
-
66,666
(66,666)
-
T Strydom
-
-
-
-

Loans to directors and executives
No loans were made to directors of Emperor Mines Limited and five specified executives of the consolidated entity,
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
33


27.
Director and executive disclosures (continued)
Remuneration of directors and executives (continued)

Other transactions with directors and specified executives

Directors of Emperor Mines Limited
A director and chairman, J A Wall is a director is a shareholder of Jim Wall and Associates Pty Limited. Emperor
Mines Limited engaged his services on matters associated with the November 2004 Rights issue and on the
financial and operational restructuring package during June 2005. The fees charged are comparable to similar
transactions negotiated in the market.

A director, R M Willcocks is a director and shareholder of Dunraven Holding Pty Ltd (formally Elaland Pty
Limited). Emperor Mines Limited engaged his services during the year for evaluating financing options available
for the proposed new power station at mine site and on matters associated with the November 2005 Rights issue.
The fees charged are comparable to similar transactions negotiated in the market.

A managing director, M Wellesley-Wood is the CEO of DRD Gold, Emperor’s major shareholder. Emperor Mines
Limited reimburses DRD Gold for his services as managing director of Emperor Mines Ltd. The fees charged are
comparable to similar transactions negotiated in the market.

Amounts recognised as an expense in respect of the above
2005
2004
$’000
$’000
Business development
-
23
Power generation project
15
50
Due Diligence fees-Convertible note
6
-
Professional services
150
-
171
73

Amounts recognised as share issue cost
(Contributed equity)
Rights issue
66
-

Specified executives of the consolidated entity

No other transactions were carried out with specified executives outside the normal employment terms.

28.               Remuneration of auditors

This financial report prepared for the years ended 30 June 2005 and 30 June 2004 was audited by KPMG Sydney.
KPMG’s audit fees are being reimbursed by the consolidated entity’s major shareholder, DRD Gold Limited. No
taxation or other services have been provided by KPMG to Emperor Mines Limited.

29.             Contingent liabilities

At 30 June 2005, the consolidated entity had contingent liabilities in respect of bank and other guarantees and other
matters arising in the ordinary course of business amounted to $718,000 (2004 $659,000) to third parties.

The consolidated entity is defendant in various legal actions and the outcome of such actions are not expected to
give rise to any significant loss not already provided for in the financial statements.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
34

30.
Commitments for expenditure

Capital Commitments
2005
$'000
2004
$'000
Commitments for the acquisition of plant and
equipment contracted for at the reporting date
but not recognised as liabilities payable:
Within 1 year
799
803
Exploration Commitments
In order to maintain current rights of tenure to
exploration and mining tenements, the consolidated
entity has the following discretionary exploration
expenditure requirements up until expiry of the leases.
These obligations, which are subject to renegotiation
upon expiry of the leases, are not provided for in the
financial statements and are payable:
Within 1 year
165
558
Finance Leases
Commitments in relation to finance leases are
payable as follows:
Within 1 year
100
48
Later than 1 year but not later than 5 years
166
55
Minimum lease payments
266
103
Less: Future finance charges
(27)
(8)
Recognised as a liability
239
95
Representing lease liabilities:
Current (Note 16)
87
42
Non-current (Note 19)
152
53
239
95
The weighted average interest rate implicit in the leases is 8.8% (2004 - 8.4%).
Operating leases
Commitments for minimum lease payments in
relation to non-cancellable operating leases are
payable as follows:
Within one year
83
32
Later than one year but not later than 5 years
309
-
Commitments not recognised in the financial
statements
392
32
Future minimum lease payments expected to be
received in relation to non-cancellable sub-
leases of operating leases not recognised in the
financial statements


78


15
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
35

31.
Employee benefits
2005
$'000
2004
$'000
Employee benefit and related on-costs liabilities
Included in other creditors and accruals-current
(Note 15)
563
1,004
Provision for employee entitlements- current (Note
17)
1,166
1,350
Provision for employee entitlements- Non-current
(Note 21)
861
633
Aggregate employee benefit and related on-costs
liabilities
2,590
2,987

Employee numbers
2005
2004

Number of employees at reporting date
1,986
2,009

Employees’ and Directors’ Incentive Share option Plan
The establishment of the Emperor Mines Limited Employees’ and Directors’ Incentive Share Option Plan was
approved by shareholders at the 1995 annual general meeting.

Eligible participants of the Plan are employees (as determined by the Board) with not less than six months service
and Directors upon appointment.

Options are granted under the plan for no consideration. Options are granted for a five year period, however may
only be exercised as to 33.33% after 1 year of service from the date of grant, as to 66.66% after 2 years of service
from the date of grant and 100.00% after 3 years of service from the date of grant. Options granted under the Plan
lapse after 5 years from the date of grant and after 90 days of the of the holder ceasing to be an eligible participant
for any reason.

The exercise price of options is determined at the absolute discretion of the Board. Options may not be issued under
this Plan if, immediately following the issue, the total number of shares which would, on exercise of any such
options if they were to be issued by the Company, when aggregated with the number of Shares issued by the
Company pursuant to any other Employee Share or Share Option Scheme during the previous five (5) years, would
exceed five per cent (5%) of the total number of Shares in the share capital of the Company on issue at the proposed
Date of Issue (and disregarding any Shares issued or to be issued to a Director or to an employee situated at the time
of the receipt of the offer or invitation outside Australia), or such other number of Options, from time to time, above
which number the issue of Options would give rise to a requirement for the Company to prepare and issue a
prospectus referable to the proposed issue of Options or Shares on exercise of the Options.

Set out below are summaries of options granted under the plan.
Grant
date
Expiry
date
Exercise
price
Balance at
the start of
the year
Issued
during the
year
Exercised
during the
year
Lapsed
during the
year
Balance at
the end of
the year
*
Number
Number
Number
Number
Number

2005
29-11-01
28-11-06
$0.30
500,000
-
(500,000)
-
-
29-11-01
28-11-06
$0.29
533,333
-
(308,333)
-
225,000
31-10-02
30-10-07
$0.57
500,000
-
(116,666)
(216,667)
166,667
02-12-04
02-12-09
$0.63
-
2,300,000
-
-
2,300,000
Total
1,533,333
2,300,000
(924,999)
(216,667)
2,691,667
*These exercise prices have been adjusted for the effect of the rights issue as disclosed in
Note 27.

2004
29-11-01
28-11-06
$0.30
500,000
-
-
-
500,000
29-11-01
28-11-06
$0.34
583,333
-
50,000
-
533,333
31-10-02
30-10-07
$0.62
500,000
-
-
-
500,000
Total
1,583,333
-
50,000
-
1,533,333
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
36

31.
Employee benefits (continued)

Options exercised during the financial year and number of shares issued to employees on the exercise of options.
Exercise date
Fair value of
shares at
issue date
2005
Number
2004
Number
01-Jul-2004
$0.78
924,999
-
22 Sep 2003
$0.34
-
50,000
924,999
50,000
Options vested at the reporting date
308,334
975,000

2005
$
2004
$
Aggregate proceeds received from
employees on the exercise of options
and recognised as issued capital
327,166
17,000

2005
$000
2004
$000
Fair value of shares issued to
employees on the exercise of options
as at their issue date
723
38

Superannuation Fund
The consolidated entity has a legal obligation to contribute to relevant superannuation plans. In Fiji, the funds are
remitted to the Fiji National Provident Fund (a defined contribution retirement fund), a National regulatory body
and a trustee managed employee super fund for expatriate employees. In Australia, Superannuation Guarantee (SG)
contributions are made to employee nominated trustee-administrated funds. These plans are generally funded by
contributions from employees and by the consolidated entity, taking account of the statutory requirements of the
relevant countries.

32.
Related parties
Directors and specified executives
Disclosures relating to directors and specified executives are set out in Note 27.

Other related parties
Since becoming a major shareholder in July 2004, DRD Gold have provided Emperor with mining and technical
support on cost plus 10% relocation allowance. The aggregate amounts included in determination of loss from
ordinary activities before income tax that resulted from transaction with each class of other related parties:
Un-audited
2005
$000
2004
$000
2003
$000
Professional services
150
-
-
Mine-Technical Services
177
-
-
Reimbursement of Expenses
220
-
-
Sublease Income
10
-
-
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
37

32.
Related parties (continued)

The aggregate amounts payable to each
class of other related parties:
Un-
audited
2005
$000
2004
$000
2003
$000
DRD Gold
169
-
-

I Murray and R Johnson, non executive directors of the Company are Chief Financial and Corporate Development
officer of DRD Gold and Divisional Director DRD Gold Australasia respectively, are not compensated by the
Company or any of its subsidiaries.

33.
Investments in controlled entities

Name of entity
Country of
incorporation

Equity holding
2005
2004
%
%
Emperor Gold Mining Company
Limited
Fiji
100
100
Jubilee Mining Company Limited
Fiji
100
100
Koula Mining Company Limited
Fiji
100
100
Tuvatu Gold Mining Company
Limited
Fiji
100
100
Sovereign Insurance Company
Limited
Vanuatu
100
100
Emperor Finance Limited
Australia
100
100
Emperor Australia Pty Limited
Australia
100
100

(i)
All holdings are in the ordinary share capital of the undertaking concerned.


34.
Interest in joint venture

The consolidated entity’s 49% interest in a joint venture of South Pacific Infrastructure Pty Limited, incorporated on
5 January 2000, for the purpose of pursuing the development of infrastructure projects in the South Pacific was
disposed of during the 2005 year. There has been no financial implication as a result of this disposal
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
38

35.
Reconciliation of operating loss from ordinary activities after income tax to net cashflows from
operating activities
Un-audited
2005
2004
2003
$000
$000
$000
Operating (loss) after income tax
(33,734)
(4,930)
(15,629)
Depreciation and amortisation
10,739
11,297
11,058
Exploration and evaluation expenditure
written off/provided against
318
159
829
Net loss/(profit) on sale of non-current assets
47
184
10
Non Cash borrowing cost
(157)
37
82
Impairment of mine assets
15,248
-
-
Net exchange rate difference
43
(237)
50
Deferred tax provision
(60)
(235)
(33)
Change in operating assets and liabilities:
- (Increase)/decrease in receivables
186
(802)
686
- (Increase)/decrease in inventories
4,355
(3,466)
(552)
- (Increase)/decrease in other operating
assets
(129)
77
(1,152)
- (Decrease)/increase in trade creditors
(2,222)
1,990
2,701
- (Decrease)/increase in other operating
liabilities
2,576
2,282
5,724
- (Decrease)/increase in provision for
income tax
(2)
(182)
370
Net cash flow provided by/(used in)
operating activities
(2,792)
6,174
4,144
36.
Non-cash financing and
investing activities
Un-audited
2005
2004
2003
$000
$000
$000
Acquisition of light vehicles by means of
finance lease
191
-
164

37.
Events subsequent to balance date

(a)
Financing and operating assistance from DRD Isle of Man
On 29 August 2005 Emperor shareholders approved a $10,000,000 convertible loan facility to be provided by DRD
(Isle of Man) Limited (“DRD Isle of Man”). DRD Isle of Man is a 100% owned subsidiary of Emperor’s major
shareholder, DRD Gold. The convertible loan facility is secured by a first ranking charge over Emperor’s 100%
interest in the Tuvatu Gold Prospect in Fiji. Amounts drawn down under this facility are subject to an interest
charge at a rate of 9% per annum and the facility is repayable upon receipt of the Tuvatu Gold Prospect sale
proceeds or by 31 December 2007.

The convertible loan facility is convertible, at DRD Gold’s election, into ordinary fully paid shares of Emperor at a
conversion price equal to the lower of $0.30 per Emperor share or the 45 day volume weighted average price of
Emperor shares on Australian Stock Exchange prior to the date of conversion.

As at 13 December 2005 Emperor has fully drawn down this $10,000,000 convertible loan facility.

Emperor has also entered into an Operational Support Agreement whereby DRD Gold provides management and
technical services to the consolidated entity.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
39

37.
Events subsequent to balance date (continued)

(b)
Tuvatu Gold Prospect sale agreement
On 16 November 2005, Emperor agreed to sell its 100% interest in the Tuvatu Gold Prospect to Alcaston Mining
NL (“Alcaston”), an unrelated party, for $4,000,000 cash and 38,000,000 Alcaston shares issued at a deemed price
of $0.15 per share.

Alcaston will also pay a $10 per ounce royalty to Emperor in respect of gold produced from the Tuvatu Gold
Prospect current resource area (as defined in the agreement), up to a maximum of $1,000,000 per annum and a total
of $2,000,000.

For all gold produced outside the current resource area, an additional royalty of 1% of the value of all gold produced
is payable (excluding the first 200,000 ounces of production).

This agreement requires Alcaston shareholder approval pursuant to section 611 of the Corporations Act as
Emperor’s ownership interest in Alcaston will exceed 20%. Following such approval it is anticipated that Mr.
Richard Johnson, an Emperor Director, will join the Board of Alcaston as a non-executive director.

(c)             Acquisition of DRD Gold’s Papua New Guinea assets
On 16 November 2005, Emperor concluded a sale and purchase agreement with DRD Gold, a related party,
whereby Emperor acquires 100% of DRD Gold’s wholly owned subsidiary, DRD (Isle of Man) Limited (“DRD Isle
of Man”).

DRD Isle of Man owns DRD Gold’s Papua New Guinea assets, comprising a 20% interest in the Porgera Joint
Venture (“Porgera”), a 100% interest in the Tolukuma Gold Mine (“Tolukuma”) and exploration tenements in
Papua New Guinea.

Before this sale and purchase transaction can occur, DRD Gold must restructure its offshore operations. This
involves DRD Isle of Man transferring its 45.33% interest in Emperor and the $10,000,000 convertible loan facility
it has extended to Emperor to DRD Gold (Offshore) Limited (“DRD Offshore”). DRD Gold will then sell DRD Isle
of Man to DRD Offshore and DRD Offshore will on-sell DRD Isle of Man to Emperor.

The restructuring of DRD Isle of Man is subject, inter alia, to the following conditions precedent:
·
DRD Gold shareholder approval;
·
South African Reserve Bank (“SARB”), approval; and
·
Other regulatory consents.

The purchase consideration payable by Emperor to DRD Offshore is subject to certain completion adjustments to
reflect the change in the capital position of both Emperor and DRD Isle of Man between 1 October 2005, which is
the effective date, and completion of the transaction. The purchase consideration will be settled by a combination of
new Emperor shares issued to DRD Offshore and cash.

The sale and purchase transaction between Emperor and DRD Offshore is subject, inter alia, to the following
conditions precedent:
·
The restructuring of DRD Isle of Man becoming unconditional;
·
Approval by the Australian Foreign Investment Review Board;
·
SARB approval;
·
Emperor shareholder approval;
·
There being no material adverse change in either Emperor or the gold assets; and
·
A number of regulatory and banking consents and approvals being obtained in relation to the existing Vatukoula
project debt facility from ANZ.
The independent Directors of Emperor have recommended that shareholders approve the transaction and have
commissioned Grant Thornton Corporate Finance to prepare an independent expert’s report on the proposal for
Emperor shareholders. Emperor will circulate a shareholder notice relating to the purchase transaction to all
Emperor shareholders by the end of December 2005.



BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
40

(d)
Intention to undertake a fundraising
On 17 November 2005, Emperor announced its intention to raise approximately US$15,000,000 through the
placement of new shares following shareholder approval of the sale and purchase transaction with DRD Offshore.
On 5 December 2005 Emperor placed $8,800,000 of new shares with institutional investors and private
shareholders. The balance of funds is expected to be raised in early 2006.

(e)
ANZ Bank standstill agreement
On 12 December 2005 Emperor entered a standstill agreement with ANZ Bank. Under this agreement the ANZ
Bank has agreed to:
·
Not enforce current covenants attached to the loan existing loan facility;
·
Postpone all principal repayments on the existing loan until 30 November 2006;
·
To make available further financial accommodation by way of equipment leasing to Emperor in an aggregate
amount up to $4,000,000; and
·
Consent to the sale and purchase agreement described in Note 37(c)

The terms and conditions of this agreement are detailed in Note 19.

(f)
Proposed new ANZ new facility agreement
In order to fund Emperor’s cash component of the total consideration to be paid to DRD Offshore for the purchase
of DRD Isle of Man and provide additional working capital, the ANZ Bank has provided Emperor with a term sheet
to establish a new US$42,000,000 facility. This facility would include a project debt facility and a working capital
facility.

The project debt facility would be available for drawdown from the date the sale and purchase agreement referred to
in Note 37(c) is finalised until 30 June 2007. For amounts drawn down under the facility Emperor would be
required to make interest only payments until 1 January 2007 when scheduled quarterly principle repayments
commence. These repayments would continue until 31 December 2011 (5 years).

The Working Capital Facility would be available for general working capital purposes but not for the purpose of
meeting interest or principal repayments under the Project Debt Facility. The Working Capital Facility would be
available from the date the sale and purchase agreement referred to in Note 37(c) is finalised and would be
renewable annually.

As a part of the overall facility, ANZ Bank will require Emperor to
·
Develop and maintain relevant risk management programs to mitigate interest rate, foreign exchange and
commodity price movements;
·
Maintain an offshore Debt Service Reserve Account to fund the equivalent of the following 3 months of interest
and principal repayments due; and
·
Satisfy the following financial covenants:
o
Debt Service Cover Ratio (“DSCR”) (both historic and forward looking) not less than 1.40;
o
Loan Life Cover Ratio (“LLCR”) not less than 1.50;
o
Project Life Cover Ratio (“PLCR”) not less than 1.80;
o
Reserve Life Cover Ratio (“RLCR”) not less than 1.30;
o
If, on any Calculation Date, any of the Financial Covenants are breached, then all free cash would be
placed in a Lockup Account. If the Financial Covenant is not restored by the next Calculation Date, then all
funds in the Lockup Account and all free cash would be applied to the repayment and permanent reduction of
the Project Debt Facility until the Financial Covenants are restored.
Should amounts be drawn down under this facility prior to 30 June 2006, an additional funding review will be
conducted by the ANZ Bank to ensure sufficient funds are available to fund a specific project in relation to the
Porgera mine.

The terms of the facilities are still being finalised and are subject to a number of conditions, including agreement on
security of the facility and completion of the proposed sale and purchase agreement referred to in Note 37(c).
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
41

38.
Earnings per share
Un-audited
2005
$
2004
$
2003
$
Basic earnings (loss) per share
(0.23)
(0.04)
(0.14)
Diluted earnings (loss) per share
(0.23)
(0.04)
(0.14)
Un-audited
2005
Shares
2004
Shares
2003
Shares
Weighted average number of ordinary
shares used as the denominator in
calculating basic earnings per share.
143,879,606
118,956,338
111,975,657
Weighted average number of ordinary
shares and potential ordinary shares
used as the denominator in calculating
diluted earnings per share.
143,879,606
118,956,338
111,975,657
Un-audited
2005
$'000
2004
$'000
2003
$'000
Earnings used in calculating:
Basic earnings (loss) per share
(33,734)
(4,930)
(15,629)
Diluted earnings (loss) per share
(33,734)
(4,930)
(15,629)


BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
42
39.
Impacts of Adopting Australian equivalents to International Financial Reporting Standards

The Australian Accounting Standards Board (AASB) is adopting International Financial Reporting Standards
(IFRS) for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian
equivalents to IFRS, and the Urgent Issues Group has issued interpretations corresponding to IASB interpretations
originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations
Committee. These Australian equivalents to IFRS are referred to hereafter as AIFRS. The adoption of AIFRS will
be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005 and the
year ending 30 June 2006.

Entities complying with AIFRS for the first time will be required to restate their comparative financial statements to
amounts reflecting the application of AIFRS to that comparative period. Most adjustments required on transition to
AIFRS will be made, retrospectively, against opening accumulated losses as at 1 July 2004.

The known or reliably estimable impacts on the financial report for the year ended 30 June 2005 had it been
prepared using AIFRS are discussed below. The expected financial effects of adopting AIFRS for the statements of
financial performance and the statements of financial position are commented upon below with descriptions of the
differences. No material impacts are expected in relation to the statements of cash flows.

Although the adjustments disclosed in this note are based on management's best estimate of expected standards and
interpretations, and current facts and circumstances, these may change. For example, amended or additional
standards or interpretations may be issued by the AASB and the IASB. Therefore, until the consolidated entity
prepares its first full AIFRS financial statements, the possibility cannot be excluded that the accompanying
disclosures may have to be adjusted.

(a) Share Based Payments

Under AASB 2 Share-based Payment, from 1 July 2004 the Consolidated entity is required to recognise an expense
for those options that were issued to employees under the Emperor Mines Limited Employees and Directors
Incentive Share Option Plan.

This will result in a change to the current accounting policy. Currently no expense is recognised for equity-based
compensation.

The consolidated entity has utilised the available exemption within AASB 1 First-time Adoption of Australian
Equivalents to International Financial Reporting Standards for not recognising an adjustment for options issued
prior to 7 November 2002 or which had vested prior to 1 January 2005.

If the policy required by AASB 2 Share-based Payment had been applied during the year ended 30 June 2005, the
share based payment reserve within equity at 30 June 2005 would have been $105,000 and the employee benefit
expense for the year ended 30 June 2005 would have been $105,000.

The options issued are measured at fair value at the grant date by using the Black-Scholes option pricing model.

There would have been no impact to accumulated losses at 1 July 2004 as the above adjustments only relate to
options which have been granted after that date.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
43

39. Impacts of Adopting Australian equivalents to International Financial Reporting Standards (continued)

(b) Income Tax

Under AASB 112 Income Taxes, deferred tax balances are determined using the balance sheet method which
calculates temporary differences based on the carrying amounts of an entity's assets and liabilities in the statement
of financial position and their associated tax bases. In addition, current and deferred taxes attributable to amounts
recognised directly in equity are also recognised directly in equity.

This will result in a change to the current accounting policy, under which deferred tax balances are determined
using the income statement method, items are only tax-effected if they are included in the determination of pre-tax
accounting profit or loss and/or taxable income or loss and current and deferred taxes cannot be recognised directly
in equity.

The consolidated entity does not currently recognise deferred tax balances due to the availability of unrecognised
tax losses of $56,931,000 resulting primarily from operating losses of wholly owned subsidiaries.

The consolidated entity continues to examine the tax implications of the transition to AIFRS. At this stage the
consolidated entity is not able to quantify with sufficient reliability to report the impact of AASB 112 Income
Taxes, at the date of transition to AIFRS or the impact on the earnings for 2005.

(c) Property, Plant and Equipment

Under AASB 116 Property, Plant and Equipment, from 1 July 2004 the consolidated entity is required to measure a
tangible fixed asset after initial recognition under either of the models listed below:

(i) Cost Model
After recognition as an asset, an item of property, plant and equipment shall be carried at its cost less any
accumulated depreciation and any accumulated impairment losses.

(ii) Revaluation model
After recognition as an asset, an item of property, plant and equipment whose fair value can be measured reliably
shall be carried at a re-valued amount, being its fair value at the date of the revaluation less any subsequent
accumulated depreciation and subsequent accumulated impairment losses. Revaluations should be carried out with
sufficient regularity to ensure that the carrying amount does not differ materially from that which would be
determined using fair value.

The consolidated entity has elected to utilise the cost model from 1 July 2004. This is a change from the current
accounting policy whereby property, plant and equipment could be re-valued. However, there will be no impact on
the financial statements at 1 July 2004 and for the year ended 30 June 2005 as a result of this change in accounting
policy.

(d) Effects of Changes in Foreign Exchange Rates

On the initial application of AIFRS, the Consolidated entity will elect to apply the exemption in AASB 1 First-time
Adoption of Australian Equivalents to International Financial Reporting Standards relating to the balance of the
foreign currency translation reserve. The cumulative translation differences for all foreign operations represented in
the foreign currency will be deemed to be zero at the date of transition to AIFRS.

This will result in the foreign currency translation reserve amounting to $20,432,000 being reclassified against
accumulated losses at 1 July 2004.

(e) Financial Instruments

The consolidated entity will be taking advantage of the exemption available under AASB 1 First-time Adoption of
Australian Equivalents to International Financial Reporting Standards to apply AASB 132 Financial Instruments:
Disclosure and Presentation and ASAB 139 Financial Instruments: Recognition and Measurement only from 1 July
2005. This allows the consolidated entity to apply previous Australian generally accepted accounting principles
(“Australian GAAP”) to the comparative information of financial instruments within the scope of AASB 132 and
AASB 139 for the 30 June 2006 financial report.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
44
Under AASB 132, the current classification of financial instruments issued by entities in the consolidated entity
would not change.

39. Impacts of Adopting Australian equivalents to International Financial Reporting Standards (continued)

AASB 139 is likely to have the following impacts.

(i) Classification and measurement of financial assets and liabilities

Under AASB 139, financial assets held by entities in the consolidated entity will be classified as either at fair value
through profit or loss, held-to-maturity, available for sale or loans and receivables and, depending on the
classification, measured at fair value or amortised cost.

Under AASB 139, the following classifications will apply:

Loans and receivables and financial liabilities classifications will remain unchanged. Measurement of these
instruments will initially be at fair value with subsequent measurement at amortised cost, using the effective interest
method.

Debt investments will be classified as held-to-maturity investments. Measurement of these financial assets will
initially be at fair value with subsequent measurement at amortised cost, using the effective interest method.

This does not effectively result in a change to the current accounting policy, under which financial assets are carried
at the lower of cost and recoverable amount, with changes recognised in the profit or loss.

As a result of the application of the exemption referred to above, there would have been no adjustment to
classification or measurement of financial assets or liabilities from the application of AIFRS during the year ended
30 June 2005. Changes in classification and measurement will be recognised from 1 July 2005.

(ii) Cash flow hedges

Forward gold contracts held and accounted for as hedge under the current accounting policy will not qualify for
hedge accounting under AASB 139 because the appropriate documentation and other requirements have not been
met.

Management will separately recognise at fair value all of the contracts, including those entered to cover future cash
flows, on the opening balance sheet at 1 July 2005. The corresponding adjustment will be to the “Cash Flow
Hedging Reserve” in equity. Future movements in the fair value of the forward gold contracts will be recorded in
the Statement of Financial Performance. This will result in a change to the current accounting policy whereby only
the portion of the hedge book not accounted for under UIG 25 Redesignation of Hedges, as described below, was
accounted for on the Statement of Financial Position and no entries were made to the Statement of Financial
Performance.

The “unrealised commodity loss” at 30 June 2005 amounting to $4,388,000 will be transferred to the “Cash Flow
Hedging Reserve” account in equity on the 1 July 2005.

In addition, the consolidated entity has a current accounting policy whereby the cumulative hedging loss is provided
for in each period to coincide with the original anticipated transactions when they take place. This policy was
adopted in 2003 in accordance with UIG 25 as a result of a redesignation which occurred in 2003. At 30 June 2005,
a total of $8,542,000 has been deferred on the balance sheet in a "Provision for Hedge Redesignation" account. In
accordance with AASB 1 and AASB 139, this treatment needs to continue prospectively (i.e. a continuation of the
deferral of the hedging losses and the subsequent release of these losses to the Statement of Financial Performance
in accordance with the original pattern of hedged transactions).

On 1 July 2005, the existing "Provision for Hedge Redesignation" will be transferred to a “Cash Flow Hedging
Reserve” in equity.

As a result of the application of the exemption referred to above, there would have been no adjustment to
classification or measurement of cash flow hedges from the application of AIFRS during the year ended 30 June
2005. Changes in classification and measurement will be recognised from 1 July 2005.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
45

39. Impacts of Adopting Australian equivalents to International Financial Reporting Standards (continued)

(f) Rehabilitation Provision

AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires that the present value of restoration
obligations associated with the mining operations be recognised as a noncurrent liability and the cost of future
restoration be capitalised as part of the relevant project. The capitalised cost is then amortised over the life of the
project and the provision is accreted periodically as the discounting of the liability unwinds. The unwinding of the
discount is recorded as interest expense.

This differs to the current accounting policy where the Consolidated entity provides for or charges expenditures
related to ongoing rehabilitation and restoration programmes, including exploration areas on non – freehold land, to
costs of production as incurred.

As a result of this change in accounting policy, the following consolidated entity balances would have been
different:

At 1 July 2004 on transition to AIFRS, a non–current provision for rehabilitation would be created for
approximately $1,100,000 resulting in a net increase in accumulated losses of $1,100,000.

Under AIFRS the impact on earnings during the financial year to 30 June 2005 would have been an increase in the
rehabilitation expense of $2,000.

(g) Revenue Recognition
Under AASB 118 Revenue, the point of sale will be recognised when the refinery process of the third party has
been finalised and the sale transaction to the third party has been completed.

This will result in a change to the current accounting policy allowed under AASB 1022 Accounting for the
Extractive Industry as revenue is currently recorded at the point in time when the gold is taken off site from the
mine by the transportation company.

There is no material impact of the above as at 1 July 2004 and no impact on earnings to 30 June 2005.

(h) Exploration Expenses
AASB 6 Exploration for and Evaluation of Mineral Resources was issued in December 2004 and replaces AASB
1022 Accounting for the Extractive Industry. The guidance specified by AASB 6 is broadly consistent with the
factors used to determine whether or not an entity can continue to recognise its capitalised exploration and
evaluation expenditures under AASB 1022.









BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
46

40.
U.S. Generally Accepted Accounting Principles disclosures
The consolidated financial statements of Emperor Mines limited are prepared in accordance with Australia’s
Generally Accepted Accounting Principles (“AGAAP”). Certain significant differences exist between AGAAP and
U.S. generally accepted accounting principles (“U.S. GAAP”). The significant differences between AGAAP and
U.S. GAAP as they relate to the consolidated entity are presented throughout this note.

Reconciliation to U.S. GAAP
The following is a summary of the adjustments to net loss for the years ended 30 June 2005 and 2004 that would be
required if U.S. GAAP had been applied instead of AGAAP.
2005
$000
2004
$000
Reconciliation of net loss – U.S. GAAP
Net loss as reported under AGAAP
(33,734)
(4,930)
add/(deduct)
Adjustments required to accord with U.S. GAAP:
Exploration expenditure
(a)
-
(232)
Mine properties development–capitalisation and amortisation
(b)
(111)
(290)
Plant and equipment–unit-of-production amortisation
(c)
(1,382)
(966)
Impairment of mine assets
(d)
15,248
-
Borrowing costs
(e)
-
434
Restoration and rehabilitation costs
(g)
(2)
(82)
Fair value accounting for derivatives
(h)
4,280
(12,764)
Deferred taxes
(i)
(77)
(43)
Total adjustment
17,956
(13,943)
Net loss under U.S. GAAP
(15,778)
(18,873)
The following is a summarised income statement prepared in accordance with US GAAP.
Consolidated Income Statement – U.S. GAAP
2005
2004
$'000
$'000
Net sales
66,345
67,610
Operating costs
Cost of sales
74,391
63,325
Depreciation, amortisation and rehabilitation expense
8,818
7,424
Administrative expenses
1,792
1,888
Fair value accounting for derivatives (gain) loss
(2,756)
14,919
Net foreign exchange gain
(1,066)
(834)
Total operating costs
81,179
86,722
Operating loss
(14,834)
(19,112)
Other income (expense)
Other income
64
542
Interest income
409
324
Interest expense
(1,169)
(566)
Total other income (expense)
(696)
300
Loss before tax
(15,530)
(18,812)
Tax expense
248
61
Net loss under U.S. GAAP
(15,778)
(18,873)
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
47
40.
U.S. Generally Accepted Accounting Principles disclosures (continued)
Consolidated Income Statement – U.S. GAAP
2005
2004
Dollars
Dollars
Earnings per share – U.S. GAAP
Basic loss per share – continuing operations
(a)
(0.11)
(0.16)
Diluted loss per share – continuing operations
(b)
(0.11)
(0.16)
(a) Based on the weighted average number of shares on issue for the period (refer note 38).
(b) Based on the weighted average number of shares on issue for the period, adjusted to reflect the
impact of the conversion of all dilutive potential ordinary shares to ordinary shares (refer note 38).

In accordance with FAS 128, the number of common shares used in computing EPS has been adjusted retroactively
for the bonus element of the Emperor rights issue in 2005. This adjustment affects both 2005 and all prior periods
presented.

The following reconciliation of comprehensive income reports changes in shareholders’ equity excluding those
resulting from investments by shareholders and distributions to shareholders.
2005
$000
2004
$000
Reconciliation of comprehensive income – U.S. GAAP
Total changes in equity other than those resulting from transactions with
owners under AGAAP
(35,545)
(4,867)
Adjustments to reflect comprehensive income in accordance with
U.S. GAAP, net of income tax:
     Total U.S. GAAP adjustments to net loss per above
reconciliation
17,956
(13,943)
Change in foreign currency translation reserve attributable to
U.S. GAAP adjustments
(389)
(499)
Comprehensive income – under U.S. GAAP
(17,978)
(19,309)
The following is a summary of the adjustments to shareholders’ equity as at 30 June 2005 and 30 June 2004 that
would be required if U.S. GAAP had been applied instead of AGAAP.
2005
$000
2004
$000
Reconciliation of shareholders’ equity
Shareholders’ equity under AGAAP
27,811
43,545
add/(deduct)
Adjustment required to accord with U.S. GAAP:
Exploration expenditure
(234)
(234)
Mine properties development – capitalisation and amortisation
31
142
Plant and equipment – unit-of-production amortisation
(10,017)
(8,635)
Impairment of mine assets
15,248
-
Borrowing costs
434
434
Restoration and rehabilitation costs
(1,153)
(1,150)
Fair value accounting for derivatives
4,703
423
Foreign currency translation reserve
(389)
(499)
Deferred taxes
251
154
Total adjustment
8,874
(9,365)
Shareholders’ equity under U.S. GAAP
36,685
34,180

The following are the variations in the balance sheet as at 30 June 2005 and 30 June 2004 that would be required if
U.S. GAAP had been applied instead of AGAAP.
The column headed ‘Unadjusted’ represents a U.S. GAAP format presentation of the assets, liabilities and
shareholders’ equity which have been measured in accordance with AGAAP. The column headed ‘Adjustments’
represents the allocation of those measurement differences (presented in the ‘Reconciliation of shareholders’
equity’), which are required to derive a balance sheet in accordance with U.S. GAAP.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
48

40.
U.S. Generally Accepted Accounting Principles disclosures (continued)
Balance Sheet – U.S. GAAP
AGAAP 30
June 2005
Adjustments
30 June 2005
U.S.
GAAP
30
June 2005
AGAAP 30
June 2004
Adjustments
30 June 2004
U.S.
GAAP
30
June 2004
$'000
$'000
$'000
$'000
$'000
$'000
Current assets
  Cash assets
3,733
3,733
3,658
3,658
  Receivables
3,210
3,210
3,396
3,396
  Inventories
7,413
7,413
11,768
11,768
  Other
643
643
303
303
  Deferred costs
183
183
187
187
  Deferred tax asset
-
232
232
-
191
191
Total current assets
15,182
232
15,414
19,312
191
19,503
Non-current assets
  Inventories
140
140
140
140
  Property, plant and equipment
49,066
5,840
54,906
65,365
(8,036)
57,329
  Deferred tax assets
398
11
409
340
(46)
294
  Deferred costs
417
417
624
624
  Restricted cash
3,195
3,195
3,594
3,594
  Unrealised commodity loss
4,388
(4,388)
-
7,192
(7,192)
-
Total non-current assets
57,604
1,463
59,067
77,255
(15,274)
61,981
Total assets
72,786
1,695
74,481
96,567
(15,083)
81,484
Current liabilities
  Payables
11,278
11,278
13,501
13,501
  Interest bearing liabilities
16,318
16,318
5,067
5,067
  Current tax liabilities
204
204
206
206
  Provisions
1,459
1,459
1,600
1,600
Total current liabilities
29,259
29,259
20,374
20,374
Non-current liabilities
  Payables
500
500
-
-
-
  Interest bearing liabilities
152
152
16,995
-
16,995
  Deferred tax liabilities
7
(7)
-
9
(9)
-
  Provisions
2,127
1,068
3,195
1,433
1,110
2,543
  Provision for hedging
  redesignation
8,542
(8,542)
-
7,019
(7,019)
-
  Fair value of hedges
4,690
4,690
7,392
7,392
  Unrealised commodity loss payable to
  counter party
4,388
(4,388)
-
7,192
(7,192)
-
Total non-current liabilities
15,716
(7,179)
8,537
32,648
(5,718)
26,930
Total liabilities
44,975
(7,179)
37,796
53,022
(5,718)
47,304
Net assets
27,811
8,874
36,685
43,545
(9,365)
34,180
  Contributed Equity
163,011
385
163,396
143,200
212
143,412
  Reserves
(22,243)
(389)
(22,632)
(20,432)
(499)
(20,931)
  Accumulated losses
(112,957)
8,878
(104,079)
(79,223)
(9,078)
(88,301)
Total equity
27,811
8,874
36,685
43,545
(9,365)
34,180
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
49


40.
U.S. Generally Accepted Accounting Principles disclosures (continued)
The Emperor Mines Limited Statement of Consolidated Cash Flows has been prepared in accordance with AGAAP
accounting standard AASB1026, the objectives and principles of which are similar to those set out in U.S. GAAP
accounting standard SFAS 95 ‘Statement of Cash Flows’. The principal differences between the standards relate to
the classification of items within the cash flow statement as well as the definition of cash and cash equivalents.
The statement below shows the adjustments to be made to the AGAAP cash flow statement to reclassify it to
comply with U.S. GAAP for the two years ended 30 June 2005:
2005
$'000
2004
$'000
Reconciliation of Cash Flows – U.S. GAAP
Net cash (outflow)/inflow from operating activities in accordance
with AGAAP
(2,792)
6,174
Exploration expenditure
(318)
(412)
Net cash (used in) provided by operating activities in accordance
with U.S. GAAP
(3,110)
5,762
Capital expenditures
(12,171)
(21,473)
Acquisitions and disposals
38
50
Net cash used in investing activities in accordance with U.S.
GAAP
(12,133)
(21,423)
Proceeds from issuance of ordinary shares
19,811
17
Increase in interest bearing liabilities
(2,442)
5,199
Borrowings under bank overdraft facility
(2,331)
2,331
Proceeds from movement in restricted cash
399
1,331
Other
(76)
(107)
Net cash provided by financing activities in accordance with U.S.
GAAP
15,361
8,771
Exchange translation effects
(43)
237
Net increase in cash and cash equivalents in accordance with U.S.
GAAP
75
(6,653)
Cash at beginning of year
3,658
10,311
Cash and cash equivalents at end of year
3,733
3,658
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
50

40.
U.S. Generally Accepted Accounting Principles disclosures (continued)
US GAAP adjustments
(a) Exploration expenditure
Under AGAAP, Emperor Mines Limited capitalises exploration expenditure provided that one of the following
conditions is met:

(iii)
such costs are expected to be recouped through successful development and exploitation of the Vatukoula
area of interest, or
(iv)
exploration activities in the Vatukoula area of interest have not yet reached a stage which permits a
reasonable assessment of the existence or otherwise of recoverable mineral resources, and active and
significant operations in relation to the area are continuing.

Exploration expenditure which fails to meet at least one of the conditions outlined above is written off. Exploration
expenditure on areas of interest outside of the Vatukoula region is fully provided for. Expenditure is not carried
forward in respect of any area of interest/mineral resource unless the consolidated entity’s rights of tenure to that
area of interest are current.

Under U.S. GAAP, exploration costs are expensed as incurred, unless a final feasibility study indicates the existence
of commercially recoverable reserves. Exploration balances capitalised by the consolidated entity under AGAAP
have been expensed for U.S. GAAP.

(b) Mine properties development – capitalisation and amortisation

Under AGAAP, mine development expenditure incurred by or on behalf of the entity is accumulated separately for
each area of interest in which economically recoverable reserves have been identified to the satisfaction of the
directors. Such expenditure comprises net direct costs and appropriate portion of related overhead expenditure
having a specific nexus with the development property. When further development expenditure is incurred in
respect of a mine property after the commencement of production, such expenditure is carried forward as part of the
mine property only when substantial future economic benefits are thereby established, otherwise such expenditure is
classified as part of the cost of production.

Under U.S. GAAP, development costs incurred to develop or expand the capacity of operating mines are capitalised
to the extent the costs are specific to an area containing proven and probable reserves as defined by SEC’s Industry
Guide 7 definitions. The costs related to areas not associated with proven or probable reserves are expensed as
incurred.

Under AGAAP, Emperor Mines Limited amortises mine properties on the unit-of-production method which
includes future capital expenditure and is based on the total number of ounces included in the Board approved mine
plan at any point in time. The total number of ounces included in the mine plan is generally in excess of proven and
probable reserves but less than available resources. The units-of-production basis under AGAAP results in an
amortization charge proportional to depletion over the mine plan.

U.S. GAAP requires mine properties and development to be amortised over proven and probable reserves as
determined by reference to SEC’s Industry Guide 7, and does not allow the use of future capital expenditure in the
calculation of the amortisation of development expenditure. The units-of-production basis under U.S. GAAP results
in an amortization charge proportional to depletion over the proven and probable reserves.

Emperor Mines Limited has prepared its capitalisation and amortisation for U.S. GAAP as follows:
·
The calculation of the U.S. GAAP adjustment is based on proven and probable reserves (excluding remnant
stope pillars, mineralised stope pillars and tailings reserves) determined in accordance with the SEC Industry
Guide 7 based on independent review performed by a geologist specialist.
·
An allocation of the development expenditure balance between in-reserve (“IR”) and not in-reserve (“NIR”)
has been based on the number of tonnes mined from an IR area verses a NIR area. This data is readily available
as it is reported annually in the statement of reserves which is prepared under the SEC Industry Guide 7.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
51
40.
U.S. Generally Accepted Accounting Principles disclosures (continued)
·
The balance of development expenditure allocated to the IR area is amortised based on units-of-production over
proven and probable reserves only. Only ounces produced from IR areas are used in this calculation; and
·
The balance of development expenditure allocated to the NIR area does not have any proven and probable
reserves attached to it. Thus these NIR costs are expensed as incurred, except for the current developed face
existing at period end.

(c) Plant and equipment – unit-of-production amortisation
Emperor Mines Limited under AGAAP depreciates life of mine assets, included in plant and equipment, on a unit-
of-production basis based on the total number of ounces included in the Board approved mine plan at any point in
time. The total number of ounces included in the mine plan is generally in excess of proven and probable reserves
but less than available resources. The units-of-production basis under AGAAP results in an amortisation charge
proportional to depletion over the mine plan.

U.S. GAAP requires life of mine assets to be amortised over proven and probable reserves and determined by
reference to SEC’s Industry Guide 7. The units-of-production basis under U.S. GAAP results in an amortisation
charge proportional to depletion over the proven and probable reserves.

The calculation of the US GAAP adjustment is based on proven and probable reserves (excluding remnant stope
pillars, mineralised stope pillars and tailings reserves) determined in accordance with SEC’s Industry Guide 7.

(d) Impairment of mine assets

Emperor Mines Limited recognised an asset impairment write down under AGAAP of $15.2 million for the 30 June
2005 financial year to the recoverable amount of its mining assets. Under AGAAP to the extent to which the net
carrying value of non-current assets exceeds its recoverable amount that excess is recognised in the statement of
financial performance as an impairment in the financial year in which this is determined. Based on Emperor Mines
Limited’s accounting policy, the expected net cash flows included in determining recoverable amounts of non-
current assets are discounted to their present values.

Under U.S. GAAP when an impairment test is undertaken, the carrying amount of an asset is first measured by
reference to undiscounted cash-flows to assess if it is recoverable. Only if the asset is not recoverable on an
undiscounted basis, must the entity measure impairment by comparing the asset’s carrying value to its fair value.
An impairment loss must be recognised in the income statement when an asset’s carrying amount is not recoverable
and exceeds fair value. An impairment loss shall be measured as the amount by which the carrying amount of a
long-lived asset exceeds its fair value.

The mining assets under U.S. GAAP have lower carrying values due to accelerated amortization over proven and
probable reserves and due to more restrictive expense treatment for exploration and development expenditure
compared to AGAAP. Under U.S. GAAP, the consolidated entity has determined the carrying amount of long-lived
assets to be recoverable on an undiscounted basis. Thus the write down recorded in the AGAAP accounts for the
period ended 30 June 2005 has been reversed for U.S. GAAP.
(e) Borrowing costs

Under AGAAP borrowing costs capitalised for the construction of qualifying assets includes a portion of interest
expense, amortisation of ancillary costs incurred in connection with arrangement of borrowings, and foreign
currency exchange gains or losses on foreign denominated borrowings specifically related to funding a project’s
construction.

Under U.S. GAAP, foreign currency exchange gains or losses are not considered in determining the capitalisation of
borrowing costs. The adjustment for U.S. GAAP includes the reversal of exchange gains and losses capitalised
under AGAAP.




BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
52


40.
U.S. Generally Accepted Accounting Principles disclosures (continued)


(f) Revenue recognition

Under AGAAP revenue is recognised as sales revenue when, there has been a passing of risk to the customer, and:

(i)    the product is in a form suitable for delivery and no further processing is required by, or on behalf, of the
producer;
(ii)   the quantity and quality of the product can be determined with reasonable accuracy;
(iii)  the product has been dispatched to the customer and is no longer under the physical control of the producer (or
property in the product has earlier passed to the customer); and
(iv) the selling price can be determined with reasonable accuracy.
U.S. GAAP requires the following four criteria to be met before revenue is realised or realisable and earned:

(i)   Persuasive evidence of an arrangement exists
(ii)  Delivery has occurred
(iii) Sellers price is fixed and determinable
(iv) Collection is reasonably assured

Based on the refining agreement with the consolidated entity’s single customer, the criteria is met upon customer
acceptance. This presumes that such contractual customer acceptance provisions are substantive, bargained-for
terms of an arrangement and pricing occurs upon customer acceptance. The outturn generally occurs within 2-4
business days after the delivery of the dore and it is at this point in time that the gold revenue is recognised under
U.S. GAAP.

Although the timing of revenue recognition can differ between U.S. GAAP and AGAAP, no differences existed as
of 30 June 2005 and 30 June 2004. However, at 30 June 2003 the revenue recognition cut-off results in a U.S.
GAAP adjustment to record $910,000 of revenue and cost of sales in financial year ended 30 June 2004 instead of
financial year ended 30 June 2003.

(g) Restoration and rehabilitation costs
Emperor Mines Limited under AGAAP did not provide for restoration and rehabilitation until the year ended 30
June 2005. Under AGAAP (pre-AIFRS), provisions are recorded for mine site rehabilitation on an incremental basis
during the course of mine life. Provisions, which are determined on an undiscounted basis, include the following
costs: reclamation, plant closure, waste site closure and monitoring activities. These costs have been determined on
the basis of current costs, current legal requirements and current technology. The provision recorded was based on
the incremental approach which is not consistent with the approach taken under U.S. GAAP.

U.S. GAAP principally requires that the asset retirement obligation (“ARO”) be determined when the obligation
first occurred and requires an entity to create an asset and a liability at that date. U.S. GAAP only allows the accrual
of ARO for which there are existing legal obligations associated with the retirement of a tangible long-lived asset
and the amount of liability can be reasonably estimated.

Existing legal obligations can be established by an agreement between two or more parties, imposed by
governmental units, or assumed through the legal doctrine of promissory estoppels. Emperor’s mining lease
contains a provision to have a deposit with the Directors of Mines for good performance under the Mining Act. The
relevant section of the Mining Act in respect of rehabilitation indicates that “when any mining tenement is
terminated or abandoned for any reason whatsoever, the person whose tenement has been terminated or abandoned
shall, not later than 30 days from the termination or abandonment of the tenements, fill up all shafts, pits, holes and
other excavations or otherwise secure them in a permanent manner so as to prevent persons or livestock
inadvertently entering therein, and shall remove all posts marking out the land the subject of the tenement”. The
U.S. GAAP adjustment made assumes that the provisions of the Mining Act create a legal obligation to restore and
rehabilitate the mine properties and therefore a provision has been recognised. The adjustment for U.S. GAAP
reflects the accretion of the ARO liability and for differences in application under the incremental approach under
AGAAP (pre-AIFRS).
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
53


40.      U.S. Generally Accepted Accounting Principles disclosures (continued)


(h) Fair value accounting for derivatives
Under AGAAP (pre-AIFRS) the consolidated entity deferred the gains and losses from derivatives until the
derivatives were settled or the hedging relationships transpired. The hedge accounting requirements under AGAAP
(pre-AIFRS) are less rigorous than those required under U.S. GAAP.

Due to the extensive record-keeping required to designate and monitor derivative transactions as hedges for U.S.
GAAP, the consolidated entity marks to market its derivatives to the income statement. Management continues to
believe its derivatives are economic hedges although they do not qualify as hedges for U.S. GAAP.

The consolidated entity has undergone a process to identify all derivatives, including potential embedded derivatives.
The consolidated entity’s interest rate swaps and the gold forward contracts meet the definition of a derivative under
U.S. GAAP.

The U.S. GAAP adjustment reflects the reversal of all derivative balances recognised under AGAAP, including the
reversal of the ‘provision for hedging redesignation’. Had U.S. GAAP been applied to derivatives retrospectively, the
‘provision for hedging redesignation’ would not have been recorded. Additionally, the U.S. GAAP adjustment reflects
the fair values of the consolidated entity’s interest rate swaps and the gold forward contracts at fair value on the
balance sheet with changes recorded in the income statement.

(i) Deferred taxes

Accounting for income taxes under U.S. GAAP is based on a balance sheet approach whereas AGAAP (pre-AIFRS)
focuses on an income statement approach relative to deferred taxes. The U.S. GAAP term “temporary difference” is
more comprehensive than the AGAAP term “timing difference.” U.S. GAAP considers all differences between
financial statement carrying amounts and tax written-down values (referred to as “tax basis” in U.S. GAAP) to be
temporary differences, and deferred tax assets and liabilities are required to be recorded for all temporary differences
(“comprehensive recognition”) with certain defined exceptions. The concept of a timing difference under AGAAP
focuses on current period (that is, income statement) differences arising that impact the calculation of deferred income
tax expense.

Under U.S. GAAP, deferred tax assets and liabilities shall be classified as current or non-current based on the
classification of the related asset or liability for financial reporting purposes. A deferred tax liability or asset that is not
related to an asset or liability for financial reporting (i.e. loss carryforwards), shall be classified according to the
expected utilization of the tax loss carryforward. All current deferred tax assets and liabilities are netted and reported
as either an asset or liability and all non-current deferred tax assets and liabilities are offset and reported as either a
non-current asset or long-term liability, depending on the net result.

The resulting U.S. GAAP tax adjustments reflects an increase income tax expense by $77,000 and $43,000 for the
years ended 30 June 2005 and 30 June 2004, respectively. Shareholders’ equity is increased (credited) by $251,000
and $154,000 as at 30 June 2005 and 30 June 2004, respectively.


(j) Foreign currency translation reserve

The adjustments recorded under U.S GAAP in the foreign controlled entities, when translated to reporting currency
result in an adjustment to the foreign currency translation reserve. The ‘foreign currency translation reserve’ is more
commonly referred to as the currency translation adjustment under U.S GAAP.
BACKGROUND IMAGE
Emperor Mines Limited
Notes to the Financial Statements
for the year ended 30 June 2005
(In Australian Dollars unless otherwise stated)
54

40.
U.S. Generally Accepted Accounting Principles disclosures (continued)


(k) Impact of recently issued U.S. accounting standards

In November 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No.151 ‘Inventory Costs, an amendment of ARB No. 43, Chapter 4’ (SFAS 151). SFAS 151 requires
abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) to be excluded from
the costs of inventory and expensed as incurred. As such, the allocation of fixed production overheads to inventory is
to be based on normal capacity of the production facilities. SFAS 151 is applicable for inventory costs incurred during
the financial year beginning after 15 June 2005. The consolidated entity is currently assessing the impact of the
adoption of this standard on its financial statement.

In December 2004, the FASB issued SFAS No. 153 ‘Exchange of Non-monetary Assets – An Amendment of APB
Opinion No.29’ (SFAS 153). SFAS 153 eliminates the exception from fair value measurement for non-monetary
exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial
substance. The standard specifies that an exchange of non-monetary assets has commercial substance if the future cash
flows of the entity are expected to change significantly as a result of the exchange. SFAS 153 is effective for non-
monetary exchanges occurring in the financial year beginning after 15 June 2005. The consolidated entity is currently
assessing the impact of the adoption of this standard on its financial statements.

In December 2004, the FASB also issued SFAS No. 123 (revised 2004) ‘Share-Based Payment’ (SFAS 123R), which
requires all share-based payments to employees to be measured based on their fair value at grant date. The cost is to be
recognised over the period during which an employee is required to provide service in exchange for the awards or the
requisite service period. SFAS 123R is applicable for the financial year beginning after 15 June 2005. The
consolidated entity will be required to apply SFAS 123R as of 1 July 2005 and intends to use the modified prospective
method, as defined therein. SFAS 123R replaces SFAS 123 and supersedes APB Opinion 25. The consolidated entity
is currently assessing the impact of the adoption of this standard on its financial statements.

In March 2005, the Emerging Issues Task Force of the FASB reached a consensus in Issue No. 04-6 ‘Accounting for
Stripping Costs Incurred During Production in the Mining Industry’ (EITF 04-6) that stripping costs incurred during
the production phase of a mine are variable production costs. As such, stripping costs incurred during the production
phase are treated differently to stripping costs incurred during the development phase, and should be included in the
cost of the inventory produced during the period that the stripping costs are incurred. This consensus is applicable for
the financial year beginning after 15 December 2005. The consolidated entity is currently assessing the impact of
adopting EITF 04-6 on its financial statements.

In March 2005, FASB Interpretation No. 47 'Accounting for Conditional Asset Retirement Obligations an
interpretation of FASB Statement No. 143' (FIN 47) was issued. FIN 47 states that a conditional asset retirement
obligation represents an unconditional obligation to perform an asset retirement activity where the timing or method of
settlement are conditional on a future event that may or may not be within the control of the entity. The interpretation
clarifies that an entity is required to recognise a liability for the fair value of a conditional asset retirement obligation, if
the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a
conditional asset retirement obligation is factored into the measurement of the liability when sufficient information
exists. SFAS 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate
the fair value of an asset retirement obligation. FIN 47 also clarifies the conditions when an entity would have
sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for
periods ending after 15 December 2005. The consolidated entity is currently assessing the impact of adopting FIN 47
on its financial statements.

In May 2005, the FASB issued SFAS No. 154 ‘Accounting Changes and Error Corrections’ (SFAS 154) which
replaced APB No.20 ‘Accounting Changes’ and SFAS No. 3 ‘Reporting Accounting Changes in Interim Financial
Statements’. The standard changes the requirements in accounting and disclosure for a change in accounting principle.
Under SFAS 154, voluntary changes in accounting principles are to be reported using retrospective application unless
it is impracticable to do so. The standard is effective for accounting changes and corrections of errors made in the
period beginning after 15 December 2005.



BACKGROUND IMAGE
55


Emperor Mines Limited
Directors’ Declaration



In the opinion of the directors of Emperor Mines Limited:

1.
the financial statements and notes set out on pages 1 to 54 are drawn up, in accordance with applicable
Australian Accounting Standards and other mandatory reporting requirements, so as to present fairly the
financial position of the consolidated entity as at 30 June 2005 and 30 June 2004 and its performance, as
represented by the results of its operations and its cash flows, for the financial years ended on those dates;
and

2.
there are reliable grounds to believe that the consolidated entity will be able to pays its debts as and when
they become due and payable.

Signed in accordance with a resolution of the directors.





JA Wall
/s/ JA Wall
/s/ M Wellesley-Wood
M Wellesley-Wood
Director
Managing Director
13 December 2005
BACKGROUND IMAGE
56
Report of Independent Registered Public Accounting Firm
The Board of Directors
Emperor Mines Limited:
We have audited the consolidated statements of financial position of Emperor Mines Limited and subsidiaries as of
June 30, 2005 and 2004, and the related consolidated statements of financial performance, and cash flows, for each
of the years in the two-year period ended June 30, 2005. These consolidated financial statements are the
responsibility of the Company’s directors. Our responsibility is to express an opinion on these consolidated
financial statements, based on our audits, to the directors of the consolidated entity for the purpose of inclusion with
DRD Gold Limited’s (“DRD Gold), a major shareholder of Emperor, annual report on Form 20F filed in the United
States of America under the Securities Act of 1934. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the consolidated entity’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Emperor Mines Limited and its subsidiaries as of June 30, 2005 and 2004, and the results of
their operations and their cash flows for each of the years in the two-year period ended June 30, 2005, in conformity
with generally accepted accounting principles in Australia.
Accounting principles generally accepted in Australia vary in certain significant respects from U.S. generally
accepted accounting principles. Information relating to the nature and effect of such differences is presented in
Note 40 to the consolidated financial statements.
The consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 1(w) to the consolidated financial statements the Company has suffered recurring
losses from operations and has a working capital deficit that raises substantial doubt about its ability to continue as a
going concern. The Director’s plans in regard to this uncertainty are described in Note 1(w). The consolidated
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Sydney, Australia
KPMG
/s/ KPMG
13 December 2005