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EX-99 20 ex15_2.htm Page 1

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

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

Crown Gold Recoveries (Proprietary) Limited

Consolidated income statement

for the year ended 30 June

Notes

2005

2004

2003

(Unaudited) (Audited) (Audited)

R’000

R’000

Revenue

589,474

643,610

571,894

Cost of sales

(624,617) (646,760) (582,808)

Cash costs

(561,439) (599,338) (522,231)

Depreciation

(18,289)

(19,637)

(45,266)

Retrenchment costs

(4,388)

(56)

Movement in provision for
environmental rehabilitation

(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

(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

(166)

(166)

(586)

Net loss for the year

(91,555) (120,684) (277,058)

Crown Gold Recoveries (Proprietary) Limited

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

92,218

100,639

Investments

9,949

7,937

Current assets

61,735

54 669

Inventories

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

Accumulated loss

(688,552)

(596,997)

Shareholders' deficit

(688,552)

(596,997)

Non-current liabilities

639,346

590,737

Shareholders’ loans

367 262

364,345

Long-term liabilities

130,306

130,306

Provision for post-retirement medical benefits

13,839

9,577

Provision for environmental rehabilitation

127,939

86,509

Current liabilities

213,108

169,506

Taxation

Amounts owing to Group companies

Leave pay provision

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.

Crown Gold Recoveries (Proprietary) Limited

Consolidated statement of changes in equity

for the year ended 30 June

Number

ordinary

shares

Share

capital

Accumulated

loss

Total

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)

Balance at 30 June 2005

100

-* (688,552) (688,552)

* Less than R1 000.

Crown Gold Recoveries (Proprietary) Limited

Consolidated cash flow statement

for the year ended 30 June

Notes

2005

2004

2003

(Unaudited) (Audited) (Audited)

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

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

Purchase of non-current investments and
other assets

(9)

Acquisition of subsidiary net of cash
acquired

(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

11,769

17,103

40,977

Crown Gold Recoveries (Proprietary) Limited

Notes to the consolidated cash flow statement

for the year ended 30 June

2005

2004

2003

(Unaudited) (Audited) (Audited)

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

Crown Gold Recoveries (Proprietary) Limited

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

Crown Gold Recoveries (Proprietary) Limited

Notes to the consolidated annual financial statements

for the year ended 30 June 2005, 2004 and 2003

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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

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

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)

- 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

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

Crown Gold Recoveries (Proprietary) Limited

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

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.

Crown Gold Recoveries (Proprietary) Limited

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

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

Crown Gold Recoveries (Proprietary) Limited

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).

Crown Gold Recoveries (Proprietary) Limited

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).

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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

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.

Crown Gold Recoveries (Proprietary) Limited

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

49,603

49,603

DRDGOLD Limited

14,848

13,359

DRDGOLD Limited

36,667

36,667

DRDGOLD Limited

34,209

34,209

DRDGOLD Limited

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

74,232

74,232

Crown Consolidated Gold

23,246

23,245

DRDGOLD Limited

3,871

2 444

Khumo Bathong Holdings (Pty) i.

114,556

114,556

Khumo Bathong Holdings (Pty) j.

367,262

364,345

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.

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.

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.

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.

The loan is interest free and repayable on demand. The lender has agreed to an indefinite suspension of all
payments of principal and interest.

The loan is interest free and repayable on demand.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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

Crown
Consolidated Gold
Recoveries Limited

8,137

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

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.

Crown Gold Recoveries (Proprietary) Limited

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.