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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 For
the fiscal
year
ended
June 30, 2022
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 1934
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)
Constantia Office Park Cnr 14th Avenue and Hendrik Potgieter Road Cycad House, Building 17, Ground Floor
Weltevreden Park
1709
,
South Africa
(Address
of principal
executive offices)
Riaan Davel
, Chief Financial
Officer, Tel. no. +
27
11
470 2600
, Email
riaan.davel@drdgold.com
Mpho Mashatola,
Group Financial
Manager Tel. no. +27
11 470 2600, Email
mpho
.
mashatola@drdgold.com
(Name, Telephone,
Email and/or
Facsimile
number and Address
of Company Contact
Person)
Securities
registered or
to be registered
pursuant to Section
12(b) of the
Act
Title of each
class:
Trading symbol
Name of each
exchange on
which registered:
Ordinary shares (traded in the form of American Depositary
Shares, each American Depositary Share representing ten
underlying ordinary shares.)
DRD
The
New York Stock Exchange
, Inc.
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.
864,588,711
ordinary shares
of no par value
outstanding
as of June 30,
2022.
Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
☐
No
☑
If this report
is an annual
report or transition
report, indicate
by check mark if
the registrant
is not required
to file reports
pursuant
to Section 13
or 15(d) of the
Securities
Exchange Act
of 1934
Yes
☐
No
☑
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 the past
90 days.
Yes
☑
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted
pursuant to Rule 405
of Regulation S-T (§
232.405 of this chapter) during
the preceding 12 months (or
for such shorter period that
the
registrant was required to submit such files).
Yes
☑
No
☐
Indicate
by check
mark whether
the registrant
is a
large accelerated
filer, an
accelerated
filer, a
non-accelerated
filer, or
an emerging
growth company.
See definition of
“large accelerated filer,” “accelerated filer,”
and “emerging growth
company”
in Rule 12b-2
of the
Exchange Act.
Large accelerated
filer
☐
Accelerated filer
☑
Non-accelerated
filer
☐
Emerging growth
company
☐
If any emerging
growth company
that prepares
its financial
statements in
accordance with
U.S. GAAP, indicate by check
mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards
provided pursuant
to Section 13(a)
of the Exchange
Act
☐
The term
“new or
revised
financial
accounting
standard”
refers to
any update
issued by
the Financial
Accounting
Standards
Board
to its Accounting
Standards Codification
after April
5, 2012.
Indicate by
check
mark
whether
the
registrant has
filed
a
report
on
and
attestation to
its
management’s
assessment of
the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the
registered
public accounting
firm that prepared
or issued its
audit report.
☑
Indicate
by check
mark which
basis of
accounting
the registrant
has used
to prepare
the financial
statements
included
in this filing
.
U.S. GAAP
☐
International
Financial Reporting
Standards as
issued by the
International Accounting Standards Board
☑
Other
☐
If “Other”
has been
checked in
response to
the previous question,
indicate by check
mark which
financial statement item
the
registrant
has elected to
follow.
Item 17
☐
Item 18
☐
If this
is an
annual report, indicate by
check mark
whether the
registrant is a
shell company (as
defined in
Rule 12b-2
of the
Exchange Act).
Yes
☐
No
☑
TABLE OF CONTENTS
Page
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
7
ITEM 2.
OFFER STATISTICS
AND EXPECTED TIMETABLE
7
ITEM 3.
KEY INFORMATION
7
3A.
[Reserved]
7
3B.
Capitalization And Indebtedness
8
3C.
Reasons For The Offer And Use Of Proceeds
8
3D.
Risk Factors
8
ITEM 4.
INFORMATION ON THE COMPANY
22
4A.
History And Development Of The Company
22
4B.
Business Overview
24
4C.
Organizational Structure
29
4D.
Property, Plant And Equipment
30
ITEM 4A.
UNRESOLVED STAFF
COMMENTS
43
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
44
5A.
Operating Results
44
5B.
Liquidity And Capital Resources
53
5C.
Research And Development, Patents And Licenses, Etc
54
5D.
Trend Information
54
5E.
Critical Accounting Estimates
58
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
58
6A.
Directors And Senior Management
58
6B.
Compensation
62
6C.
Board Practices
65
6D.
Employees
69
6E.
Share Ownership
70
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
72
7A.
Major Shareholders
72
7B.
Related Party Transactions
73
7C.
Interests Of Experts And Counsel
73
ITEM 8.
FINANCIAL INFORMATION
73
8A.
Consolidated statements And Other Financial Information
73
8B.
Significant Changes
73
ITEM 9.
THE OFFER AND LISTING
74
9A.
Offer And Listing Details
74
9B.
Plan Of Distribution
74
9C.
Markets
74
9D.
Selling Shareholders
74
9E.
Dilution
74
9F.
Expenses Of The Issue
74
ITEM 10.
ADDITIONAL INFORMATION
74
10A.
Share Capital
74
10B.
Memorandum and articles of association
74
10C.
Material Contracts
77
10D.
Exchange Controls
78
10E.
Taxation
80
10F.
Dividends And Paying Agents
85
10G.
Statement By Experts
85
10H.
Documents On Display
85
10I.
Subsidiary Information
85
ITEM 11.
QUANTITATIVE
AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
85
TABLE OF CONTENTS
Page
PART II
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
86
12A.
Debt Securities
86
12B.
Warrants and Rights
86
12C.
Other Securities
86
12D
American Depositary Shares
87
ITEM 13.
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
88
ITEM 14.
MATERIAL
MODIFICATIONS TO
THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
88
ITEM 15.
CONTROLS AND PROCEDURES
88
ITEM 16.
[RESERVED]
89
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
89
ITEM 16B.
CODE OF ETHICS
89
ITEM 16C.
PRINCIPAL ACCOUNTANT
FEES AND SERVICES
89
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
90
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
90
ITEM 16F
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
90
ITEM 16G.
CORPORATE
GOVERNANCE
90
ITEM 16H.
MINE SAFETY DISCLOSURES
91
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
91
PART III
ITEM 17.
FINANCIAL STATEMENTS
92
ITEM 18.
FINANCIAL STATEMENTS
92
ITEM 19.
EXHIBITS
95
SIGNATURES
98
1
Preparation
of Financial
Information
We are a South African
company and
currently
all our operations
are located
in South Africa.
Accordingly, our books
of account
are
maintained
in South African
Rand. Our financial statements included in our corporate filings are prepared in accordance with International
Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
Our consolidated financial statements included in this Annual Report are prepared in accordance with IFRS as issued by the IASB.
All financial information in this Annual Report, except as otherwise noted is prepared in accordance with IFRS as issued by the IASB.
We present our financial information in rand, which is our presentation and reporting currency.
All references
to “dollars”
or “$”
herein are
to United States
Dollars and
references
to “rand” or
“R” are to South
African rands.
Solely for your convenience, this Annual Report
contains translations of certain rand amounts into dollars at specified rates. These rand amounts do not represent actual dollar amounts, nor
could they necessarily have been converted into dollars at the rates indicated. Unless otherwise indicated, rand amounts have been translated
into dollars at the rate of R16.27 per $1.00, the year end exchange rate on June 30, 2022.
In this Annual Report, we present certain non-IFRS financial measures such as “cash operating costs per kilogram”, “all-in
sustaining costs per kilogram” and “all-in costs per kilogram” which have been determined using industry guidelines promulgated by the
World Gold Council, and which we use to determine costs associated with producing gold, cash generating capacities of the mines and to
monitor performance of our mining operations. An investor should not consider these items in isolation or as alternatives to, operating costs,
cash generated from operating activities, profit/(loss) for the year or any other measure of financial performance presented in accordance
with IFRS or as an indicator of our performance. While the World Gold Council has provided definitions for the calculation of these
measures,
the calculation of cash operating costs per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram 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. See Glossary of Terms and Explanations and Item 5A. Operating Results – “Cash operating costs, all-in
sustaining costs and all-in costs” and “Reconciliation of cash operating costs per kilogram, all-in sustaining costs per kilogram, all-in costs
per kilogram”.
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
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
U.S. Securities
Exchange
Act of 1934,
regarding expected
future events,
circumstances,
trends and expected
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 phrases
such as “anticipates,”
“believes,”
“could,” “estimates,”
“expects,”
“intends,”
“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,
including statements in connection with, or relating
to, among other things:
●
our reserve calculations and underlying assumptions;
●
the trend information discussed in Item 5D.- Trend Information, including target gold production and cash operating costs;
●
life of mine and potential increase in life of mine;
●
statements made in or with respect to the Technical Report Summaries (“
TRS
” or “
TRSs
”) including statements with respect to
Mineral Reserves and Resources and assumptions, gold prices, projected revenue and cash flows and capital expenditures and
other forward looking statements in the TRSs;
●
estimated future throughput capacity and production;
●
expected trends in our gold production as well as the demand for and the price of gold;
●
our anticipated labor, electricity, water,
crude oil and steel costs;
●
our expectation that existing cash will be sufficient to fund our operations in the next 12 months including our anticipated
commitments;
●
estimated production costs, cash operating costs per ounce, all-in sustaining costs per ounce and all-in costs per ounce;
●
expectations on future gold price, supply and pricing trends, including long term trends, expected impact of the global environment
on gold prices;
●
expected gold production and cash operating costs expected in fiscal year 2023;
●
statements with respect to agreements with unions;
●
our prospects in litigation and disputes;
●
statements with respect to the legal review for increasing the deposition capacity of the Brakpan/Withok Tailings Storage Facility
(“
TSF
”) and the Regional Tailings Storage Facility (“
RTSF
”), and expected potential increase in capacity and life of mine and
statements with respect to our flotation fine-grind
(“
FFG
”) program;
●
expected deposition capacity from improvements in our dams and new dam construction; and
●
expected effective gold mining tax rate.
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:
2
●
the global
impact of
the COVID-19
pandemic and
potential new
variants,
including in
South Africa;
●
the global
impact of
Ukraine conflict
and global inflation;
●
adverse changes
or uncertainties
in general
economic conditions
in South Africa;
●
regulatory
developments
adverse to
us or difficulties
in maintaining
necessary
licenses or
other governmental
approvals;
●
future performance
relating to
the FWGR
Phase 2 assets
and the reclamation
sites on the
east of Ergo’s plant;
●
challenges
in replenishing
mineral reserves;
●
changes in
our competitive
position;
●
changes in,
or that affect,
our business
strategy;
●
that assumptions
underlying our
Mineral Reserves
and Mineral
Resources as
set forth in
this report
and our TRSs
prove to be
incorrect;
●
our ability
to achieve
anticipated
efficiencies
and other cost
savings in
connection
with past
and future
acquisitions;
●
the success
of our business
strategy, development
activities
and other initiatives;
●
adverse changes
in our gold
production
as well as
the demand
for and the
price of gold;
●
changes in
technical
and economic
assumptions
underlying our
Mineral Reserve
estimates;
●
any major
disruption in
production
at our key
facilities;
●
adverse changes
in foreign
exchange rates;
●
adverse environmental
or environmental
regulatory changes;
●
adverse changes
in ore grades
and recoveries,
and to the
quality or quantity
of reserves;
●
unforeseen
technical
production issues,
industrial
accidents
and theft;
●
anticipated
or unanticipated
capital expenditure
on property, plant
and equipment;
●
the impact
of HIV/AIDS,
tuberculosis
and the spread
of other contagious
diseases;
and
●
various other
factors,
including those
set forth in
Item 3D.
Risk Factors.
For a discussion
of such risks,
see Item
3D. Risk Factors.
The risk factors
described above
and in Item
3D. could affect
our future
results, causing
these results
to differ materially
from those
expressed in
any forward-looking
statements.
These 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.
Investors are
cautioned not
to place undue
reliance
on these forward-looking
statements,
which speak
only as of the
date thereof.
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.
Special Note
Regarding Links
to External,
or Third-party
Websites
Any links to
external,
or third-party
websites,
are provided
solely for
convenience.
We take no responsibility
whatsoever
for any third-
party information
contained in
such third-party
websites,
and we specifically
disclaim adoption
or incorporation
by reference
of such information
into this report
and no websites
are incorporated
by reference
into this report.
3
Imperial units
of measure
and metric
equivalents
The table
below sets
forth units
stated in this
document, which
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 kilometers
1 meter
3.28084 feet
1 foot
0.3048 meters
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 centimeters
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
4
Glossary of Terms and Explanations
The table below sets forth a glossary of terms used in this Annual Report:
Adjusted EBITDA
Adjusted
EBITDA
means
earnings
before
interest,
tax,
depreciation,
amortisation,
share-based
payment
(benefit)/expense, change in estimate of environmental rehabilitation recognised in profit
or loss, gain/(loss) on
disposal
of
property,
plant
and
equipment,
gain/(loss)
on
financial
instruments,
IFRS
16
lease
payments,
exploration expenses and
transaction costs, and retrenchment
costs. This is
a non-IFRS financial measure
and
should not be considered a substitute measure of net income reported by us in accordance with IFRS.
Administration expenses and
other costs excluding non-
recurring items
Administration
expenses
and
other
costs
excluding
loss
on
disposal
of
property,
plant
and
equipment
and
transaction costs.
All-in sustaining costs per
kilogram
All-in sustaining
costs is
a measure
on which
guidance is
provided by
the World
Gold Council
and includes
cash operating costs of production, plus movement in gold in process on a sales basis, corporate administration
expenses and other (costs)/income,
the accretion of rehabilitation
costs and sustaining
capital expenditure. Costs
other than those listed above are excluded. All-in sustaining costs per kilogram are calculated by dividing total
all-in sustaining costs by kilograms of
gold produced. This is a non‑IFRS
financial measure and should not be
considered a substitute measure of costs and expenses reported by us in accordance with IFRS.
All-in costs per kilogram
All-in costs is
a measure
on which
guidance is
provided by
the World Gold Council
and includes
all-in sustaining
costs,
retrenchment
costs,
care
and
maintenance
costs,
ongoing
rehabilitation
expenditure,
growth
capital
expenditure and capital recoupments.
Costs other than
those listed above
are excluded. All-in costs
per kilogram
are calculated by dividing
total all-in costs by
kilograms of gold
produced. This is
a non‑IFRS financial measure
and should not
be considered a
substitute measure of
costs and expenses
reported by us
in accordance with
IFRS.
Assaying
The chemical testing process of rock samples to determine mineral content.
Brakpan/Withok final life design
The Brakpan/Withok Tailings
Storage Facility final life design is the engineering
design that ultimately brings
the
tailings
storage facility
to
its
finality
in
terms
of
extent, operation,
rehabilitation and
management. The
implemented final design
would result in
alignments with the
Global Industry Standard
on Tailings Management
(“
GISTM
”)
and
regulatory
bodies,
increase
deposition
capacity,
improve
operation/management
and
bring
about the sustainable closure of the facility.
$/oz
US dollar per ounce.
Called gold content
The theoretical gold content of material processed.
Care and maintenance
Costs to ensure that the Ore Reserves are open, serviceable
and legally compliant after active mining activity at
a shaft has ceased.
Cash operating costs of
production
Cash
operating
costs
of
production
are
operating
costs
less
ongoing
rehabilitation
expenses,
care
and
maintenance costs and net other operating costs/(income). This is a
non‑IFRS financial measure and should not
be considered a substitute measure of costs and expenses reported by us in accordance with IFRS.
Cash operating costs per kilogram
Cash operating
costs are
operating costs
incurred directly
in the
production of
gold and
include labor
costs,
contractor and other
related costs, inventory
costs and electricity
costs. Cash operating
costs per kilogram
are
calculated by dividing
cash operating costs
by kilograms of
gold produced.
This is a
non‑IFRS financial measure
and should not
be considered a
substitute measure
of costs and
expenses reported by
us in accordance
with IFRS.
Cut‑off grade
The grade
(i.e., the
concentration of
metal or
mineral in
rock) that
distinguishes material
deemed to
have no
economic value from material deemed to have economic value.
CIL Circuit
Carbon-in-leach circuit.
Definitive Feasibility Study
("
DFS
")
A definitive
engineering estimate
of all
costs, revenues,
equipment requirements
and production
at a
-5% to
+10% level of accuracy. The study
is used to define the
economic viability of a
project and to support
the search
for project financing.
Depletion
The decrease in the quantity of ore in a deposit or property resulting from extraction or production.
Deposition
Deposition is the geological process
by which material is added
to a landform or land mass.
Fluids such as wind
and water, as
well as sediment flowing via gravity,
transport previously eroded sediment, which, at
the loss of
enough kinetic
energy in
the fluid,
is deposited,
building up
layers of
sediment. Deposition
occurs when
the
forces responsible for sediment transportation are no longer sufficient to
overcome the forces of particle weight
and friction, creating a resistance to motion.
Dilution
Waste or material below the cut-off grade that contaminates the ore during the course of mining operations and
thereby reduces the average grade mined.
Doré
Unrefined gold and silver
bullion bars consisting of
approximately 90% precious metals
which will be further
refined to almost pure metal.
Footwall
The underlying side of a stope or ore body.
Grade
The amount
of gold
contained within auriferous
material generally
expressed in
ounces per
ton or
grams per
tonne of ore.
Growth capital expenditure
Capital additions that
are not sustaining capital
expenditure. This is a
non‑IFRS financial measure and
should
not be considered a substitute measure of costs and expenses reported by us in accordance with IFRS.
g/t
Grams per tonne.
5
Indicated Mineral Resources
That part of a Mineral Resource for which quantity and grade or
quality are estimated on the basis of adequate
geological
evidence
and
sampling.
The
level
of
geological
certainty
associated
with
an
indicated
Mineral
Resource is sufficient to allow a qualified person to apply modifying factors
in sufficient detail to support mine
planning and evaluation of the economic viability of the deposit. Because an indicated
Mineral Resource has a
lower level of
confidence than the
level of confidence
of a measured
Mineral Resource, an
indicated Mineral
Resource may only be converted to a probable Mineral Reserve.
Inferred Mineral Resources
That part of
a Mineral Resource
for which quantity
and grade or
quality are estimated
on the basis
of limited
geological
evidence
and
sampling.
The
level
of
geological
uncertainty
associated
with
an
inferred
Mineral
Resource
is
too
high
to
apply
relevant
technical
and
economic
factors
likely
to
influence
the
prospects
of
economic
extraction
in
a
manner
useful
for
evaluation
of
economic
viability.
Because
an
inferred
Mineral
Resource has the lowest level
of geological confidence of
all Mineral Resources, which prevents
the application
of the modifying factors in a manner useful for evaluation of economic viability,
an inferred Mineral Resource
may not be considered when assessing the economic viability of a
mining project and may not be converted to
a Mineral Reserve.
Measured Mineral Resources
That part of a Mineral
Resource for which quantity and
grade or quality are estimated
on the basis of conclusive
geological
evidence
and
sampling.
The
level
of
geological
certainty
associated
with
a
measured
Mineral
Resource is
sufficient
to allow
a
qualified person
to apply
modifying factors,
in sufficient
detail
to support
detailed mine planning
and final evaluation
of the
economic viability
of the
deposit. Because
a measured Mineral
Resource has a higher level of confidence than the level of confidence of
either an indicated Mineral Resource
or an inferred Mineral Resource, a measured Mineral Resource may be converted to a proven
Mineral Reserve
or to a probable Mineral Reserve.
Metallurgical plant
A processing plant (mill) erected to treat ore and extract the contained gold.
Mineral Reserves
An estimate of tonnage and
grade or quality of indicated
and measured Mineral Resources that, in
the opinion
of the qualified person, can be the basis of an economically viable project. More specifically, the economically
mineable part of a
measured or indicated Mineral
Resource, which includes diluting materials
and allowances
for losses that may occur when the material is mined or extracted.
Mineral Resources
A concentration or occurrence of material of economic interest in or on the Earth's crust in such form, grade or
quality,
and
quantity
that
there
are
reasonable
prospects
for
economic
extraction.
A
Mineral
Resource
is
a
reasonable estimate of mineralization, taking into
account relevant factors such as
cut-off grade, likely mining
dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is
likely to, in
whole or in
part, become economically
extractable. It is
not merely an
inventory of all
mineralization
drilled or sampled.
Mine call factor
The gold content recovered expressed as a percentage of the called gold content.
Modifying factors
The factors that a qualified person must
apply to indicated and measured Mineral Resources and
then evaluate
in order
to establish
the economic
viability of
Mineral Reserves.
A qualified person
must apply
and evaluate
modifying
factors
to
convert
measured
and
indicated
Mineral
Resources
to
proven
and
probable
Mineral
Reserves.
These
factors
include,
but
are
not
restricted
to:
Mining;
processing;
metallurgical;
infrastructure;
economic;
marketing;
legal;
environmental
compliance;
plans,
negotiations,
or
agreements
with
local
individuals or groups; and governmental
factors. The number, type and specific
characteristics of the modifying
factors applied will necessarily be a function of and depend upon the mineral, mine, property, or project
Mt
Million tons.
Ore
A mixture of valuable
and worthless materials from
which the extraction of
at least one mineral
is technically
and economically viable.
Other operating costs / (income)
Expenses incurred, and
income generated in
the course of
operating activities, which
are not directly
attributable
to production activities.
Operating costs
Operating costs are cost of sales less depreciation, change in estimate
of rehabilitation provision, movement in
gold in process and
finished inventory –
gold bullion, ongoing
rehabilitation expenditure, care
and maintenance,
other operating income and retrenchment costs.
oz/t
Ounces per ton.
Prefeasibility study ("
PFS
")
A comprehensive study of a range of
options for the technical and economic
viability of a mineral project that
has
advanced
to
a
stage
where
a
preferred
mining
method,
in
the
case
of
underground
mining,
or
the
pit
configuration,
in
the
case
of
an
open
pit,
is
established
and
an
effective
method
of
mineral
processing
is
determined. It includes a
financial analysis based on
reasonable assumptions on the
modifying factors and the
evaluation
of
any
other
relevant
factors
which
are
sufficient
for
a
competent
person,
acting
reasonably,
to
determine if all or part of the Mineral Resource may
be converted to a Mineral Reserve at the time of
reporting.
A prefeasibility study is at a lower confidence level than a feasibility study.
Proven Mineral Reserves
The economically mineable part of a measured Mineral Resource and can only result from conversion of a
measured Mineral Resource and can only result from conversion of a measured Mineral Resource.
Probable Mineral Reserves
The economically mineable part of an indicated and in some cases, a measured Mineral Resource.
Qualified Person
An individual who is a
mineral industry professional with at least 5
years of relevant experience in the
type of
mineralization
and
type
of
deposit
under
consideration
and
in
the
specific
type
of
activity
that
person
is
undertaking on behalf of
the registrant, and an eligible
member or licensee in
a good standing of a
recognized
professional organization at the time the technical report is prepared.
Refining
The final purification process of a metal or mineral.
6
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.
Sediment
The deposition of solid fragmental material that originated from weathering of rocks and was transported from
a source to a site of deposition.
Slimes
The tailings discharged from a processing plant after the valuable minerals have been recovered.
Sustaining capital expenditure
Sustaining capital expenditure are
those capital additions that
are necessary to maintain
current gold production.
This is a non‑IFRS financial measure and should
not be considered a substitute measure of costs
and expenses
reported by us in accordance with IFRS.
T’000
Tonnes in thousands.
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/Tonne
Quantities
where the
metric tonne
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.
Tpm
Tonne per month.
Yield
The amount of recovered gold from production generally expressed in ounces or grams per ton or tonne
of ore.
7
PART I
ITEM 1. IDENTITY
OF DIRECTORS, SENIOR
MANAGEMENT AND
ADVISERS
Not applicable.
ITEM 2. OFFER
STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY
INFORMATION
3A. [Reserved]
8
3B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3C. REASONS
FOR THE OFFER
AND 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 these
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;
●
Risks related to climate change;
●
Risks related to government regulation; and
●
Risks related to ownership in our ordinary shares or American Depositary Shares (ADSs).
Risks related
to our business
and operations
Changes in the market price for gold and exchange rate fluctuations,
both of which have fluctuated widely in the past, affect the
profitability
of our operations
and the cash
flows generated
by those operations.
Our results
are significantly
impacted
by the price
of gold and
the USD-Rand
exchange rate.
Any sustained decline in the market price
of gold
from the current
levels would adversely
affect us,
and any sustained
decline in the
price of gold
below the
cost of production
could
result in the closure of
some or all of our operations
which would result in significant costs
and expenditure, such as, incurring
retrenchment
costs earlier than
expected which could
lead to a
decline in profits,
or losses, as
well as impairment
losses.
In addition, as
most of our
production
costs are
in rands,
while gold
is sold
in dollars
and then
converted to
rands, our
results of
operation and
financial condition
have been
and
could be in the future materially affected by
an appreciation in the value of the rand. Accordingly,
any sustained decline in the dollar price of
gold and/or the strengthening of
the South African rand against
the dollar would negatively and
adversely affect our business, operating
results
and financial condition.
In the wake-of
the COVID-19 pandemic
and measures
taken to address
the outbreak,
there has been
a global trend
of investors
turning
to gold
and gold
stocks as
a safe
haven asset,
as has
been the
case in
previous
times of
global economic
crisis.
This has
led to
a surge
in the
average
gold price
during fiscal
2020 and
fiscal
2021. Although
the impact
of the
COVID-19
pandemic
has diminished
and the
gold prices
have marginally
decreased,
the average
gold price
for fiscal
2022 remained
high due to
continued
economic
uncertainty
as the
global economies
attempt to
recover
from all
the after
effects of
COVID19
and deal
with,
the conflict
in Ukraine
and rapidly
rising
inflation.
In addition,
we are
impacted
by movements
in the exchange
rate of the
rand against
the dollar
as described
below.
Exchange rates are influenced by global economic trends. The closing exchange rate of
the rand against the dollar
at June 30,
2022
weakened
by 14% compared
to June 30,
2021.
The closing
price of the
rand against
the dollar
at June 30,
2021 strengthened
by 18% compared
to
June 30,
2020. At
September
30, 2022,
the rand
traded at
R18.15 =
$1.00 (based
on closing
rates),
a 12% weakening
of the rand
against the
Dollar
from June
30, 2022 as
the dollar
strengthened
as a result
of quantitative
tightening
and the raising
of interest
rates by the
US Federal
Reserve.
The
rand/dollar exchange
rate was volatile throughout
the fiscal year 2022
mainly as a result of global,
emerging market and
South Africa economic
uncertainty including
uncertainties
resulting from
the global economic
slowdown sentiment,
rapidly rising global
inflation,
geopolitical
tensions
in
Ukraine,
perceived political and
economic instability,
structurally weak economic
growth of
the South
African economy
exacerbated by
increasing
loadshedding
by power utility
Eskom Holdings
SOC Limited
(“
Eskom
”) as it battles
with supply.
A decrease in the dollar gold price
and/or a strengthening
of the rand against the dollar
results
in a decrease in our profitability. If the
rand was to appreciate against
the dollar or the gold price were to decrease
for a continued time, our operations
could experience a reduction
in
cash flow
and profitability,
and this would adversely affect our business, operating results and financial condition.
We typically 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. Up to April 11, 2022 we sold gold at
spot prices based on the afternoon
London Bullion Market
fixing price on the
day when Rand Refinery, acting
as an agent for the sale
of all gold produced by the
Group, delivers
the Gold to the buyer. Our foreign
currency
was usually sold at the
spot price in the
market on the date of
trade. Subsequent to April 11, 2022
gold is sold at
a dollar gold price and
spot
exchange rate
specified
in a contract
with the South
African bullion
banks to
deliver the
gold at a
specified
settlement
date.
If the dollar
gold price
should fall
and/or the
rand should
strengthen
against the
dollar, this
would adversely
affect us,
and we may
experience
losses, and
if these
changes
result in
revenue below
our cost of
production and
remain at
such levels
for any sustained
period, we may
be forced
to curtail or
suspend some
or
all our operations.
A failure
to acquire
new Mineral
Reserves could
negatively affect
our
future
cash
flows, results
of
operations and
financial
condition.
9
New or
ongoing exploration
programs may be
delayed or
may not result
in new mineral
producing operations
that will
sustain or
increase our Mineral Reserves. A failure to
acquire new Mineral Reserves in sufficient
quantities and quality to maintain or grow
the current
level and quality of our reserves will negatively affect our future cash flow, results of operations and financial condition. In addition, if we
are
unable to identify Mineral Reserves
that have reasonable prospects
for economic extraction
while maintaining sufficient
controls on production
and other costs,
this will
have a material
effect on the
future viability
of our operations.
If we are not
successful in increasing reserves
in future years, our
reserves could decrease,
and such reduction would
adversely affect
our business, operating results and financial condition.
We may be unable to
make desirable
acquisitions
or to integrate
successfully
any businesses
we acquire,
including the
development
of Phase 2
of the FWGR
assets acquired
from Sibanye-Stillwater
.
Our future
success may
depend in
part on the
acquisition
of businesses
or technologies
intended to
complement,
enhance or
expand our
current business
or products or that
might otherwise
offer us growth opportunities.
Our ability to complete
such transactions
may be hindered
by
a number of
factors, including identifying acquisition targets, obtaining
necessary financing and potential difficulties in obtaining government
approvals. Any acquisitions we make,
could fail to
achieve our financial or
strategic objectives or disrupt
our ongoing business which
could
adversely
impact our
results of
operations.
Any acquisition that we do make would pose risks related
to the integration of the new business or technology
with our business and
organization.
We cannot be certain
that we will
be able to
achieve the
benefits we
expect from
a particular
acquisition
or investment.
Acquisitions
may also strain
our managerial
and operational
resources,
as the challenge
of managing
new operations
may divert
our management
from day-to-
day operations of
our existing
business. Furthermore, we may
have difficulty integrating
employees, business systems, and
technology. The
controls, processes
and procedures
of acquired
businesses
may also not adequately
ensure compliance
with laws and
regulations
and we may fail
to identify compliance
issues or liabilities.
Our business,
financial condition
and results
of operations
may be materially
and adversely
affected if
we fail
to coordinate
our resources
effectively
to manage
both our existing
operations
and any businesses
we acquire.
Acquisitions
can also result
in unforeseen
liabilities.
Moreover, our
resources
are limited
and our
decision
to pursue
a transaction
has opportunity
costs;
accordingly, if
we pursue
a particular
transaction,
we may need
to forgo the
prospect of
entering into
other transactions
that could
help us achieve
our financial
or strategic
objectives.
Limited deposition
capacity
Our operations
are based on ultra-volume
and almost nano-gold
extraction.
The volume of reclaimed
material delivered
has one of the
most profound impacts on the gold
output of our metallurgical plants.
The large volumes of
material that are processed at our operations are
deposited on tailings facilities
which have a finite capacity. Alternative facilities
will be required to ensure adequate deposition
capacity for the
current life of mine and for the future. Key projects to increase
such a deposit capacity include the development
of the regional tailings storage
facility as part of Phase 2
FWGR project or identifying interim alternate deposition facilities as well as obtaining regulatory approvals for the
Brakpan/Withok
TSF final design
at Ergo.
However, their
products may
not be successful
or sufficient
to maintain
or increase
deposit capacity
.
Our large projects, most notably the development
of FWGR Phase 2, the Solar Plant Project and
Brakpan/Withok TSF final life
design implementation to enable mining on the
east of the
Ergo plant, are subject to
schedule delays and cost overruns, and we
may face
constraints
in financing our existing
projects or new
business opportunities,
which could render
our projects unviable
or less profitable
than
planned.
The development of our projects are capital
intensive processes carried
out over long durations and requires us to commit significant
capital expenditure
and allocate
considerable
management
resources in
utilizing our
existing experience
and know-how.
Projects like
the
development of
Phase 2
of
the
FWGR assets
acquired from
Sibanye-Stillwater, the
Solar Plant
Project and
the
implementation
of the Brakpan/Withok TSF final life design are subject
to the risk of delays,
regulatory approvals
and cost overruns which are
inherent in
any large construction
project including,
inter alia
:
•
shortages
or unforeseen
increases
in the cost
of equipment,
labor and
raw materials;
•
unforeseen
design and
engineering
problems;
•
changes in
construction
plans that
may require
new or amended
planning permissions;
•
unforeseen
construction
problems;
•
unforeseen
delays
commissioning
sections
of the project;
•
inadequate
phasing of activities;
•
labor disputes;
•
inadequate
workforce
planning or
productivity
of workforce;
•
inadequate
management
practices;
•
natural disasters
and adverse
weather conditions;
•
national work
stoppages
as a result
of infectious
deceases and
pandemics;
•
failure or
delay of third-party
service providers;
and
•
changes to
regulations,
such as environmental
regulations.
We also face the
risk that expected
benefits of
our projects
are not achieved.
10
The Phase 2 definitive
feasibility
study was completed
in the 3
rd
quarter of fiscal
year 2021, however
regulatory approval
still needs
to
be obtained
for the submitted
amended design.
It is therefore
anticipated
that the construction
of the Regional
Storage Facility,
related to Phase
2,
will commence
in fiscal
year 2031.
As the
Driefontein
4 TSF is
expected
to reach
full capacity
during fiscal
year 2025,
whereafter
the depositional
rate would
have to
decrease
materially. Plans
are in
place to
redirect
material
to Sibanye
Gold’s Leeudoorn
TSF until
the Regional
Storage
Tailings
Facility is
ready for commissioning
expected in
fiscal year
2031.
Ergo is currently
developing a
Solar Power
Plant to reduce
its reliance
on Eskom and
to reduce
its future
cost of electricity
(“
the Solar
Plant
”).
The Solar
Plant
definitive
feasibility
study was
completed
during
fiscal
year 2022
and is
currently
under
development.
A significant
capital
investment
is needed to
complete the
project. It
is estimated
that benefit
from the project
in reduced electricity
costs and reduced
carbon footprint
will start
to materialize
from April
2023 onwards.
Regulatory approvals
for the final life design of the Brakpan/Withok TSF are yet to be obtained. The
implementation
of the final life
design is expected
to be crucial
in the increase
of the life
of mine of
Ergo as it will
accommodate
material in
toward the
east of the
Ergo plant.
In addition,
if the
assumptions
we make
in assessing
the viability
of our
projects,
including
those relating
to commodity
prices,
exchange
rates, interest rates, inflation
rates and
discount rates,
prove to
be incorrect or
need to
be significantly revised, this
may adversely affect
the
profitability or even
the viability of our projects.
The uncertainty and volatility
in the gold market makes it more difficult
to accurately evaluate
the project
economics
and increases
the risk that
the assumptions
underlying
our assessment
of the viability
of the project
may prove incorrect.
As the
development of
FWGR,
the Solar
Power Project
and the
implementation of the
final life
design Brakpan/Withok TSF
are
particularly
material
to DRDGOLD,
significant
cost overruns
or adverse
changes
in assumptions
affecting
the viability
of these
projects
could have
a material
adverse effect
on our business,
cash flows,
financial condition
and prospects.
Our operating cash flow and available banking facilities may be insufficient to meet our capital expenditure plans and requirements,
depending on the timing and cost of development of our existing projects and any further projects we may pursue. As a result, new sources of
capital may
be needed to meet
the funding requirements
of these projects
and to fund ongoing
business activities.
Our ability to
raise and service
significant
new sources
of capital
will be
a function
of,
inter alia
, macroeconomic
conditions,
rising cost
of debt,
our credit
rating, our
gearing and
other risk
metrics, the condition of
the financial markets, future
gold prices, the
prospects for our
industry, our
operational performance and
operating cash
flow and debt
position.
In the event of operating or financial
challenges, any dislocation
in financial markets
or new funding limitations,
our ability to pursue
new business
opportunities,
invest in
existing and
new projects,
fund our ongoing
business activities
and pay dividends,
could be
constrained,
any
of which could
have a material
adverse effect
on our business,
operating results
cash flows
and financial
condition.
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,
such as the rand gold price, production volumes,
recovered grades
and costs.
Management
is estimating
a significant
capital investment
in major projects
in the next
few years.
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 financing
sources
and any
such financing
may not
be permitted
under the
terms of
our financing
arrangements
or may not
be possible
on attractive
terms or
at all
due
to rising
interest
rates,
or may not
be available
on acceptable
terms, or
at all.
If we do
not generate
sufficient cash
flows or
have access
to adequate
financing, our
ability to respond
to changing
business and
economic conditions,
make future
acquisitions,
react to adverse
operating results,
meet
our debt service
obligations
and fund required
capital expenditures
or meet our
working capital
requirements
may be adversely
affected.
Any interruption
in gold production at any of our two mining
operations generating
cash flows, will have an adverse
effect on the
Company.
We have two mining
operations
generating
cash flows,
namely Ergo and
FWGR.
Ergo’s
reclamation
sites,
processing
plants,
pump
stations and
the Brakpan/Withok
TSF are linked
through pipeline
infrastructure.
The Ergo plant
is currently
our major
processing
plant. FWGR’s
reclamation
site, DP2 processing
plant, pump
stations and
the Driefontein
4 Tailings Storage
Facility are
linked through
pipeline infrastructure.
Our reclamation sites, plants,
pipelines
infrastructure and the
deposition/storage facilities are exposed to
numerous risks, including
operational
down time due
to planned or unplanned
maintenance
and load shedding
or power dips,
destruction of
infrastructure,
spillages, higher
than expected operating
costs, or
lower than
expected production as a
result of
decreases in
extraction efficiencies due to
imbalances in the
metallurgical
process as
well as inconsistent
volume throughput
or other factors.
Our FWGR operations are reliant
on the
use and access to
Sibanye-Stillwater’s
mining infrastructure,
related services including the
smelting and recovery of gold
from gold loaded carbon produced at
FWGR as well
as the
use of various
rights, permits and licenses held by
Sibanye Gold
pursuant to
which FWGR
operates,
pending the
transfer
to FWGR of
those that
are transferable.
Any disruption
in the supply
of, or
our ability to
use and access
the Sibanye-Stillwater
mining infrastructure,
related services
and rights, permits
and licenses,
could have an
adverse
impact on
our operations.
Any of the risks
above or weather
conditions or
other interruptions
could adversely
impact our operations
which could have
a material
adverse effect
on our business,
operating results
and financial
condition.
11
Flooding at
our discontinued
underground
operations
may cause
us to incur
liabilities
for environmental
damage.
If the rate
of rise of
water is not
controlled,
water from
our abandoned
underground mining
areas and
active TSFs
could potentially
rise
and come
into contact
with naturally
occurring
underground
water or
decant into
surrounding
underground
mining areas
and could
ultimately
also
rise to surface. Progressive
flooding of these abandoned
underground mining areas
and surrounding underground
mining areas could eventually
cause the
discharge of
polluted water
to the surface
and to local
water sources.
Should underground water levels
not reach a natural subterranean
equilibrium, and if underground
water rises to the surface, we may
face claims
relating
to environmental
damage.
Any such
claims
may have
a material
adverse
effect on
our business,
operating
results
and financial
condition.
An increase
in production
costs could
have an adverse
effect on our results
of operations.
An increase
in our production
costs will
impact our
results of
operations.
Production
costs are
affected by,
inter alia
:
•
rising global
and national
inflation;
•
labor stability,
productivity
and increases
in labor costs;
•
increases
in electricity
and water prices;
•
increases
in crude oil
and steel
prices;
•
changes in
regulation;
•
unforeseen
changes in
ore grades
and recoveries;
•
unexpected
changes in
the quality
or quantity
of reserves;
•
technical
production issues;
•
availability
and cost of
smelting and
refining arrangements;
•
environmental
and industrial
accidents;
•
gold theft;
•
shortages
or availability
of materials
used in production;
•
environmental
factors; and
•
pollution.
Our production costs
consist mainly
of materials
including reagents
and steel, labor, electricity,
specialized
service providers,
machine
hire,
security,
water, fuels,
lubricants
and other
oil and
petroleum-based
products.
Production
costs
have in
the past,
and could
in the
future,
increase
at rates
in excess
of our
annual inflation
rate and
impact our
results
of operation
and can
result in
the restructuring
of these
operations
at substantial
cost.
The transitional arrangement regarding wage increases with the workforce at
FWGR when these
employees were incorporated into
DRDGOLD have now come to an end. A three-year
wage agreement was reached
with organized labor at FWGR in November
2021 and wage
negotiations
are currently
under
way at
the ERGO
operations
after the
previous
extended
agreement
came to
an end
on June
30, 2022.
A new
wage
agreement
was concluded
after June
30, 2022.
Increases in production
costs, if material,
will adversely
impact our results
of operations.
In addition, any initiatives
that we pursue to
reduce costs, such as reducing our reliance on Eskom’s grid through self-generation of power, for example through the
Solar Power project at
Ergo, reducing
our labor
force, a
reduction
of the corporate
overhead,
negotiating
lower price
increases
for consumables
and cost
controls
may not
be successful
or sufficient to offset the
increases affecting
our operations and could
adversely affect
our business, operating
results and financial
condition.
Uncertainties regarding
the
impact
of
the
COVID-19
pandemic
and
potential new
variants could
impact
current
and
future
operations
The risk related
to the impact of the COVID-19
pandemic is not isolated
to health and safety
for our employees
and disruptions to
our
operations,
but has manifested
as a risk in
terms of
social stability
as well as
economic activity
and growth
both in South
Africa and
globally. The
national
state
of disaster
imposed
by the
South African
Government
ended on
April 4,
2022,
which reduced
the overall
risk related
to the
pandemic.
We continue to monitor
the risk related
to the COVID-19
pandemic and
have measures
in place to
react in the
case that the
COVID-19 pandemic
worsens.
We have benefitted
from the increase
in dollar gold
prices and
weakening of the
rand/dollar
exchange rate
driven at least
in part by the
impact of
the COVID-19
pandemic.
Dollar gold
prices may
decrease and
the rand/dollar
exchange rate
may strengthen
as the global
impact of
the
COVID-19 pandemic
is alleviated.
Uncertainties
regarding supply
chain
The
global
economic
environment,
geopolitical
tensions
as
well
as
inflationary
pressures
worldwide
have
highlighted
the
interdependencies
of supply
chains.
The risk
of dependency
on key
suppliers
requires
ongoing focus
and proactive
management.
The unavailability
of critical
material
such as
reagents
and critical
equipment
may affect
production
and operating
costs
resulting
in loss
of revenue.
Delays
in supplies,
freight costs
and higher
than inflationary
increases
for capital
equipment are
crucial elements
for new projects.
Our operations
are subject
to extensive
environmental
regulations
which could
impose significant
costs and liabilities.
12
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 have
the potential to impact the environment, including land,
habitat, streams and environment
near the mining sites. Failure to comply with environmental
laws or 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
costs of compliance,
resulting in
a material
adverse effect
on our profitability.
We have incurred, and expect to incur in the future, expenditures to comply with these
environmental laws and regulations.
We have
estimated our aggregate
group Provision for
Environmental Rehabilitation at a
net present
value of
R517.7 million which is
included in
our
statement
of financial
position
as at
June 30,
2022
(Refer
to Item
18. ‘‘Financial
Statements
- Note
11 –
Provision
for environmental
rehabilitation”).
However, the ultimate amount of rehabilitation costs may in the future exceed the current estimates due to factors beyond our control, such as
changing legislation,
higher than expected
cost increases,
or unidentified
rehabilitation
costs. We used to fund these environmental
rehabilitation
costs by making contributions over the life of the mine to
environmental trust funds or funds held in insurance instruments established
for our
operations.
During fiscal
year 2022
we
changed the
method of
provision to
funds held
in
insurance products.
If
any
of
our operations
are
prematurely
closed,
the rehabilitation
funds may
be insufficient
to meet
all the
rehabilitation
obligations
of those
operations.
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 prosecution,
litigation
and potentially
significant
liabilities.
Damage to
tailings dams
and excessive
maintenance
and rehabilitation
costs could
result in
lower production
and health,
safety and
environmental
liabilities.
Our tailings
facilities
are exposed to
numerous risks
and events,
the occurrence
of which may
result in the
failure, breach
or damage of
such a facility. These may include sabotage, failure by our employees
to adhere to the codes of practice and natural disasters such as excessive
rainfall and seismic events, any of which could force us to stop or limit operations. This is further impacted and expected to intensify with the
effects of climate change. In
addition, the dams could overflow or
a side wall
could collapse and the
health and safety of
our employees and
communities living around these dams could be jeopardized. In the event of
damage to our tailings facilities, our operations will be adversely
affected and
this in turn
could have
a material
adverse effect
on our business,
operating results
and financial
condition.
Due to the
nature of our
business, our
operations
face extensive
health and safety
risks and regulation
of those risks.
Gold mining
is exposed
to
numerous risks
and events,
the occurrence
of
which may
result in
the death
of, or
personal injury,
to
employees.
According to
section 54
of the Mine,
Health and
Safety Act
of 1996, if
an inspector
believes
that any
occurrence,
practice or
condition
at a mine
endangers
or may endanger
the health
or safety
of any person
at the mine,
the inspector
may give
any instruction
necessary
to protect
the
health or safety
of persons at
the mine. These
instructions
could include
the suspension
of operations
at the whole
or part of the
mine. Health
and
safety incidents
could lead to mine operations
being halted and that will
increase our unit production
costs, which could
have a material adverse
effect on our
business,
operating results
and financial
condition.
Events may
occur for which
we are not
insured which
could affect
our cash flows
and profitability.
Because of
the nature of
our business,
we may become
subject to liability
for pollution
or other hazards
against which
we are unable
to
insure or are
not insured, including those in
respect of past mining activities. Our existing property,
business interruption and other insurance
contains certain exclusions
and limitations on coverage.
The insured value for property and loss of profits due to business
interruption is R14.7
billion, with a total loss limit
of R1 billion for Ergo and R650 million for FWGR
for the 2023 fiscal year. Business interruption
is only covered
from the time the loss occurs
and is subject to time and amount
deductibles that
vary between categories.
To cover legal liability to third parties
for damage, injury,
illness or death a
total of R1
billion insurance cover is in
place for the
2023 fiscal
year, subject to
certain exclusions and
limitations
on coverage.
Insurance coverage
may not cover the extent of claims brought 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,
this
could have
a material
adverse effect
on our business,
operating results
and financial
condition.
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 the positions
of Chief Executive Officer
and Chief Financial Officer. In addition, we compete with mining and other companies on a
global basis to
attract and retain key
human resources at
all levels with
appropriate technical skills and operating
and managerial experience
necessary to operate the
business. Factors critical to retaining our present staff and attracting additional highly qualified personnel
include our
ability to
provide these individuals with
competitive compensation arrangements, 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 man” life insurance
policies on
any members
of our executive
team. The loss
of any of our
key personnel
could delay
the execution
of our business
plans, which
may
result in
decreased
production, increased
costs and decreased
profitability.
We are subject to
operational
risks
associated
with our flotation
and fine-grind
(FFG) project.
Our flotation
and fine-grind
project, implemented
in fiscal
year 2014, is
designed to
improve extraction
efficiencies.
13
Certain
components
of the FFG
were temporarily
halted in
the first
quarter
of fiscal
year 2020
to perform
an evaluation
and compare
the
additional revenues earned from additional gold extracted
from the most recently integrated reclamation sites compared to the cost incurred to
operate the FFG circuit.
The remaining components
of the FFG continue to operate.
Testing on the newly integrated material
has suggested that
some of these
halted components
will only operate
in subsequent
years once the
related reclamation
sites have
been brought
online in accordance
with the current life of mine plan for ERGO. These halted components
are classified as idle assets until
they are brought back into operation
as
described.
The
success of
the
FFG is
directly dependent on
the
material type
and
material mix
processed through
it.
Therefore, the
halted
components will
remain idle
pending the continuation
and conclusion
of various test
work regarding
the material
type and material
mix of future
reclamation
sites.
Firm decisions
have also
not yet
been made
by the executive
committee
and the
Board of
Directors
on the
future of
the FFG.
We
remain subject
to operations
risks relating
to the FFG
project.
A disruption
in our information
technology
systems, including
incidents
related to
cyber security,
could adversely
affect our
business
operations.
We
rely
on
the
accuracy,
availability and
security
of
our
information technology
systems. Despite
the
measures
that
we
have
implemented,
including
those
related
to cyber
security, our
systems
could be
breached
or damaged
by computer
viruses
and systems
attacks,
natural
or man-made
incidents,
disasters
or unauthorized
physical or
electronic
access.
Any system
failure, accident or
security breach could
result in
business disruption, theft
of our
intellectual property, trade
secrets
(including
our proprietary
technology),
unauthorized
access to,
or disclosure
of, personnel
or supplier
information,
corruption
of our data
or of our
systems,
reputational
damage
or litigation.
We may also
be required
to incur
significant
cost to
protect
against
or repair
the damage
caused
by these
disruptions or
security breaches in
the future,
including, for
example, rebuilding internal
systems, implementing additional threat
protection
measures, defending
against litigation,
responding to regulatory
inquiries or
actions, paying
damages, or taking
other remedial
steps with respect
to third parties.
These threats
are constantly
evolving,
thereby
increasing
the difficulty
of successfully
defending
against
them or
implementing
adequate
preventative
measures and
we remain
subject to
additional
known or unknown
threats.
In some instances,
we may be
unaware of
an incident
or its
magnitude and effects. We
may be
susceptible to new and emerging
risks,
including cyber-attacks and phishing, in the evolving landscape of
cybersecurity
threats. Given
the increasing
sophistication
and evolving
nature of
these threats,
DRDGOLD cannot
rule out the
possibility
of them
occurring in the future. An extended
failure of critical system
components, caused by accidental,
or malicious actions, including
those resulting
from a cyber
security attack,
could result
in a significant
environmental
incident, commercial
loss or interruption
to operations.
In addition,
from
time
to time,
we implement
updates
to our
information
technology
systems
and software,
which
can disrupt
or shutdown
our information
technology
systems.
Information
technology
system disruptions,
if not
appropriately
addressed
or mitigated,
could have
a material
adverse effect
on our operations.
Risks related
to the gold
mining industry
A change in
the dollar
price of gold,
which in the
past has fluctuated
widely, is beyond
our control.
Historically,
the gold
price has
fluctuated
widely and
is affected
by numerous
industry factors
over which
we have
no control
including:
•
a significant
amount of above-ground
gold in the
world that
is used for
trading by investors;
•
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 jewelry;
•
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;
•
interest
rates;
•
gold hedging and de-hedging by gold producers; and
•
actual or expected gold sales by central banks and the International Monetary Fund.
During fiscal
year 2022 the
gold price reached
a high of U$2,070
per ounce
and a low of
U$1,684.
We benefited from
a sustained
high
gold price
due to slow
global economic
recovery,
economic uncertainty
and geopolitical
tensions.
Investors globally, as they have in so many previous times
of crisis, turned to gold and gold stocks as a safe haven asset,
leading to a
sustained high gold price for fiscal 2022 after the highs experienced
in fiscal 2021.
The rand/dollar exchange
rate remained volatile throughout
fiscal 2022 mainly as a result
of economic uncertainty
and perceived political
instability,
increase of interest
rates by the US Federal Reserve
as
they attempt
to reduce
inflation,
global market
slowdown
sentiment,
Ukraine
conflict,
tensions
between the
USA and
China, low
economic
growth
and increased load shedding from Eskom as it struggles to keep up with demand., and a continually distressed Eskom. Further volatility
in the
Rand was fueled by Moody’s
upgrading of South Africa’s sovereign credit rating to stable after the rating was
downgraded to sub-investment
grade in fiscal
2021.
14
The factors
mentioned above
could put
negative pressure on
the price
of
gold or
the rand/dollar
exchange rate in
the future.
Our
profitability may
be negatively impacted
by a decline in the gold price as
we incur losses when revenue
from gold sales drops below
the cost of
production for
an extended
period.
The
exploration
of
mineral
properties
is
highly
speculative
in
nature,
involves
substantial
expenditures,
and
is
frequently
unproductive.
Exploration is highly speculative
in nature and requires
substantial expenditure for drilling,
sampling and analysis of
ore bodies to
quantify the extent of the gold reserve. Many gold 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
the deposit
contains economically
recoverable mineralization.
Uncertainties as
to the
metallurgical recovery
of any
gold
discovered may not warrant mining based on available technology.
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. Our business focuses
mainly on the extraction of gold from tailings, which
is a
volume driven
exercise. Only
significant deposits
within proximity
of services
and infrastructure
that contain
adequate gold
content to
justify the significant capital investment associated with plant,
reclamation and deposition infrastructure are suitable for exploitation
in terms
of our model. There is a limited supply of these deposits which may inhibit exploration and developments,
especially in a declining gold price
environment.
Because 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 operations. The costs incurred on exploration activities that do
not identify commercially exploitable reserves of gold are not likely to be recovered and therefore are likely to be impaired.
There is inherent uncertainty in Mineral Reserves
and Mineral Resources estimates.
Our Mineral Reserve and Mineral Resources 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 the SEC’s Regulation S-K (Subpart 1300). These
estimates may not
reflect actual Mineral Reserves and Mineral Resources 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 reserve
estimates to
decline. Moreover,
if the rand price
of gold declines,
or stabilizes
at a price
that is lower
than recent
levels,
or those assumed
in our mining
plans,
or if our
labor, water, steel, electricity and other production costs increase or recovery rates decrease, it may become uneconomical to recover
Mineral Reserves
and Mineral Resources,
particularly
those containing
relatively lower
grades of mineralization.
Under these circumstances,
we
would be required
to re-evaluate our Mineral
Reserves and Mineral
Resources.
Short-term operating
factors relating
to the ability to reclaim
our
Mineral Reserves,
at the required
rate, such
as an interruption
or reduction
in the supply
of electricity,
limited deposition
capacity or
a shortage
of
water may have
the effect that we
are unable to
achieve critical
mass, which may
render the recovery
of Mineral Reserve,
or parts of the
Mineral
Reserve
no longer
feasible,
which
could
negatively
affect
production
rate
and costs
and decrease
our profitability
during
any given
period.
Estimates
of Mineral Reserves
and Mineral Resources
are based on drilling
results and because
unforeseen conditions
may occur in these
mine dumps that
may not
have been
identified
by the
drilling results,
the actual
results
may vary
from the
initial estimates.
These factors have in the past and
could
in the future result in reductions in our
Mineral Reserves
and Mineral
Resources estimates and as a result, our production, which could in turn
adversely impact the total value of our mining asset base and our business, operating results and financial condition.
Gold mining is susceptible to numerous events that could have an adverse impact on a gold mining business.
The business of gold
mining is 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
and reclamation
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:
●
environmental
hazards and pollution,
including dust generation,
toxic chemicals,
discharge of metals, pollutants,
radioactive materials
and other
hazardous
material
into the air
and water;
●
flooding, landslides,
sinkhole formation,
ground subsidence,
ground and
surface water
pollution and
waterway
contamination;
●
a decrease
in labor productivity
due to labor
disruptions,
work stoppages,
disease, slowdowns
or labor strikes;
●
unexpected
decline of
ore grade;
●
metallurgical
conditions or
lower than
expected gold
recovery;
●
failure of
unproven or evolving
technologies;
●
mechanical
failure or
breakdowns
and ageing
infrastructure;
●
energy and electrical
power supply
interruptions;
●
availability
of water;
15
●
injuries to
employees
or fatalities
due to falls
from heights
and accidents
relating to
mobile machinery
or electrocution
or other causes;
●
activities
of illegal
or artisanal
miners;
●
material
and equipment
availability;
●
legal and
regulatory
restrictions
and changes
to such restrictions;
●
social or
community disputes
or interventions;
●
accidents
caused from
the collapse
of tailings
dams;
●
pipeline failures
and spillages;
●
safety-related
stoppages;
and
●
corruption, fraud and theft including
gold bullion
theft.
The occurrence of any of these
hazards could delay production,
result in losses, or increase
production costs or decrease
earnings and
may result
in significant
legal claims
and adversely
impact our
business results
of operations
and financial
condition.
Risks related
to doing business
in South Africa
Political or
economic
instability
in South Africa
may reduce
our production
and profitability.
We are incorporated
in South
Africa
and all
our operations
are currently
in South
Africa.
As a
result,
political
and economic
risks relating
to South Africa could have a significant
effect on 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
most 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 may
impede fixed
inward investment
into South
Africa and
increase emigration
of skilled
workers and
as a result,
we may have
difficulties
retaining qualified
employees.
The sustained
high unemployment
rate of
33.9% and 46.5%,
for 2022,
amongst the
youth has
increased
the risk
of social
unrest,
such as
protests and conflict, in our surrounding communities
already created from a growing frustration
of society at large on slow reformative action
being taken by all spheres of the South African government, specifically,
in combating unemployment particularly
in the youth of the country.
This frustration was a contributing
factor that led to social unrest, people committing
crimes, vandalising
property, and damaging infrastructure
during July 2021. A prolonged economic downturn
could result in an extended period of high unemployment,
further exacerbating
anti-mining
sentiments
in South Africa.
Furthermore,
the rise
of ESG factors,
such as electricity
usage, social
unrest, social
license to
operate, climate
change,
water usage
and environmental
stewardship,
in investment
decisions may
result in divestment
in the mining
sector.
Inflation can
adversely
affect us.
The inflation
rate in
South Africa
is relatively
high compared
to developed,
industrialized
countries,
although many
countries
around the
world are
currently
facing inflation
challenges.
As of June
30, 2022, the
annual Consumer
Price Inflation
Index (“
CPI
”),
stood at 7.4%
compared
to 4.9%
in June 2021 and 2.2%
in June 2020. Annual CPI was
7.5%
as at September 30, 2022. Inflation
in South Africa generally
results
in an
increase in our rand operational
costs.
Higher and sustained inflation
in the future, with a consequent increase
in operational costs could have a
material adverse effect on our results of operations and our financial condition and could result in operations being discontinued
or reduced or
rationalized,
which could
reduce our profitability.
The treatment of
occupational health diseases and
the potential liabilities related
to occupational health
diseases may have
an
adverse effect
on the results
of our operations
and our financial
condition.
We may be subject
to claims
relating to occupational
health diseases
and we are
currently
subject to
legal action
described below.
In January 2013, DRDGOLD, East Rand Proprietary Mines Limited (“
DRDGOLD Respondents
”) and 23
other mining companies
(“
Other Respondents
”) (collectively
referred
to as "
Respondents
") were
served with
a court
application
issued in
the High
Court of
South Africa
for
a
class certification
on
behalf of
former mineworkers
and
dependents of
deceased mineworkers
(“
Applicants
”).
In
the
application the
Applicants allege
that
the
Respondents conducted
underground mining
operations in
a
negligent and
complicit manner
causing the
former
mineworkers to contract
occupational lung diseases.
The Applicants have as yet not quantified
the amounts which they are demanding
from the
Respondents
in damages.
On May
3, 2018, former mineworkers and dependents of
deceased mineworkers (“
Applicants
”) and
Anglo American South Africa
Limited,
AngloGold
Ashanti
Limited,
Sibanye
Gold Limited
trading as
Sibanye-Stillwater,
Harmony Gold
Mining Company
Limited,
Gold Fields
Limited, African Rainbow Minerals Limited and certain of their affiliates (“
Settling Companies
”) settled the class certification application in
which the Applicants
in each sought to certify
class actions against
gold mining houses
cited therein on behalf
of mineworkers who had worked
for any of
the particular
respondents
and who suffer
from any occupational
lung disease,
including silicosis
or tuberculosis.
The DRDGOLD
Respondents,
are not a
party to the
settlement
between the
Applicants
and Settling
Companies.
The dispute,
insofar as
the class certification
application
and appeal
thereof is concerned,
still stands
and has not
terminated
in light of the
settlement
agreement (refer to
Item 18. “Financial
Statements
- Note 26 – Contingencies”).
An adverse judgment in the claim described above or any other claim could have an adverse impact on us.
We have experienced
an increase
in organised
crime activities
which have
started to
target gold
plants.
16
In October
2019, a number
of companies,
including our
Knights and
Ergo plants,
were subject
to armed attacks
targeting the
gold in the
plants or high-grade
gold bearing material.
These incidents were
very well organised and
in all the incidents the
thieves were armed.
In some of
the incidents
employees
of companies
were also held
hostage until
the targeted
material was
obtained. In
the 2019 incident,
a security
officer was
fatally injured.
Any such incidents have
and may still
result in losses of
gold or
other damage which could
have a
material adverse impact on our
business,
financial
results or
condition.
Theft at our
sites, particularly
of copper and
pipelines,
may result
in greater
risks to employees
or interruptions
in production.
Crime statistics
in South Africa
indicate an
increase in
theft. This
together with
price increases
for copper and
steel has resulted
in theft
of copper
cables
and pipelines.
Our operations
experience
high incidents
of copper
cable
theft and
pipelines
despite
the implementation
of enhanced
security measures
which have increased
our security
spend. At times,
the incidences
have resulted
in serious injuries
of our security
personnel.
In
addition to
the general
risk to
employees’
lives in
an area
where theft
occurs, we
may suffer
production
losses and
incur additional
costs as
a result
of power interruptions
caused by
cable theft
and theft of
bolts used
for the pipeline.
Power stoppages
or shortages
or increases
in the cost
of power could
negatively
affect our results
and financial
condition.
Our mining operations
are dependent on electrical
power supplied by Eskom,
South Africa’s state-owned
utility company. As a result
of insufficient generating
capacity, owing to poor maintenance and lagging capital
infrastructure
investment, South Africa has faced significant
disruptions
in electricity
supply in
the past
and Eskom
has warned
that the
country could
continue to
face disruptions
in electrical
power supply
in
the foreseeable
future. Loadshedding
has intensified
over the past
year.
The security
of future
power supply
as well
as the
cost thereof
remains a
risk and
may have
major implications
for our
operations,
which
may result in
significant production losses.
The country’s
current reserve capacity may be
insufficient and the
risk of
electricity stoppages is
expected to continue for the foreseeable
future. Supply interruptions
because of this as well as an aging and poorly maintained distribution
grid
may pose a
significant
risk to the
operations.
The Group has a load-curtailment agreement in
place with Eskom in terms of which
we reduce power consumption by between 10%
and 20% when the grid is under pressure, but Eskom maintains uninterrupted power supply to the operations.
Eskom has
approached
the National
Energy Regulator
of South Africa
(“
NERSA
”) for a
32% increase
in tariffs
for 2023,
a request
that
has been met
by strong push
from business
and society.
These increases
have had an adverse
effect on our
production
costs and
similar or higher
future increases
could have
a material
adverse effect
on our operating
results and
financial
condition.
In February 2019,
the President of
South Africa announced the
vertical unbundling of Eskom
to improve efficiencies and
have an
independent
grid operator
and open
competition
for energy
generation
at lower
cost to
the consumer.
While full
state
ownership
will be
maintained,
the unbundling
is expected to result
in the separation
of Eskom’s generation,
transmission
and distribution
functions into
separate entities,
which
may require legislative
and/or policy
reform. The unbundling
is expected to be completed
by December 2022 for the
generation and distribution
functions.
Poor reliability
of the
supply of
electricity
and instability
in prices
through the
unbundling
process
is expected
to continue.
Eskom’s coal
fired power plants
have not performed
well for a number of years,
with national rotational
power cuts (load
shedding) having
been implemented
intermittently through the last number of
fiscal years.
Should we
experience further power tariff increases, our business operating results and
financial
condition may
be adversely
impacted.
Ergo is currently
developing a
Solar Power
Plant to reduce
its reliance
on Eskom and
to reduce
its future
cost of electricity
but we face
risks in the
development
of this plant
as such plant
may not be completed
within expected
timeframe or
budget and may
not reduce
our
dependence
on Eskom as
expected.
Ergo
is
currently
disputing
the
electricity
tariff
charged
by
Ekurhuleni
Metropolitan
Municipality
(refer
to
Item 18.
“Financial
Statements
- Note 24 –
Payments made
under protest”).
Risks related
to climate
change
Extreme weather
As a result
of climate
change,
our operations
are exposed
to severe weather
events that
has in the past
and could interrupt
production.
Major property, infrastructure
and/or environmental damage
as well as loss of human life could be caused by extreme weather events. Extreme
weather conditions
such as
droughts,
extreme rainfall
and high wind
volumes are
on the increase.
Specifically, we
have experienced
an increase
in
intensity of events, such as thunderstorms on the Highveld, where our operations
are situated. It is believed that the long-term upward trend in
global temperature
is directly
correlated
with the increase
in global severe
weather events
both in terms
of magnitude
and frequency.
17
For example,
dry weather
conditions
have prompted
level 2
water restrictions
on residential
water users
in the Johannesburg
area. These
water restrictions remain in place as at September 30, 2022.
Severe thunderstorms
and high winds,
especially during the summer rainy season,
may also cause damage to
operation infrastructure that may in turn cause an
interruption in the production of gold.
Such incidents and other
weather
events
may damage
the facility
and may
result
in water
shortages
which can
impact our
operations
and cause
the interruption
of deposition
and gold production
until the
facility is
repaired
or alternative
deposition is
brought online.
Scarcity
of water may
negatively
affect our operations.
South Africa
is a relatively
dry area and
predictions
are that
dry conditions
will escalate.
South Africa
faces water
shortages,
which may
lead to the
revision of
water usage
strategies
by several
sectors in the
South African
economy, including
electricity
generation and
municipalities.
This may result in rationing
or increased water
costs. Such changes
would adversely
impact our surface
retreatment operations,
which use water
to transport
the slimes
or sand from reclaimed
areas to the
processing plant
and to the tailings
facilities.
In addition,
as our gold plants
and piping
infrastructure were designed to carry certain minimum throughputs, any reductions in the volumes of available water may require us to
adjust
production at
these operations.
DRDGOLD invested R22 million in the construction
of a filtration plant at the Rondebult Waste Water
Works (operated by the East
Rand Water Care Company) to
treat sewage water to reduce the use of
potable water. This water is used
both to reclaim and carry production
materials and
also,
ultimately,
to
irrigate rehabilitation
vegetation at
a
significantly lower
cost
than
that
of
potable
water.
The
plant
was
commissioned in early fiscal
year 2016 and has design capacity to provide Ergo with 10 Mega Litres (“
Ml
”) a day from the Rondebult sewage
treatment facility.
However, due to the deterioration
of the local government
authorities’ infrastructure,
the expected quantity
of sewerage is not
reaching the
treatment
facility and
as a result
Ergo is still
not able to
extract
the full design
capacity
of 10 Ml of
water a
day.
It is not
certain if
and
when the flow
of sewerage
will reach
expected levels.
These measures may not be sufficient to alleviate the water scarcity issues we face.
Risks related
to government
regulation
Government
policies in
South Africa
may adversely
impact our operations
and profits.
The mining
industry in
South Africa
is extensively
regulated through legislation
and regulations issued
through the
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
the government
enforces its
regulations through the
various government departments. Lack
of
communication between government and
regulators as
well as
ineffective
regulators remains
an issue that may increase
the cost of compliance
and obtaining permits.
The formulation or
implementation of government
policies may be discretionary and unpredictable on certain issues, including changes
in conditions for the issuance of licenses insofar as
social
and labor plans
are concerned, transformation of
the workplace, laws relating
to mineral rights, ownership
of mining assets and
the rights to
prospect and mine,
additional taxes
on the mining
industry and in
extreme cases,
nationalization. A change
in regulatory or
government policies
could adversely affect our business.
Mining royalties
and other
tax reform
could have
an adverse
effect on the
business,
operating results
and financial
condition
of our
operations.
The
Mineral
and
Petroleum
Resources
Royalty
Act,
No.28
of
2008
and
the
Mineral
and
Petroleum
Resources
Royalty
Act
(Administration),
No.29 of 2008
govern royalty
rates for
gold mining
in South Africa.
These acts
provide for
the payment
of a royalty, calculated
through a
royalty rate
formula (using
rates of
between 0.5%
and 5.0%)
applied against
gross revenue
per year, payable
half yearly
with a third
and
final payment
thereafter.
The royalty
is tax
deductible
and the
cost after
tax amounts
to a
rate of
between
0.33% and
3.3% at
the prevailing
marginal
tax rates
applicable
to the taxed
entity. The royalty
is payable
on old
unconverted
mining rights
and new
converted
mining rights.
Based on
a legal
opinion
the
Company
obtained,
mine
dumps
created
before
the
enactment
of
the
Mineral
and
Petroleum
Resources
Development
Act
(“
MPRDA
”) fall outside the ambit of
this royalty and consequently the Company does not pay any royalty on any
dumps created prior to the
MPRDA. Introduction
of further
revenue
based royalties
or any adverse
future tax
reforms
could have
an adverse
effect on
our business,
operating
results and
financial
condition.
Failure to comply with the requirements
of the Broad Based Socio-Economic Empowerment
Charter 2018 could have an adverse
effect on our
business,
operating results
and financial
condition of
our operations.
In April
2018, judgment
was handed
down by the
North Gauteng
High Court
in Pretoria
against a
provision in
the 2010 Mining
Charter
regarding
the “once
empowered
always empowered”
principle.
This principle
refers
to whether
a mining
company, after
the exit
of a Black
partner
that held a
stake in the
company consequent
to a result
of a Black
Economic Empowerment
(“
BEE
”) transaction,
continues to
be BEE compliant.
The judgment
was appealed
by the DMRE.
The DMRE
in August
2020, withdrew
their notice
to appeal
to the
Supreme
Court of
Appeal in
respect
of the judgment
issued in
April 2018
by the Pretoria
High Court.
On September
27, 2018,
the Broad-Based
Socio-Economic
Empowerment
Charter
for the
Mining
and Minerals
Industry, 2018
(“
Mining
Charter 2018
”) was
published in
Government Gazette No.
41934 of
Government Notice No.
639 on
September 27,
2018 superseding and
replacing all previous
charters, including
the Reviewed Broad-Based
Black Economic Empowerment
Charter for the South African
Mining and
Minerals
Industry, 2016 (“
Mining Charter
III
”).
18
Mining Charter
2018 requires,
inter alia
, an enduring
30% BEE
interest
in respect
of new mining
rights.
It also
has extensive
provisions
in
respect
of
Historically Disadvantaged
Persons
(“
HDP
”)
representation at
board
and
management, as
well
provisions
relating
to
local
procurement
of goods and
services.
The procurement
target of the
total spend
on services
from South
African companies
has been pegged
at 80%
(up from 70%
in Mining
Charter III)
and 60% of
the aggregate
spend thereof
must be apportioned
to BEE entrepreneurs.
In March 2019,
the Mineral
Council of
South Africa
brought an application
in the High
Court, Pretoria
for a judicial
review and
setting aside
of certain
provisions in
Mining Charter
2018.
In June
2020, the
High Court
ordered
the Minerals
Council
to join
parties
representing
communities,
trade unions
and BEE
entrepreneurs
as a prerequisite
to the continuation
of the lawsuit,
as they have
a direct and
substantial
interest in
the outcome
of the litigation.
On September
21, 2021,
the High
Court of
South Africa
ruled that
the Mining
Charter
2018 is
not binding
subordinate
legislation
but an
instrument of policy. This ruling affirmed that the Minister
of Mineral Resources and Energy (“
MRE Minister
”) was not entitled to make law
through the
Mining Charter
2018 to
require
30% HDP
ownership
for the
renewal
of existing
mining rights.
The MRE
Minister
confirmed
that they
will not appeal
the ruling.
DRDGOLD cannot guarantee
that it will meet all the targets set out by the Mining Charter 2018. For example,
if the Mining Charter
2018 were
to remain
in its current
form, there
is no assurance
that the goods,
services
and supplies
in South Africa
would be sufficient
to allow us
to
meet the
targets.
More specifically,
DRDGOLD may
not
be
able to
meet the
requirement that
80%
of
total mining
goods and
services
procurement spend be on South African-manufactured
goods due to an insufficient number of suppliers in South Africa
with heavy equipment.
DRDGOLD may be required to increase participation by HDP in senior positions and allocate additional resources
for the development of the
mine community, human resources,
sustainability, procurement
and enterprise. DRDGOLD
may also be required to make further adjustment
to
the ownership
structure of
its South African
mining assets,
including increasing
the ownership
of HDP, in order to meet
the Mining Charter
2018
requirements.
Any such additional
measures could
have a material
adverse effect
on our business,
operating results
and/or financial
condition.
In addition,
if we are
unable to
obtain sufficient
representation
of HDP at
the board
level and
in management
positions
or if there
are not
sufficient succession
plans in place, this could have a material adverse
effect on our business (including resulting
in the imposition of fines and
having
a
negative effect
on
production levels),
operating results
and
financial position.
In
relation to
this,
the
mining
industry,
including
DRDGOLD, continues
to experience a global shortage of qualified senior
management and technically
skilled employees.
DRDGOLD may be
unable to hire
or retain appropriate
senior management,
technically
skilled employees
or other management
personnel, or
may have to
pay higher
levels of
remuneration
than it currently
intends in
order to do
so.
Also, there is no
guarantee that
any steps DRDGOLD has
already taken or
might take in
the future will
ensure the retention
of its
existing mining rights, the successful renewal of its existing mining rights, the granting of applications for
new mining rights or that the terms
of renewals of its mining
rights would not be significantly less favourable
than the terms of its current
mining rights. Any further adjustment
to
the
ownership
structure of
DRDGOLD’s South
African mining
assets in
order
to
meet the
abovementioned
requirements
could have
a
material adverse effect on the value of DRDGOLD’s securities
Refer to
Item 4B. Business
Overview – Governmental
regulations
and their effect
on our business
– The Broad
Based Socio-Economic
Empowerment
Charter.
Government
policies in
South Africa
may adversely
impact our operations
and profits
related to
financial
provisioning
for
rehabilitation.
An amendment to the MPRDA was first proposed in 2013. The amendment bill, if implemented, would have had a material adverse
impact
on the Group's
estimated
financial
provisions
for environmental
remediation
and management
due to
the proposed
inclusion
of historic
and
old mine dumps
in the definition
of “residue
stockpiles”
as well as the
extension of
the liability
for rehabilitation
beyond the issuance
of a closure
certificate and the requirement to maintain financial provision for
closed sites within a
period of 20
years after a
site is closed.
The MPRDA
Amendment Bill
was withdrawn
in August 2018
by the MRE Minister,
citing, amongst
other things,
the adequacy
of the current
MPRDA to deal
with all regulatory
matter pertaining
to the mining
and petroleum
industries.
Revised Financial
Provisioning Regulations
(“
FPR
”)
were
published on
November 20,
2015,
under
the
National Environmental
Management Act, 107 of 1998 (“
NEMA
”) and became effective from the date of publication thereof. Proposed
amendments to the FPRs were
published
for public
comment
GNR 1228
GG 41236
of November
10, 2017
(“
Draft
Regulations
”), which
seek
to address
some challenges
relating
to the implementation
thereof. Under
these FRPs to
be implemented
by the DMRE,
existing environmental
rehabilitation
trust funds
may only be
used for post
closure activities
and may no
longer be utilised
for their
intended purpose
of concurrent
and final rehabilitation
and closure.
Several further proposed amendments to
the FPRs,
(“
Proposed Amendments
”) were
published subsequently. The
latest Proposed
Amendments were published
in July 2022 which,
inter alia
, extends the compliance with these regulations
to three months following the fiscal
year end June
30, 2023.
The Proposed Amendments,
in their current form and which are still subject
to the approval of the DMRE and Treasury, allow under
certain circumstances for the withdrawal against financial
provision (which is currently not contemplated in the FPR). It is
therefore uncertain
whether these
provisions relating
to withdrawal
will remain
in their current
form, or at
all.
See discussion
in
4.B. Business
Overview –
Governmental regulations and their
effect on
our
business –
Financial Provision for
Rehabilitation.
19
The implementation
of Carbon Tax effective
from June
1, 2019 may
have a direct
or indirect
material adverse
effect on our
business,
operating results
and financial
condition.
The Carbon Tax Act No
15 of 2019, or the
CTA, came into effect from
June 1, 2019. The
CTA is based on the polluter-pays-principle
and will be implemented across
phases. The first phase will run from June 1, 2019 to December
31, 2022 and is applicable to scope 1 emitters.
The First
phase did not
have a material
financial impact
on the Group.
The second
phase will
be implemented
from January
1, 2023 to December
31, 2030. During
the first
phase, tax-free
emission allowances
ranging from
60 per cent to
95 per cent are
available to
emitters in this
first phase.
This includes
a basic
tax-free
allowance
of 60 per
cent for
all activities,
a 10 per
cent process
and fugitive
emissions
allowance,
a maximum
10 per
cent allowance
for companies
that use carbon offsets
to reduce their tax
liability, a performance
allowance of up to
5 per cent for companies
that
reduce the
emissions intensity of their
activities, a 5
per cent
carbon budget allowance for
complying with the
reporting requirements and a
maximum 10
per cent allowance
for trade exposed
sectors. The
South African
government
indicated that
a review of
the impact of
the carbon tax
will be conducted
before the
second phase
of the South
African Carbon
Tax Act is implemented.
The draft explanatory memorandum of the Taxation
Laws Amendment Bill proposes that amendment to section 5(2) of
the Carbon
Tax
Act to provide
for the carbon
tax rate adjustment
by US$1, US$2
and US$3/
t CO2e for
2023, 2024 and
2025 tax period
ending on
31
December using the
average exchange rate as
defined in the Income
Tax
Act. The rate will
thereafter increase gradually to
US$20t CO2e in
2026 and at
least to US$30/t
CO2e in 2030.
Currently under phase
1 an amount
of R120/t CO2e
is levied.
Although the decarbonization
of
electricity as an
energy supply must
nevertheless be prioritized
by both the
country and industries
at large to
de-carbonize the economy,
the
increased proposed rates denominated to US Dollar is expected to have an adverse impact on business.
The carbon
tax has
not had
an impact
on the
price
of electricity.
However, should
Eskom be
required
to pass
on the
cost of
the tax
from its
emissions
to its customers,
electricity
tariffs may rise
significantly. This may
also affect the electricity
prices charged to our
suppliers who
may pass on the
tax to us increasing
the price
of goods and
services
we consume
in our operation.
Regulations detailing
the tax-free emission allowances
during the second phase have not been
published to date. The second
phase of
implementation of the
Carbon Tax
may have
a material
direct and/or indirect
adverse effect on
our business, operating
results and
financial
condition if the tax-free emission allowances
are significantly reduced or the scope of implementation
of the CTA
is significantly increased.
In
addition,
the potential
increases
in costs resulting
from suppliers
passing through
their Carbon
Tax exposure to
the Company
may have a
direct or
indirect material
adverse effect
on our business,
operating results
and financial
condition.
Ring-fencing
of unredeemed
capital
expenditure
for South
African
mining
tax purposes
could
have
an adverse
effect on
the business,
operating results
and financial
condition of
our operations.
The Income Tax Act No 58 of 1962,
or the ITA, contains certain
ring-fencing
provisions in
section 36 specifically
relating to different
mines
regarding
the deduction
of certain
capital
expenditure
and the
carry
over to
subsequent
years.
After the
restructuring
of the
surface
operations,
effective July 1, 2012,
Ergo is treated as
one taxpaying operation
pursuant to the
relevant ring-fencing
legislation.
It is expected that
FWGR will
also be
treated as
one taxpaying
operation
pursuant to
the relevant
ring-fencing
legislation.
In the event
that we
are unsuccessful
in confirming
our
position or should
the South African
Revenue Service
have a different interpretation
of section 36 of the ITA, it could have
an adverse effect on
our business,
operating results
and financial
condition.
Draft amendments
to the
ITA regarding
claiming
accelerated
capital expenditure
allowances
for South
African
mining tax
purposes
could have
an adverse
effect on the
business,
operating results
and financial
condition
of our operations.
The National Treasury
has proposed a prospective
amendment to the
preamble of section
15 of the ITA to limit the accelerated
capital
expenditure
allowances
applicable
to taxpayers
conducting
mining
operations
to only
those
taxpayers
that hold
“
a mining
right
as defined
in section
1 of the Mineral
and Petroleum
Resources Development
Act in respect of
the mine where
those mining
operations
are carried
on
”. In addition,
in
relation
to section
36 of
the ITA, the
National
Treasury has
proposed
an amendment
to the
heading
in order
to limit
the application
of the
provisions
in respect
of the
calculation of the
redemption allowance and
balance of
unredeemed capital
expenditure, to
certain mining operations. The
proposed amendment
will come
into operation
on March 31,
2023 and apply
in respect
of years of
assessment
ending on or
after that
date.
DRDGOLD, as a surface miner, conducts mining
operations for its own benefit (i.e.
it is not a contract miner) but DRDGOLD is not
required to hold
a mining right
in terms of the
MPRDA.
The proposed requirement
by the ITA to require a miner
to hold a mining
right in terms
of the MPRDA
will preclude
DRDGOLD from
claiming accelerated
capital expenditure
allowances
in terms
of sections
15 and 36 of
the ITA.
If these proposed amendments are adopted, it will accelerate
cash outflows resulting from current
tax expenditure.
This could have a
material adverse
effect on our
cash flows,
operations,
capital investment
decisions
and financial
condition.
Assessment
of unredeemed
capital expenditure
by the South
African Revenue
Service could
have an adverse
effect on the business,
operating results
and financial
condition of
our operations.
The South African
Revenue Service
(“
SARS
”) assesses capital
expenditure when
it is redeemed against
taxable mining income
rather
than when
it is
incurred.
A different
interpretation
by SARS
could have
an adverse
effect on
our business,
operating
results
and financial
condition.
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.
20
Labor costs
are significant
for Ergo, constituting
18% of Ergo’s
production
costs for
fiscal year
2022 (2021:
19%). As
of June
30, 2022,
our Ergo operations
provided full-time
employment
for 763 employees
while our main
service providers
deployed an
additional
1,677 employees
to our operations,
of whom approximately
85% are members
of trade unions
or employee
associations.
Labor costs
are significant
for FWGR, constituting
21% of FWGR’s production
costs for fiscal
year 2022 (2021:
20%). As of June
30,
2022, our FWGR
operations provided full-time employment for 152 employees while our
main service providers deployed an additional 339
employees to our operations,
of whom approximately
82% are members of
trade unions or employee
associations.
We have entered into various
agreements regulating
wages and working
conditions at
our mines. Unreasonable
wage demands could
increase production
costs to levels
where
our operations are no longer profitable.
This could lead to accelerated
mine closures and labor disruptions.
We are also susceptible to strikes by
workers from
time to time,
which result
in disruptions
to our mining
operations.
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.
Labor
cost increases
could have
an adverse
effect on our
business,
operating results
and financial
condition.
Labor unrest
could affect
production.
During March
2022 to
June 2022
there was
strike action
by staff
at the
Sibanye-Stillwater
gold mines
adjacent
to FWGR.
FWGR’s gold
bars are smelted
at Sibanye’s Driefontein
plant. This resulted
in Ergo having to smelt
FWGR gold on their behalf.
Such events at our operations
or at our reclamation
sites has
in the past
and could in
future have
an adverse
effect on our
business,
operating results
and financial
condition.
We use a
third
party service
provider
for the
management
of our
reclamation
sites
as well
as on
our Brakpan/Withok
TSF and
Driefontein
4 TSF.
Any labor
unrest or other
significant
issue at
this third
party service
provider may
impact the
operation of
this facility.
Strike action and
intimidation at mining
operations adjacent to our
FWGR mining
operations could have
an adverse
effect on
our
business,
operating results
and financial
condition.
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 South Africa, the Republic of
Namibia, and the
Kingdoms of Lesotho
and Eswatini, known
collectively as the
Common Monetary Area
(the “
CMA
”). 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 the 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.
While the
South African
Government has
relaxed exchange
controls in
recent years,
South African
companies remain
subject to
restrictions on their ability to deploy capital outside of the CMA and it is difficult to predict whether such relaxation of controls
will continue
in
the
future.
As
a
result,
DRDGOLD’s
ability
to
raise
and deploy
capital
outside
the
CMA
is
restricted.
These
restrictions
could
hinder
DRDGOLD’s
financial
and
strategic
flexibility,
particularly
its
ability
to
fund
acquisitions,
capital
expenditures
and
exploration
projects
outside South Africa. For further information see Item 10D. Exchange Controls.
We
could be adversely affected
by violations of
the U.S. Foreign Corrupt
Practices Act and
similar anti-bribery laws outside
of
the United States.
The U.S. Foreign
Corrupt Practices
Act, or the FCPA, and similar
anti-bribery laws
in other jurisdictions
generally prohibit
companies
and their
intermediaries
from
making improper
payments
to government
officials
or other
persons
for the
purpose
of obtaining
or retaining
business.
This includes
aggressive
investigations
and enforcement
proceedings
by both the
U.S. Department
of Justice
and the SEC,
increased
enforcement
activity by
non-
U.S. regulators,
and increases
in criminal
and civil proceedings
brought against
companies
and individuals.
Our policies
mandate
compliance
with the FCPA and other applicable
anti-bribery laws.
Our internal control
policies and procedures
may not protect us from
reckless
or criminal
acts committed
by our employees,
the employees
of any of
our businesses,
or third
party intermediaries.
In the event
that we
believe or
have reason to believe that our employees or agents have
or may have violated applicable anti-corruption
laws, including the FCPA, we would
investigate or have outside
counsel investigate the relevant facts and
circumstances, which can be expensive and
require significant time and
attention
from senior
management.
Violations of
these laws
may result
in criminal
or civil
sanctions,
inability
to do
business
with existing
or future
business partners
(either as a result of express prohibitions
or to avoid the appearance of impropriety),
injunctions against
future conduct, profit
disgorgements,
disqualifications
from directly
or indirectly
engaging in
certain
types of
businesses,
the loss of
business
permits,
reputational
harm
or other restrictions
which could
disrupt our
business and
have a material
adverse effect
on our business,
financial
condition, results
of operations
or liquidity.
21
We face risks with respect to compliance with
the FCPA and similar anti-bribery laws through
our acquisition of new companies
and
the due diligence
we perform in connection
with an acquisition
may not be sufficient
to enable us fully to assess
an acquired company’s historic
compliance
with applicable
regulations.
Furthermore,
as we make acquisitions
such as the acquisition
of FWGR, our post-acquisition
integration
efforts may
not be
adequate
to ensure
our system
of internal
controls
and procedures
are fully
adopted and
adhered
to by
acquired
entities,
resulting
in increased
risks of non-compliance
with applicable
anti-bribery
laws.
Risks related to ownership of our ordinary shares or ADSs
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. All
our assets
are
located outside the United States and a major portion with
respect to 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 including in 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 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
use in South African courts.
It may not be
possible therefore for an
investor to seek
to impose liability on
us in a South
African court arising
from a violation of United States federal securities laws.
Dividend withholding tax will reduce the amount of dividends received by beneficial owners.
On April 1, 2012, the South African Government replaced
Secondary Tax on Companies (then 10%) with a 15% withholding tax on
dividends and other distributions
payable to shareholders.
The dividend withholding
tax rate was increased to 20%, effective
from February 22,
2017.
The withholding
tax reduces
the amount of
dividends or
other distributions
received
by our shareholders.
Any further
increases
in such tax
will further
reduce net
dividends received
by our shareholders.
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 of incorporation 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.
Control by principal shareholders could adversely affect our other shareholders.
22
Sibanye-Stillwater beneficially owns 50.1% of our
outstanding ordinary shares and voting power
and has the ability to control, our
board of
directors. Sibanye-Stillwater
will continue
to have
control over
our affairs
for the
foreseeable future,
including with
respect to
the
election of directors, the consummation of significant corporate transactions, such as an amendment
of our constitution, a merger or other sale
of
our company
or our
assets, and
all matters
requiring
shareholder approval.
In certain
circumstances, Sibanye-Stillwater’s
interests as
a
principal shareholder
may conflict
with the
interests of
our other
shareholders and
Sibanye-Stillwater’s ability
to exercise
control, or
exert
significant influence, over us may have the effect
of causing, delaying, or preventing changes or transactions that our
other shareholders may
or may not deem
to be in their
best interests. In addition,
any sale or expectation
of sale of some or
all the shares held
by Sibanye-Stillwater
could have an adverse impact on our share price.
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 any
such substantial sales may
occur,
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 marketplace will
increase trading volumes and may place our
share price under
pressure.
ITEM 4. INFORMATION ON
THE COMPANY
4A. HISTORY AND DEVELOPMENT
OF THE COMPANY
Introduction
DRDGOLD, is
a South
African domiciled company that
holds assets engaged
in surface
gold tailings
retreatment in South
Africa
including exploration,
extraction,
processing
and smelting.
We are a public limited liability company, incorporated
in South Africa on February
16, 1895, as Durban Roodepoort Deep,
Limited.
On December 3, 2004,
the company changed
its name from Durban
Roodepoort Deep
Limited to DRDGOLD
Limited. Our operations
focus on
South Africa's
Witwatersrand Basin,
which has
been a gold
producing
region for
over 120 years.
Our shares
and/or related
instruments
trade on the
Johannesburg
Stock Exchange
(“
JSE
”),
and the New
York Stock Exchange.
Our registered office and
business address is Constantia Office
Park,
Cnr 14th
Avenue and
Hendrik Potgieter Road,
Cycad House,
Building 17, Ground Floor,
Weltevreden Park,
1709,
South Africa. The postal address is
P.O. Box
390, Maraisburg, 1700, South Africa. Our
telephone number is (+27
11) 470-2600 and our facsimile number
is (+27 86) 524-3061.
We are registered under the South African Companies
Act 71, 2008 under registration number
1895/000926/06. For our ADSs,
the Bank of New York
Mellon, at 101 Barclay Street,
New York,
NY
10286, United
States, has
been appointed
as agent.
The SEC maintains
an internet
site that contains
reports, proxy
and information
statements
and other information
regarding issuers
that
file electronically with the SEC, which can be found
at http://www.sec.gov. Our internet address is http://www.drdgold.com.
The information
contained on
our website
is not incorporated
by reference
and does not
form part
of this annual
report.
All of our
operations
are conducted
in South Africa.
Our
operations primarily
consist
of
Ergo
and
FWGR.
Our
Ergo
operations include
the
historic
Crown
operations (which
were
restructured
into Ergo during fiscal
year 2012 and have substantially
been rehabilitated
as at the end of fiscal year
2018).
East Rand Proprietary
Mines
Limited's
(“
ERPM
”)
underground mining infrastructure was under
care and
maintenance up to
this reporting date
at which
date the
decommissioning
and rehabilitation
of the last
remining underground
mining infrastructure
was completed.
Ergo
Ergo was formed
in June 2007. Ergo is the surface tailings retreatment operation which consists
of what was historically the Crown
Gold Recoveries
Proprietary Limited
(“
Crown
”), ERPM
Cason Dump
operation and
the Ergo
Gold business
units. On
July 1, 2012, Ergo
acquired the mining assets and certain liabilities of Crown and all the surface assets and liabilities of ERPM as part of the
restructuring of our
surface operations.
Capital expenditure for the
Ergo projects is
mainly financed through
operational cash flows while
financing for significant growth
projects may
be obtained
through specific
financing arrangements
if required.
Brakpan/Withok TSF final life design
The Brakpan/Withok TSF
final life design is the engineering
design that ultimately brings the
tailings storage facility to its finality
in terms of
extent, operation, rehabilitation
and management. The
implemented final design
would result in
alignments with the
Global Industry
23
Standard on Tailings Management (“
GISTM
”) and regulatory bodies, increase deposition
capacity, improve operation/management and bring
about the sustainable closure of the facility.
A legal review
of the existing
authorizations
was undertaken
for the final
life design
of the Brakpan/Withok
TSF. The results indicated
that most of the current authorizations are sufficient. An updated application
was submitted to the Department of Water Affairs and Sanitation
(“
DWAS
”) for which we are awaiting
approval.
Final designs for
the final stage
of the Brakpan/Withok TSF
are being reviewed,
in anticipation
of the DWAS approval.
The Ergo life
of mine has
been increased
to 19 years
and the Daggafontein
TSF classified
as a Mineral
Reserve.
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.
FWGR
On July 31, 2018, we acquired certain gold surface processing assets and tailing storage facilities that included Driefontein 3 and 5,
Kloof 1,
Venterspost
North and
South, Libanon,
Driefontein 4,
Driefontein 2
plant, Driefontein
3 plant,
WRTRP
pilot plant,
and the
land
owned by Sibanye-Stillwater that was earmarked for the
future development of a central processing
plant, regional tailings storage facility and
return
water
dam
(together,
the
“
WRTRP
Assets
”)
associated
with
Sibanye-Stillwater’s
WRTRP,
subsequently
renamed
FWGR.
This
acquisition represented a significant
increase in our assets, which
impacted our results in
fiscal 2019, 2020 and
2021. In connection with
the
acquisition, we
issued to
Sibanye-Stillwater new
shares equal
to 38.05%
of outstanding
shares and
granted Sibanye-Stillwater
an option
to
acquire up to a total
of 50.1% of our shares
within a
period of
2 years
from the
effective
date of
the acquisition
at a
10% discount
to the
prevailing
market value.
On January 8,
2020, Sibanye-Stillwater exercised the
option and on
January 22, 2020 subscribed
for 168,158,944 DRDGOLD
shares at an aggregate subscription price of R1,086 million, (R6.46 per DRDGOLD share).
The assets acquired are to be developed in two phases – Phase 1 and Phase 2.
FWGR Phase 1
Phase 1
involves the
reclamation of
the Driefontein
5 dump
through a
reconfigured Driefontein
2 plant
and deposition
onto the
Driefontein 4 tailings storage facility. The Driefontein
4 tailings
storage facility
was an upstream
day-wall dam
with a capacity
of approximately
200,000 tonnes per
month. In
order to
increase the deposition
capacity to
500 000 tonnes per
month, the
conversion of this
dam to
cyclone
deposition
commenced
in fiscal
year 2019. The
conversion
has been
completed
and this
allows a
deposition capacity
of 500,000
tonnes per
month
until at least
the end of
calendar year
2025.
Although the Phase
1 upgrade of the Driefontein
2 Plant was essentially
complete by the end
of fiscal year 2019,
a decision was
made
to bypass the mill so that
further improvements
to the mill liner configuration
could be made. These
modifications
were successfully
completed,
and the mill
was recommissioned
in September
2019. A further
upgrade to convert
the mill to closed
circuit from
the open circuit
to improve the
grind of
the material and
yield more
gold was
completed in
fiscal year
2021.
A new
thickener was
commissioned in November
2021.
The
conversion yielded
better grind of material
with a concomitant improvement
in leaching conditions and
gold recovery,
lower maintenance
costs
and increased
water storage
capacity in
the current
thickeners.
The material being reclaimed
by FWGR contains
high levels of copper which incurs
penalty refining charges
of between 1% and 5%
during final refining by
Rand Refinery depending on
the copper content of
the bullion delivered. FWGR
has been
allocated 98% of
its gold
production
with 2%
lost to
these penalty
refining charges
due to the
high levels
of copper
in the
bullion delivered.
To reduce these
penalty refining
charges, FWGR
constructed
and commissioned
a copper
elution plant
at a cost
of approximately
R12 million
during fiscal
year 2021.
On average,
the plant resulted
in an additional
1.2kg of gold
per month
which would
otherwise
have been
lost due to
penalty refining
charges for
the copper
in
its bullion.
FWGR Phase 2 expansion
The Phase 2 project is a key project for us intended to extend potential resources in the West Rand.
Phase 2 initially included the construction of a new Central Processing Plant
(“
CPP
”) with a capacity of between 1.2 to 2.4 million
tonnes per month
and the equipping of
the required reclamation sites and
pipeline infrastructure to supply
the relevant resources to
the CPP.
The capital spent on final design work on the CPP, with the design work is also applicable to the
potential expansion of DP2 from to 1.2 Mt as
an alternative to CPP is currently being considered.
Phase 2 also includes the construction of a new Regional
Tailings Storage
Facility (“
RTSF
”),
that we believe is necessary in order to
develop our FWGR as envisaged by our management, the new RTSF is expected to be capable of processing 3 million tonnes per month with
a maximum
capacity
of
approximately 800
million tonnes.
Delays in
obtaining
regulatory approval
have
affected
the
previously
reported
expected dates of the construction.
The Sibanye-Stillwater Leeudoorn tailings storage facility
was evaluated as a viable interim alternative
to
the RTSF whilst regulatory approvals are obtained.
The Definitive Feasibility Study (“
DFS
”) for Phase 2 was completed in the 3rd
quarter of fiscal year 2021 and that the
project was found to be
economically viable in a number of scenarios.
24
We engaged an external consultant, Sound Mining (consultants to the mining industry specializing in surface and underground operations) to
perform an independent review of the available information and studies that have been performed regarding the Phase 2 expansion project.
These included:
●
DFS performed by DRA
Global (“
DRA
”) (An engineering consulting
company) regarding the construction of
the CPP and related
pumping and pipeline infrastructure;
●
Detail design
of a
new Reginal
Storage Facility
(“
RTSF
”) performed
by Beric
Robinson (engineer
of record)
and related
capital
costing performed by DRA;
●
Reviews of
the explorations
data base, Mineral
Resource and Reserve
estimates of FWGR
assets and
other future potential
assets
such as battery metals, uranium and other gold West Rand metal resources;
●
Legal tenure, permitting, environmental and compliance status; and
●
Economic analysis of the projects.
Based on currently
available information, the Company
believes that there are
no material technical
or geo-metallurgical risks
that
could significantly impact the production forecasts.
Risks associated
with the
Phase 2
project include
obtaining regulatory
approval of
the amended
design of
the RTSF,
which was
submitted to
the DWA
S. Delays in
obtaining such
regulatory approval may
have an adverse
impact on
the project timeline
and capital cost
estimate. We engaged the services of an
external expert to assist
us with engaging with
the DWAS and these discussions are currently
ongoing.
Presentations were conducted to provide the regulator with the technical and scientific reasons for the changes to the design of the RTSF. It is
anticipated that construction of the RTSF
will commence in first half fiscal year 2027. The plant construction is anticipated to commence 6-9
months later.
Financing for significant growth projects may be
obtained through specific financing arrangements if required.
Capital expenditure
for FWGR
Phase 1
was financed
through our
RCF (Refer
to Item
18. “Financial
Statements -
Note 20
– Capital
Management). Significant
financing is
required for the
Phase 2 expansion
which is expected
to be
financed through a
combination of cash
resources, operational cash
flows and facilities as
may be determined.
Capital expenditure for other
projects is mainly financed through
operational cash flows and
cash
resources.
We have
commenced final design work
on the CPP,
with the design work also
being applicable to the
potential expansion of DP2.
FWGR has appointed DRA Global to perform the relevant function.
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.
ERPM
ERPM was
acquired
in October
2002 and
consists
of an underground
mine which
has been
under care
and maintenance
since fiscal
year
2009. Underground mining
at ERPM was halted in October
2008. On July 1, 2012, ERPM sold its
surface mining
assets and its 65% interest
in
ErgoGold to Ergo
in exchange
for shares
in Ergo as part
of the restructuring
of our surface
operations.
In December
2018,
ERPM concluded
revised agreements
to dispose certain
of its underground
assets to OroTree
Limited (“
Orotree
”).
The disposal of the
underground mining and prospecting rights
were concluded in the
second half of
the financial year ended June
30, 2019.
Orotree did
not exercise
an option to
purchase the
underground mining
infrastructure.
In fiscal
2021, ERPM
completed
the decommissioning
and rehabilitation
of the
last remaining
underground
mining infrastructure,
being
the Far East
Vertical Shaft.
Crown
Crown was
acquired
on September
14, 1998.
Due to the
depletion
of ore
reserves
in the western
Witwatersrand,
the Crown
plant ceased
operation in
March 2017
and since
then substantially
rehabilitated.
4B. BUSINESS
OVERVIEW
We
are
a
South
African
company
that holds
assets engaged in
surface gold
tailings retreatment including exploration, extraction,
processing
and smelting.
Our surface tailings retreatment operations, including the requisite infrastructure and metallurgical processing plants,
are located in South
Africa. Our operating footprint is
unique in that it involves
some of the largest concentration
of gold tailings deposits in
the world, situated within the city boundaries of Johannesburg and its suburbs and the far west rand of the province of Gauteng.
DRDGOLD has arranged
its operations into two wholly
owned entities covering
their East Rand (east of Johannesburg)
and far West
Rand (far west of
Johannesburg) businesses. The East Rand operations are run
by Ergo
and the West
Rand operations by FWGR. A
detailed
overview of
the operations
is provided under
Item 4D. Property,
Plant and Equipment
and in the Technical
Report Summary
attached as exhibits
in this annual
report.
25
DRDGOLD’s
long-term goal
to extract
as much
gold from
its assets
as possible,
sustainable and
economically viable.
To
a large
extent this
depends on
how effectively
it continues
to manage
its capitals.
DRDGOLD uses
sustainable development
to direct
its strategic
thinking. We
seek sustainable benefits in
respect to financial, manufactured, natural,
social and human capitals, each
of which is essential
to
our operations.
We also aim
to align and overlap the interests of each of these capitals in such a manner that an investment in anyone translates into
value-added increases
in as many of the others as possible. We therefore seek to achieve
an enduring and harmonious
alignment between
them,
and we pursue
these criteria
in the feasibility
analysis
of each investment.
We intend to explore
opportunities
made possible
by technology, which
could entail
further investment
in research
and development
(“
R&D
”) to improve
gold recoveries
even further
over the long
term.
During the
fiscal years
presented in
this Annual
Report, all
of our
operations took
place in
one geographic
region, namely
South
Africa.
Description
of Our Mining
Business
Surface tailings retreatment
Surface tailings
retreatment
involves the
extraction
of gold from
old mine dumps
and slimes
dams,
comprising
the waste material
from
earlier
underground
gold mining
activities.
This is
done by
reprocessing
sand dumps
and slimes
dams.
Sand dumps
are the
result
of the
less efficient
stamp-milling
process employed
in earlier
times. They
consist of coarse-grained
particles which
generally contain
higher quantities
of gold. Sand
dumps are reclaimed
mechanically
using front
end loaders
that load sand
onto conveyor
belts. The
sand is fed
onto a screen
where water
is added
to wash the sand into a sump, from where it is pumped to the plant. Most sand dumps have already been retreated using more efficient milling
methods.
Lower
grade slimes
dams were
the product
of the
“tube
and ball
mill”
recovery
process.
The economic
viability
of processing
this material
has improved due to improved treatment
methods such as the treatment of large volumes
of this material. The material from
the slimes dams is
broken down using
monitor guns
that spray jets
of high pressure
water at the target
area. The resulting
slurry is then
pumped to a treatment
plant
for processing.
Exploration
Exploration activities
are focused on the extension
of existing ore reserves
and identification
of new ore reserves both
at existing sites
and at undeveloped
sites. Once a potential
site has been identified,
exploration is extended
and intensified
in order to enable clearer
definition of
the site
and the
portions with
the
potential to
be
mined. Geological techniques
are
constantly refined to
improve the
economic viability
of
exploration
and exploitation.
Our Metallurgical
Plants and
Processes
A detailed
review of the
metallurgical
plants and
processes is
provided under
Item 4D.
Property, Plant and
Equipment.
Gold Market
The gold market
is relatively
liquid compared
to other commodity
markets, and
the price of
gold is 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
jewelry,
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 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
or economic
uncertainty
gold is often
seen as a
safe haven,
leading to
increased
purchases of
gold and support
for its price.
In the wake
of the COVID-19
pandemic and measures
taken to address
the outbreak,
there has been
a global trend
of investors
turning
to gold
and gold
stocks as
a safe
haven asset,
as has
been the
case in
previous
times of
global economic
crisis.
This has
led to
a surge
in the
average
gold price
during fiscal year
2020 and
fiscal year 2021.
Although the impact
of the
COVID-19 pandemic has
reduced and
gold prices have
marginally decreased,
the average gold price for
fiscal year 2022 remained
high due to continued economic
uncertainty as the
global economies
attempt to recover
from all the after
effects of COVID-19,
and deal with the
conflict in Ukraine
and rapidly rising
inflation. In
addition, we
were
impacted by
movements
in the exchange
rate of the
rand against
the dollar during
described
below.
We generally take full
exposure to the
US dollar spot
price of gold
and rand/dollar
exchange rate.
The higher the gold
price, the higher
our profit margin
and
vice versa,
subject to exchange
rate fluctuations.
The average
gold spot price
decreased
by 1% from
$1,850 per
ounce to
$1,834 per
ounce during
fiscal year
2022 after
having increased
by 18% from $1,562
per ounce to $1,850 per ounce during the fiscal year 2021 and having increased
by 24% from $1,263
per ounce to $1,562
per ounce during
the fiscal year
2020.
As a
result,
the average
gold price
received
by us
in Rands
for fiscal
year 2022
decreased
by 3%
to R894,409
per kg compared
to the previous
year at
R917,996 per
kg and for
fiscal year
2021 increased
by 19% to R917,996
per kg compared
to the previous
26
year at
R768,675 per
kg. The
decrease
in the gold
price received
contributed
to a 3%
decrease
in our total revenue for
fiscal year 2022 amounting
to R5,118.5 million (2021: R5,269.0 million and 2020: R4,185.0 million). All our revenue is generated from our operations in South Africa.
Looking ahead
we believe
that the global
economic environment,
including escalating
sovereign and
personal levels
of debt, economic
volatility
and the oversupply
of foreign
currency, will continue
to make gold
attractive
to investors.
The supply of
gold has shrunk
in recent years
and is likely to shrink even more due to the significantly
reduced capital expenditure
and development occurring
in the sector.
We believe that
this, coupled
with global
economic uncertainty,
is likely to
provide support
to the gold
price in the
long term.
Until April
11, 2022, all gold
we produce
was sold on
our behalf
by Rand Refinery
Proprietary
Limited (Rand
Refinery)
in accordance
with a refining agreement
entered into in October
2001 and updated
in July 2018.
The sales price
was fixed at the London
afternoon fixed
dollar
price on
the day
the gold
was delivered
to the
buyer. Before
November
2020, the
dollar proceeds
sold were
remitted
to us
within two
days at
which
date the dollars
were sold.
Since November
2020 up to
April 11, 2022,
the dollars
are also
sold on the
day the gold
is delivered
to the buyer.
After
April 11,
2022, gold
is sold
directly to South
African Bullion banks after
being refined to
the required purity
by Rand
Refinery.
The Group
recognizes
revenue from the sale
of gold at a point in time
when the gold is delivered
to the South African
Bullion bank on
an agreed upon date,
gold price
and exchange
rate.
The gold
bars
which
we produce
consist
of approximately
85% gold,
7-8% silver
and the
remaining
balance
comprises
copper and other common
elements. The gold bars
are sent to Rand Refinery
for assaying and final
refining where the
gold is purified to 99.9%
and cast
into troy
ounce bars
of varying
weights.
In exchange
for this
service,
we pay
Rand Refinery
a variable
refining fee
and administration
fees
and up to April
11, 2022, a fixed
marketing
charge.
We own 11.3% (fiscal year
2021 and 2020: 11.3%) of
Rand Refinery.
Governmental
regulations
and their
effects on
our business
Common Law
Mineral Rights
and Statutory
Mining Rights
Prior to the introduction
of the Minerals
and Petroleum Resources
Development Act,
or MPRDA in 2002,
ownership in mineral
rights
in South Africa
could be acquired
through the common
law or by statute.
With effect from May
1, 2004, all minerals
have been placed
under the
custodianship
of the
South African
government
under the
provisions
of the
MPRDA and
old order
proprietary
rights were
required
to be
converted
to new order rights
of use within certain
prescribed periods,
as dealt with in more
detail below. Mine dumps
created
before the MPRDA
became
law
fall outside the MPRDA
and do
not require a
mining license to be
processed nor do
they require the extensive rehabilitation and closure
guarantees that are
a feature
of the
MPRDA. Many
of the
activities to re-process a
mine dump
do fall
under the
provisions of the
National
Environmental
Management
Act though,
which requires
at it most
basic the
compilation
and submission
of an Environmental
Impact
Assessment.
Conversion
and renewal of
Rights under
the Mineral
and Petroleum
Resources
Development
Act, 2002
Existing old
order rights
were required
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 MPRDA.
In respect
of used old
order mining
rights, the
DMRE
is obliged
to convert
the rights
if
the applicant complies
with certain
statutory criteria. These include
the submission of
a mining
works program, demonstrable technical
and
financial capability
to give effect to the
program, provision
for environmental
management and
rehabilitation,
and compliance
with certain black
economic
empowerment
criteria
and a social
and labor
plan. These
applications
had to be
submitted
within five
years after
the promulgation
of the
MPRDA
on May
1, 2004.
Similar
procedures
apply
where
we hold
prospecting
rights
and a
prospecting
permit
and conduct
prospecting
operations.
Under the
MPRDA mining
rights are
not perpetual,
but endure
for a fixed
period, namely
a maximum
period of
thirty years,
after
which they
may
be renewed for
a further period of
thirty years. Prospecting rights are limited to
five years, with one
further period of renewal of
three years.
Applications for conversion of our
old order
rights were submitted to
the DMRE
within the requisite time
periods. As at
June 30,
2022 and
September
30, 2022 respectively,
all of our
Ergo operation’s
old order
mining rights
have been
converted
into new order
rights under
the terms
of
the MPRDA
and applications
to renew the
converted
the new order
mining rights
have
been lodged
timeously.
The Broad Based
Socio-Economic
Empowerment
Charter
In order to promote broad based participation in mining revenue, the MPRDA provides
for a Mining Charter to be developed by the
MRE Minister within
six months of commencement
of the MPRDA beginning
May 1, 2004 and
was subsequently
amended in September
2010.
It is
used an
instrument to achieve mutually symbiotic sustainable growth and broad
based and meaningful transformation of the
mining and
mineral industry.
The Mining Charter
sets certain
goals on equity
participation
(amount of
equity participation
and time frames)
by historically
disadvantaged
South Africans
of South African
mining assets.
It recommends
that these
are achieved
by, among other methods,
disposal 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 by
May 1, 2014.
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 from
May 1, 2004.
Compliance
with these
objectives is
measured
on the weighted
average “scorecard”
approach in
accordance
with a scorecard
which was
first published
around August
2010. In April
2018,
judgment was
handed down
by the North
Gauteng High
Court in Pretoria
against a
provision in
the 2010 Mining
Charter regarding
the “once
empowered
always empowered”
principle.”
This principle
refers to whether
a mining company,
after the exit
of a Black
partner that
held a stake
in the company
consequent
to a result
of a BEE transaction,
continues
to be BEE compliant.
The judgment
was appealed
by the DMRE.
The
DMRE in August
2020, withdrew
their notice
to appeal
to the Supreme
Court of Appeal
in respect
of the judgment
issued in
April 2018
by the
Pretoria High
Court.
The Mining Charter and the related
scorecard are not legally
binding and, instead,
simply state a public policy. However, the DMRE
27
places significant
emphasis on the
compliance
therewith. The
Mining Charter
and scorecard
have a decisive
effect on administrative
action taken
under the MPRDA.
In recognition of the Mining
Charter’s objectives of
transforming the mining industry
by increasing the number
of black people in
the industry
to reflect
the country’s
population demographics,
to empower
and enable
them to
meaningfully participate
in and
sustain the
growth of the
economy, thereby advancing equal
opportunity and equitable
income distribution, we
have
achieved
our commitment
to ownership
compliance
with the MPRDA
through our historic
black economic
empowerment
structures
which have
subsequently
unwound.
The mining
industry in
South Africa
is extensively
regulated
through legislation
and regulations
issued by government’s
administrative
bodies. These involve
directives with respect
to health
and safety,
mining and
exploration of
minerals, and
managing the
impact of
mining
operations
on the environment.
A change
in regulatory
or government
policies could
adversely
affect our business.
On June
15, 2017, the
Reviewed Broad-Based Black Economic Empowerment Charter for the South
African Mining and Minerals
Industry, 2017
(“
2017 Mining
Charter
”) was published
in the
Government
Gazette
No. 40923
of Government
Notice.581.
The publication
of the
charter was met with widespread criticism
and on June 26, 2017 the Minerals Council of South Africa (previously
Chamber of Mines of South
Africa), and
applied to the
High Court
of South Africa,
Gauteng division
for an urgent
interdict
to prevent
the charter
from implementation.
Key provisions
included:
•
50% Black ownership
for new prospecting
rights;
•
30% Black ownership
for mining
rights (up
to 11% offset
for local
beneficiation)
•
For new
mining
rights
to be
issued,
the provision
for 1%
of Earnings
Before
Interest,
Taxes, Depreciation
and Amortisation
(“
EBITDA
”)
is paid to
communities
and employees
as a trickle
dividend from
the sixth year
of a mining
right until
dividends
are declared
or at any point
in a
12-month period
where dividends
are not declared
On February 2016, The
President of South Africa
announced that a new
mining charter would
be developed and will
follow a process
which includes
all stakeholders.
The Minerals
Council of
South Africa
subsequently
postponed
its application
in the
High Court
in respect
of the
2017 Mining
Charter.
On September
27, 2018
the Broad-Based
Socio-Economic
Empowerment
Charter
for the
Mining and
Minerals
Industry, 2018
(“
Mining
Charter 2018
”) was
published in
Government Gazette No.
41934 of
Government Notice No.
639 on
September 27,
2018 superseding and
replacing
all previous
charters,
including Mining
Charter III.
Mining Charter
2018 requires
an enduring
30% BEE interest
in respect
of new mining
rights. It
also has extensive
provisions in
respect
of HDP representation
at board and management,
as well provisions
relating to
local procurement
of goods and services.
The procurement
target
of the total
spend on services
from South African
companies has
been set at 80% (up
from 70% in Mining
Charter III)
and 60% of the aggregate
spend thereof
must be apportioned
to BEE entrepreneurs.
Key provisions
of Mining Charter
2018 are:
•
the conditional
acceptance
of the continued
consequences
of previous
compliance
of the BEE
ownership threshold
of 26% in
respect of
existing mining
rights;
•
of the 30% HDP
ownership component,
qualifying employees
and communities
are each to hold
a 5% carried
interest (as
opposed to a
free carry
interest
as per
Mining Charter
III) the
cost of
which may
be recovered
by the mining
right holder
from the
development
of the
asset. the
community interest
in turn may
be offset by
way of an
equity equivalent;
•
removal of
the so-called
1% of EBITDA
trickle dividend
provided for
in the 2017
Mining Charter;
and
•
the removal
of provisions
requiring
community
and employee
representation
at board level.
•
that the continuing
consequences
of HDP ownership
are not recognized
for transfers
of mining rights;
and
•
that a top
up of HDP ownership
back to 30%
is required
for the renewal
of existing
rights.
Subsequently, several
notable developments
have occurred:
In March
2019, the
Mineral Council
of South Africa
brought an
application
in the High
Court, Pretoria
for a judicial
review and
setting
aside of certain
provisions in
Mining Charter
2018.
In June 2020, the
High Court ordered
the Minerals Council
of South Africa to join parties
representing
communities,
trade unions and
BEE entrepreneurs
as a prerequisite
to the continuation
of the lawsuit,
as they
have a
direct and
substantial
interest
in the outcome
of the litigation.
On September
21, 2021,
the High
Court of
South Africa
ruled that
the Mining
Charter
2018 is
not binding
subordinate
legislation
but an
instrument of policy. This ruling
affirmed that the MRE Minister
was not entitled to make
law through the Mining Charter
2018 to require 30%
HDP ownership
for the renewal
of existing
mining rights.
On November
23, 2021,
the MRE
Minister
confirmed
that the
MRE Minister
will not
appeal
the ruling
made by
the High
Court of
South
Africa.
28
Mine Health
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 and/or
reduce our production
capacity. The Act was
amended in 2009
and the
amendments to the
Act dealt with
inter alia
the stoppage
of production and
increase punitive measures
including increased financial
fines and legal
liability of mine
management. Some
of the more
important provisions in
the 2009 amendment bill
are the insertion of
section 50(7A) that obliges
an inspector to impose
a prohibition on the
further functioning of a site where a person’s death, serious injury or
illness to a person or a health threatening
occurrence has occurred; a new
section 86A(1) creating a
new offence for any
person who contravenes or
fails to comply with
the provisions of the
Mine Health and Safety
Act thereby causing a
person’s death or
serious injury or illness to
a person. Subsection (3)
further provides that (a)
the “fact that the person
issued instructions prohibiting
the performance or
an omission is not
in itself sufficient
proof that all
reasonable steps were
taken to prevent
the performance or omission”; and that
(b) “the defense of ignorance or mistake by
any person accused cannot be permitted”; or that
(c) “the
defense that the death of a person, injury, illness or endangerment was caused by the performance or an omission of any individual within the
employ
of
the
employer
may
not
be
admitted”;
section
86A(2)
creating
an
offence
of
vicarious
liability
for
the
employer
where
a
Chief
Executive Officer,
manager, agent
or employee of
the employer committed
an offence and
the employer either
connived at or
permitted the
performance or
an omission
by the
Chief Executive
Officer,
manager, agent
or employee
concerned; or
did not
take all
reasonable steps
to
prevent the performance or an omission. The maximum fines were also increased. Any owner convicted in
terms of section 86 or 86A may be
sentenced to “withdrawal
or suspension of
the permit” or
to a fine
of R3 million
or a period
of imprisonment not
exceeding five years
or to
both such
fine and
imprisonment, while
the maximum
fine for
other offences
and for
administrative fines
have all
been increased,
with the
highest being R1 million.
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 dependents
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
of the
prospect
of costly
damages
but does
not relieve
employers
from liability
for negligent
acts caused
to third
parties
outside the
scope of
employment.
In fiscal
year 2022,
we contributed
approximately
R5.9 million
under the
COID Act
(2021: R4.3
million
and 2020: R3.7
million) 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,” usually in circumstances
where the employee
is exposed to dust, gases,
vapors, chemical
substances or other working
conditions which are
potentially harmful,
or 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.
These payment
requirements
are based
on a combination
of the employee
costs and claims
made during the
fiscal year.
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 to radiation
in the nearby vicinity. We monitor our uranium and radon
emissions for compliance with
all local
laws and
regulations pertaining to
uranium and radon
management and under
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
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 Air Quality
Act 2004, the
National Water Act
(managing effluent),
and the Nuclear
Regulator
Act 1999. Liability
for
environmental damage is also extended to
impose personal liability on managers and
directors of mining
corporations that are found to
have
violated applicable
laws.
The impact
on the environment
by mining operations
is extensively
regulated
by the MPRDA.
The MPRDA
has onerous
provisions
for
personal liability
of directors
of companies
whose mining
operations have
an unacceptable
impact on the
environment.
Mining
companies are
also
required to
demonstrate both
the
technical and
financial ability
to
sustain an
ongoing environmental
management program,
or EMP,
and achieve ultimate rehabilitation,
the particulars of which are to be incorporated in an EMP. This program is
required to
be submitted
and approved
by the DMRE
as a prerequisite
for the issue
of a new order
mining right.
Various funding mechanisms
are
in place,
including trust
funds, guarantees
and concurrent
rehabilitation
budgets, to
fund the rehabilitation
liability.
The MPRDA
imposes specific,
ongoing environmental
monitoring and
financial
reporting obligations
on the holders
of mining rights.
We
believe that
our
environmental risks
have
been
addressed in
EMPs
which
have
been
submitted to
the
DMRE
for
approval.
Additionally, key environmental issues
have been prioritized and are being addressed through active management
input and support as well as
progress measured
in terms of
activity schedules
and timescales
determined for
each activity.
29
Our existing
reporting and
controls
framework
is consistent
with the additional
reporting and
assessment
requirements
of the MPRDA.
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. This can be done through the use of rehabilitation trusts or through financial
guarantees issued to the DMRE. During
fiscal year
2022,
a change
in method
was decided
upon as providing
for environmental
rehabilitation
from funding
in a specific
rehabilitation
trust
to financial
guarantees
which is an
allowed method
in terms
of the National
Environmental
Management Act.
The financial
guarantees
are issued
through approved
insurance
products
from Guardrisk
Insurance
Company Limited
(“
GICL
”).
All the
required
approvals
for the
change in
method
and transfer
of the rehabilitation
trust funds
were obtained
from the
DMRE and a
thorough consideration
of tax and
legal impacts
were completed
prior to the funds being
transferred
to GICL directly from
the rehabilitation
trust where the
funds were previously
held. As of June 30, 2022,
we
held
a
total of
R589.8 million
(2021: R87.5
million) in
funds held
in
insurance instruments after
the
transfer,
of
R579.5
million from
the
rehabilitation
trusts
was completed.
As at
June 30,
2022 guarantees
amounting
to R614.0
million
(2021:
R430.1
million)
were
issued
to the
DMRE.
As of June
30, 2022, subsequent
to the transfer
to GICL, the
balance in
the rehabilitation
trust was
R nil (2021:
R564.7 million).
The provision
for environmental
rehabilitation
for the group was
R517.7 million
at June 30, 2022,
compared to
R570.8 million
at June
30, 2021.
New
Financial Provisioning
Regulations (“
FPR
”)
were
promulgated on
November 20,
2015
under
the
National
Environmental
Management Act, 107
of 1998
(“
NEMA
”) by
the Department of
Forestry, Fisheries and
the Environment (“
DFFE
”).
Under the
FPRs to
be
implemented
by the DMRE, existing
environmental
rehabilitation
trust funds, of
which DRDGOLD
has R0.0 million,
may be used only
for post
closure
activities
and may
no longer
be utilized
for their
intended
purpose
of concurrent
and final
rehabilitation
on closure.
As a
result,
new methods
for provisions
will have
to be made
for these activities.
Several further proposed amendments to
the FPRs,
(“
Proposed Amendments
”) were
published subsequently.
The latest
Proposed
Amendments
were published
in August
2021 which,
inter alia
, extends
the compliance
with these
regulations
to three
months following
the fiscal
year end June
30, 2022.
The Proposed Amendments,
in their current form and which are still subject
to the approval of the DMRE
and Treasury, allow under
certain circumstances for the withdrawal against financial
provision (which is currently not contemplated in the FPR). It is
therefore uncertain
whether these
provisions relating
to withdrawal
will remain
in their current
form, or at
all.
Regulation 5(4) of the Proposed Amendments
states that the determination of financial provision
must be undertaken by a specialist,
which according to the definitions
listed in the Proposed Amendments
is an “independent person”.
Regulation 10 of the Proposed
Amendments
further requires
the annual review and re-assessment
of financial provision
by an independent specialist,
which in terms of Regulation
11 of the
Proposed Amendments
must also be
audited by an
independent
auditor. The Proposed
Amendments do
not require
that the annual
review and re-
assessment
of financial
provision be
audited by a
financial
auditor.
4C. ORGANIZATIONAL
STRUCTURE
The
following chart
shows our
principal subsidiaries as
of
June 30,
2022
and
as
of
September 30,
2022 respectively.
All
of
our
subsidiaries are incorporated in South Africa. Our voting interest in each of our subsidiaries are equal to our
ownership interests. We hold the
majority of
our subsidiaries
directly or
indirectly
as indicated
below. Refer to
Exhibit 8.1 for
a list of
our significant
subsidiaries.
30
4D. PROPERTY, PLANT AND EQUIPMENT
Description
of Significant
Subsidiaries'
Properties and
Mining Operations
Mineral Reserves
and Mineral
Resources summary
disclosures
Previously mining property disclosures
were reported in accordance with the requirements of the SEC’s Industry Guide 7.
The SEC
adopted amendments
to modernize
the property
disclosure
requirements
for mining
registrants,
and related
guidance.
The amendments
consolidate
the SEC’s mining property disclosure requirements
by relocating them to a new subpart of Regulation S-K 1300 (Subpart
1300) (“
S-K 1300
”).
These amendments closely align disclosure requirements
to current industry and global regulatory practices and standards as embodied by the
Committee for
Reserves International
Reporting Standards
(“
CRIRSCO
”). The amendments
were effective
for the first fiscal
year beginning on
or after January 1,
2021. We
have therefore adopted the new amendments in
this Annual Report and
going forward. The new
rules require a
registrant to obtain a dated and Technical Report Summary or Summaries (“
TRSs
”) from the qualified person or persons, which identifies
and
summarizes the information reviewed and conclusions reached by each qualified person about the registrant’s Mineral Resources and Mineral
Reserves
determined
to be on each
material
property. Key changes
in the amendments
include the
following:
●
The reporting
of Mineral
Resources and
not only Mineral
Reserves. This
is therefore
the first time
that we report
on Mineral Resources
and no comparatives
are provided
●
Statement
of Mineral
Resources exclusive
of Mineral
Reserves
●
Removal
of the
requirement
to use
a three-year
historical
gold price
to use
in determining
Mineral
Reserves,
but rather
that of
a reasonable
and justifiable
gold price
●
Application
of modifying
factors in
indicated
or measured
Mineral Resources
in order to
convert them
to Mineral
Reserves
The financial and technical assumptions
underlying the Mineral Resources
and Mineral Reserves estimations
contained in this report
and in the
TRSs included as exhibits in this
report are current as at
June 30, 2022, the
period covered by each of
the respective reports. Such
assumptions rely on various
factors that may change after the reporting
period, including as a result
of operational reviews which
the Company
undertakes
from time to time
and when necessary.
The TRSs which
are filed as exhibits
to this report
in accordance
with Item 601(86)
and Item
1300 of Regulation
S-K have been
prepared by
the Qualified
Persons named
therein'.
In South
Africa,
we are
legally
required
to publicly
report
Mineral
Reserves
and Mineral
Resources
in compliance
with the
South African
Code for
the Reporting
of Exploration Results,
Mineral Resources and
Mineral Reserves, or
SAMREC Code.
South Africa
is a
member of
CRIRSCO.
The following information is detailed for material properties of the Companies in Item 4D:
●
History of operations
●
Overview of operations
●
Properties and location
●
Geology
●
Mining method
●
Mineral Processing and Recovery Methods
●
Infrastructure
●
Exploration
●
Environmental
and Closure
Aspects
●
Water usage and reduction in use of potable water
●
Water pollution
●
Environmental rehabilitation closure providing and funding
●
Legal aspects and permitting
●
Production
●
Capital Expenditure
●
Mineral Reserves and Mineral Resources Estimation
History of operations
For a detailed review of the history of the operations, refer to Item 4A. History and development of the Company.
Overview of operations
DRDGOLD owns 100% of Ergo
and 100% of FWGR. Both are surface
tailings retreatment
operations producing
gold. Ergo operates
across central
and east Johannesburg,
within the Gauteng
Province and
FWGR in Carletonville
on the far West Rand
of the Gauteng
Province. In
order to improve synergies, effect cost
savings and establish a simpler group structure,
DRDGOLD restructured
the Group’s surface operations
(Crown, ERPM’s
Cason Dump
surface operation
and ErgoGold)
into Ergo with
effect from
July 1, 2012.
On July 31,
2018, DRDGOLD
acquired
WRTRP
Assets,
which
are
surface
gold
processing assets
and
tailing
storage
facilities associated
with
Sibanye-Stillwater’s WRTRP,
and
subsequently
renamed it
FWGR.
DRDGOLD also owns 100% ERPM. In December 2018, ERPM concluded
revised agreements to dispose
certain of its underground
31
assets to
OroTree Limited
(“OroTree”) which
included the
disposal of
ERPM’s underground
mining and
prospecting
rights. Underground
mining
infrastructure
was not sold.
ERPM’s underground
gold mining
infrastructure
is under care
and maintenance.
At June
30, 2022, Ergo
employed
763 full-time
employees.
In addition,
specialist
service providers
deployed a
further 1,677
employees
to our operations
bringing the
total number
of in-house and
outsourced
employees to
2,440 at June
30, 2022 (at
June 30, 2021:
2,266
;
at June 30,
2020:
2,155
)
.
At June
30, 2022,
FWGR employed 152
full-time employees. In addition, specialist service providers deployed
a further
339
employees
to our operations
bringing the
total number
of in-house
and outsourced
employees
to 491.
Below is geographical representation of the location on Ergo and FWGR within South Africa:
Properties and location
The Ergo plant is
located approximately
43 miles (70
kilometers)
east of the Johannesburg’s
central business
district in the
province of
Gauteng on
land owned
by Ergo. Access
to the Ergo plant
is via the
Ergo Road on the
N17 Johannesburg-Springs
motorway.
Following the
restructuring
of the
Crown operations,
which consisted
of three
separate
locations,
City Deep,
Crown Mines
and Knights,
into a single
surface retreatment
operation in Ergo,
these mining
rights were
transferred
to Ergo in March
2014.The Crown
Mines plant
and sites
were closed
down in March
2017 and rehabilitated.
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 City
Deep plant
continues to
operate as
a pump/milling
station feeding
the metallurgical
plants.
The Knights operation
is located at
Stanley and Knights
Road Germiston
off the R29 Main
Reef Road. The
Knights plant
continues to
operate as
a metallurgical
plant.
As of June
30, 2022 and
September 30, 2022, no material
encumbrances
exist on Ergo's
property.
As of June
30, 2022, the
net book value
of Ergo’s mining assets
was R1,707.0
million (2021:
R 1,427.8
million).
32
Below is
a geographical
representation
of the location
of individual
material
properties
of Ergo:
Below is a geographical representation of the location of individual material properties of FWGR:
FWGR’s assets
consists of
the currently operational
Driefontein 2 plant
(“
DP2
”), Driefontein 3
plant (“
DP3
”), Driefontein 4
TSF
which is
a current
active tailings
deposition facility,
pilot plant,
which is
a moveable
LogiProc pilot
plant established
to test
the processes,
techniques and assumptions made
in the definitive level
design of the
full scale retreatment
of dumps.
FWGR currently own six
tailings storage
facilities on the West Rand between Roodepoort and Carletonville, approximately 70km South West
of Johannesburg (Figure A).
There are an
additional four
TSFs which will
be transferred from
Sibanye-Stillwater to
FWGR once no
longer required by
the existing
operations (Available
TSFs). These are
Driefontein 1,
and 2, Kloof
2 and
Leeudoorn. Numerous
other TSFs
are potentially available
in the
area for future reclamation. FWGR also owns land
on which the Central Processing Plant (“
CPP”
) and RTSF and
the return water dam were
originally planned to be built.
As of June
30, 2022, and
September 30, 2022, no material
encumbrances
exist on FWGR's
property.
At June 30, 2022,
the net book value of FWGR’s mining assets was R1,340.6 million (2021:
R1,341.3 million).
Surface reclamation
operations including
the treatment
of sand
from ERPM’s
Cason Dump,
was conducted
through the
Knights
metallurgical plant, tailings deposition facilities and associated facilities until
ERPM’s surface mining assets were transferred
to Ergo as part
of the restructuring which took place on July 1, 2012.
As of June 30, 2022,
and September 30, 2022,
no encumbrances
exist on ERPM's
property.
At June
30, 2022,
the net book
value of ERPM’s
mining assets
was zero (2021:
zero).
33
Geology
DRDGOLD’s
surface deposits
are the
residue (“
tailings
”) of
the mining
and metallurgical
process recovery
of gold
and uranium
ores of the gold bearing
late Archaean (2.7Ga to
3.2Ga) Witwatersrand sedimentary basin. The Witwatersrand Basin is
the largest gold bearing
metallogenic province
globally and
is unconformably
overlain by units
of the
Ventersdorp
Supergroup (~2.7Ga),
the Transvaal
Supergroup
(~2.6Ga), and the Karoo Supergroup (~280Ma).
The deposits
consist of
gold, uranium
and sulphur-bearing
sand dumps
and slimes
dams, and
the composition
reflects the
major
constituents of the
Witwatersrand Basin: quartz
(70%-80%), mica
(10%), chlorite
and chloritoid
(9%-18%) and
pyrite (1%-2%).
Gold, uranium,
zirconium and chromium may be minor constituents averaging <100ppm each.
Deposits possess characteristics, determined by the geometry,
material source and processing plants in which the original ores were processed.
Mining method
Material processed by
Ergo is sourced from
surface sources namely, sand and
slime and are
reclaimed separately. FWGR only source
is slime.
No selective mining takes place on a dump with the entire TSF being processed. This is due to the following:
●
No place exists on mining sites to dump below cut-off grade material;
●
The mining method is not conducive to selective mining; and
●
The
operation
is
also
a
rehabilitation
exercise,
and
all
mineralized
material
must
be
removed
from
the
site,
and
it
is,
therefore,
economically beneficial to process all material, even low-grade material.
TSFs
are
mined
through
hydro-mining
using
high-pressure
jets
of
water
to
dislodge
tailings
material
or
move
sediment
for
transportation as
a slurry
to processing
plants. The
hydro-mining removes
the tailings
material from the
top of
a TSF
to the
natural ground
level in 15m layers. Hydraulic
mining provides slurry feedstock to
the plants continuously. Ergo also uses mechanical
front end loaders to load
slimes/sand material. Material is re-pulped with water and pumped to the plants.
Mineral Processing and Recovery Methods
Our metallurgical plants use carbon-in-leach (“
CIL
”) metallurgical processes to recover gold from slurry.
The
surface
sources
have
generally
undergone
a
complex
depositional
history
resulting
in
grade
variations
associated
with
improvements in plant
recovery over the
period the material
was deposited. At
Ergo, our two
gold producing metallurgical
plants, Ergo
and
Knights
have
an
installed
capacity
to
treat
approximately
25
million
tons
of
material
per
year
based
on
92%
availability
and
are
fully
operational. All of the plants
have undergone
various modifications
during recent
years resulting
in significant
changes to the
processing
circuits.
The City Deep plant
continues to operate
as a pump/milling
station feeding
the metallurgical
plants. At FWGR, DP2 has a
installed capacity to
treat approximately 7.2 million tons of material per year.
The re-pulped slime
is pumped to the
plant and the reclaimed
material is treated using
screens, cyclones, ball mills
and Carbon-in-Leach, or
CIL, technology to extract the gold.
Set forth below is a description of each of our plants in operation:
Ergo Plant:
Commissioned
by Anglo American Corporation
in 1977, became part
of AngloGold Ashanti
in 1998 from which it was
acquired
for a
consideration
of R42.8
million
in 2007.
The remaining
five CIL
tanks were
refurbished
during fiscal
year 2015
to increase
capacity to
treat up to
25.2Mt per
year.
Knights Plant:
Commissioned in 1988, this surface/underground plant comprises a circuit including screening, primary cycloning,
milling in closed circuit with hydrocyclones,
thickening, oxygen preconditioning,
CIL, elution, electro-winning
and smelting to doré.
The
Knights
plant,
although
historically
part
of
the
Crown
operation,
is
located
further
east
and
considerably
closer
to
the
Brakpan/Withok
TSF. Due to the location
of the Knights
plant it deposits
waste on the
Brakpan/Withok TSF. The
Knights plant
has an
installed
capacity to
treat an estimated
3.6Mt per year.
City Deep Plant:
Commissioned
in 1987, this surface/underground
plant comprises
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. Retreatment
continued at the City Deep Plant until the plant was decommissioned in August 2013 to
operate as
a milling
and pump station
and is currently
pumping material
to the Ergo Plant
for the final
extraction
of gold.
Driefontein 2 Plant:
Recommissioned
in fiscal year 2019, this surface/underground
plant was refurbished
and modifications
made to
the milling
and cyclone
circuit to
ensure the
production
of a finer
grind for gold
liberation.
Infrastructure
The hydro-mining, reprocessing
and re-deposition of
tailings material requires
a network of
pipes. Slurry pipelines
will be needed
34
from
the
hydro-mining
sites at
the
TSFs
to
the plants
and tailings
pipelines
from
the plants
to the
respective
depositional
facilities. High
pressure water pipelines are necessary to supply the mining operations while separate low-pressure water pipes are
needed for returning water
to the plants from return water dams at the various TSFs. These have all been adequately designed and included in the LoM planning.
Ergo currently uses the Brakpan/Withok tailings facility as deposition facility, and FWGR, the Driefontein 4 TSF. Ergo
requires the
implementation of the final design of the Brakpan/Withok
TSF to receive an additional 800Mt in order to deliver into its life of mine. FWGR
requires the RTSF
to ensure adequate
storage facilities for
the long-term deposition
of all tailings
arising from FWGR
operations. It will
be
built on Transvaal Supergroup lithology (Figure D), to mitigate any risk of
dolomite related sink holes. The design and cost estimate
caters for
a storage capacity of 800Mt and a potential disposal rate of up to 3.0Mtpm.
We are seeking
to obtain the last regulatory approval for
the final life design of the Brakpan/Withok
TSF. Designs
for the final life
stage of the TSF are being reviewed. The
permitting for the RTSF has
been approved based on the initial design with a
geomembrane barrier
and FWGR
are pursuing
approval for
the more
recent scavenger
well design.
FWGR have
reached an
in-principle agreement
with Sibanye
Gold to co-deposit tailings on the Leeudoorn TSF.
This will allow FWGR to increase production to 750ktpm for an interim period
while also
mitigating against the risk of an interruption to the planned production in the event that the approval sought for the RTSF is delayed.
Both operations obtain
their power ultimately
from the
Eskom grid and
therefore are currently
exposed to
the material
risks associated
with Eskom. Ergo operations receive power
from several substations and mining
sites are supplied power
via several separate feeds. Currently,
the Ergo
plant demands
peaks at
18MVa
and the
Brakpan/Withok Tailings
Storage facility
at 8MVa.
Ergo operates
24-7-365 and
the plant
receives power at 6.6KV via Eskom’s 88KV Vlakfontein distribution. At FWGR, power is currently supplied from
Eskom’s 132kV and 44kV
grid to various Sibanye owned gold mines in the vicinity
of FWGR’s operations. The power requirement of FWGR remains within the current
surplus capacity of the Driefontein and Kloof mining complexes.
Exploration
Exploration and development
activity at Ergo involves
the drilling of surface
dumps and evaluating the potential
gold bearing surface
material in
the determination
of its Mineral
Resources and
Mineral Reserves.
These exploration
programmes
comprise:
●
surveying to determine physical dimensions and volumes;
●
auger or reverse circulation drilling programs to permit sampling for gold content and mapping of the gold distribution;
●
metallurgical and flow sheet development test work; and
●
tailings toxicity tests and specific gravity determination.
Environmental
and Closure
Aspects
In accordance
with South
African mining
legislation,
all mining
companies
are required
to rehabilitate
the land on
which they
work to a
determined
standard
for alternative
use. DRDGOLD’s
business
involves
the reclamation
of previously
discarded
material
deposited,
in many
cases,
by other companies,
most of which
are no longer
in business.
As a result
we deal with
legacy environmental
issues.
Before we
embark on
new mining
projects, we
undertake an
environmental authorization process which is
performed by
external
consulting specialists
that conduct detailed specialist studies, an environmental
impact assessment and environmental management
programme
(“EMP”)
for the
management
of these
projects.
These reports
are discussed
and reviewed
by our stakeholders
through an
open public
participation
process. Through this process, we are
able to identify,
address and minimize the effects of
our activities on the
environment and identify and
mitigate
the potential
impacts
our activities
may have
on surrounding
communities
and the
receiving
environment.
Our environmental
management
systems and
policies
have been
designed
in compliance
with South
Africa’s National
Environmental
Management
Act 107 of
1998 and
associated
regulations. Internal and
external environmental audits
are performed
annually and
recorded in
a
database to
ensure compliance. Our
EMP
encompasses
all the activities
of our operations
and assesses
the environmental
impacts of mining
at reclamation
sites, plants
and tailings
storage
facilities.
It also outlines
the closure
process,
including financial
provisions.
At
Ergo,
environmental management and
compliance is
further assisted
by
the
in–house developed
electronic monitoring system
(Compliance Management
Tool) that incorporates all existing
Environmental
Impact Assessments
(“
EIA
s”), EMPs, Mining Right Conversions,
Performance Assessments
and Social and Labor Plans (“
SLP
s”) associated with each
mining right. At Ergo the monitoring
system incorporates
existing EMPs and
water use licenses.
The existing and most
recent studies
are used to supplement
the management
components with
regards to
the mining
right
boundaries
and its
required
compliance
parameters.
The individual
management
items are
integrated
to provide
a holistic
overview
of the state
of each of
the mining
right areas.
Spatial data
pertaining to
the mining
right boundaries
is stored onto
a central
database and
is utilized
to create
a live map
which illustrates
the mining
right area
and various
environmental
monitoring systems.
The Group actively manages
and monitors the consumption
of natural resources
(including potable water
and energy) at monthly and
weekly meetings.
This entails the analysis
of trends to identify excess
use and discuss various
focus areas to ensure
responsible natural
resource
usage. The major environmental risks are associated with dust
from various reclamation sites, and effective management of relocated process
material
on certain
tailings
dams. At Ergo,
Municipal
infrastructure
as well as
commercial
and residential
developments
have encroached
towards
the Ergo operation.
The impact
of nuisance
dust fallout
on the surrounding
environment
and community
is addressed
through a comprehensive
monitoring
network including
appropriate
community involvement.
The monitoring
reports are
sent to regulators,
municipalities,
and interested
and affected
35
parties.
For a residential
zoned monitoring
bucket, an
exceedance
is defined
as above the
dust limit
of 600mg/m
2
/day. For a non-residential
zoned
monitoring bucket,
an exceedance
is defined
as above the
dust limit
of 1200mg/m
2
/day.
Mitigation
measures include
environmentally
friendly dust
suppressants
applied to
high impact
areas, active
wetting of access
roads by
water bowsers, and a network of high velocity sprayers on our active TSFs. 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.
Water usage and reduction in use of potable water
The primary
uses for
water are in
the plants
and hydro-mining for
the various
TSFs. Ergo
constructed a central
water reticulation
plant in 2017 to
give it the ability
to deliver water to
all corners of the
operation and return it
through a fully integrated
closed system.
Between
60%- 70% of all
process water make up
at Ergo is drawn
from the Brakpan/Withok
TSF to various reclamation sites
by way of return
water
columns. Another 15%-20% water is drawn from lakes and dams in the region in terms of the
requisite extraction licenses. A further 6%-11%
of
process
water
top
up
needs
are
from
treated
underground
acid
mine
drainage
(“
AMD
”)
drawn
from
Trans-Caledon
Tunnel
Authority
(“
TCTA
”). DRDGOLD has the right to use up to 30 Ml of AMD water per day. Less than 1% of water is drawn from a wastewater treatment
facility.
Potable water is
used only
where the
sensitivity of
equipment requires
it and
for certain early
stages of
irrigation to settle
in newly
established vegetation on TSFs.
At FWGR, all water
harvested from Driefontein 4
TSF is used. This
amounts to approximately 54%
of process
water requirements.
The balance is
made up
from underground
mine dewatering. Water
use licenses are
available for
the pumping of
water
from underground
workings at Kloof
10 shaft
and Driefontein
10 shaft, and
the consumption
planned from these
shafts will
not exceed
the
pumping rates approved in the respective WULs. Potable water consumption is limited to drinking and change houses and flocculant make
up
for usage in the plant.
Water
pollution
A closed
water system
is designed
to avoid
having to
treat water
or having
to discharge
into surface
water courses.
Overflows of
return water dams may,
depending on their location, pollute
surrounding streams and wetlands. Ergo and FWGR have an ongoing monitoring
program to ensure that its water
balances (in its reticulation system, on its tailings and its
return water dams) are maintained at
levels that are
sensitive
to the capacity
of return water
dams. Any water discharge is contained through paddocks on
reclaimed sites, storm water run-off and
water systems that pump rain or excess water
into the system. Another possible source water discharge is attributed
mainly to compromised or
aging pipes
that may
cause leaks.
An external
expert continuously
monitors pipelines
to timeously
identify water
leaks to
minimize water
seepages. A comprehensive maintenance plan is in place for replace compromised pipelines.
ERPM acid mine drainage
There is a regular ingress of
water into the underground workings of ERPM, which was contained by continuous pumping from the
underground section.
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.
The
government appointed
TCTA
to
construct a
partial treatment
plant
(neutralisation plant)
to
prevent the
ground
water
being
contaminated.
TCTA completed the construction
of the neutralisation
plant for the
Central Basin
and commenced
treatment during
July 2014. As
part of
the heads
of agreement
signed in
December
2012 between
EMO, Ergo,
ERPM and
TCTA, sludge emanating
from this
plant is
co-disposed
onto the Brakpan/Withok
TSF together
with processed
material from the
Ergo plant. Partially
treated water
is then discharged by TCTA into the
Elsburg Spruit.
This agreement
includes the
granting of
access to
the underground
water basin
through one
of ERPM shafts
and the rental
of a site
onto which
it constructed
its neutralisation
plant. In
exchange,
Ergo and its
associate
companies
including ERPM
have a
set-off against
any future
directives
to make any
contribution
toward costs
or capital
of up to
R250 million.
Through this
agreement,
Ergo also
secured the
right to
purchase
up to 30 ML of partially
treated AMD,
a day, from TCTA at cost, in order to reduce Ergo’s reliance
on potable water
for mining and processing
purposes.
Refer Item
18. ‘‘Financial Statements -
Note 26.2
Contingent liability for environmental rehabilitation” for disclosures on potential pollution
impact on
ground water
through seepage
Environmental rehabilitation closure providing and funding
While the ultimate amount
of rehabilitation costs
to be incurred is uncertain,
we have estimated that the total cost
for Ergo, in current
monetary terms
as at June 30,
2022 is approximately
R414.4 million.
As at June 30,
2022, a total
of R132.8 million
(2021: R62.7
million) is
held
in insurance
instruments
in the
Guardrisk
Cell Captive,
as security
for financial
guarantees
issued for
rehabilitation
costs. As
at June
30, 2022,
after
the change in method for providing
for rehabilitation
and subsequently
the rehabilitation
funds were transferred
to the Guardrisk Cell Captive,
a
total of
R0.0 million
(2021: R127.2
million)
is held
in the Ergo
Rehabilitation
Trust Fund, previously
called the
Crown Rehabilitation
Trust Fund,
which 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.
We have estimated that the total cost for FWGR, in current
monetary terms as at June 30, 2022 is approximately
R93.9 million (June
30, 2021: R116.4 million).
As at June 30, 2022, a total
of R444.1 million
(2021: R0.0 million)
is held in insurance
instruments in the
Guardrisk
Cell Captive,
as security for
financial
guarantees
issued for rehabilitation
costs. As at
June 30, 2022, after
the change in
method for providing
for
rehabilitation and subsequently the rehabilitation funds were transferred to the
Guardrisk Cell Captive, a
total of
R0.0 million (2021: R425.1
36
million) is
held in the
Ergo Rehabilitation
Trust Fund.
We have estimated that as at June 30, 2022 the present discounted
value of the total cost of rehabilitation
for ERPM is approximately
R9.3 million (2021: R8.6 million).
A total of R0.0 million (2021: R12.4
million) is held in the Ergo Rehabilitation
Trust Fund
for the benefit of
ERPM and R51.6
million (2021:
R24.8 million)
is held in
insurance
instruments
and is available
for the settlement
of these rehabilitation
costs.
Legal aspects and permitting
Mining Rights
and Prospecting
Rights held
are listed
under the
Ergo Mining
Proprietary
Limited subsidiary.
DRDGOLD
has numerous
Surface, Mining
and Prospecting
Rights and ownership
of the surface
rights and mine
dumps vests in
various legal
entities.
Ergo is one of only a
few surface operators that holds Mining Rights under the MPRDA over a large portion of its reserves. The provisions of the MPRDA, and the
definition
of ‘mineral’
had inadvertently
created
a gap
in the
Act placing
the ‘minerals’
in certain
TSFs beyond
the regulatory
reach of
the MPRDA
and limiting its competency to
issue rights upon application. However, in
terms of the
transitional arrangements of the MPRDA, which were
peremptory upon the DMRE
in the event that the petitioner
met the conditions for conversion
from ‘old order’ to ‘new
order’, Ergo was able to
convert its
old
order rights,
thus extending
its “license
to
mine” into
the dispensation introduced
by the
MPRDA. Ergo
has also
submitted
applications to renew
all its Mining and Prospecting
Rights with the DMRE. The
current Mining and Prospecting
Rights have expired (with
the
exception of 7L4 TSF) but remain in force
until such time that the renewal applications
have been granted or refused by the DMRE. Water use
licenses are
applied for
as and when
required to
remain compliant
with relevant
legislation.
Ergo complies
with all the
conditions for
renewal and
has no reason
to believe that
the submitted
renewals would
not be granted.
Ergo is in constant
communication
with the DMRE and
is submitting
the required
information
as per their
requests
to finalize
these renewal
applications.
The Mineral Resources and
Mineral Reserves held by
FWGR were acquired from
Sibanye Gold Limited, a
subsidiary of Sibanye-
Stillwater
Limited, in
a transaction
in which
common law
ownership
was established
over the
various TSFs
containing
the said
Mineral
Resources
and Mineral
Reserves,
and control
was established
by Sibanye-Stillwater
over DRDGOLD.
FWGR conducts
its activities
inter alia
in accordance
with Environmental
Approvals
(“
EAs
”) and the
provisions
of the
Mine Health
and Safety
regulations.
A Use and
Access Agreement
with Sibanye
Gold articulates
the various rights,
permits and licenses
held by Sibanye Gold
in terms of which
FWGR operates,
pending the transfer
to FWGR
of those that
are transferable.
FWGR entered into
a smelting agreement
with Sibanye-Stillwater to
smelt and recover
gold from gold
loaded carbon produced
at
the DP2
plant, and
deliver the
gold to
Rand Refinery.
In exchange
for this
service, Sibanye-Stillwater receives
a fee
based on
the smelting
costs plus
10% of
the smelting
costs. Rand
Refinery performs
the final
refinement of
all gold
produced. Up
to April
11, 2022,
FWGR also
engaged its
fellow subsidiary,
Ergo Mining
Proprietary Limited,
to act
as its
agent and
representative and
to enter
into a
refining services
arrangement with Rand Refinery
for the sale,
marketing and export
of the refined
gold of the
Company. After April 11, 2022, FWGR
continued
to engage Ergo Mining Proprietary Limited, to act as its agent and representative to sell gold directly to the
South African Bullion banks. This
agreement is expected
to be in
place until FWGR
obtains its own
precious metals beneficiation
license and its
own depository account
with
Rand Refinery.
DRDGOLD and its
subsidiaries own the
rights to
some of
the properties where the
Mineral Resources are located.
In other
cases,
agreements are
in place with the landowners
to mine the dump material
and rehabilitate
the land for other uses.
The details of the related
surface
rights are
not material
for the purpose
of this report.
The necessary
agreements
are in place
for all properties
in the LoM plan.
Impediments on rights to mine
Grootvlei Complex
Ergo has submitted
a renewal application
of its prospecting
rights over
Grootvlei
dumps 6L16,
6L17 and 6L17A
to the DMRE.
During
the 2022 financial year, an external party raised a conflicting claim of common law ownership of 6L16, 6L17 and 6L17A TSFs. Although the
claim was based on common
law ownership and
no attempt has been
made to set aside
the prospecting
rights over the TSFs,
the Grootvlei
TSFs
have been
excluded from
the Mineral
Reserves statement
and the Life-of-Mine
(LoM) plan
but included
in the Mineral
Resources
statement.
Marievale Complex
Ergo acquired the 7L5,
7L6 and 7L7 TSFs in terms
of a written notarial executed
deed of sale during 2019 and
took possession
of the
TSFs on 8 April 2019. It has since also obtained the requisite National
Environmental Management
Act, 1998 (Act No. 107 of 1998) (NEMA)
regulatory approvals
to retreat the said TSFs. During
the 2022 financial year, the owner
of the land on which 7L5, 7L6 and 7L7 are situated,
an
estimated 36,524t
out of the total 54,114t comprising
the Marievale cluster,
notified Ergo that in its view, the said TSFs
had acceded to the land
and that it
had become
the owner
of the TSFs.
Ergo disputes
the claim
of legal title
and the matter
is to be referred
to arbitration.
All ownership requirements
were met when the TSFs
were purchased by Ergo
and therefore
the TSFs are still
included in the Mineral
Reserves.
Whilst Ergo
has received
confident
legal advice
on the merits
of its claim,
in the event
that the arbitration
goes against
Ergo, its Mineral
Reserves
will reduce
by 35.52Mt
(0.35Moz
at 0.29g/t).
Inasmuch
as it
then enters
into a
commercial
arrangement
with the
land-owner,
the financial
benefit of
this portion
of the Marievale
cluster will
be reduced
by whatever
benefit is agreed
to in favor
of the land-owner.
Ergo has
a submitted
renewal
application
to the
DMRE for
the prospecting
rights it
holds over
7L4 TSF. The
entity (who
holds common
law ownership
rights over
the land on which
the TSF is
situated and
the TSF itself)
has agreed
to relinquish
ownership in
favor of Ergo,
provided
that Ergo undertakes
to:
●
make a notional
amount payment;
37
●
suitably remove
the TSF; and
●
rehabilitate
the land.
A draft contract
stipulating
the terms
of such agreement
is awaiting
final signature.
Below is a graphical representation of the permits and licenses held within the Group:
Production
Ergo
For fiscal year 2022, production
decreased to 133,618.0
ounces from 137,059.0 ounces
in fiscal year 2021 mainly due to
the volume
throughput
that decreased
from 23.0Mt
to 22.1Mt
as a result
of increased
rainfall experienced
in fiscal
year 2022 in
comparison
to previous
years.
The impact
of this decrease
was offset by
the increase
in the average yield from 0.186g/t in fiscal year 2021 to 0.188g/t in fiscal year 2022.
Cash operating costs increased
by $198.0 per ounce, or 16.0%, from $1,272.0 per ounce in fiscal year 2021 to $1,470.0 per ounce in
fiscal year
2022 mainly
due to the
above inflationary
increases
in the costs
of key consumables,
diesel, steel
and cyanide.
38
The following table details certain production and financial results of Ergo for the past two fiscal years.
2022
2021
Production (imperial)
Ore milled ('000 tons)
22,111
22,952
Recovered grade (oz/ton)
0.006
0.006
Gold produced (ounces)
133,618
137,059
Results of Operations
Revenue (R million)
3,704.9
3,943.0
Cost of sales (R million)
3,141.8
2,871.0
Cash operating costs (R million)
1
3,009.8
2,666.5
Cash operating costs (R/kilogram)
1
718,676
629,585
All-in sustaining costs (R/kilogram)
1
826,891
704,503
All-in cost (R/kilogram)
1
848,683
717,755
1 Cash operating cost, cash operating costs per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram are financial measures of performance that we use to determine cash generating capacities
of the
mines and to monitor
performance of our mining operations.
These are all non-IFRS
measures. For a reconciliation of
these measures to the nearest
IFRS measure see Item
5A.: “Operating Results - Reconciliation
of
cash cost per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram.”
FWGR
For fiscal
year 2022,
production increased to
50,284 ounces
from 46,940
ounces produced
in
fiscal year
2021. Although
volume
throughput decreased
from 6.2Mt in
fiscal year
2021 to 6.1Mt in
fiscal 2022,
this was offset
by an increase
average yield form 0.237g/t in fiscal
year 2021 to 0.257g/t in fiscal year 2022.
Cash operating
costs increased
by $38 per ounce,
or 7%, from
$558 per ounce
in fiscal year
2021 to $596 per
ounce in fiscal
year 2022
mainly due
to an above
inflationary
increases
in the costs
of key consumables,
diesel, steel
and cyanide.
The following table details certain production and financial results of FWGR for the past two fiscal years.
2022
2021
Production (imperial)
Ore milled ('000 tons)
6,078
6,159
Recovered grade (oz/ton)
0.008
0.008
Gold produced (ounces)
50,284
46,940
Results of Operations
Revenue (R million)
1,413.6
1,326.0
Cost of sales (R million)
592.1
517.2
Cash operating costs (R million)
1
454.0
406.2
Cash operating costs (R/kilogram)
1
291,302
276,174
All-in sustaining costs (R/kilogram)
1
396,762
377,210
All-in cost (R/kilogram)
1
422,540
400,829
1 Cash operating cost, cash operating costs per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram are financial measures of performance that we use to determine cash generating capacities
of the
mines and to monitor
performance of our mining operations.
These are all non IFRS
measures. For a reconciliation of
these measures to the
nearest IFRS measure see Item
5A.: “Operating Results - Reconciliation
of
cash cost per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram.”
Licenses to Operate
All
the
licenses,
permits,
permissions,
management
plans
and
reports,
as
well
as
amendments,
variations
or
modifications thereof from time to time necessary for Sibanye-Stillwater to operate the WRTRP Assets lawfully.
Access Rights
The grant of access to DRDGOLD of the:
·
Driefontein 10 shaft;
·
Kloof 10
shaft located
in the
Kloof mining
area that
is subject
to the
Kloof Mining
Right, for
the purpose
of
pumping and
supplying, at the
cost of WRTRP,
the required quantities of
water, as licensed,
for the WRTRP
Assets;
·
rights, servitudes
and agreements
for installation,
supply and
distribution and
maintenance of
power supply;
existing and proposed pipeline routes; servitudes; wayleaves and surface right permits; and
·
Driefontein 1 Gold Plant for the purpose of accessing the Pilot Plant.
Capital Expenditure
Ergo
For a
discussion of capital
expenditures in fiscal
years 2020,
2021 and
2022, see
"Item 5.A.
Operating and Financial
Review and
39
Prospects—Capital
expenditure".
Capital expenditure
related to
material growth
projects are
financed on
a project-by-project
basis which
may include
bank facilities
and
existing
cash resources.
Sustaining
capital
expenditure
is financed
from cash
generated
from operations
and existing
cash resources.
For a
summary
of capital
expenditure,
see Item 5A.
Operating
Results.
Advance planning
is underway
for the
implementation
of the final
life design
of the
Brakpan/Withok
TSF to
accommodate
higher grade
resources
in the area
east of the
of the
Ergo Plant and
further extend
the life
of mine of
Ergo.
During fiscal
year 2022
capital was
expended to
commence
with the development
of a solar
power project,
to reduce
Ergo’s reliance
on
the Eskom
grid and
reduce
its carbon
footprint.
A large
percentage
of the
planned
capital
expenditure
in fiscal
year 2023
will be
applied
to complete
the first
phase of the
project. The
project is
expected to
be completed
in FY2024.
FWGR
FWGR appointed an engineering consulting company to undertake the
definitive feasibility study and detailed design for the Phase
2 project.
The available
information was
independently reviewed
by an
external consultant,
Sound Mining
Solution (Pty)Ltd.
The project
includes the construction of a new CPP with a capacity of between 1.2 Mtpm to 2.4 Mtpm and the equipping of the required reclamation sites
and pipeline
infrastructure to
supply the
relevant resources
to the
CPP.
Phase
2 also
includes the
construction of
a new
RTSF
capable of
accepting up
to 3 Mtpm
to a capacity
of approximately 800Mt.
The definitive feasibility
study was concluded
in the fiscal
2021 year and
is
subject to
obtaining regulatory
approvals on
the amended
design of
the RTSF.
During the
current year,
management considered
alternative
plans
should
the
RTSF
be
delayed
further,
based
on
information
at
hand.
The
Sibanye-Stillwater
Leeudoorn
tailings
storage
facility
was
evaluated as a viable interim alternative to the RTSF
whilst regulatory approvals are obtained. Furthermore, the expansion of DP2 to a 1.2Mt
processing capacity per month has been planned.
Capital expenditure related to material growth projects are financed
on a project-by-project basis which may include bank facilities
and existing cash resources. Sustaining capital expenditure is financed from cash generated from operations and existing cash resources.
Mineral Reserves and Mineral Resources Estimation
Mineral Resources
Mineral Resources
are estimates
that contain
inherent risk
and uncertainties
and depend
upon geological
interpretations and
data
statistics drawn from
drilling and sampling
programmes, which may prove
to be unreliable.
For detailed description of
risks associated with
the Company’s material properties, refer to Item 3D: Risk Factors.
Mineral
Resources consist
of sand
dumps,
slimes dams
and silted
‘vlei’ areas
and dams.
Before dumps
are included
as Mineral
Resources, they are evaluated by drilling and an initial assessment is completed by the Qualified Person.
With respect to the Mineral Resources
and Mineral Reserves, drilling takes place
on a predetermined grid to
ascertain the average grade
(grade
model), moisture, expected
extraction factors and ultimate
financial viability before mining
begins. Sampling is done
subject quality control
and assurance as prescribed.
Estimation methods vary depending on data distribution and statistics.
A block model is generated and used to evaluate
the potential
for inclusion into a
mine plan. The applied Mineral
Resource classification is a
function of the confidence
of the entire process
from surveying,
drilling, sampling, assaying, geological understanding and/or geostatistical relationships. Mineral Resources is reported
in situ
.
Both Mineral Resources and
Mineral Reserves are determined
by the average grade
of a TSF which
must be above or equal
to a plant
feed cut-off
grade. A cut-off
is also determined
per complex or
cluster. A
TSF may report
an average gold
grade below a
cut-off, but
when
included in a
complex, the total complex
could be above the
cut-off. The assumptions
on a Mineral Resource
cut-off include
working costs,
the average plant recovery, the expected residue grade, the required yield based on working cost and gold price, and are presented below:
Ergo
FWGR
Cut-off assumptions
Gold price (R)
914 294
914 294
Working cost (R/tonne)
90.86
85.23
Plant recovery (%)
40.87
53.55
Mine call factor (%)
100
100
Cut-off grade (g/t)
0.24
0.15
The Mineral Resource estimates for all the TSFs and a sand dump are declared as follows:
●
The point of reference is in-situ. The TSFs or sand dumps themselves are the reference points;
●
No geological or other losses were applied as all material is accessible and there are no geological structures;
●
Mineral Resource Estimates are stated as both inclusive and exclusive of Mineral Reserves as defined in S-K 1300; and
40
●
Mineral Resources are 100% attributable to DRDGOLD.
Mineral Reserves
The Mineral Reserves were
prepared in accordance with
the requirements of
S-K 1300, and the
economic viability thereof performed
at a minimum prefeasibility study
level. Modifying factors like dilution
or mining losses bare not
applied for the Mineral Reserve
estimation
because the
TSFs are re-mined
and re-processed in
their entirety.
All other
modifying factors are
reflected in the
mine design and
all of the
associated technical aspects that informed the capital and operating cost
estimates. Mineral Reserve is reported as delivered to the processing
plants.
As material is
removed for
retreatment, the Mineral
Resources and Mineral
Reserves for each
operation are
adjusted accordingly.
Continuous checks of modifying factors and
ongoing surveys are conducted to
monitor the rate of depletion and the
accuracy of factors used
in conversion.
Mineral Reserves changed in
the past
two fiscal
years as follows:
●
Mineral Reserves increased from 5.35
million ounces at
June 30,
2021, to
6.04 million ounces at
June 30,
2022, mainly
because of
Ergo’s
Daggafontein TSF
being reclassified
to a
Mineral Reserve
which was
in part
offset through
ongoing
mining
activities. This
is despite
the
Grootvlei
dumps being
classified from
a Mineral
Reserve.
Ergo
also
classified a
number
of
its
dumps
from
a
Probable
Mineral
Reserve
to
a
Proven
Mineral
Reserve,
notably
the
Rooikraal
TSF,
0.47Moz(56.76Mt@0.26g/t). Grootvlei Complex
has been excluded from
the life of mine
and has been classified
from a
Mineral Reserve to a Mineral Resource due to land claims.
●
Mineral Reserves decreased from 5.73
million ounces at June
30, 2020, to
5.35 million ounces at
June 30,
2021, mainly
because of depletion through ongoing mining activities.
The life-of-mine
for Ergo
based on
Proven and
Probable Mineral
Reserves S-K
1300 as
at June 30, 2022,
was 19
years (June 30,
2021:
13 years).
The life
of mine
for FWGR
based on Proven
and Probable
Mineral Reserves
under S-K
1300 as
at June
30, 2022
was 20 years
(June 30,
2021: 18 years).
The year on year Mineral Reserve reconciliation is shown below:
Tonnes
(Mt)
Grade Au
(g/t)
Au
Ounces
(Moz)
Mineral Reserves as at June 30, 2021
518.10
0.32
5.35
Depletion of Mineral Reserves – Ergo
(20.48)
0.33
(0.22)
Survey adjustments - Ergo
(2.94)
0.20
(0.01)
Addition of Daggafontein TSF - Ergo
192.79
0.24
1.49
Addition of Various dumps
- Ergo
6.72
0.24
0.06
Exclusion of Grootvlei Dumps – 6L16, 6L17 and 6L17A -Ergo
(66.04)
0.26
(0.55)
Depletion of Mineral Reserves – FWGR
(5.77)
0.45
(0.08)
Mineral Reserves at June 30, 2022
622.37
0.30
6.04
The figures contained in
the table are rounded,
which may result in minor
computational discrepancies which are
not deemed
to be significant. Depletion based on block model surveys
Gold Price
Assumptions
The estimation of Mineral Reserves
and Mineral Resources requires the
economic assessment to demonstrate reasonable
prospects
for economic
extraction. Assumptions
in the
economic assessment
includes a
gold price.
The Company
has estimated
gold price
based on
consensus forecasts obtained
from various sources
which provided a
range as of
June 30, 2022.
The lowest range
of these forecasts
was selected
to take into account the
volatility experienced in the current
global economic conditions. As
of June 30, 2021,
the three-year average gold
price
was used in accordance with Industry Guide 7 for the estimation of Mineral Reserves.
41
Year ended
June 30, 2022
Gold price
Rand gold price per kilogram
914,294
Dollar gold price per ounce
1,823
ZAR/USD rate
15.60
Year ended
June 30, 2021
Three-year average
gold price
Rand gold price per kilogram
756,355
Dollar gold price per ounce
1,559
Ore Reserves (million ounces)
5.35
Qualified
Persons:
The information contained in Item 4D related
to Mineral Reserves and Mineral Resources is based
on information compiled by the
Qualified
Persons
as
defined
in
S-K
1300.
The
Qualified
Persons
are
not
employed
by
the
Company.
The
Company
has
evaluated
the
qualification and experience of the Qualified Persons
and is satisfied that they meet the
requirements in accordance with the SAMREC Code
and S-K
1300. DRDGOLD
obtained written
consents from
the Qualified
Persons prior
to publication
of this
report. The
Qualified Person
responsible for the
compilation and reporting of
Ergo’s Mineral
Resources is Mr
Mpfariseni Mudau and for
FWGR is Ms
Diana van Buren.
The Qualified Person responsible for the compilation and reporting of Ergo’s Mineral Reserves is Professor Steven Rupprecht and for FWGR
is Mr Vaughn Duke
.
Qualified Persons
Title
Address
Qualifications
Relevant years
Experience
Mpfariseni Mudau
Pr.Sci.Nat
400305/12
Director of The RVN
Group Proprietary
Limited
Willowbrook
Villas 21, Van
Hoof St,
Roodepoort, 1724
BSc (Hons) –
Geology, MSc
(Mining
Engineering)
16
Professor Steven Rupprecht
FSAIMM 701013
Associate Principal
Mining Engineer of
the RVN Group
Willowbrook
Villas 21, Van
Hoof St,
Roodepoort, 1724
BSc. Mining
Engineering PhD.
Mechanical
Engineering
35
Diana van Buren
Pr.Sci.Nat. 400107/14
Partner of Sound
Mining Solution
Proprietary Limited
Sound Mining
House, 2A Fifth
Avenue, Rivonia,
2128
BSc (Hons) –
Geology
16
Vaughn
Duke
Pr.Eng 940314 FSAIMM 37179
Partner of Sound
Mining Solution
Proprietary Limited
Sound Mining
House, 2A Fifth
Avenue, Rivonia,
2128
BSc Mining
Engineering
(Hons), MBA
37
Mineral Reserves and Mineral Resources internal control disclosure
DRDGOLD has employed
an independent
consultant to
manage drilling
activities and
report sampling
results in
accordance with
DRDGOLD’s prescribed internal control procedures. The control procedures include standard operating procedure, supervision of
drilling by
experienced
geologists,
technical
site
visits
by
Qualified
Persons,
chain
of
custody
and
management
approvals.
Reputable
commercial
laboratories perform the
assaying of samples
for gold.
These laboratories have
quality assurance and
quality control measures
in place that
satisfy Qualified
Persons and
also meet
DRDGOLD’s
requirements. The
results are
also submitted
to the
directors at
Ergo
and FWGR
to
ensure that due process has been followed and to identify any anomalies. Verification
of estimates is a routine part of the plant feed sampling
programme. Plant feed
grades are compared
to the expected
grades from the
Mineral Resource and
Mineral Reserves and
updated monthly.
Surveys are undertaken monthly, and a reconciliation is reported annually.
Any adjustments for shortfall or overruns are made in the Mineral
Resource and Mineral Reserve statement for the following year. Gains or losses are largely related to volume adjustments on survey although
adjustment may
be made for
other reasons such
as unexpected
deleterious materials in
the dump. The
estimation of
Mineral Reserves is
an
outcome of life
of mine and
budget planning which
runs annually, whereby capital
costs, operating costs
and other assumptions
are interrogated
and approved at an executive committee level.
42
DRDGOLD's summary Mineral Resources (Including Mineral Reserves) as of June 30, 2022 are set forth in the tables below.
Mineral Resources (including Mineral Reserves)
Measured Resources
Indicated Resources
Inferred Resources
Total
Tons
Grade
Gold Content
Tons
Grade
Gold Content
Tons
Grade
Gold Content
Tons
Grade
Gold Content
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
Ergo
266.25
0.31
2.64
82.24
568.21
0.25
4.55
141.40
21.32
0.24
0.16
5.12
855.78
0.27
7.35
228.76
FWGR
229.37
0.33
2.46
76.39
-
-
-
-
-
-
-
-
229.37
0.33
2.46
76.39
Total
495.62
0.32
5.10
158.63
568.21
0.25
4.55
141.40
21.32
0.24
0.16
5.12
1,085.15
0.28
9.81
305.15
DRDGOLD's summary Mineral Resources (Exclusive of Mineral Reserves) as of June 30, 2022 are set forth in the tables below.
Mineral Resources (Exclusive of Mineral Reserves)
Measured Resources
Indicated Resources
Inferred Resources
Total
Tons
Grade
Gold Content
Tons
Grade
Gold Content
Tons
Grade
Gold Content
Tons
Grade
Gold Content
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
Ergo
66.04
0.26
0.55
17.17
375.41
0.25
3.02
93.85
21.32
0.24
0.16
5.12
462.77
0.25
3.73
116.14
FWGR
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
66.04
0.26
0.55
17.17
375.41
0.25
3.02
93.85
21.32
0.24
0.16
5.12
462.77
0.25
3.73
116.14
1
Mineral Resources when stated exclusive of Mineral Reserves amount to zero for FWGR,
because all of the Mineral Resources will be exploited and converted to Mineral
Reserves
DRDGOLD's summary Mineral Reserves as of June 30, 2022 are set forth in the tables below.
Mineral Reserves
Proved Reserves
Probable Reserves
Total Reserves
Tons
Grade
Gold Content
Tons
Grade
Gold Content
Tons
Grade
Gold Content
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
(mill)
(g/tonne)
('m ozs)
(tonnes)
Ergo
200.21
0.33
2.09
65.02
192.79
0.24
1.49
46.27
393.00
0.28
3.58
111.29
FWGR
216.49
0.33
2.32
72.15
12.88
0.33
0.14
4.24
229.37
0.33
2.46
76.39
Total
416.70
0.33
4.41
137.17
205.67
0.25
1.63
50.51
622.37
0.30
6.04
187.68
The figures contained in the tables are rounded, which may result
in minor computational discrepancies which are not deemed to be significant.
43
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL
REVIEW AND PROSPECTS
This
section
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 International Financial Reporting Standards
(“
IFRS
”) as issued
by the International
Accounting Standards Board
(“
IASB
”). 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.
Comparison of financial performance for the fiscal year ended June 30, 2021 with fiscal year ended June 30, 2020
This comparison analysis can be found in Item 5A of the Company’s
annual report on Form 20-F for the fiscal year ended
June 30,
2021.
44
5A. OPERATING RESULTS
Business overview
We
are
a
South
African
gold
mining
company
engaged
in
surface gold
tailings retreatment,
including
exploration,
extraction,
processing and
smelting. All
our surface
tailings retreatment
operations, including
the requisite
infrastructure and
metallurgical processing
plants, are located in South Africa.
The success of DRDGOLD’s long-term goal to extract as much gold from its assets as possible and is economically viable depends,
to a large extent, on how effectively it continues to manage its resources.
DRDGOLD’s
strategic thinking
is informed
by principles
of sustainable
development. Our
goal is
to optimally
exploit our
entire
resource over the long term,
thereby seeking sustainable benefits
in respect to the
following capitals, each of which
is essential to our operation
– financial, manufactured, natural, human and social capital.
We also aim to align and overlap the interests of each of these capitals
in such a manner that an investment in any
one translates into
value-add in
as many of
the others as
possible. We
therefore seek to
achieve an enduring
and harmonious alignment
between them, and
we
pursue these criteria in the feasibility analysis of each investment.
Our profit
for fiscal
year 2022 decreased
compared to
fiscal year
2021, mainly
due to,
inter alia
, the following:
●
gold production decreased by 3kg to 5,720kg together with a
decrease in gold sold by
20kg to 5,714kg. The decrease in production
reflected
a 3% decrease
in throughput
to 28,189,000t,
offsetting the
3% increase
in average
yield to 0.203g/t;
●
the average
rand gold price
received decreased
by 3%; and
●
above inflationary
increases
in the cost
of key consumables,
diesel, steel
and cyanide.
Key drivers of our operating results and principal factors affecting our operating results
●
the price of gold, which fluctuates both in terms of dollars and rands;
●
our production tonnages and gold content thereof, impacting on the amount of gold we produce at our operations;
●
our cost of producing gold, including the effects of mining efficiencies;
●
general economic factors, such as exchange rate fluctuations and inflation, and factors affecting mining operations in South Africa;
and
●
government policies that could materially impact our operations.
Gold price
Our revenues
are derived
primarily from
the sale
of gold
produced at
our surface
tailings retreatment
operations. 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 jewelry
demand, expectations with respect
to the rate of
inflation, the strength
of the U.S. 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 is often subject
to rapid short-term changes because of
speculative activities. In response to the COVID-
19 pandemic
and measures
taken to deal
with the
outbreak,
investors
globally, as they
have in so
many previous
times of
crisis, turned
to gold and
gold stocks
as a
safe haven
asset, leading
to a surge
in the
average
gold price
during fiscal
year 2021
and the
continued
economic
uncertainty
along
with the
slow economic
recovery,
consequences
of the
Ukraine
conflict
resulted
in sustained
high (although
marginally
lower)
gold prices
for fiscal
year 2022.
The demand
for and supply
of gold affects
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.
The following table indicates data relating to the dollar gold spot prices for the 2022 and 2021 fiscal years:
2022 fiscal year
2021 fiscal year
Change
$ per ounce
$ per ounce
%
Closing gold spot price on June 30,
1,807
1,770
2
Lowest gold spot price during the fiscal year
1,684
1,676
-
Highest gold spot price during the fiscal year
2,070
2,072
-
Average gold spot price for the fiscal year
1,834
1,850
(1)
All our
operations and
gold production
are based
in South
Africa, and
as a
result, the
impact of
movements in
relevant exchange
rates is significant to our operating results.
The average gold price in rand (based
on average spot prices for the year) increased
by 16% from
R24,466 per ounce in 2020 to R28,490 per ounce in 2021, and decreased by 2% to R27,896 per ounce in 2022.
An increase/(decrease) of 20% in the US dollar gold price throughout
fiscal year 2022 would have increased/(decreased) revenue by
approximately R1,023.7 million (2021: R1,053.8 million).
45
An increase/(decrease) of 20% in
the Rand to US dollar exchange
rate throughout fiscal year 2022
would have increased/(decreased)
revenue by approximately R1,023.7 million (2021: R1,053.8 million).
Gold production
In fiscal year 2022, gold production
decreased to 183,902 ounces (produced from
28.2 million tonnes milled at
an average yield of
0.203g/t) from 183,999 ounces in fiscal
year 2021 (produced from 29.1 million tonnes
milled at an average yield of
0.197g/t). This was mainly
due to
Ergo’s gold production which decreased
to 133,618.0 ounces
in fiscal year
2022 (produced from
22.1 million tonnes
milled at an
average
yield of 0.188g/t) from 137,059.0
ounces in fiscal year 2021
(produced from 23.0 million tonnes
milled at an average yield
of 0.186g/t). The
decrease was a result
of a decrease
in tonnes milled
due to increased
rainfall as
well as lower
grade material
being mined.
In fiscal year 2021,
gold production increased to
183,999 ounces (produced from 29.1
million tonnes milled at
an average yield of
0.197g/t) from 174,385 ounces in fiscal
year 2020 (produced from 26.3 million tonnes
milled at an average yield of
0.206g/t). This was mainly
due to the first full year of gold production
of FWGR resulting in production
of 46,940 ounces (produced from 6.2
million tonnes milled
at an
average yield of 0.237g/t), mitigating the impact of
Ergo’s gold production which increased to 137,059.0 ounces in fiscal year 2021
(produced
from 23.0 million tonnes milled at
an average yield of 0.186g/t) from
128,249.0 ounces in fiscal year 2020
(produced from 20.2 million tonnes
milled at an
average yield of
0.197g/t). The increase was a consequence
of stable production during
fiscal 2021 compared
to fiscal 2020 when
production suffered
from the impact
of the Lockdown,
subsequent cautious
ramp-up and interruptions
in power supply
from Eskom and
the City
of Ekurhuleni.
Cash operating costs
Cash operating costs is a non-IFRS financial measure of performance that
is reported to the group’s chief
operating decision maker
(CODM) and is used
to monitor performance –
refer to Item 18. ‘‘Financial Statements
- Note 23 – Operating Segments”.
For a reconciliation
of this measure see Item 5A.: “Reconciliation of cash cost per kilogram, all-in sustaining costs per kilogram and all-in costs per kilogram”.
Cash operating
costs include
consumables, labor,
specialized service
providers, electricity
and other
related costs
incurred in
the
production of gold. Consumables, water and electricity, labor, specialized service providers and other costs are the largest components of cash
operating costs. A breakdown of cash operating costs into
these costs is described in Item 5A.: “Comparison of financial performance for
the
fiscal year ended June 30, 2022 with fiscal year ended June 30, 2021”.
General economic factors
We are
exposed to a number
of factors, which could
affect our profitability,
such as exchange rate
fluctuations, inflation and other
risks relating to South
Africa. In conducting mining operations,
we are subject to the
inherent risks and uncertainties of
the industry, and
the
wasting nature of the assets.
Effect of exchange rate fluctuations
For the fiscal years 2022
and 2021, all of
our revenues were generated from
South African operations, all of
our operating costs were
denominated in
rand and
we derived
all of
our revenues
in dollars
before being
translated to
rands. As
the price
of gold
is denominated
in
dollars which is then translated into
rands, the appreciation of the dollar
against the rand increases our profitability,
whereas the depreciation
of the dollar against the rand reduces our profitability.
In fiscal
year 2022
the average
Rand gold
price received
decreased by
3% compared
to fiscal
year 2021,
this was
a result
of the
combined impact
of the
average Dollar gold
price which
decreased by
1% and
the average
exchange rate of
the rand
against the dollar
that
strengthened by 1%.
In line with our long-term strategy of being an unhedged gold producer,
we generally 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. 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 plants
or to continue the
development of some or
all of our projects.
However, during periods
when medium-
term debt is incurred
to fund growth projects and
hence introduce liquidity risk
to the Group, we
may mitigate this liquidity
risk by entering
into hedging instruments to achieve price protection (refer Item 11.
Quantitative and Qualitative Disclosures About Market Risk – General).
Effect of inflation and exchange rates
In the past, our operations have been materially adversely affected by inflation. If there is a significant increase in inflation in South
Africa, our costs will
increase and if such
a cost increase is not
offset by an
increase in the rand
price of gold, this
will negatively affect our
operating results.
The movements in
the rand/dollar exchange
rate, based
upon average rates
during the periods
presented, and the
local annual inflation
rate for the periods presented, as measured by the South African Consumer Price Index, or CPI, are set out in the table below:
46
Fiscal year ended
Year
ended June 30,
2022
2021
2020
(%)
(%)
(%)
The average rand/dollar exchange rate (strengthened)/weakened by:
(1)
(2)
10
CPI (inflation rate)
7.4
4.9
2.2
Government
policies that
could materially
impact operations
The mining
industry in
South Africa
is extensively
regulated
through legislation
and regulations
issued by government’s
administrative
bodies.
One of the key findings of the Frasers
Institute weighing
on South Africa’s investment appeal,
is lack of regulatory certainty.
Although
the industry’s
successfully
challenge
of Mining
Charter
III in the
High Court,
that set
aside certain
provisions
of the charter
on the basis
that it was
purported legislation (as opposed to policy) provided some certainty to the industry,
turnaround in obtaining permits and regulatory approvals
remains slow,
delaying the
execution of
key capital
projects.
The increasing
prominence
of ESG is
also resetting
the standard
on transparency
and
sustainability
and society
generally is
far more environmentally
and socially
aware, applying
increasing
pressure through
providers
of capital and
the regulator
to enforce
compliance.
Production
stoppages
due to the
impact of the
COVID-19 pandemic
on current
operations
The Group
temporarily halted its operations at
Ergo and
FWGR on
March 26,
2020 pursuant to
the announcement of
the national
lockdown in South African (“
Lockdown
”). Operations gradually recommenced through April and May 2020. Subsequent lockdowns in fiscal
2021 did not resulting in any similar stoppages in production and during fiscal 2022 the national state of disaster implemented
by the National
Government
came to an
end. (Refer
to Item 4D.
‘‘Property, plant and production
– Ergo Production
and FWGR
production”).
Key financial and operating indicators
The table
below presents
the key
performance measurement
data for
the past
two fiscal
years: The
financial results
for the
fiscal
years below are stated in accordance with IFRS as issued by the IASB. The table includes the key performance measures for our business and
its profitability, which are revenue, gold production, gold prices, operating costs, cash operating costs per kilogram, all-in sustaining costs per
kilogram and all-in costs per kilogram, capital expenditure (additions to property, plant and equipment) and Ore Reserves.
Financial and operating data
Year ended
June 30,
2022
2021
Revenue (R'm)
5,118.5
5,269.0
Gold production (ounces)
183,902
183,999
Gold production (kilograms)
5,720
5,723
Gold sold (ounces)
183,709
184,352
Gold sold (kilograms)
5,714
5,734
Average spot gold price (R/kilogram)
896,877
915,972
Average gold price received (R/kilogram)
894,409
917,996
Cost of sales (R'm)
3,741.5
3,388.2
Operating costs (R'm)
3,506.5
3,122.5
Cash operating costs (R'm)
(1)
3,463.8
3,072.7
Cash operating costs (R/kilogram)
(1)
600,875
540,338
All-in sustaining costs (R/kilogram)
(1)
721,684
626,247
All-in costs (R/kilogram)
(1)
746,255
643,338
Additions to property, plant and equipment (R'm)
598.4
395.7
(1) Cash
operating costs,
cash operating
costs per kilogram,
all-in sustaining
costs, all-in
sustaining costs per
kilogram and
all-in costs
and all-in
costs per kilogram
are non-IFRS financial
measures of performance
that we use
to monitor performance.
A reconciliation of
these measures to the nearest IFRS measure is included in Item 5A.: “Operating Results - Reconciliation of cash cost
per kilogram, all-in
sustaining costs per kilogram and all-in costs per kilogram.”
Revenue
Revenue decreased by
3% to R5,118.5 million
in fiscal year
2022 from R5,269.0
million in fiscal
year 2021 mainly
due to the
average
rand gold price
received that
decreased by
3% to R894,409 per
kilogram and
the 20kg decrease
in gold sold from
5,734 kilograms
in fiscal 2021
to 5,714 kilograms
in fiscal 2022.
Refer to Item 5A:. “Operating results: Key drivers of our operating results
and principal factors affecting our operating results”
for a
discussion
regarding the
gold price
received and
sales volumes.
47
Capital expenditure
During fiscal year 2022 capital expenditure increased by R202.7 million to R598.4 million from R395.7 million in fiscal year 2021.
Ergo’s capital expenditure during fiscal year 2022 increased by R173.3 million to R424.2 million from R250.9 million in fiscal year
2021. This was mainly due to upgrading of the 4A8 pump station
& power supply amounting to R45.0 million, infrastructure development for
Marievale and Rooikraal dumps amounting
to R204.5 million, various
expenditure on the Brakpan/Withok TSF
including decanting and slurry
lines amounting to R53.0 million and solar project plant related costs amounting to R59.1 million.
FWGR’s capital expenditure during fiscal
year 2022 increased
by R16.5 million to
R159.8 million from R143.3 million in
fiscal year
2021. This was mainly due to
the completion of the construction of
an additional thickener to all full
closed circuit milling amounting to
R47.7
million, final designs for
the CPP,
with the design work
also being applicable to
the potential expansion of
DP2 amounting to R64.1
million
and the ongoing improvement of Driefontein 4 Tailings Storage Facility amounting to R6.3 million.
During fiscal year
2021, capital expenditure
was R395.7 million
primarily consisting of
expenditure incurred on
sustaining capital
expenditure on
the reclamation
site, the
Brakpan/Withok TSF,
the Brakpan
plant, the
commencement of
the construction
for the
additional
thickener and the installation of the copper elution circuit.
Critical accounting policies
The
preparation
of
the
consolidated financial
statements
requires
management
to
make
accounting
assumptions, estimates
and
judgements
that affect the application
of the Group's
accounting policies
and reported amounts
of assets and liabilities,
income and expenses.
By
their nature, judgements
are subject to an inherent
degree of uncertainty. Accounting
assumptions,
estimates and
judgements are
reviewed on an
ongoing basis.
Revisions
to reported
amounts are
recognized
in the period
in which
the revision
is made and
in any future
periods affected.
Actual
results may
differ from
these estimates.
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.
This discussion
and analysis should
be read in
conjunction
with the
consolidated
financial
statements
and related
notes included
in Item 18.
“Financial
Statements”.
Critical accounting policies that require significant judgment
Management
believes
the following
critical
accounting
policies
require more
significant
judgements
to be used
in the preparation
of our
consolidated
financial
statements
and could potentially
impact our
financial
results and
future financial
performance:
●
Payments
made under
protest: Judgement
regarding the
outcome of
the matter, and
●
Contingencies:
Judgement
regarding the
outcome of
the respective
matters
Payments made
under protest
The assessment
to develop and apply the relevant
accounting policy
for payments made
under protest that
arise from the Municipality
Electricity Tariff Dispute (refer
Item 18. ‘‘Financial
Statements - Note 24
Payments made under protest”) requires the
exercise of significant
judgement.
The judicial
proceedings
that impact
the Payments
made under
protest
are inherently
complex
legal
issues
that are
subject
to uncertainties
and complexities
and are subject
to interpretation.
Contingencies
The assessment
of the impact
of contingent
liabilities
requires the
exercise of
significant
judgement regarding
the outcome
of uncertain
future events.
Litigation
and other
judicial
proceedings
inherently
entail complex
legal issues
that are
subject to
uncertainties
and complexities
and
are subject
to interpretation.
Critical accounting policies that require significant assumptions and estimates
Management
believes the
following are
critical accounting
policies which
involve the
more significant
assumptions
and estimates
used
in the preparation
of our consolidated
financial statements,
and are therefore
considered DRDGOLD’s critical
accounting estimates
which could
potentially
impact our
financial
results and
future financial
performance:
●
Depreciation:
Estimation
of the life-of-mine
●
Provision for
environmental
rehabilitation:
Estimation
of future environmental
rehabilitation
costs
●
Income tax:
Estimation
of the deferred
tax rate
●
Payments
made under
protest: Estimation
of the carrying
value and recoverability
●
Other investments:
Estimation
of the fair
value of financial
assets
48
Depreciation:
Estimation
of life-of-mine
Depreciation
of
mine plant
facilities and
equipment, as
well as
mining
property and
development (including
mineral
rights)
are
calculated using the units of production method which is based on the life-of-mine of each site. The life-of-mine is primarily based on proved
and probable
mineral reserves. It
reflects the estimated
quantities of
economically recoverable
gold that
can be
recovered from
reclamation
sites based on
the estimated
gold price.
Changes in the
life-of-mine will impact
depreciation on a
prospective basis. The
life-of-mine is prepared
using a methodology that takes account of current information
to assess the economically recoverable gold from specific
reclamation sites and
includes the consideration of historical experience.
Provision
for environmental
rehabilitation:
Estimation
of future environmental
rehabilitation
costs
Provisions for environmental
rehabilitation
are provided at the present
value of the costs expected
to be incurred in the future to settle
the obligation based on
current prices. The unwinding of
the obligation is
included in profit
or loss.
Estimated future costs of
environmental
rehabilitation
are reviewed
regularly
and adjusted
as appropriate.
Changes
in estimates
are capitalized
or reversed
against
the related
asset
but taken
to profit or loss if there
is no related asset left.
Gains or losses from the
expected disposal
of assets are not taken into
account when determining
the provision.
Estimates
of future environmental
rehabilitation
costs are
based on the
Group’s environmental
management
plans which
are developed
in accordance
with regulatory requirements,
the life-of-mine
plan and the planned method
of rehabilitation
which is influenced
by developments
in trends and
technology.
Income tax:
Estimation
of the deferred
tax rate
Deferred tax
is recognized
in
respect of
temporary differences between the
carrying amounts of
assets and
liabilities for financial
reporting purposes
and the amounts
used for tax
purposes.
The deferred
tax liability
is calculated
by applying a
forecast
weighted average
tax rate
that is based
on a prescribed
formula. The
calculation
of the forecast
weighted average
tax rate requires
the use of assumptions
and estimates
and
are inherently uncertain and could change materially over time. These assumptions and estimates include the expected future profitability and
timing
of the
reversal
of the
temporary
differences.
Due to
the forecast
weighted
average
tax rate
being based
on a
prescribed
formula
that increases
the effective
tax rate with
an increase
in forecast future
profitability, and
vice versa,
the tax rate
can vary significantly
year on year
and can move
contrary to
current period
financial performance.
Payments made
under protest:
Estimation of
the carrying
value and recoverability
The discounted
amount of
the Payments
made under
protest is
determined using
assumptions about the
future that
are inherently
uncertain
and can change
materially over
time and includes
the discount
rate and discount
period.
These assumptions about the future include estimating
the timing of concluding on the main application, i.e. the discount period, the
ultimate settlement terms (refer Item
18. ‘‘Financial
Statements -
Note 24
Payments made under
protest”), the discount
rate applied and
the
assessment
of recoverability.
Recognition
and measurement
The asset that
arises from the
Ekurhuleni electricity dispute (refer Item 18. ‘‘Financial Statements -
Note 24 Payments made
under
protest”) and that are payments made under protest is
initially measured at a discounted amount and any
difference between the face value of
payments made
under protest
and the discounted
amount on initial
recognition is
recognised
in profit or loss
as a finance expense.
Subsequent to
initial recognition, the Payments made under
protest is measured using
the effective interest method to
unwind the discounted amount to
the
original face value
less any write downs for recovery. Unwinding
of the carrying value and
changes in the discount
period are recognised
in the
statement
of profit or
loss.
Assessment
of recoverability
The discounted amount of the payments under protest is assessed at
each reporting date to determine whether there is any
objective
evidence that the full amount
is no longer expected to be recovered.
The Group considers the reasonable
and supportable information
related to
the
creditworthiness of Ekurhuleni
Metropolitan Municipality and
events surrounding
the outcome
of
the
Main Application
(refer Item
18.
‘‘Financial Statements
- Note 24 Payments
made under
protest”).
Any write
down is recognised
in the statement
of profit or
loss.
Other investments:
Estimation
of the fair
value of financial
assets
The fair
value of
other investments is
determined using assumptions about
the future
that are
inherently uncertain and can
change
materially over time.
It includes several
assumptions that are based
on both
observable and unobservable inputs. Assumptions applied in
the
estimation
of the fair
value of the
investment
in Rand Refinery
include the
following:
49
Amounts in R million
Observable/unobservable
input
Unit
2022
2021
Rand Refinery operations
Average gold price
Observable input
R/kg
880,207
847,317
Average silver price
Observable input
R/kg
11,209
11,751
Average South African CPI
Observable input
%
4.4
4.4
South African long-term government bond rate
Observable input
%
10.26
9.5
Terminal growth rate
Unobservable input
%
4.4
4.4
Weighted average cost of capital
Unobservable input
%
15.9
15.1
Investment in Prestige Bullion
Discount period
Unobservable input
Year
s
11
12
Cost of equity
Unobservable input
%
14.2
16.5
Marketability and minority discounts (both
unobservable inputs) were also applied
of 16.5%
and 17.0%
(2021: 16.5% and
17.0%)
respectively. The latest budgeted cash flow
forecasts provided by Rand Refinery as
at June
30, 2022 was
used, and therefore classified as an
unobservable
input
into the models.
New standards, amendments to standards and interpretations
Refer to Item 18. ‘‘Financial Statements - Note 3 – New standards, amendments to standards and interpretations”
for a discussion of
relevant standards,
amendments to standards
and interpretations
that may be applicable
to the business of the Group
and may have an impact
on
future consolidated
financial
statements.
Comparison of financial performance for the fiscal year ended June 30, 2022 with fiscal year ended June 30, 2021
Gold revenue
The following table illustrates the year-on-year change in gold revenue for fiscal year 2022 in comparison to fiscal year 2021:
R million
Total
Impact of change in amount
of gold sold
Impact of
change in
gold price
Net change
Total
gold revenue
gold revenue
2021
2022
Ergo
3,939.9
(135.1)
(104.7)
(239.8)
3,700.1
FWGR
1,323.9
116.1
(29.4)
86.7
1,410.6
Consolidated
5,263.8
(19.0)
(134.1)
(153.1)
5,110.7
Gold revenue decreased by R153.10 million,
or 3%, to R5,110.7 million during fiscal year 2022. This was
mainly due to
the average
rand gold price
received which
decreased
by 3% to R894,409
per kilogram
and a marginal
decrease in
gold sold from
184 350 ounces
to 183 709
ounces.
Cost of sales
Cost of sales
amounted to R3,741.5
million in fiscal
year 2022, consisting
mainly of operating
costs of R3,506.5
million, depreciation
of R267.6 million,
a positive movement
in gold in
process of R30.4
million and a
positive movement in
the change in
estimate of environmental
rehabilitation of R2.2 million. These are discussed as follows:
Operating costs
Operating costs increased by 12.3% to R3,506.5 million for fiscal year
2022 compared to R3,122.5 million for fiscal year 2021. The
increase is mainly due to general
higher inflation in fiscal year 2022
as well as above inflation increase
in the costs of key consumables,
diesel,
steel and cyanide.
50
Depreciation
Depreciation charges were
R267.6 million for
fiscal year
2022 compared to
R252.5 million for
fiscal year
2021. Depreciation charges
increased as a result of increased capital expenditure over the last two fiscal years.
Change in estimate of environmental rehabilitation
As of June 30,
2022, we estimate our total
environmental rehabilitation provision, being the
discounted estimate of future
costs, to
be R517.7 million as compared to R570.8 million
at June 30, 2021.
A change in estimate
of environmental rehabilitation
of R2.2 million
was
recognized due to changes in the estimated timing
of the vegetation of non-viable reclamation sites and
dormant infrastructure. In addition,
a
R67.2 million decrease in the provision due to the increase in the Ergo life of mine.
A
total
of
R589.8 million
(2021:
R87.5 million) is
invested in
funds held in
insurance instruments to secure financial
guarantees
provided to the DMRE through an
insurance cell captive company, the Guardrisk Cell Captive. The
increase is attributable to the transfer
from
the environmental trust funds to the
Guardrisk Cell Captive along with growth
of R10.4 million on these funds during fiscal year 2022.
As at
June 30, 2022, guarantees
amounting to R614.0
million were in issue
to the DMRE
(2021:
R430.1 million).
Any shortfall between the
invested
funds and the estimated provisions
is expected to be financed
by contributions to the Guardrisk
Cell Captive from time
to time as required over
the remaining production life
of the respective mining operations
and, at the time of
mine closure, the proceeds on
the disposal of remaining
assets and gold from plant clean-up. The transfer of the funds from the environmental trust fund to the Guardrisk Cell Captive was completed
after the required
approvals for the
change in method
and transfer of
the environmental trust
funds were obtained
from the DMR
and a thorough
consideration of tax and legal impacts was performed.
As
a
result,
a
total
of
R0.0 million
remained
in
our
various
environmental
trust
funds
as
at
the
end
of
fiscal
year
2022,
as
compared
to
R564.7 million at the end of
fiscal year 2021. Up
to the time of the
transfer, R 14.8 million of interest
was received on these funds
during fiscal
year 2022.
Movements in gold in process
Movement in
gold in
process in
fiscal year
2022 amounted
to R30.4
million mainly
due to
an increase
in the
lock up
of gold
in
process at the plants and finished inventories - Gold Bullion.
Administration expenses and general costs
Administration expenses
and general
costs increased
by R97.2 million
from R64 million
in fiscal
year 2021
to R161.2 million
in
fiscal year 2022. Administration expenses and general costs
in fiscal year 2021 included a share-based
payments benefit of R44.3 million. The
share-based payment
benefit in
2021 was mainly
due to the
remeasurement of the
cash-settled share-based payment
liability at a
seven-day
volume weighted average price (VWAP) of the DRDGOLD share from R25.14 at
June 30, 2020 to R18.62 at
November 5, 2020. This liability
was fully settled
on November 5,
2020. In addition, transaction
and exploration costs
increased from R3.1
million in fiscal year 2021 to R15.2
million in
fiscal year
2022 as well
as an increase
in other administration
expenses
and other
costs of R13.1
million related
to short term
incentives
and information
technology.
Finance income
Finance income increased
from R216.2 million in fiscal year 2021
to R225.8 million in fiscal year 2022,
mainly due to an increase
in interest income
earned of R3.9
from higher cash and cash equivalents balances
during the year and an unrealized foreign exchange
gain of
R7.0 million in fiscal year 2022 compared to an unrealized foreign exchange loss in 2021 which was recognized in finance expense.
Finance expense
Finance
expenses
increased
from
R69.5
million
in
fiscal
year
2021
to
R74.8 million
in
fiscal
year
2022,
mainly
attributable
to
discount on the
initial payment made under
protest of R21.1
million compared to R7.4
million in fiscal year
2021. This increase was
in part
offset by the unrealized foreign exchange loss of nil in fiscal year 2022 compared to R8.4 million in fiscal year 2021.
Income tax
Income tax amounted to a
charge of R334.3 million for
fiscal year 2022 (2021: charge
of R523.7 million) and consists of
a current
tax charge of
R261.5 million (2021: charge
of R423.7 million) and
deferred tax charge
of R72.7 million (2021:
deferred tax charge
of R100
million).
The current tax decreased to R261.5 million in fiscal year 2022 from R423.7 million in fiscal year 2021 mostly due to a decrease in
the taxable
mining income of
both Ergo
and FWGR resulting
mainly from a
decrease in profits
as well as
increased capital
expenditure for
which full capital redemption under section 36 of the Income Tax Act was applied.
The forecast weighted average
deferred tax rate for
both Ergo and FWGR
decreased in fiscal year
2022 to 22% and
29% respectively
from 25%
and 30% respectively
in fiscal year
2021.
The decrease is
due to a
change in the
gold mining tax
formula and the
updated life of
mine plan. Refer to Item 10E.: Taxation – “Income Tax and Withholding
Tax on Dividends” for a detailed explanation on changes in taxation
laws and regulations.
51
Non-IFRS Measures
Set forth below is a discussion of non
-IFRS measures presented in this report, including a
reconciliation of such measures from the
nearest measure under IFRS, as well as an explanation as to why we believe that presentation of such
information provides useful information
to investors and additional purposes, if any, for which we use such measures.
Adjusted earnings before interest, tax, depreciation and amortization (“Adjusted EBITDA”)
Set forth below
is a
presentation of our
Adjusted EBITDA, which
is a
non-IFRS measure, including
the items
included in this
measure
and a reconciliation from profit for
the year.
Our calculation of Adjusted EBITDA
is based on the calculation of
this measure as included in
our
RCF
agreement
and
may not
be
comparable
to
similarly
titled measures
of
other
companies.
Adjusted
EBITDA
is
not
a
measure
of
performance under
IFRS and
should be
considered in
addition to,
and not
as a
substitute for,
other measures
of financial
performance and
liquidity. We
consider Adjusted EBITDA for the purpose of evaluating compliance with the covenants imposed by
the Company’s borrowing
agreements entered into
during fiscal year
2019. The Group
considers the presentation
of Adjusted EBITDA
provides useful information
to
investors to enable investors to assess compliance with our historic covenants in the RCF agreement.
Year ended,
June 30
Reconciliation of adjusted EBITDA
2022
2021
Profit for the year
1,123.8
1,439.9
Income tax
334.3
523.7
Profit before tax
1,458.1
1,963.6
Finance expense
74.8
69.5
Finance income
(225.8)
(216.2)
Results from operating activities
1,307.1
1,816.9
Depreciation
267.6
252.5
Share based payment (benefit)/expense
18.4
(28.3)
Change in estimate of environmental rehabilitation recognised in profit or loss
(2.2)
(12.4)
Gain on disposal of property, plant and equipment
(6.6)
(0.1)
IFRS 16 Lease payments
1
(23.8)
(15.8)
Exploration expenses and transaction costs
15.2
3.1
Adjusted earnings before interest, tax depreciation and amortisation ("Adjusted EBITDA")
2
1,575.7
2,015.9
1
The amended RCF includes IFRS 16 lease payments in the calculation of the adjusted EBITDA.
2
See Glossary of Terms for definitions.
Cash operating costs, cash operating costs per kilogram, all-in sustaining costs and all-in costs per kilogram
Cash operating costs,
cash operating costs per
kilogram, all-in sustaining
costs per kilogram and
all-in costs per kilogram
are non-
IFRS financial measures that should not be
considered by investors in isolation or as alternatives
to cost of sales, net profit/(loss) attributable
to equity owners of the parent, profit/(loss) before tax and other items or any other measure of financial performance presented in accordance
with IFRS or as
an indicator of our performance.
While the World
Gold Council has provided
guidance for the calculation of
cash operating
costs, cash operating costs
per kilogram, all-in sustaining
costs and all-in costs
per kilogram, such measurements
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
these
measures
are
useful
indicators
to
investors
and
our
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 margin per kilogram, by comparison of the cash operating costs per kilogram to the price of gold; and
●
a benchmark of performance to allow for comparison against other mines and mining companies.
52
For fiscal
year 2022,
consolidated cash
operating costs
per kilogram
increased by
11%
to R600,875
per kilogram
from R540,338
per
kilogram in fiscal year 2021. Consolidated all-in sustaining costs
per kilogram increased by 15% to R721,684 per
kilogram in fiscal year 2022
from R626,247 per kilogram
in fiscal year 2021.
Consolidated all-in costs per
kilogram increased by 16%
to R746,255 per kilogram
of gold
in fiscal 2022 from R643,338 per kilogram of gold in fiscal year 2021.
The increase in consolidated cash operating costs
per kilogram,
all-in sustaining costs
per kilogram and all-in costs per kilogram
was
mainly due to an increased
in cash operating costs, which
is due to higher inflation of
7.4% in fiscal 2022 in comparison
to 4.9% fiscal 2021
and above inflationary increases in the costs of key consumables, diesel, steel and cyanide.
The
increase
in
sustaining
capital
expenditure
during
fiscal
year
2022
contributed
to
the
increase
in
all-in
sustaining
costs
per
kilogram. The increase in
growth capital expenditure
incurred during fiscal year
2022 similarly contributed to
the increase in all-in
costs per
kilogram.
Reconciliation of cash operating costs, cash operating costs per kilogram, all-in sustaining costs, all-in
sustaining costs per kilogram, all-in costs and all-in costs per kilogram
R millions
2022
2021
Cost of sales
3,741.5
3,388.2
Depreciation
(267.6)
(252.5)
Change in estimate of environmental rehabilitation
2.2
12.4
Movement in gold in process
30.4
(25.6)
Operating costs
3,506.5
3,122.5
Ongoing rehabilitation expenditure
(31.6)
(48.3)
Care and maintenance costs
(5.9)
(3.9)
Other operating income/(costs)
(5.2)
2.4
Cash operating costs
1
3,463.8
3,072.7
Movement in gold in process
(30.4)
25.6
Administration expenses and other costs excluding non-recurring items
1
146.0
109.7
Other operating income/(costs)
5.1
(2.4)
Change in estimate of environmental rehabilitation
(2.2)
(12.4)
Unwinding of rehabilitation provision
45.0
44.7
Sustaining capital expenditure
1
496.4
353.0
All-in sustaining costs
1
4,123.7
3,590.9
Care and maintenance costs
5.9
3.9
Ongoing rehabilitation expenditure
31.6
48.3
Exploration expenses and transaction costs
15.2
3.1
Growth capital expenditure
1
87.7
42.7
All-in costs
1
4,264.1
3,688.9
Gold produced (kilograms)
5,720
5,723
Cash operating costs per kilogram (R per kilogram)
600,875
540,338
All-in sustaining costs per kilogram (R per kilogram)
721,684
626,247
All-in costs per kilogram (R per kilogram)
746,255
643,338
Reconciliation of sustaining capital expenditure and growth capital expenditure
Additions - property, plant and equipment owned
584.1
395.7
Less
Growth capital expenditure
1
87.7
42.7
Sustaining capital expenditure
1
496.4
353.0
1
See Glossary of Terms for definitions.
53
Cash operating costs
Cash operating costs are linked directly to the level of throughput of a specific fiscal year.
The following table
illustrates the year-on-year
change in
cash operating costs
for fiscal year
2022 in
comparison with fiscal
year
2021
.
R million
Cash operating
costs
Impact of change in
throughput
Impact of change in
costs
Net change
Cash operating
costs
2021
2022
Ergo
2,666.5
(97.7)
441.0
343.3
3,009.8
FWGR
406.2
(5.3)
53.1
47.8
454.0
Total
3,072.7
(103.0)
494.1
391.1
3,463.8
Cash
operating
costs
in
fiscal
year
2022
increased
by
R391.1
million
to
R3,463.8
million
compared
to
cash
operating
costs
of
R3,072.70 million in fiscal
year 2021.The increase is
due to higher inflation
of 7.4% in fiscal
year 2022 in comparison to
4.9% fiscal year 2021
and above inflationary increases in the costs of key consumables, diesel, steel and cyanide.
The following
table lists
the major
components of
cash operating
costs for
the Group
for each
operation and
fiscal year
set forth
below respectively:
Ergo
FWGR
Years ended
Year ended
Costs
2022
2021
Costs
2022
2021
Consumables
29%
28%
Consumables
32%
33%
Labor
18%
19%
Labor
21%
20%
Electricity and water
18%
18%
Specialized service providers
9%
9%
Specialized service providers
16%
16%
Electricity and water
19%
12%
Machine hire
4%
4%
Machine hire
2%
2%
Security expenses
4%
4%
Security expenses
5%
5%
Other costs
11%
11%
Other costs
12%
19%
5B. LIQUIDITY AND CAPITAL
RESOURCES
Cash flows
from operating
activities
Cash generated
from operating
activities
amounted to
R1,497.8 million
for fiscal
year 2022 (fiscal
year 2021:
R1,573.40 million).
Cash generated from operating activities
decreased during fiscal year 2022 mostly due to an 11%
increase in cash operating costs to
600,875 per kilogram and an 3% decrease
in the average rand gold price received to R894,409
per kilogram. Net movement
in working capital
(changes
in trade
and other
receivables,
consumable
stores
and stockpiles
and trade
and other
payables)
amounted
to a
cash inflow
of R78.1
million
in fiscal
year 2022.
The decrease
in cash inflows
was partially
mitigated
by a R189.4 million
decrease
in current
tax paid to
R262.7 million.
Cash flows
from investing
activities
Net cash
utilized by
investing
activities
amounted to
R626.2 million
in fiscal
year 2022
compared
to R446.6 million
in fiscal
year 2021.
In fiscal
year 2022,
net cash
utilized by
investing activities consisted mainly of
R584.1 million in
additions to
property, plant
and
equipment,
R28.9 million investment in
other funds and
R25.4 million spent on
environmental rehabilitation
payments. These outflows were
reduced by
R12.2 million
proceeds on
the disposal
of property, plant
and equipment.
In fiscal
year 2021,
net cash
utilized by
investing activities consisted mainly of
R395.7 million in
additions to
property, plant
and
equipment and R51.0 million spent
on environmental rehabilitation payments. These outflows were reduced by R0.1
million proceeds on the
disposal of
property, plant and
equipment.
Cash flows
from financing
activities
Net cash outflow from
financing activities
was R533.0 million
in fiscal year 2022 compared
to net cash outflows of R653.5
million in
fiscal year
2021.
54
During fiscal
year 2022,
the net cash
outflow consisted
mostly of dividends
paid on ordinary
shares amounting
to R513.3 million.
During fiscal
year 2021,
the net cash
outflow consisted
mostly of dividends
paid on ordinary
shares amounting
to R640.9 million.
Cash and cash
equivalents
Cash and cash equivalents as at June 30, 2022 amounted
to R2,525.6 million compared
to R2,180.00 million at the end of fiscal year
2021.
Substantially
all of our
cash and
cash equivalents
balances were
denominated
in South African
rand. Cash
and cash
equivalent
denominated
in foreign
currency amounted
to USD3.4 million
at June 30,
2022 compared
to USD3.4 million
at the end of
fiscal year
2021.
Cash and
cash equivalents
as at June
30, 2022 includes
restricted
cash related
to guarantees
of R10.7 million
compared
to R10.4 million
at the end
of fiscal
year 2021.
At September
30, 2022,
our cash and cash equivalents were R2,245.1 million.
Borrowings
and funding
At June 30, 2022 our external
sources of
capital included
our RCF. At September 30, 2022, we had
no external
sources of
capital.
In September
2020,
the RCF
was amended. The amendments
include a reduction in the
size of the facility from
R300 million to R200
million as well as removing
any commitment towards the
performance guarantee issued to
Ekurhuleni Metropolitan Municipality. No amounts
were drawn under this
facility as of June 30,
2022 or up to
the expiry date of September
14, 2022. The RCF has not been renewed
as funding
requirements
for capital
projects is
currently
being evaluated.
Anticipated funding requirements and sources
Our cash
and cash
equivalents are set
out above
under “Cash
and cash
equivalents”. Our management believes
that existing
cash
resources,
net cash
generated
from operations
and long
term finance
options for
long term
capital
projects will
be sufficient
to meet
the anticipated
commitments of our existing
operations for fiscal
year 2023. As a result of the sustained
high rand gold price, at September
30, 2022 the Group
has a cash
and cash equivalents
balance of
R2,245.1 million. Liquidity
has been enhanced
by the continued
high rand gold
price levels.
5C. RESEARCH
AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
DRDGOLD
has a
dedicated
team that
looks at
ways and
means
of improving
recoveries.
While the
team remains
active with
an ongoing
focus on improving
extraction efficiencies,
the projects undertaken
during the year
ended June 30, 2022
were focused
on optimizing the
existing
facilities
rather than
implementing
new technologies
to improve
extraction
efficiencies.
We have no registered
patents or
licenses.
5D. TREND INFORMATION
Any sustained
decline in
the market
price of
gold from
the current
elevated gold
price levels
would adversely
affect us,
and any
decline in
the price
of gold
below the
cost of
production could
result in
the closure
of some
or all
of our
operations which
would result
in
significant costs and expenditure, such as,
incurring retrenchment costs earlier than expected
which could lead to a decline
in profits, or losses.
In addition, as most of our production costs are in rands, while gold is sold in dollars and then converted to rands, our results of operation and
financial condition
have been
and could
be in
the future
materially affected
by an
appreciation in
the value
of the
rand. Accordingly,
any
sustained decline in
the dollar price
of gold and/or
the strengthening
of the South
African rand
against the dollar
would negatively and
adversely
affect our business, operating results and financial condition.
For the fiscal year 2023,
we are planning Group gold production
of 160,000 (4 977kg) to 180,000
(5 599kg) ounces
at cash operating
unit cost of
approximately
R685,000 per
kilogram
and expect
a capital investment
of approximately
R1 400 million.
Reconciliation of budgeted cost of sales to budgeted cash operating costs (R’million)
Cost of sales
3 954.8
Reconciling items
1
(318.1)
Cash operating costs
2
3 636.7
1
Includes expected
depreciation
of R274.4 million,
ongoing environmental
expenses
of R37.1
million and
care and maintenance
expenses
of R6.6
million
2
See glossary
of terms
for definition
Rounding of
figures may
result in computational
discrepancies
Our ability
to meet
the full
year’s production
target could
be impacted
in a number
of ways,
including stoppages
in production
due to outbreaks
of
infections
if the COVID-19
virus mutates
and spreads in
our workforce
and interruptions
to our supply
chain.
It could also
be impacted by
lower
grades,
failure to achieve
the throughput targets
set at Ergo and FWGR, power
interruptions
and other risks (refer
Item 3D. Risk Factors—Risks
related to our
business and operations
and “–Forward
Looking Statements”).
We are also subject to cost
pressures in the
event of above
inflation
increases
in labor, key
consumables,
diesel,
steel and
cyanide.
Unforeseen
changes in
ore grades
and recoveries,
unexpected
changes in
the quality
55
or quantity of reserves and resource, technical production issues, environmental and industrial accidents,
gold theft, environmental factors and
pollution could
adversely
impact the production,
sales and
cash operating
costs for
fiscal year 2023
and cause
us to fail to
meet our targets
for the
year.
Refer to Item 5A.: “Key drivers of our operating
results and principal factors affecting
our operating results” for a discussion of the
trends
in the US Dollar
gold price
as well as
exchange rates
impacting our
business.
Set forth below
is our summary
results for
the first
quarter of
fiscal year
2023. This information
has not been
audited.
Operating results
for the quarter
ended September
30, 2022
56
Quarter ended
Quarter ended
Sep 30, 2022
Jun 30, 2022
% change
Production
Gold produced
kg
1,453
1,443
1%
oz
46,715
46,393
1%
Gold sold
kg
1,442
1,446
0%
oz
46,362
46,490
0%
Ore milled
Metric (000't)
7,157
7,064
1%
Yield
Metric (g/t)
0.203
0.204
0%
Reconciliation of adjusted EBITDA
(R'million)
Profit for the period
253.4
399.3
Income tax
116.5
71.2
Profit before tax
369.9
470.5
Finance expense
17.3
29.1
Finance income
(54.8)
(79.4)
Results from operating activities
332.4
420.2
Depreciation
55.0
64.1
Share based payment expense
3.9
4.6
Change in estimate of environmental
rehabilitation recognised in profit or loss
-
(2.2)
Gain on disposal of property, plant and
equipment
-
(6.6)
IFRS 16 Lease payments
1
(5.9)
(8.2)
Exploration expenses and transaction costs
1.0
5.4
Adjusted EBITDA
1,2*
386.4
477.3
1
The amended RCF includes IFRS 16 lease
payments in the calculation of the adjusted
EBITDA
2
See Glossary of Terms for definitions.
* The adjusted EBITDA may not be comparable to similarly titled measures of other companies. Adjusted EBITDA is not a measure of performance under IFRS and should be
considered in addition to, and not as substitute for other measures of financial performance and liquidity
Reconciliation of cash operating costs, cash operating costs per kilogram, all-in sustaining costs, all-in sustaining
costs per kilogram, all-in costs and all-in costs per kilogram
(R'millions)
Cost of sales
1,007.6
1,003.7
Depreciation
(55.0)
(64.1)
Change in estimate of environmental
rehabilitation
-
2.2
Movement in gold in process
4.4
4.0
Operating costs
957.0
945.8
Ongoing rehabilitation expenditure
(6.2)
(4.4)
Care and maintenance costs
(0.8)
(0.9)
Other operating income/(costs)
4.1
(2.7)
Cash operating costs
1
954.1
937.8
Movement in gold in process
(4.4)
(4.0)
Administration expenses and other costs
excluding non-recurring items
1
26.8
8.4
Other operating (income)/Costs
(4.1)
2.7
Change in estimate of environmental
rehabilitation
-
(2.2)
Unwinding of rehabilitation provision
13.2
8.4
Sustaining capital expenditure
1
101.2
314.8
All-in sustaining costs
1
1,086.8
1,265.9
Care and maintenance costs
0.8
0.9
Ongoing rehabilitation expenditure
6.2
4.4
Exploration expenses and transaction costs
0.9
5.4
57
Growth capital expenditure
1
53.6
(16.8)
All-in costs
1
1,148.3
1,259.8
Quarter ended
Quarter ended
September 30,
2021
June 30, 2021
% change
Price and costs
Average gold price received
R per kg
945,983
937,509
-
US$ per oz
1,727
1,871
-8%
Cash operating costs
R/t
133
133
-
US$/t
8
9
-11%
Cash operating costs
R per kg
658,530
645,782
2%
US$ per oz
1,202
1,289
-7%
All-in sustaining costs **
R per kg
755,201
875,450
-14%
US$ per oz
11,378
1,747
551%
All-in cost **
R per kg
796,255
871,162
-9%
US$ per oz
1,453
1,739
-16%
Capital expenditure
Sustaining
Rm
101.2
314.8
-68%
US$m
5.9
20.2
-71%
Non-sustaining/growth
Rm
53.6
(16.8)
-419%
US$m
3.1
(1.1)
-382%
Average R/US$ exchange rate
17.04
15.58
9%
Reconciliation of sustaining capital
expenditure
Additions - property, plant and equipment
owned
154.8
298.0
Less
Growth capital expenditure
1
101.2
314.8
Sustaining capital expenditure
1
53.6
(16.8)
1
See Glossary of Terms for definitions.
Rounding of figures may result in computational discrepancies
**
All-in cost definitions based on the guidance note on non-GAAP Metrics issued by the World Gold Council on 27 June 2013
.
Gold production
increased
by 1% from
the previous
quarter to
1,453kg primarily
due to a 1% increase
in tonnage
throughput
despite yield
being 0.001g/t
lower at
0.203g/t. Gold
sold decreased
by 4kg to 1,442kg.
As a result
of the above,
the cash
operating costs
per kilogram
of gold sold
increased
marginally from
the previous
quarter to
R658,530/kg.
The cash
operating costs
per tonne of
material
remained stable
from the previous
quarter
at R133/t.
All-in sustaining
costs per
kilogram and
all-in costs
per kilogram
were R755,201/kg
and R796,255/kg,
respectively, decreasing
quarter on
quarter mainly
due to a decrease
in sustaining
capital expenditure
in
comparison
to the previous
quarter.
Adjusted EBITDA
decreased
by 19% from
the previous
quarter to
R386.4 million
primarily
due to an insurance
claim of
R84.7 million
recognised
in the previous
quarter.
Cash and cash
equivalents
decreased
by R280.5 million
to R2,245.1
million as
at September
30, 2022 (June
30,
2022: R2,525.6
million) after
paying the final
cash dividend
of R342.5
million for
the year ended
June 30, 2022.
The cash
generated during
the current
quarter will,
inter alia,
be applied
towards the
Company’s extended
capital
expenditure
programme
for the year
ending June
30, 2023.
Despite the
capital expenditure
planned for
the current
financial
year, the Company
remains in
a favourable
position to,
in the absence
of unforeseen
events, consider
declaring an
interim cash
dividend in
or around
February 2023.
58
5E. Critical Accounting Estimates
For
more
information
on
environmental
rehabilitation
obligations
Note
2
-
“Use
of
accounting
assumptions,
estimates
and
judgements” under Item 18. “Financial Statements".
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 at June
30, 2022,
our board consisted
of
nine directors.
In accordance
with JSE listing
requirements
and our Memorandum
of Incorporation,
or MOI, 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 election
at the first
annual general
meeting following
their appointment.
Retiring directors
normally make
themselves
available for
re-election.
Mr Geoffrey Campbell’s
tenure as a director
and chairman
of the board
of directors
of the Company
came to an end
from December
1,
2021. Mr Timothy Cumming, a non-executive director
of the Company, replaced
Mr Campbell as chairman of the Board and the Nominations
Committee
with effect
on December
1, 2021,
after shareholder
approval
was obtained
at the
Annual General
Meeting held
on November
29, 2021.
In order
to ensure
good corporate
governance
in accordance
with the
recommendations
of the King
IV Report
on Corporate
Governance
for South
Africa 2016,
Mr Edmund Jeneker
will remain
as the lead
independent
director of
the Company.
Mrs Toko Mnyango,
an independent
non-executive
director
of the
Company, was
appointed
as a
member
of the
Nominations
Committee
effective August
19, 2021.
The address of each of our Executive Directors
and non-executive directors
is the address of our principal executive offices.
Refer to
Item 4A. Information
on the Company
– Introduction
for the company’s
address.
Executive
Directors
Daniël (Niel)
Johannes Pretorius
(55) (BProc, LLB,
LLM)
Chief Executive
Officer;
•
Member: Risk
Committee
Niël Pretorius
has two
decades
of experience
in the
mining industry.
He was
appointed
Chief
Executive
Officer
designate
of DRDGOLD
on August
21, 2008
and Chief
Executive
Officer
on January
1, 2009.
Having
joined the
company
on May
1, 2003
as legal
advisor, he
was promoted
to Group Legal Counsel
on September 1, 2004 and General
Manager: Corporate
Services on April 1, 2005.
Niël was appointed
Chief Executive
Officer of Ergo Mining Operations Proprietary Limited
(formerly DRDGOLD SA) on July 1, 2006 and became Managing Director thereof on
April 1, 2008.
Niël also
serves as
an elected
Council Member
with the Minerals
Council of
South Africa.
Adriaan (Riaan)
Jacobus Davel
(46) (BCom
(Hons), MCom,
CA (SA)
Chief Financial
Officer.
•
Member: Social
and Ethics
Committee
Riaan
Davel
joined
DRDGOLD
in January
2015. Before
joining
DRDGOLD,
he gained
17 years’
experience
in the
professional
services
industry, the
majority
obtained
in the
mining industry
in Africa.
As part
of gaining
that experience,
Riaan provided
assurance
and advisory
services,
including support
and training
on IFRS to clients
and teams across
the African continent.
He has spent seven
years at KPMG as
an audit partner,
performing,
inter alia
, audits of listed
companies in
the mining industry,
including SEC
registrants.
Riaan has also
gained experience
as an IFRS
technical
partner and
represented
the South African
Institute
of Chartered
Accountants
on the International
Accounting Standards
Board’s project
on extractive
activities
from 2003
to 2010.
Riaan
has served
on committees
that compile/update
the South
African
codes
for reporting
and valuation
of mineral
reserves and
resources.
Riaan is
a member of
the Social
& Ethics Committee
of DRDGOLD.
Non-Executive
Directors
Timothy (Tim) John Cumming
(64) BSc (Hons)
(Civil Engineering),
MA (Philosophy,
Politics and
Economics)
Non-executive
Chairman
•
Chairman:
Board and Nominations
Committee
•
Member: Risk
Committee;
and Remuneration
Committee
Tim was appointed Non-executive Director
in August 1, 2020 and Non-executive Chairman December
1, 2021. Furthermore, he is a
member of the
Risk Committee,
Remuneration
Committee,
and appointed
Chairman of
the Nominations
Committee on
December 1,
2021.
He is
also
an
independent non-executive director
of
Sibanye-Stillwater Limited and
Nedgroup Investments
Limited and
serves
as
non-executive
Chairman of Riscura
Holdings Limited.
His career spans mining,
financial services
and consulting. He is the founder
of Scatterlinks
Proprietary
Limited, a South African-based
company providing
leadership development
and advisory services
to senior business
executives. Tim started
out
59
as an
engineer
at the
Anglo American
Corporation
of South
Africa
Limited
working
on a
number
of gold
and diamond
mines
including
involvement
in the geo-technical
design of
the Ergo tailings
dam. Thereafter
he held senior
roles in
financial
services including
General
Manager at
Allan Gray
Limited,
Head of
Investment
Research
at HSBC
Securities
(SA), CEO
of Old Mutual
Asset Managers
and MD of
various divisions
within the
Old
Mutual
Group.
Other
involvements include
Chairmanship of
the
Mandela Rhodes
Foundation’s
Investment Committee
and
the
Woodside
Endowment Trust
and
membership of
the
Greenpop advisory
board (a
social enterprise
committed to
restoring ecosystems and
sustainable
development).
Edmund Abel
Jeneker
(60) (Chartered
Director (SA),
B Hons, IEDP, M.Inst.D.,
SAIPA)
Lead Independent
Non-executive
Director
•
Chairman:
Social and
Ethics Committee
•
Member: Remuneration
Committee;
and Nominations
Committee
Edmund Jeneker was appointed
Non-executive Director in November
2007 and Lead Independent
Non-executive Director in August
2017. He has more than
31 years’ experience as
an executive in banking,
business strategy, advisory and management at Grant
Thornton South
Africa Proprietary Limited, Swiss Re Corporate Solutions Advisors South Africa Proprietary Limited, the World Bank Competitiveness Fund
and Deloitte South
Africa. More recently,
he completed almost
15 years at
Absa Bank and
Barclays Africa Group,
where he was
Managing
Executive and
served as director
on the
boards of
several subsidiaries in
the Barclays
Africa Group.
Edmund is
active in community
social
upliftment and
served as
a member
of the
Provincial Development
Commission of
the Western
Cape Provincial
Government. He
currently
serves on
the Advisory
Board of the
Institute of
Directors Southern
Africa, investment
committee of
BADISA and
The Cape
Philharmonic
Orchestra. He is
a Chartered
Director (South
Africa). Edmund chairs
the Social
& Ethics Committee
and is
a member of
the Remuneration
Committee and the Nominations Committee of DRDGOLD.
Johan Andries
Holtzhausen
(76) (BSc (Geology
and Chemistry),
BCompt (Hons),
CA(SA))
Independent
Non-executive
Director
•
Chairman:
Audit Committee
•
Member: Remuneration
Committee;
and Nominations
Committee
Johan Holtzhausen
holds a
B.Sc. (Geology and
Chemistry) from the
University of
Stellenbosch and a
B. Compt.
(Hons) from the
University of
South Africa.
He has
been a
Chartered Accountant
(South Africa)
since 1975.
He was
appointed independent
Non-executive
Director in on April 25, 2014. He
has more than 43 years’ experience in
the accounting profession, having served as a senior
partner at KPMG
Services Proprietary Limited,
and held the
highest Generally Accepted
Accounting Principles (United
States), Generally Accepted
Auditing
Standards and Sarbanes-Oxley Act accreditation required to service
clients listed on stock exchanges in the United States.
His clients included
major corporations
listed in
South Africa, Canada,
the United Kingdom,
Australia and the
United States. He
also chairs
the Audit
and Risk
Committee of Tshipi
é Ntle Manganese Mining Proprietary Limited. He
is a Non-executive Director of Caledonia
Mining Corporation Plc, a
Canadian
corporation
listed
in
the
United
States
and
the
United
Kingdom.
Johan
chairs
the
Audit
Committee
and
is
a
member
of
the
Remuneration Committee and the Nominations Committee of DRDGOLD.
Jean Johannes Nel (50) (BAcc (Hons), CA (SA), CFA (AIMR))
Independent Non-executive Director
•
Chairman: Remuneration Committee
•
Member: Audit Committee; Remuneration Committee; and Risk Committee
Jean Nel
was appointed as
an independent
Non-executive Director
on November
30, 2018.
He qualified
as a
CA(SA) in
1998 obtained
the CFA (AIMR) qualification. Mr. Nel has 20 years of mining
finance and mining executive
and operational management experience. He
was
appointed to the Aquarius Platinum Board in April 2012 and became CEO of
the Group in November 2012, a position he held until Aquarius
Platinum was acquired
by Sibanye- Stillwater
in April 2016.
From April 2016
to January 2017
he was the
CEO of the
Platinum division of
Sibanye Stillwater. He is currently a Non-executive director of Mimosa
Investments which owns the Mimosa platinum mine
in Zimbabwe and
Tongaat Hulett
. Jean chairs the Remuneration Committee and is a member of the Audit Committee and the Risk Committee of DRDGOLD.
Toko Victoria
Buyiswa Nomalanga Mnyango (57) (Dip Juris, BJuris)
Independent Non-executive Director
•
Member: Social and Ethics Committee, Nominations Committee; and Remuneration Committee
Toko Mnyango was appointed independent Non-executive Director on December 1,
2016. Toko began her career as a prosecutor for
the KaNgwane
homeland,
before becoming
a legal
advisor for
the Eastern
Cape Development
Corporation.
She has
held directorships
on
company
boards
including
Gijima, EOH
Mthombo
Proprietary
Limited, AllPay
Eastern
Cape Proprietary
Limited,
a subsidiary
of ABSA
Limited, and the Ryk
Neethling Foundation. She currently holds
the position of CEO of Vitom
Technologies Proprietary Limited
and Vitom
Brands Communication Proprietary Limited.
Toko is
a member of the Remuneration
Committee, Nominations Committee, and
the Social &
Ethics Committee of DRDGOLD.
Kuby Prudence Lebina (41) (BCom; Higher Diploma (Accounting), Certificate in Business Leadership, CA (SA))
Independent Non-executive Director
•
Chairman: Risk Committee
•
Member: Audit Committee; and Nominations Committee
Prudence Lebina was appointed as
independent non-executive director on 03
May 2019. She qualified as
a chartered accountant in
December 2005
after serving
her
articles at
PricewaterhouseCoopers
Incorporated.
A member
of
the South
African Institute
of
Chartered
60
Accountants,
with
extensive
experience
in
corporate
finance,
financial
management,
investor
relations
and
the
mining
industry.
She
was
previously CEO of
GAIA Infrastructure
Capital Limited.
Prudence is
currently CEO of
TriAlpha Investment Management
Proprietary Limited,
a specialist fixed income investment house, and is also an independent non-executive director of Growthpoint Properties Limited and Telkom
SA
SOC
Limited.
Prudence
chairs
the
Risk
Committee
and
is
a
member
of
the
Nominations
Committee
and
the
Audit
Committee
of
DRDGOLD.
Charmel Diane
Flemming (39)
(BAcc (Hons)
CA (SA))
Independent Non-executive Director
•
Member: Audit Committee; Risk Committee; and Social and Ethics Committee
Charmel Flemming
holds a B.Acc
(Hons) from
the University
of the Free
State and is
a qualified
Chartered Accountant
(South Africa)
with 11 years´
post articles
experience
primarily
within the
mining space.
She started
her career
as a trainee
accountant
at KPMG
South Africa
and
held various
positions
within the
De Beers
Group over
a period
of 11 years.
She also
served as
a trustee
on the boards
of both
the De
Beers Benefit
Society Medical
Aid and De
Beers Pension
Fund from
2014 to 2018.
Charmel is
the founder
and chief
executive
officer of
F Twelve and is also
a
non-executive
director at Acorn
Agri & Food Limited
and at ATKV.
Charmel is a member
of the Risk Committee,
Audit Committee
and Social
& Ethics Committee of DRDGOLD.
Senior Management
and Prescribed
Officers
Wilhelm Jacobus
Schoeman (48)
(Dip Analytical
Chemistry, BTech Analytical
Chemistry)
Chief Operating
Officer
Jaco Schoeman joined DRDGOLD in 2011 as Executive Officer: Business Development to focus on expanding the Group’s surface
retreatment business
and extracting maximum value
from existing resources.
In July 2014, he was appointed Operations
Director: Ergo Mining
Operations
Proprietary
Limited.
Shalin Naidoo
(45) (BTech, MBA)
Chief Information
and Technology Officer
Shalin Naidoo
joined DRDGOLD
as Chief
Information
and Technology Officer
on 2 November
2021. Ranked
amongst South
Africa’s
Top 8 Visionary CIOs by the
institute
of IT Professionals
in South Africa
(IITPSA) and
International
Data Corporation
CIO of the Year in 2019,
he has 10
years’ experience
in leadership
and strategy. He
has worked
previously
in the mining
sector for
Anglo American
Platinum and
Tronox .
Henry Gouws
(53) (National
Higher Diploma
(Extraction
Metallurgy), MDP)
Managing Director:
Ergo
Henry Gouws
has more than
30 years’ experience
in the mining
industry. He graduated
from Technikon Witwatersrand
and obtained
a
National
Diploma
in Extraction
Metallurgy
in 1990
and a
National
Higher
Diploma
in Extraction
Metallurgy
in 1991.
He completed
a Management
Development Program in 2003 through Unisa School of Business Leadership and an Executive Development Programme in 2012 through the
University
of Stellenbosch
Business
School. He
was appointed
Operations
Manager
of Crown
in January
2006 and
General
Manager in
July 2006.
He was appointed
to his current
position in
October 1,
2011.
Mark Burrell
(60) (BCom
Accounting,
MDP)
Financial
Director:
Ergo
Mark Burrell
holds a B.Comm
Accounting degree,
has completed
a Management Development
Programme (MDP)
and has more than
20 years’ experience in the mining sector. He joined DRDGOLD in 2004 on
a consulting basis and later that year, was appointed as Financial
Manager
of the
Blyvooruitzicht
operation.
He was
appointed
as Financial
Director
of Ergo
in January
2012. Mark
serves
as a director
on the
Board
of Rand Refinery
Proprietary
Limited.
Kevin Kruger
(54) (BscEng
(Mechanical
Engineering),
MDP, PMD, Government Certificate
of Competency
(Mines))
Managing Director:
FWGR
Kevin has more than 30 years’ experience
in the mining industry in Africa. He joined the mining industry
in January 1987 as second
year
engineering
student.
Kevin
graduated
from
the University
of the
Witwatersrand
at the
end of
1989 obtaining
his BSc
(Mechanical
Engineering)
and
his government
certificate
of Competency
(mines) during
1993. Kevin
was appointed
as junior engineer
in December
1989, section
engineer
- March 1994
and engineer in September 1994. He
was appointed engineering manager 2003, general manager – technical services 2004 and
managing director Chizimgold 2010.
On 01
October 2013
he was
appointed as
technical director at
Ergo where
he
was responsible for
the
environmental,
health and safety, mineral resources and engineering
portfolios. On 1 August 2018, Kevin was appointed Managing
Director of
FWGR.
Henriette
Hooijer (42)
(BCom (Hons),
CA(SA))
Financial
Director:
FWGR
Henriette Hooijer
is the Financial
Director of
FWGR. She joined
DRDGOLD in May
2016 and was
appointed as
Financial Director
of
FWGR in August 2018. Before joining DRDGOLD, she spent 11 years in
the professional services industry at KPMG, performing,
inter alia
,
audits of listed
companies
in the mining
industry, including
SEC registrants.
61
Elise Beukes
(45) (BProc)
Company Secretary
Elise Beukes
was appointed
as Company
Secretary of DRDGOLD
with effect
from October
01, 2019.
She has
broad governance
experience
in all aspects
of commercial
law, having spent
several
years in
both litigation
and commercial
practice
as an admitted
attorney
and four
years as
corporate legal counsel.
She has
dealt extensively with
broad-based black economic
empowerment structures, employee ownership
schemes, enterprise
development and share
incentive schemes
involving complex
company restructuring
for both multi-nationals
and large local
entities. She has extensive knowledge on the new Companies Act and has particular interests
in company secretarial and corporate governance
matters.
There are no family relationships between
any of our non-executive directors,
executive directors or members
of the group executive
and senior
management.
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 has been so elected or appointed. Furthermore, none of the non-executive directors, executive
directors, group
executive and senior
management members
or other key management
personnel are
elected or appointed
under any undertaking
by, arrangement
or understanding
with any major
shareholder,
customer, supplier
or otherwise.
62
6B. COMPENSATION
Our MOI
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 and or
accrued for
the year
ended June
30, 2022 was
R42.0 million.
During fiscal
year
2021, an independent consultant compiled
a benchmarking analysis report against
an appropriate comparator group of companies
consisting of
JSE listed companies
on fees paid
non-executive
directors.
The report was
presented to
the Remuneration
Committee
on August 18, 2021.
These
changes were made to the base fee and committee fees and were approved by the shareholders
at the annual general meeting on November 30,
2022.
Non-Executive
Directors
received the
following fees
for fiscal
year 2022:
●
Base fee
as Non-Executive
Chairman of
R1,457,944 per
annum up to
December
1, 2021
and R1,500,000
thereafter;
●
Base fee
as Lead Independent
Non-Executive
Director of
R672,247 per
annum up to
December
1, 2021
and R850,000
thereafter;
●
Base fee
as Non-Executive
Directors of
R647,975
per annum
up to December
1, 2021
and R430,000
thereafter;
●
Annual fee for the Audit Committee Chairman
of R32,399 (excluding fee received
as a committee member) up to December 1, 2021
and R180,000
(including
fee received
as a committee
member) thereafter;
●
Annual fee
for an Audit
Committee member
of R32,399 up
to December
1, 2021
and R120,000
thereafter;
●
Annual fee for the Risk Committee
Chairman of R140,000 (excluding
fee received as a committee
member) from December
1, 2021,
onwards.
●
Annual fee
for a Risk
Committee member
of R100,000
from December
1, 2021, onwards.
●
Annual fee
for the
Chairman
of Remuneration
Committee
R24 299 (excluding
fee received
as a committee
member) up
to December
1,
2021
and R100,000
thereafter;
●
Annual fee
for a member
of the Remuneration
Committee
of R24 299 each
up to December
1, 2021
and R100,000
thereafter;
●
Annual fee for
Chairman of the
Social and
Ethics Committee of
R100,000 (excluding fee received as
a committee member)
up to
December
1, 2021
and R140,000
thereafter;
●
Annual fee
for a member
of the Social
and Ethics
Committee of
R24,299 each
up to December
1, 2021
and R90,000
thereafter;
●
Daily fee of R24,299 up to December 1, 2021
and thereafter the director
will be remunerated if determined
appropriate for additional
services provided;
●
Hourly rate of R3,240
up to December
1, 2021
and thereafter
the director will
be remunerated if
determined appropriate
for additional
services provided;
●
Half-day
fee for
participating
by telephone
in special
board meetings
of R12,150
up to
December
1, 2021
and thereafter
the director
will
be remunerated
if determined
appropriate
for additional
services provided;
and
●
The Chairman of the board, Lead Independent Non-Executive
Director and other Non-Executive
Directors do not receive committee
fees.
The following table sets forth the compensation for our directors and prescribed officers for the year ended June 30, 2022.
The disclosure detailed in this table is consistent with the disclosure requirements of the Companies Act, 2008 (Act 71 of 2008)
and the JSE Listings Requirements.
Directors / Prescribed Officer
Total
remuneration
recognised
during the year
Short-Term
Incentives
recognised
related to this
cycle
Long-term
Incentives
settled during
this cycle
Total
remuneration
related to this
cycle
R'000
R'000
R'000
R'000
Executive directors
D J Pretorius
7,647
7,273
7,495
22,415
A J Davel
4,708
4,460
3,628
12,796
12,355
11,733
11,123
35,211
Non-executive directors
T J Cumming
1,267
-
-
1,267
G C Campbell
659
-
-
659
E A Jeneker
884
-
-
884
J Holtzhausen
808
-
-
808
T B V N Mnyango
772
-
-
772
J J Nel
844
-
-
844
K P Lebina
817
-
-
817
C D Flemming
778
-
-
778
6,829
-
-
6,829
Prescribed officers (1)
W J Schoeman
4,464
4,460
3,628
12,552
63
E Beukes
1,432
1,274
535
3,241
5,896
5,734
4,163
15,793
Total
25,080
17,467
15,286
57,833
(1)
The Companies
Act, 2008
(Act 71
of 2008),
under section
30, requires
the remuneration
of prescribed
officers, as
defined in
regulation 38
of Company
Regulations 2008,
to be
disclosed with
that of
directors of
the company.
A person
is a
prescribed officer
if they
have general
executive authority
over the
company, general responsibility for the financial management
or management of legal affairs, general
managerial authority over the operations
of the company
or directly or indirectly exercise or significantly
influence the exercise of control over the
general management and administration of the whole
or a significant
portion of the business and activities of the company.
Also see Item 6E. Share Ownership for details of share options held by directors.
Compensation
of key management
Refer to Item 18. ‘‘Financial
Statements
– Note 19.3 –
Related party
transactions’’ for
the total compensation
paid to key management
(including executive
and non-executive
directors
as well as
prescribed officers).
The Group applies
a pool-based Short-Term Incentive
scheme, based on
modified free cash
flow, because it drives
a strong teamwork
culture with
all participants
working primarily
towards a
single goal,
maximising free
cash flow
which is
an easy
measure to
understand.
Salient features of the short-term incentive scheme are as follows:
• Participants include the executive directors, prescribed officers and senior management.
• The pool is calculated as 15% of the adjusted Free
Cash Flow with 90% of the pool accruing to employees achieving
a satisfactory
performance rating;
• 10%
of
the
pool is
available
for allocation
at the
discretion
of the
remuneration
committee as
recommended
by
the executive
committee which provides the ability to recognise exceptional discretionary effort;
• A production modifier that can modify the pool upwards as well as downwards based on gold produced measured against budget;
• A safety and a
fatality modifier, both supporting the Company’s strong commitment to its
strategy of a renewed focus
on employee
safety, development, values and wellbeing; and
• The
individual performance
moderator model
has been
expanded to
include employee
performance ratings
between 2
and 3
to
participants in the STI scheme on a broader sliding scale set out below:
Individual performance rating
Individual performance modifier
< 2
(100%)
2 to 2.24
(80%)
2.25 to 2.49
(60%)
2.5 to 2.74
(40%)
2.75 to 2.99
(20%)
>= 3
0%
Performance measures
The STI
is funded
out of
a pool
created from
the Adjusted
Free Cash
Flow (“
Adjusted
FCF
”) generated
by DRDGOLD
in the
financial year:
• Adjusted FCF is defined for the performance
measure as cash generated from operations, less
capital expenditure (“
Capex
”), and
tax. In the budgeting
process, if the Group believes
that any Capex, Investment
or other item/s should be
excluded or amortised or
treated in
any different way for determining Adjusted FCF at the end of the year, they may make representations to the Remuneration Committee on the
treatment of such
item/s for the
purposes of calculating Adjusted
FCF for purposes
of the STI
pool. Remco has
absolute discretion in approving
the treatment of such items;
• The STI Pool is modified as per the Tables below;
Modifiers of the incentive pool
To drive strategic initiatives, the short-term incentive pool is modified by up to
20% for isolated non-achievements of targets and up
to 50% for systemic or
repetitive non-compliance. The modifiers are
approved by the Remuneration
Committee. These strategic initiatives and
their measures
are assessed
at the
beginning of
each financial
year to
ensure that
current strategies
are driven
in that
year.
These strategic
modifiers
and
their
weightings
are
communicated
to
participants
at
the
beginning
of
each
financial
year
to
ensure
understanding
and
compliance.
The Group performance measures set out by the Remuneration Committee and the weightings for FY2022 are as follows:
Strategic Initiatives Modifiers
Environmental:
4%
Safety:
4%
Social development:
4%
Labour development:
4%
Transformation:
4%
64
Fatality Modifier
• Up to 25% per fatality, depending on the degree of culpability of the company,
as assessed by the Remuneration Committee.
• If the fatality/ies is/are as a result of a breakdown in or disregard for a safety culture, the STI Pool can be modified by up to 100%
at the Remuneration Committee’s discretion.
Production Modifier
The calculated
STI Pool
may be
modified, upwards
or downwards,
based upon
gold (kg)
produced measured
against budget,
as
follows:
Gold (Kg) Produced:
STI
% of Budget
Pool Adjustment
< 93%
-10%
93% to < 97%
-5%
97% to < 103%
0%
103% to < 107%
+5%
≥ 107%
+10%
Distribution of the Incentive pool
The STI pool, after any moderation, will be distributed as follows:
• 90% formulaically, pro-rata to each individual’s
“% of STI Pool” taking
inter alia
the following factors into account:
• All-inclusive package of the individual for the financial year;
• Market-related STI quanta applicable to the Category;
• The level of accountability and responsibility of the role of the individual.
•
10%
on
a
discretionary
basis
allocated
by
the
Executive
Committee
after
recommendations
from
line
management.
The
Remuneration Committee will approve any allocations from the 10% discretionary pool to Executive Committee members.
Distributions are moderated for individual performance as follows:
Individual Performance Rating
Modifier %
< 2
-100%
2 to < 2.25
-80%
2.25 to < 2.5
-60%
2.5 to < 2.75
-40%
2.75 to < 3
-20%
≥ 3
0%
In order
to be
able to
reward exceptional
individual performance
appropriately,
the formulaic
plus discretionary
allocations may
exceed this amount, but these instances, if any, would be subject to the Executive Committee’s and ultimately the Remuneration Committee’s
approval.
Further considerations for the CEO and CFO
For
the
CEO and
CFO
(“executive directors”)
the
formulaically calculated
STI
amounts
will
be
reviewed by
the
Remuneration
Committee, who has absolute discretion to further modify the STI amounts, upwards or downwards:
• If compelling, exceptional and objective circumstances warrant such application of discretion; and
• To ensure that the STI amounts awarded are balanced and equitable.
Executive Directors’
STI amounts
may be
settled in
a combination
of cash
and DRDGOLD
shares (deferred
bonus shares),
with
Remco having discretion to make up to 40% of the award in deferred bonus shares.
Deferred Bonus Shares will vest / be released to the Executive Directors as follows:
• 50% after 9 months;
• 50% after 18 months.
The following provisions apply to the deferred bonus shares:
• The Executive Director needs to be in active service and not under notice of resignation on the vesting dates in
order to be eligible
to receive the deferred bonus shares and any dividends accrued thereon; and
• The deferred bonus shares carry voting and dividend rights; however, the dividends will accrue and will only be paid out upon the
vesting / release of the shares to which the dividends relate.
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 Committee.
65
The Company’s current executive directors, Mr. D.J. Pretorius and Mr. A.J. Davel, entered into agreements of employment with us,
on January 1,
2009 and
January 1, 2015,
respectively. These
agreements regulated
the employment relationship
with Messrs. D.J.
Pretorius
and A.J. Davel during the year ended June 30, 2022.
On July 1, 2022
Mr. D.J.
Pretorius entered into a
new agreement of employment
for a period of 3
years and thereafter it
continues
indefinitely until
terminated by
either party on
not less than
three months’
written notice. Under
the employment agreement
effective up
to
June 30,
2025 Mr.
D.J. Pretorius
receives from
us a
guaranteed remuneration
package of
R7.6 million
per annum.
Mr. D.J.
Pretorius was
eligible under his employment
agreement, for an incentive
bonus of up to
100% of his annual
remuneration package in respect
of one bonus
cycle per
annum
over
the
duration of
his
appointment,
on
the condition
that DRDGOLD
achieves certain
key
performance indicators.
In
addition, he is
eligible to participate in
the equity-settled long-term
incentive scheme (awarded
332,497 conditional shares
in October 2020,
549,986 conditional shares in October 2021 and 799,595 conditional shares in October 2022).
Mr.
A.J.
Davel entered
into
a
new employment
agreement
effective
from
July 1,
2022
for
a
period
of
3
years
and
thereafter
it
continues indefinitely until
terminated by either
party on not
less than three
months’ prior written
notice. Mr.
A.J. Davel receives
from us a
guaranteed remuneration
package of
R4.7 million
per annum.
Mr. A.J.
Davel is
eligible under
his employment
agreement, for
a short
term
incentive of up to 100% of his annual remuneration package in respect of one bonus cycle
per annum over the duration of his appointment, on
the condition that DRDGOLD achieves certain key performance indicators. In addition, he is
eligible to participate in the equity-settled long-
term
incentive
scheme
(awarded
160,919
conditional
shares
in
October
2020,
292,796
conditional
shares
in
October
2021
and
425,680
conditional shares in October 202)
Mr.
E.A. Jeneker has
a service
agreement which run for
a fixed
period until October 31,
2023. Mr.
J.A Holtzhausen has a
service
agreement which runs
for a fixed period until April 25, 2024. Mrs. TVBN Mnyango has a service agreement
which runs until March 31, 2023.
Mr. J Nel
entered
into a
service
agreement
which runs
for a
fixed period
until March
31, 2022,
and Ms.
K.P Lebina
entered
into a
service
agreement
which runs
until May
02, 2023.
Mr. T J Cumming
and Ms C
D Flemming
entered
into a service
agreement
which runs
for a fixed
period until
July
31, 2022.
After expiration
of the
initial
two-year
periods,
the agreements
continue
indefinitely
until terminated
by either
party on
not less
than three
months’ prior
written notice.
The Company
does not administer
any pension,
retirement
or other similar
scheme in which
the directors
receive a
benefit.
Each service
agreement with
our directors
provides for
the provision
of benefits
to the director
where the
agreement
is terminated
by us
in the case of our executive
officers, except
where terminated
as a result of certain
action on the part
of the director, upon the
director reaching
a
certain age, or by
the director upon the occurrence of a
change of control. A termination of a
director's employment upon the occurrence of a
change of control
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 three
years' salary for
Executive Directors or two
years’ fees for
Non-Executive Directors,
depending on
the period
of time that
the director
has been employed.
6C. BOARD PRACTICES
Board of Directors
As at June 30, 2022 and as at September
30, 2022,
the board of directors comprises two Executive Directors (Mr. D.J. Pretorius and
Mr. A.J. Davel), and seven Non-Executive Directors
(Messrs. T.J. Cumming, J.J. Nel, E.A. Jeneker, J.A. Holtzhausen
and Mmes. K.P. Lebina,
T.V.B.N.
Mnyango,
C.D.
Flemming).
The
Non-Executive
Directors
are
independent
under
the
New
York
Stock
Exchange,
or
NYSE,
requirements (as affirmatively determined by the Board of Directors) and the South African King IV Report except Mr. T Cumming who also
serves as an independent non-executive director of Sibanye-Stillwater Limited, DRDGOLD’s controlling shareholder.
In
accordance
with
the
King
IV
Report
on
corporate
governance,
as
encompassed
in
the
JSE
Listings
Requirements,
and
in
accordance with
the United
Kingdom Combined
Code, the
responsibilities of
Chairman and
Chief Executive
Officer are
separate. Mr.
T.J.
Cumming is the Non-Executive Chairman, Mr. D.J. Pretorius is the Chief Executive Officer and Mr. A.J Davel is the Chief Financial Officer.
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 NYSE 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 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.
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
66
as a board, as part of an evaluation process, which is driven by an independent consultant. In
addition, the Nominations Committees formally
evaluate the executive directors on an annual basis, based on objective criteria.
All
directors,
in
accordance
with
the
Company’s
MOI,
are
subject to
retirement by
rotation
and re-election
by
shareholders.
In
addition, all directors are subject to election by shareholders at the first annual general
meeting following their appointment by directors. 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.
Board
meetings
are
held
quarterly
in
South
Africa
and
occasionally
abroad.
The
structure
and
timing
of
the
Company’s
board
meetings, which
are scheduled over
two 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
Audit
Committee,
Risk
Committee,
Remuneration
Committee
&
Nominations Committee as well as the Social & Ethics Committee which act as
subcommittees to the board. Each subcommittee is chaired by
one of
the Independent
Non-Executive Directors,
each of
whom provides
a formal
report back
to the
board. Each
subcommittee meets
for
approximately half a day. Certain senior personnel of the Company attend the subcommittee meetings as invitees.
The board sets the
standards and values of
the Company and much of
this has been embodied in
the Company’s Code
of Conduct,
which is available
on our website
at www.drdgold.com.
The Code of
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
NYSE rules.
The Code
contains provisions for
employees to
report violations
of Company
policy or
any applicable
law, rule or regulation, including US securities laws.
A description of the significant ways in which our corporate governance practices
differ from practices followed by U.S. companies
listed on the NYSE can be found in Item 16G. Corporate Governance.
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
as
at June 30,
2022:
Director
Title
Year first
appointed
Term of
current office
Unexpired
term of
current office
D.J. Pretorius
Chief Executive Officer
2008
3 years
0 months
A.J. Davel
Chief Financial Officer
2015
3 years
0 months
T.J. Cumming
Non-Executive Director
2020
2 years
1 month
E.A. Jeneker
Non-Executive Director
2007
2 years
16 months
J. Holtzhausen
Non-Executive Director
2014
2 years
22 months
T.V.B.N.
Mnyango
Non-Executive Director
2016
2 years
7 months
J.J Nel
Non-Executive Director
2018
2 years
7 months
K.P Lebina
Non-Executive Director
2019
2 years
10 months
C.D. Flemming
Non-Executive Director
2020
2 years
1 month
* Renewal of the term of office was deferred to the October 2022 board meeting at which the contracts of D.J. Pretorius and A.J. Davel were extended to June 30, 2025.
Executive
Committee
As at June
30, 2022,
the Executive
Committee
consisted of
Mr. D J Pretorius
(Chairman),
Mr. A J Davel, Mr. W.J. Schoeman
and Ms.
E. Beukes.
The Executive
Committee meets
bi-weekly
basis to review
current operations,
develop strategy
and policy proposals
for consideration
by the board
of directors.
Members of
the Executive
Committee,
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. The
subsidiary companies’
executives
are permanent
participants
on the Executive
Committee.
Board Committees
67
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 of Non-Executive Directors for their services on the committees concerned is determined by the board. The
committees are subject to annual evaluation by the board with respect to their performance and effectiveness. The following information
reflects the composition and activities of these committees.
The Board constituted an Investment Committee who had their first meeting on October 6, 2022 to consider prospective projects,
acquisitions and disposals in line with DRDGOLD's strategy and to ensure that adequate due diligence procedures are followed. The
Investment Committee also conducts other investment-related functions as delegated to it by the Board from time to time, as governance
oversight increases as the DRDGOLD Group continues to grow. Members of this committee include J J Nel (Chairman), J A Holtzhausen,
K
P Lebina, E A Jeneker and T J Cumming. The CEO, CFO and COO are invitees.
Committees
of the Board
of Directors
Nominations
Committee
As at June
30, 2022 the
Nominations
Committee
consisted of
T J Cumming
(Chairman),
E A Jeneker,
J A Holtzhausen, T V B N
Mnyango and
K P Lebina.
The Nominations Committee meets on an
ad hoc
basis. All members of this committee are independent non-executive directors
who are independent according to the definition set out in the NYSE Rules, except for T Cumming. It is chaired by the board chairman who
is a non-executive director (“
NED
”).
The primary role of the committee is to execute the following functions:
●
ensure the
establishment
of a formal
process for
the appointment
of directors;
●
ensure that
inexperienced
directors are
developed through
a mentorship
programme;
●
ensure that
directors receive
regular briefings
on changes
in risks, laws
and the appropriate
contribution;
●
drive an annual
process to
evaluate the
board, board
committees
and individual
directors;
●
ensure that
succession
plans for the
board, chief
executive officer
and senior
management
appointments
are developed
and
implemented.
The key responsibilities of the Nominations Committee include the following:
●
make recommendations
to the board
on the appointment
of new directors;
●
make recommendations
on the composition
of the board
and the balance
between executive
and non-executive directors appointed
to the board;
●
review board
structure,
size and composition
on a regular
basis;
●
make recommendations
on directors
eligible to
retire by
rotation; and
●
apply the principles
of good corporate
governance
and best practice
in respect
of nominations
matters.
Remuneration
Committee
As at June
30, 2022 the
Remuneration
Committee
consisted of
J.J. Nel (Chairman),
E.A. Jeneker,
J.A. Holtzhausen, T.V.B.N.
Mnyango and
T.J. Cumming.
The Remuneration Committee meets on a quarterly basis. All members of this committee are independent non-executive directors
who are independent according to the definition set out in the NYSE Rules, except for T.J. Cumming.
It is chaired by an independent non-
executive director.
The committee has a mandate to offer competitive packages that will attract and retain executives of the highest caliber and
encourage and reward superior performance. Industry surveys are provided for comparative purposes, and to assist the committee in the
formulation of remuneration policies that are market related.
Audit Committee
As at June
30, 2022 the
Audit Committee consisted
of J.A. Holtzhausen (Chairman), J.J. Nel, K.P. Lebina and C.D. Flemming.
All members of the Audit Committee are independent according to the definition set out in the NYSE Rules. The committee’s
charter deals with all the aspects relating to its functioning.
The Audit Committee charter sets out the committee’s terms of reference which include responsibility for:
●
appointment
and oversight
of external
auditors, audit
process and
financial reporting;
●
oversight of
internal audit;
●
overseeing
the integrated
reporting and
assurance
model;
68
The Audit Committee meets each quarter with the external auditors, the company’s manager: risk and internal audit, and the CFO.
The committee reviews the audit plans of the internal auditors to ascertain the extent to which the scope of the audits can be relied upon to
detect weaknesses in internal controls. It also reviews the annual and interim financial statements prior to their approval by the board.
The committee is responsible for making recommendations to appoint, reappoint or remove the external auditors, and the
designated external audit partner as well as determining their remuneration and terms of engagement. In accordance with its policy, the
committee preapproves all audit and non-audit services provided by the external auditors. KPMG Inc. was reappointed by shareholders at the
last AGM on November 30, 2021 to perform DRDGOLD’s external audit function, such appointment was made by the shareholders in
accordance with the laws of South Africa and upon recommendation from the board following the Audit Committee recommendations. To
comply with section 10(1)(a) of the Auditing Profession Act, 26 of 2005, the Independent Regulatory Board for Auditors (“
IRBA
”)
published the rule on Mandatory Audit Firm Rotation (“
MAFR
”) for auditors of all public interest entities, as defined in section 290.25 to
290.26 of the amended IRBA Code of Professional Conduct for Registered Auditors. An audit firm, including a network firm as defined in
the IRBA Code of Professional Conduct for Registered Auditors, shall not serve as the appointed auditor of a public interest entity for more
than 10 consecutive financial years. Thereafter, the audit firm will only be eligible for reappointment as the auditor after the expiry of at least
five financial years. The requirement is effective for financial years commencing on or after 1 April 2023. KPMG Inc. has been the
appointed auditors since 2003 and the Company has decided to early adopt the MAFR rule and appoint new auditors – BDO South Africa
Inc. for the 30 June 2023 financial year, subject to the shareholder approval at the next AGM on November 29, 2022.
The internal audit function is performed in-house, with the assistance of Pro-Optima Audit Services Proprietary Limited. Internal
audits are performed at all DRDGOLD operating units and are aimed at reviewing, evaluating and improving the effectiveness of risk
management, internal controls and corporate governance processes.
Significant deficiencies, material weaknesses, instances of non-compliance and exposure to high risk and development needs are
brought to the attention of operational management for resolution and reported to the Audit Committee. The committee members have access
to all the records of the internal audit team.
DRDGOLD’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 the CEO. All significant findings arising from audit procedures are brought to the attention of the
committee and, if necessary, to the board.
Section 404(a) of the Sarbanes-Oxley Act of 2002 stipulates that management is required to assess the effectiveness of the internal
controls surrounding the financial reporting process. The results of this assessment are reported in the form of a management attestation
report that is filed with the SEC as part of the Form 20-F. Additionally,
DRDGOLD’s external auditors are required to express an opinion on
the effectiveness of internal controls over financial reporting, which is also contained in the Company’s Form 20-F.
Risk Committee
As at June
30, 2022 the
Risk Committee consisted
of K.P. Lebina (Chairwoman), D.J. Pretorius, J.J. Nel, C.D. Flemming and T.J.
Cumming.
Roles and responsibilities:
●
Oversee the
development
and annual
review of
a policy and
plan for risk
management
to recommend
for approval
to the Board
●
Ensure that
risk management
assessments
are performed
on a continuous
basis
●
Ensure that
reporting on
risk management
is complete,
timely, accurate
and accessible
●
Oversee that
the risk management
plan is widely
disseminated
throughout the
company and
integrated
in the day-to-day
activities
of the company
●
Ensure that
frameworks
and methodologies
are implemented
to increase
the possibility
of anticipating
unpredictable
risks
●
Ensure that
management
considers and
implements
appropriate
risk responses
●
Ensure co-ordination
with the audit
committee
who will be
responsible
for the risk
management
process as
far as internal
controls,
financial
reporting and
IT risks are
concerned.
All members of the Risk Committee are independent according to the definition set out in the NYSE Rules, except for T.J.
Cumming. It is chaired by an independent NED.
An important aspect of risk management is the transfer of risk to third parties to protect the company from disaster. DRDGOLD’s
major assets and potential business interruption and liability claims are therefore covered by the group insurance policy, which encompasses
all the operations. Most of these policies are held through insurance companies operating in the United Kingdom, Europe and South Africa.
The various risk-management initiatives undertaken within the group as well as the strategy to reduce costs without compromising cover
have been successful and resulted in substantial insurance cost savings for the
Group.
Social and
Ethics Committee
As at June 30, 2022, the Social and Ethics Committee consisted of E.A. Jeneker (Chairman),
A.J. Davel,
TVBN Mnyango and
C.D. Flemming
69
The Social and Ethics Committee is a statutory body established in terms of section 72 of the Companies Act, 2008; the objectives
of which are to facilitate transformation and sustainable development by,
inter alia,
promoting transformation within the Company and
economic empowerment of previously disadvantaged communities particularly within the areas where the Company conducts business;
striving towards achieving the goal of equality as the South African Constitution and other legislation require within the context of the
demographics of the country at all levels of the Company and its subsidiaries; and conducting business in a manner which is conducive to
internationally acceptable environmental and sustainability standards.
The following terms of reference were approved by the board to enable the committee to function effectively. These are to be
responsible for and make recommendations to the board with respect to the following matters:
●
monitor the
Company’s activities
regarding the
10 principles
set out in
the United
Nations Global
Compact Principles
and the
OECD recommendations
regarding Corruption,
the Employment
Equity Act
and the Broad
Based Black
Economic Empowerment
Act;
●
maintaining
records of
sponsorship,
donations
and charitable
giving;
●
reviewing matters
relating to
the environment,
health and
public safety, including
the impact
of the company’s
activities
and of its
products or
services;
●
reviewing
matters relating
to labor and
employment
●
reviewing and
recommending
the company’s code
of ethics;
●
reviewing and
recommending
any corporate
citizenship
policies;
●
reviewing significant
cases of employee
conflicts
of interests,
misconduct or
fraud, or any
other unethical
activity by
employees
or
the Company
6D. EMPLOYEES
Employees
The total
number of employees
at June 30,
2022, of 2,959
comprises
2,016 specialized
service providers
and 943 employees
who are
directly employed
by us and our
subsidiary
companies.
Of the 943
employees
directly employed
by us and our
subsidiary
companies,
34
employees
are on a fixed
term employment
contract.
The total
number of employees
at June 30,
2021, of 2,791
comprises
1,838 specialized
service providers
and 953 employees
who are
directly employed
by us and our
subsidiary
companies.
Of the 953
employees
directly employed
by us and our
subsidiary
companies,
42
employees
are on a fixed
term employment
contract.
The total
number of employees
at June 30,
2020, of 2,573
comprises
1,615 specialized
service providers
and 958 employees
who are
directly employed
by us and our
subsidiary
companies.
Of the 958
employees
directly employed
by us and our
subsidiary
companies,
34
employees
are on a fixed
term employment
contract.
The total
number of employees
at September
30, 2022, of
2,941 comprises
2,018 specialized
service providers
and 923 employees
who are directly
employed by us
and our subsidiary
companies.
Of the 923 employees
directly employed
by us and our
subsidiary
companies,
36
employees
are on a fixed
term employment
contract.
All of our
employees
are based at
our operations
that operate
exclusively
in South Africa.
Labor Relations
As at June
30, 2022,
approximately
84% of our Ergo
employees
and 86% of our
FWGR employees
are members
of trade unions
or
employee associations.
South Africa's
labor relations
environment
remains a
platform for
social reform.
The National
Union of Mineworkers,
(“
NUM
”),
one of the
main South
African mining
industry unions,
is influential
in the tripartite
alliance between
the ruling African
National
Congress,
the Congress
of South African
Trade Unions,
(“
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 organized
labor coordinating
forum meets
regularly
to
discuss matters
pertinent to
both parties.
A three-year
wage agreement
was reached
with organized
labor at FWGR
in November
2021 and a new
three-year
wage agreement
was concluded
at Ergo subsequent
to fiscal
year 2022.
We recognize the
need for transformation
and have put
systems and
structures
in place to
address this
at both management
and board
level. We aim to recruit
in line with
our transformational
objectives.
The composition
of the Board
of Directors
specifically, changed
significantly
over the past
two fiscal
years
and is more
diverse and
reflective
of transformation
and South Africa’s
demographics.
70
Safety statistics
Due to the
importance
of our labor
force, we
continuously
strive to
create a
safe and healthy
working environment.
The following
are
our fiscal
2022 overall
safety statistics
for our operations:
(Per million man hours)
Ergo
FWGR
Consolidated
Year ended
June 30,
Year ended
June 30,
Year ended
June 30,
2022
2021
2022
2021
2022
2021
Lost time injury frequency rate (LTIFR)
1
2.14
0.78
-
0.97
1.84
0.80
Reportable incidence frequency rate (RIFR)
1
0.76
0.47
-
-
0.66
0.40
Fatalities
-
-
-
-
-
-
1 Calculated as follows: actual number of instances divided by the total number of man hours worked multiplied by one million.
6E. SHARE OWNERSHIP
To the best of our
knowledge,
we believe
that our ordinary
shares held
by prescribed
officers and
directors,
in aggregate,
do not exceed
one percent
of the Company’s
issued ordinary
share capital.
For details
of share
ownership
of directors
and prescribed
officers see
Item 7A.
Major
Shareholders.
As of June
30, 2022, directors
and prescribed
officers do not
hold any options
to purchase
ordinary shares.
Closed periods
apply to
share trading
by directors,
prescribed officers
and other
employees, whenever
persons become
or could
potentially become aware of
material price sensitive information, such
as information relating to
an acquisition, bi-annual results
etc., which
is not in
the public domain.
When these persons
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 only
apply to
the board
of directors,
executive committee, and the financial
and new business teams,
but in the case
of interim and year-end results
the closed-period is group-wide.
DRDGOLD Phantom
Share Scheme
(Amended November
2015) – Cash
Settled Long-Term
Incentive Scheme
Salient terms
of the
DRDGOLD Phantom
Share Scheme
are disclosed
in Item
18. ‘‘Financial Statements - Note
19. Cash Settled
Long-Term Incentive
Scheme’’
On
November
4,
2015,
the
committee
approved
an
allocation
of
20,527,978
phantom
shares
which
is
driven
by
share
price
performance and individual performance and is based on phantom share allocations. The vesting of any shares allocated was staggered over a
five-year period commencing in the
third year after the allocation is granted in line with King IV Report recommendations. The objectives
of
the
revised
scheme
are
to
drive
the
longer-term
strategies
of
DRDGOLD,
to
align
participants’
interests
with
shareholders’
interest,
to
incentivise and motivate
participants, to attract
and retain scarce
human resources and
to reward superior
performance by the
Company and
participants. The
revised cash settled
long-term incentive
scheme was fully
settled on November
5, 2020
and replaced by
the equity-settled
long term incentive scheme described below.
Equity-Settled
Long-Term Incentive
Scheme
On December 2, 2019 shareholders approved an Equity-Settled Long-Term Incentive Scheme (“
Scheme
”) for purposes of
replacing the current Cash-Settled Long-Term Incentive Scheme. The Cash-Settled Long-Term
incentive scheme has a finite life and
comes to an end with the vesting of the last phantom shares during fiscal year 2021. Certain key features of the
Scheme are:
Equity settled
The Scheme will be equity-settled.
Equity-settlement will be implemented by way of market acquisition of DRDGOLD ordinary shares
or through the issue of authorised but unissued shares or treasury shares.
Participants
Persons eligible to participate in the Scheme will be permanent employees (which, for the avoidance of doubt, includes an executive
director, but excludes a non-executive director) of the Company and its subsidiaries, in Category 19 and above (“
Participants
”).
Award of Conditional Shares
Pursuant to the Scheme, the Company’s Remuneration Committee will resolve, on an annual basis, to award “Conditional Shares”
(“
Award
”) which are comprised of:
●
“Performance Shares” which are subject to conditions, as set out in the rules of the Scheme and performance conditions; and
●
“Retention Shares” which are subject to conditions, as set out in the rules of the Scheme.
Participants are not required to pay for Awards or Shares Settled in terms of vested Awards.
Annual awards of Conditional Shares will be made, in two forms:
●
80% of the Award will be comprised of Performance Shares
●
20% of the Award will be comprised of Retention Shares
71
The target award value will be referenced to market-related award quanta, and will be adjusted based upon individual performance as
follows:
Individual Rating
% of Target Value
Awarded
< 2.75
0%
2.75 to < 3.00
50%
3.0 to < 3.75
100%
3.75 to < 4.5
133.33%
4.5 to < 5.0
166.67%
5.0
200%
Dividend and Voting
Rights
The Conditional Share Awards carry no dividend or voting rights, until Settled, and therefore any transfer and other rights associated
with the Conditional Shares will only vest following settlement.
Vesting
of the Conditional Shares
The first grant was made on December 2, 2019 and will vest in two tranches, 50% on the 2nd anniversary and the remaining 50% on the
3rd anniversary of the grant date respectively, provided the employee is still within the employment of the Group until the respective
vesting dates.
Retention shares:
100% of the retention shares will vest if the employee remains in the employ of the Company at vesting date and individual performance
criteria are met.
Performance shares:
Total shareholder’s return (“
TSR
”) measured against a hurdle rate of 15% referencing DRDGOLD’s Weighted
Average Cost of Capital
“WACC”:
•
50% of the performance shares are linked to this condition; and
•
all of these performance shares will vest if DRDGOLD’s TSR exceeds the hurdle rate over the vesting period
TSR measured against a peer group of 3 peers (Sibanye-Stillwater, Harmony Limited and Pan-African Resources Limited):
•
50% of the performance shares are linked to this condition; and
•
The number of performance shares which vest is based on DRDGOLD’s actual TSR performance in relation to percentiles of peer
group’s performance as follows
Percentile of Peers
% of Conditional Shares Vesting
< 25th percentile
0%
25th to < 50th percentile
25%
50th to < 75th percentile
75%
≥ 75th percentile
100%
Awarded Conditional Shares which do not Vest
to the Participant, as a result of forfeiture or which lapse, revert back to the Scheme.
Share Limits
Overall Company Limit
The aggregate number of Shares at any one time which may be awarded for Settlements under the Scheme shall not exceed 34,500,000
(thirty four million, five hundred thousand) Shares (representing approximately 4.95% of the total issued share capital of the Company at
the date of this Notice).
Individual Limit
Subject to certain dilution adjustments, the aggregate number of Shares at any one time which may be awarded under the Scheme to any
one Participant shall not exceed 14,500,000 Shares.
72
ITEM 7. MAJOR
SHAREHOLDERS
AND RELATED PARTY TRANSACTIONS
7A. MAJOR SHAREHOLDERS
As of September
30, 2022,
our issued
capital consisted
of:
●
864,588,711 ordinary
shares of
no par value;
and
●
5,000,000 cumulative
preference
shares.
To our knowledge, as
of June 30,
2022, we were
not directly
or indirectly
owned or controlled
by another
corporation
or any person
or
foreign government,
other than
the controlling
interest
held by Sibanye-Stillwater.
On July 31,
2018, 265 million ordinary shares were issued to
Sibanye-Stillwater
as settlement of the
purchase consideration for the
acquisition
of the WRTRP Assets.
On January 8,
2020, Sibanye-Stillwater
exercised the
option granted
to it to subscribe
for such number
of new
ordinary shares
in the share capital of DRDGOLD
for cash resulting in Sibanye-Stillwater
holding in aggregate
50.1% of all DRDGOLD shares
in issue
(including
treasury
shares).
Sibanye-Stillwater
subscribed
for 168,158,944
Subscription
Shares
at an
aggregate
subscription
price
of R1,086
million, on January
22, 2020. The
Subscription
Shares were
allotted and issued
at a price of
R6.46 per share,
being a 10% discount
to the 30-day
volume weighted
average traded
price.
Other than
the above 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
September
30, 2022:
●
there were 10,468 record holders of
our ordinary shares in South
Africa, who held 559,688,990 or
approximately 64.7% of our
ordinary shares;
●
there was one record holder of our cumulative
preference shares in South Africa,
who held 5,000,000 ordinary
shares or 100% of
our cumulative
preference
shares;
●
there were
36 US record
holders of
our ordinary
shares,
who held
approximately
33,974,859 ordinary
shares
or approximately
3.9%
of our ordinary
shares excluding
those shares
held as part
of our ADR program;
and
●
there
were 664
registered
holders
of our
ADRs in
the United
States,
who held
approximately
215,869,190
shares
(21,586,919 ADRs)
or approximately
25.0% of our
ordinary shares.
The following
table sets
forth information
regarding the
beneficial
ownership of
our ordinary
shares as
of September
30, 2022,
by:
●
each of our
directors
and prescribed
officers; and
●
any person whom the
directors are
aware of as at September
30, 2022 who is interested
directly or indirectly
in 1% or more of our
ordinary shares.
There was
significant
change in
the percentage
ownership of
the major
shareholders
over the
preceding
three years.
During fiscal
year 2020
Sibanye-Stillwater
exercised
the option
granted
to it to
subscribe
for such
number of
new ordinary
shares in
the share
capital
of DRDGOLD
for cash
resulting in
Sibanye-Stillwater
holding in
aggregate
50.1% of all
Shares in
issue (including
treasury shares).
Sibanye-Stillwater
subscribed
for 168,158,944
ordinary
shares.
Shares Beneficially owned
Holder
Number
Percent of outstanding
ordinary shares
Directors/prescribed officers
D.J. Pretorius
804,816
*
A.J. Davel
338,438
*
Other
Sibanye-Stillwater
433,158,944
50.10%
The Bank of New York Mellon
227,196,436
26.28%
Government Employees Pension Fund
30,101,431
3.48%
Allan Gray Proprietary Limited
15,638,811
1.81%
BNYMSANV RE BNYMLBGC RE 586388
12,562,291
1.45%
CLEARSTREAM BANKING S.A LUXEMBOURG
10,763,378
1.24%
STATE
STREET BANK AND TRUST
10,052,483
1.16%
*
Indicates share ownership of less than 1% of our outstanding ordinary shares.
No ordinary
shareholder
has voting
rights which
differ from
the voting rights
of any other
ordinary shareholder.
73
Cumulative
Preference Shares
Randgold and Exploration Company
Limited, or Randgold, owns 5,000,000
(100%) of our cumulative preference
shares. Randgold's
registered
address is
Suite 25, Katherine
& West Building, Corner
of Katherine
and West Streets,
Sandown, Sandton,
2196.
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 in
September
1997. 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. Holders
of cumulative preference shares will only obtain their potential
voting rights once the Argonaut Project becomes an
operational gold
mine, and
dividends accrue
to
them. The
prospecting rights
have since
expired and
the
Argonaut Project
terminated. The
development of the project is not expected to materialise and therefore no dividend is expected to be paid.
7B. RELATED PARTY TRANSACTIONS
Transactions with related parties are disclosed in Item 18. ‘‘Financial
Statements
- Note 5.1 –
Cost of sales’’
Remuneration
paid
to key
management is
disclosed
in
Item 18. ‘‘Financial
Statements - Note
19.3 –
Key management personnel
remuneration’’
7C. INTERESTS
OF EXPERTS AND COUNSEL
Not applicable.
ITEM 8. FINANCIAL
INFORMATION
8A. CONSOLIDATED STATEMENTS AND OTHER
FINANCIAL INFORMATION
1.
Please refer
to Item 18.
Financial Statements.
2.
Please refer
to Item 18.
Financial Statements.
3.
Please refer
to Item 18.
Financial Statements.
4.
The last year
of audited financial
statements
is not older
than 15 months.
5.
Not applicable.
6.
Not applicable.
7.
Please refer
to Item 4D.
Property, plant and
equipment—Ongoing
Legal Proceedings.
8.
Please refer
to Item 10B.
Memorandum and
articles
of association.
8B. SIGNIFICANT
CHANGES
Significant changes that have occurred since June 30, 2022, the date of the last
audited financial statements included in this Annual
Report, are discussed in the relevant notes to the financial statements under Item 18. Financial Statements.
74
ITEM 9. THE
OFFER AND LISTING
9A. OFFER AND
LISTING DETAILS
The principal trading market
for our
equity securities is the
JSE (symbol: DRD)
and our
ADSs that trade
on the
New York
Stock
Exchange
(symbol:
DRD). The
ADRs are
issued by
The Bank
of New
York Mellon, as
depositary. Each
ADR represents
one ADS
and each ADS
represents
ten of our ordinary
shares. Until
July 23, 2007,
each ADS
represented
one of our ordinary
shares.
The cumulative
preference
shares are
not traded
on any exchange.
There have
been no trading
suspensions
with respect
to our ordinary
shares on the
JSE during the
past three
years ended
June 30, 2022,
nor have there
been any trading
suspensions
with respect
to our ADRs
on the New
York Stock Exchange
since our
listing on that
market.
9B. PLAN OF
DISTRIBUTION
Not applicable.
9C. MARKETS
Nature of Trading Markets
See “Offer and
Listing Details”
above
.
9D. SELLING
SHAREHOLDERS
Not applicable.
9E. DILUTION
Not applicable.
9F. EXPENSES OF THE ISSUE
Not applicable.
ITEM 10. ADDITIONAL
INFORMATION
10A. SHARE CAPITAL
Not applicable.
10B. MEMORANDUM
AND ARTICLES
OF ASSOCIATION
As
of
June 30,
2022,
we
had
authorized for
issuance 1,500,000,000 ordinary
shares of
no
par
value (as
of
September 30,
2022:
1,500,000,000),
and 5,000,000
cumulative
preference
shares of
R0.10 par
value (as
of September
30, 2022:
5,000,000).
On this
date, we
had issued
864,588,711 ordinary shares (as of September 30, 2022:
864,588,711)
and 5,000,000 cumulative preference
shares (as of September 30, 2022:
5,000,000).
Set out below
are brief
summaries
of certain
provisions
of our Memorandum
of Incorporation,
or our
MOI, the
Companies
Act of South
Africa and
the JSE
Listings
Requirements,
all as
in effect
on June
30, 2022
and September
30, 2022.
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
MOI, the Companies
Act, and the
JSE Listings
Requirements.
We are registered
under
the Companies
Act of
South Africa
under registration
number
1895/000926/06.
As set
forth
in our
Memorandum
of Incorporation,
the main object
and business
of our company
is mining
and exploration
for gold and
other minerals.
Borrowing Powers
Our directors may from time to time borrow for the purposes of the company, such sums as they think fit and secure the payment or
repayment of any such sums,
or any other sum, as they think fit, whether
by the creation and issue of securities,
mortgage or charge upon all or
any of
the property
or assets
of the company.
The directors
shall procure
that the
aggregate
principal
amount at
any one
time outstanding
in respect
of monies
so borrowed
or raised
by the company
and all the
subsidiaries
for the time
being of the
company shall
not exceed
the
aggregate
amount
at that time
authorized
to be borrowed
or secured
by the company
or the subsidiaries
for the time
being of the
company (as
the
case may be).
Share Ownership
Requirements
75
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
is a majority
of the directors
present at
a meeting
before a
vote
may be called
at any meeting
of directors.
Directors
are
required
to notify
our board
of directors
of interests
in companies
and contracts.
If a
director
has a
personal
financial
interest
in respect
of a matter
to be
considered
at a meeting
of the
board he
or she
must disclose
the interest
and its
nature,
any material
information
relating
to the matter and thereafter leave the meeting immediately
after making the disclosure. Such director
must not take part in consideration of the
matter. He is
not to be regarded
as being present
for the purpose
of determining
whether a
resolution has
sufficient
support to be
adopted.
The King IV Report on Corporate Governance for South Africa, 2016 (King IV) was published on 1 November 2016 and came into
effect on 1
April 2017 for companies with financial years commencing thereafter. The application regime for King IV is
"apply and explain",
requiring companies to substantially
and meaningfully strive towards good corporate
governance. King IV is principles and outcomes based: a
departure from mere
compliance-based mindset. King IV
recognises that sound
governance outcomes, exemplified by integrity,
competence,
responsibility,
accountability,
fairness
and transparency,
are the
cardinal
pillars of
good corporate
citizenship.
The JSE
Limited has
since made
the
adoption and
application
of King IV
mandatory
for all listed
companies.
The remuneration of non-executive directors is typically determined
by the board, but
subject to approval by the shareholders at the
AGM of the Company. In terms of section
65(11)(h) of the Companies
Act, 2008 read with sections
66(8) and 66(9) thereof,
remuneration may
only be paid
to directors
for their
services as
directors in
accordance
with a special
resolution approved
by the shareholders
within the
previous 2
(two) years.
A special resolution
was passed
at the 2021
AGM on November
30, 2021 to change
the structure
of the NED
remuneration.
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.
These common
law duties
have now been
codified by
the Companies
Act.
Age Restrictions
There is
no age limit
for directors.
Election of
Directors
Each director
shall be
appointed
by election
by way
of an
ordinary
resolution
of shareholders
at a
general
or annual
meeting
of company
(“elected director (s)”) and
no appointment of
a director by
way of
a written
circulated shareholders resolution in terms of
section 60 of
the
Companies
Act shall
be competent.
One
third of our
directors,
on a rotating
basis, are
subject to
re-election at
each annual
general shareholder’s
meeting. Retiring
directors
usually make themselves available
for re-election. An amendment to the MOI which also subjects executive
directors to re-election by rotation
was approved
by shareholders
at the 2014
annual general
meeting.
General Meetings
On the request
of any shareholder
or shareholders
holding not less
than 10 percent
of our share
capital which
carries the
right of voting
at general
meetings,
we shall
issue a
notice to
shareholders
convening
a general
meeting
for a
date not
less than
15 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
15 days advance
written notice
of that meeting.
For any other
general meeting
of our shareholders,
15 days advance
written notice
is required.
Our MOI provides
that if at a
meeting convened
upon request
by our shareholders,
a quorum is not
present within
fifteen minutes
after
the time selected for the meeting, such
meeting shall be postponed
for one week. However the chairman
has the discretion to extend the fifteen
minutes for
a reasonable
period on certain
grounds. The
necessary
quorum is
three members
present with
sufficient
voting powers
in person or
by
proxy to exercise
in aggregate
25% of the voting
rights.
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 vote 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. Additionally, holders of
cumulative preference shares may vote
on resolutions which
adversely affect their interests and
on
resolutions regarding the disposal of
all or
substantially all of
our assets
or mineral
rights. When entitled
to vote,
holders of
our cumulative
preference shares are entitled to one vote per person on a show
of hands and that portion of
the total votes which the aggregate amount of the
nominal value
of the shares
held by the relevant
shareholder
bears to the
aggregate
amount of the
nominal value
of all shares
issued by us.
76
Dividends
We may,
in certain
circumstances 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.
Ownership
Limitations
There are
no limitations
imposed by our
MOI 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 June
30, 2022 and
September
30, 2022, no
such dividends
have been
declared.
Except for
the preference
dividend and
as described
in this Item
our cumulative
preference
shares are
not entitled
to any other
participation
in the distribution
of our surplus
assets on
winding-up.
Reduction
of Capital
We may,
by special resolution, reduce the share capital
authorized by our MOI, 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
MOI
Our MOI may be altered
by the passing
of a special resolution
or in compliance
with a court order. The
Company may
also amend the
MOI by increasing
or decreasing
the number
of authorized
shares,
classifying
or reclassifying
shares,
or determining
the terms
of shares
in a class.
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.
An amendment
to the MOI to increase
the number of authorized
shares was approved
by shareholders
at the 2018 general
meeting on March
28,
2018.
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
the Argonaut 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
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.
We also need
to consider
the solvency
and liquidity
requirements
stated in
the
Companies
Act of South
Africa.
Directors’
power to vote
compensation
to themselves
The remuneration
of non-executive
directors
may not
exceed
in any
financial
year the
amount fixed
by the
Company
in general
meeting.
The Companies
Act requires that
remuneration
to non-executive
directors may be paid
only in accordance
with a special resolution
approved by
shareholders
within the
previous two
years.
Time limit for
dividend entitlement
All unclaimed monies that are due
to any shareholder/s shall be held
by the company in
trust for an indefinite period until
lawfully
claimed by
such shareholder/s,
subject to
the Prescription
Act, 1969 as
amended or
any other law
which governs
the law of
prescription.
Staggered director
elections
& cumulative
voting
77
At each annual general meeting of the Company one-third of the directors shall retire and be eligible for re-election. No provision is
made for
cumulative
voting.
Sinking fund
provisions
and liability
to further
capital calls
There are no
sinking fund provisions in
the MOI
attaching to any
class of
the company shares,
and the
company does not
subject
shareholders
to liability
to further
capital calls.
Provision
that would delay/prevent
change of control
The Companies
Act provides
that companies
which propose
to merge
or amalgamate
must enter
into a written
agreement
setting out
the
terms thereof.
They must
prove that
upon
implementation of the
amalgamation or
merger each
will
satisfy the
solvency and
liquidity test.
Companies
involved in disposals,
amalgamations
or mergers,
or schemes
of arrangement
must obtain a
compliance
certificate
from the Takeover
Regulation
Panel, pass
special resolutions
and in some
instances
they must obtain
an independent
expert report.
10C. MATERIAL CONTRACTS
Not applicable.
78
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,
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
the SARB prior
to
raising foreign
funding on
the strength
of their South
African statements
of financial
position, 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
the 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
the SARB.
Foreign investment
and outward loans
by South African companies
are also restricted.
In addition, without
the approval of the
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 the
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.
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
R500 million to
finance approved
investments abroad and up to R500 million to finance approved new investments in African countries on an annual bases. Approval
from the SARB is required in advance for investments in excess of R500 million. On application
to the 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, the
SARB requires
that more than
10% 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,
the SARB may
instruct that
the
equity be disposed of. In our experience
the SARB has taken a commercial view on this, and has on occasion extended the period of
time for compliance;
and
79
●
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 the 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
ADRs 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.
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
paid in rands.
Holders of ADRs
on the relevant
record date
will be entitled
to receive any
dividends
payable in respect
of the shares
underlying the
ADRs, 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 ADRs,
net of conversion
expenses of
the depositary, in accordance with the deposit
agreement. The depositary
will charge holders of ADRs, to the extent applicable,
taxes and other
governmental
charges and
specified fees
and other expenses.
Voting rights
There are no limitations
imposed by South African law
or by our MOI on the right of non-South African
shareholders
to hold or vote
our ordinary
shares.
80
10E. TAXATION
Material South
African Income
Tax Consequences
The following
is a summary
of material
income tax
considerations
under South African
income 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 tax
advisers
with
respect to
their particular
circumstances
and the effect
of South African
or other tax
laws to which
they may be
subject.
South Africa imposes
tax on worldwide income of South
African residents.
Generally, individuals
not resident in South Africa
do not
pay tax in South
Africa except
in the following
circumstances:
Income Tax and Withholding
Tax on Dividends
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)(i)
of the
South African
Income Tax Act,
1962 (as
amended),
or the Income
Tax Act. This exemption
applies to
so much of
any interest
and dividends
(which are
not otherwise
exempt) received
from a South
African source
not exceeding
(a) R34,500
if the taxpayer
is 65 years
of age or
older or (b)
R23,800 if
the taxpayer
is younger
than 65 years
of age
at the end
of the relevant
tax year.
No withholding
tax
is deductible
in respect
of interest
payments made
to non-resident
investors.
Section 64F of the amendments to the Income Tax Act as set out in Part VIII in Chapter II of the Income Tax Act sets out beneficial
owners
who are
exempt
from the
dividend tax
which includes
resident
companies
receiving
a dividend
after
the effective
date, being
April 1,
2012.
The Convention
between
the United
States
of America
and the
Republic
of South
Africa for
the Avoidance
of Double
Taxation and the
Prevention
of Fiscal
Evasion with
Respect to
Taxes on Income
and Capital
Gains, or
the Tax Treaty, would limit
the rate
of this tax
with respect
to dividends
paid on ordinary
shares or
ADRs
to a U.S.
resident
(within the
meaning of
the Tax Treaty)
to 5% of
the gross
amount of
the dividends
if such
U.S.
resident is
a company which
holds directly
at least 10%
of our voting
stock and 20%
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
United States,
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.
In fiscal years 2022 and 2021, the tax rates for taxable mining income for Ergo was 5% and 25% respectively and for FWGR 31%
for both fiscal periods. The gold mining tax
formula for determining the South African gold mining tax
rate for fiscal years ended 2022
and
2021 is:
Y = 34
– 170/X. Where
Y is the
percentage rate of
tax payable and
X is the
ratio of taxable
income, net of
any qualifying capital
expenditure that bears to
mining income derived, expressed
as a percentage. The
tax rate for non-mining
taxable income is
28% for both
fiscal
years 2022 and 2021.
On February 23, 2022, the Minister of Finance announced that the corporate income tax (“
CIT
”) rate will be lowered from 28% to
27% for companies with years of
assessment commencing on or after April
1, 2022. The mining operations of
the Group accounts for income
tax using the
gold mining tax formula as
opposed to the CIT rate. The
gold mining tax formula was
changed to Y = 33
- 165/X for years of
assessment commencing on or after April 1, 2022.
It was further announced that the lowering of the CIT rate will be implemented alongside
additional amendments to broaden the CIT base by limiting interest deductions and assessed losses. Section 23M which limits the deduction
of interest
payable to
certain parties
who are
not subject
to tax
was significantly
widened. A
maximum of
R1 million
or 80%
of assessed
losses (whichever is greater) is permitted to be set-off against taxable income.
With effect from April 1, 2014, Section 8F of the
Income Tax Act results
in any amount of interest which is incurred in respect of a
“
hybrid debt
instrument
” is
deemed to
be a
dividend
in specie
declared by
the payor
and received
by the
recipient which
is exempt
from
income tax, as opposed
to interest which is
taxable. The terms of
some of our intercompany
loans cause the affected
loans to be deemed
as
“
hybrid debt instruments
” and the interest thereof
to be deemed to
be an exempt dividend
in specie
. This characterization of
the affected loans
as a “
hybrid debt instrument
” was not impacted by subsequent
amendments
to Section
8F of the
Income Tax Act
that became
effective
in fiscal
year 2017.
81
U.S. Federal
Income Tax Considerations
The following
is a
summary of
the U.S.
federal income tax
considerations generally applicable to the
U.S. Holder
ownership and
disposition
of ordinary
shares
or ADRs.
Unless
otherwise
indicated,
this discussion
addresses
only U.S.
Holders
who hold
ordinary
shares
or ADRs
as capital
assets (generally,
property held
for investment)
for U.S.
federal
income tax
purposes.
This discussion
is based
upon the
provisions
of the
U.S. Internal
Revenue Code
of 1986,
as amended
(the “Code”),
Treasury regulations
promulgated
thereunder, judicial
decisions,
published
rulings
of the Internal Revenue
Service (the “IRS”),
administrative
pronouncements
and other relevant
authorities,
all as in effect on the date
hereof and
all of which are
subject to differing
interpretations
and change,
possibly on a retroactive
basis. There can
be no assurance
that the IRS would
not
assert, or
that a court
would not sustain,
a position
contrary to
any of the
considerations
discussed herein.
This summary
does not
address U.S.
federal estate, gift
or
other non-income tax
considerations, the alternative minimum tax,
the
Medicare tax on
certain net investment income, or
any state, local
or non-U.S. tax
considerations, relating to the ownership or
disposition of
ordinary shares or ADRs, nor does it
address all aspects of U.S. federal income taxation that may be
relevant to U.S. Holders in light
of their
particular circumstances
or that may be relevant to certain types of U.S. Holders subject
to special treatment under U.S. federal
income tax law
(such as dealers in securities
or currencies, partnerships
or other pass-through
entities, banks and
other financial
institutions, traders
in securities
that elect
mark-to-market
treatment, insurance
companies,
tax-exempt organizations
(including private
foundations),
certain expatriates
or former
long-term residents of the
United States, persons holding
ordinary shares or ADRs
as part
of a
“hedge,” “conversion transaction,” “synthetic
security,” “straddle,”
“constructive
sale” or other integrated
investment, persons
who acquired the ordinary
shares or ADRs upon the
exercise of
employee stock
options or
otherwise as
compensation, persons whose
functional currency is
not
the U.S.
dollar, or
persons that
actually or
constructively
own ten percent
or more of
the voting power
or value of
our shares).
82
For purposes
of this discussion,
a “U.S. Holder”
is a beneficial
owner of ordinary
shares or
ADRs that
is, for U.S.
federal income
tax purposes:
●
a citizen
or individual
resident of
the United
States;
●
a corporation (or any entity treated as a corporation for U.S. federal income
tax purposes) created or organized under the laws of the
United States,
any state
thereof or
the District
of Columbia;
●
an estate
the income
of which is
subject to U.S.
federal income
tax without regard
to its source;
or
●
a trust (i)
if a court within
the United
States is able
to exercise
primary supervision
over the administration
of the trust
and one or more
U.S. persons have
the authority to
control all substantial
decisions of
the trust, or (ii)
if the trust has made
a valid election to
be treated
as a U.S.
person.
If a partnership
(or other entity
or arrangement
treated as a
partnership
for U.S. federal
income tax purposes)
owns any ordinary
shares
or ADRs, the
U.S. federal
income tax treatment
of a partner
in the partnership
will generally
depend on the
status of the
partner and the
activities
of the partnership.
Partnerships
holding any
ordinary shares
or ADRs and their
partners should
consult their
tax advisors
regarding an investment
in ordinary
shares or
ADRs.
U.S.
Holders of
ordinary shares
or
ADRs should
consult their
tax
advisors regarding
the
U.S.
federal income
tax
considerations
applicable to the
ownership and disposition
of ordinary shares
or ADRs in light of their
particular circumstances
as well as any considerations
to
them arising
under the tax
laws of any
foreign, state
or local taxing
jurisdiction.
Distributions
For U.S. federal income
tax purposes, a U.S. Holder of ADRs will
be treated as the owner of the ordinary
shares represented
by such
ADRs. Exchanges
of ordinary
shares for
ADRs and ADRs
for ordinary
shares will
generally not
be subject
to U.S. federal
income tax.
Subject to
the discussion below
under the
heading “Passive Foreign
Investment Company”, the gross
amount of
any distributions
received by a
U.S. Holder on
ordinary shares or ADRs
(including any amounts withheld in
respect of South
African withholding taxes) will
generally be
subject to tax
to the extent paid
out of our current
or accumulated
earnings and
profits, as determined
under U.S. federal
income tax
principles,
and will be includible
in the gross
income of a
U.S. Holder
on the day actually
or constructively
received.
For U.S. federal
income tax
purposes, the gross amount of any distributions
received by a U.S. Holder will generally
equal the dollar value of the sum of the South African
rand payments
made (including
any amounts
withheld in
respect
of South African
withholding
taxes),
determined
at the “spot
rate” on
the date
the
dividend distribution
is includable in such U.S. 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 U.S. 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
or accumulated
earnings and
profits will
constitute
a non-taxable
return of capital
and will
be applied
against and
reduce the
U.S. Holder's
basis in the
ordinary shares
or ADRs. To the extent
that distributions
exceed the
U.S. Holder's
tax
basis in the ordinary
shares or ADRs,
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
U.S. federal
income tax purposes.
U.S.
Holders should
therefore
assume that
any distributions
on our ordinary
shares or
ADRs will constitute
dividend income.
An individual
or other
non-corporate
U.S. Holder
may be
subject
to tax
on any
such dividends
at the
lower
capital
gain tax
rate applicable
to “qualified dividend
income,” provided
that certain conditions
are satisfied,
including that (1)
the ordinary shares
or ADSs
are readily tradable
on an established securities
market in the United States,
or we are eligible for the benefits
of a qualifying income
tax treaty, (2) we are neither a
PFIC nor treated as such
with respect to a U.S. Holder
(as discussed below)
for the taxable year in which
the dividend is paid and
the preceding
taxable year, and
(3) certain
holding period
requirements
are met. Dividend
income derived
with respect to
the ordinary shares
or ADRs will not
be eligible
for the dividends
received deduction
generally allowed
to a U.S. corporation.
U.S. Holders
should consult
their tax advisors
regarding
the U.S. federal
income tax
rate that will
be applicable
to their receipt
of any dividends
paid with respect
to the ordinary
shares and
ADRs.
For U.S.
foreign tax
credit purposes,
dividends
received
on ordinary
shares
or ADSs
common shares
will generally
be treated
as income
from foreign sources and will
generally constitute
passive category income.
Subject to certain conditions
and limitations, a U.S. Holder eligible
for the benefits
of an applicable
income tax treaty
may be eligible
to claim a foreign
tax credit
in respect of any
South African
income taxes
paid
or withheld
with respect
to dividends
on ordinary
shares or
ADSs to
the extent
such taxes
are nonrefundable
under the
treaty. Alternatively,
a U.S.
Holder may elect
to deduct such taxes
in computing its taxable
income for U.S. federal
income tax purposes.
A U.S. Holder’s election
to deduct
foreign taxes
instead of
claiming foreign
tax credits
applies to
all creditable
foreign income
taxes paid
or accrued
in the relevant
taxable year. The
rules regarding
foreign tax
credits and
the deductibility
of foreign
taxes are
complex. All
U.S. Holders
should consult
their tax advisors
regarding
the availability
of foreign
tax credits
and the deductibility
of foreign
taxes in
light of their
particular
circumstances.
83
Passive Foreign
Investment
Company
A non-U.S. corporation, such as our company, will
be classified as a passive foreign investment company (“PFIC”) for U.S. federal
income tax purposes for any taxable year if either (i) 75% or more of our gross income for such year, 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, consists
of certain types
of “passive income”
or
(ii) 50% or more of the value
of our assets
(determined on the
basis of a quarterly
average) during
such year, 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, is
attributable
to assets
that produce
or are held
for
the production of
passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net
gains from the
sale or
exchange
of property
producing
such income
and net
foreign
currency
gains.
Passive
assets
are those
which give
rise to
passive income
and include
assets held
for investment,
as well as
cash, assets
readily convertible
into cash,
and (subject
to certain
exceptions)
working capital.
Our company’s
goodwill and other unbooked
intangibles are
taken into account and may be classified
as active or passive depending
on the income such assets
generate
or are held
to generate.
If we are a PFIC for any
taxable year
during which a U.S.
Holder holds ordinary
shares or ADRs,
the U.S. Holder would
be subject to
special rules
with respect
to any (i) gain
recognized
upon the disposition
of the ordinary
shares or ADRs
and (ii)
receipt of
an excess
distribution
(generally, any distributions
to a U.S. Holder during a taxable year that
is greater than 125% of the average
amount of distributions received
by
such U.S. Holder during the three preceding taxable years in respect of
the ordinary shares or ADRs or,
if shorter, such U.S. Holder's holding
period for
the ordinary
shares or
ADRs). Under
these rules:
●
the gain
or excess
distribution
will
be allocated
ratably
over a
U.S. Holder's
holding
period
for the
ordinary
shares
or ADRs,
as applicable;
●
amounts allocated to the taxable
year of the excess distribution
or of the sale or other disposition and to any taxable years
in the U.S.
Holder’s holding period
prior to the first taxable
year in which we are classified
as a PFIC (each, a “pre-PFIC year”),
will be taxed as
ordinary income;
●
amounts allocated
to each
prior year
(other than
the current
taxable year
or a pre-PFIC
year) will
be taxed
at the highest
tax rate
in effect
applicable
to the U.S.
Holder for
that year;
and
●
such amounts will be increased by an additional tax equal to interest on the resulting tax deemed deferred with respect to such years
(other than
the current
taxable year
or a pre-PFIC
year).
Although we generally will be treated as a PFIC as to any
U.S. Holder if we are a PFIC for
any year during a U.S. Holder's holding
period, if
we cease
to be a PFIC,
the U.S. 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
ADRs through
the close
of the tax
year in which
we cease
to be a PFIC.
A U.S. Holder
of a PFIC is required
to file an annual
report with
the Internal
Revenue Service
containing such
information
as the U.S.
Secretary
of Treasury may
require.
A U.S. Holder
of ordinary
shares or ADRs
that are treated
as “marketable
stock” 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 U.S. Holder would include in ordinary
income or loss for each taxable year an amount equal to the difference
between, as of the close of the taxable year, the fair market value of the
ordinary shares
or ADRs and
the U.S. Holder's
adjusted tax
basis in such
ordinary shares
or ADRs. Losses
would be allowed
only to the
extent of
net mark-to-market
gain previously
included
by the
U.S. Holder
under the
election
for prior
taxable
years.
If a
U.S. Holder
makes a
mark-to-market
election, then, in any taxable year for which we are classified
as a PFIC, tax rules that apply to distributions by corporations
that are not PFICs
would apply to distributions
by us (except that the lower applicable capital
gains rate for qualified dividend income
would not apply). If a U.S.
Holder makes a valid
mark-to-market
election and we
subsequently
cease to be classified
as a PFIC, the U.S. Holder
will not be required
to take
into account
the mark-to-market
income or loss
described above
during any period
that we are
not classified
as a PFIC. In
addition, because,
as a
technical
matter, a mark-to-market
election cannot
be made for
any lower-tier
PFICs that we
may own, a U.S.
Holder may
continue to be
subject
to the PFIC rules
with respect
to such U.S. Holder’s
indirect interest
in any investments
held by us that
are treated
as an equity interest
in a PFIC
for U.S.
federal income
tax purposes.
U.S. Holders
should consult
their tax
advisors
with respect
to the application
and effect
of making
the mark-
to-market
election for
their ordinary
shares or
ADRs.
In the case
of a U.S. Holder
who holds ordinary
shares or
ADRs 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
ADRs and
if we comply
with certain
reporting
requirements.
However, we
do not intend
to provide
the information
necessary
for U.S. Holders
to make qualified
electing fund
elections.
We believe that
we were
not a
PFIC for
our taxable
year ended
June 30,
2022. There
can be
no assurance
regarding
our PFIC
status for
the current
taxable year or foreseeable
future taxable years,
however, because our PFIC status
is a factual determination
made annually that will
depend, in
part, upon
the composition
of our income
and assets.
The value
of our assets
for purposes
of the asset
test, including
the value
of our goodwill
and
unbooked intangibles,
may be determined
in part by reference
to the market price
of our ordinary shares
or ADRs from time
to time (which may
be volatile). Because we
will generally take
into account our
current market capitalization in estimating the
value of
our goodwill and
other
unbooked
intangibles,
our PFIC
status
for the
current
taxable
year and
foreseeable
future
taxable
years may
be affected
by our
market
capitalization.
84
The rules relating to PFICs are complex. U.S. Holders should consult their tax advisors regarding
the application of the PFIC rules to
their investments
in our ordinary
shares or ADRs.
Disposition
of Ordinary
Shares or ADRs
A U.S. Holder
will generally
recognize
gain or loss
on the sale,
exchange, or
other taxable
disposition
of ordinary
shares or
ADRs in an
amount equal
to the difference
between the U.S.
dollar value
of the amount realized
on the disposition
and such holder's
adjusted tax
basis in the
ordinary shares or
ADRs. Subject to
the discussion above
under the heading
“Passive Foreign Investment Company”, such gain
or loss
will
generally be long-term capital gain or loss a
if the U.S. Holder’s holding period in
the ordinary shares or ADRs exceeds one year.
Long-term
capital gains
of individuals
and certain other
non-corporate
U.S. Holders
are generally
eligible for
a reduced rate
of taxation. The
deductibility
of
capital
losses
is subject
to limitations.
Gain
or loss
recognized
by a
U.S. Holder
on the
taxable
disposition
of ordinary
shares
or ADRs
will generally
be treated
as U.S. source
gain or loss
for U.S. foreign
tax credit
purposes.
85
In the case of a cash basis U.S. Holder who receives
rands in connection with the
taxable disposition
of ordinary shares or ADRs,
the
amount realized
will be
based on
the spot
rate as
determined
on the
settlement
date of
such exchange.
A U.S.
Holder who
receives
payment in
rand
and converts rand
into U.S. 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 U.S. Holder
may elect the
same treatment required of cash basis taxpayers with respect to
a taxable disposition of
ordinary
shares
or ADRs,
provided
that the
election
is applied
consistently
from year
to year.
Such election
may not
be changed
without
the consent
of the IRS.
In the event
that an
accrual basis
U.S. Holder
does not
elect to
be treated
as a cash
basis taxpayer,
such U.S.
Holder may
have a foreign
currency gain or
loss for U.S.
federal income tax purposes because of
the differences between the U.S.
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 U.S.
Holder on the
disposition
of such ordinary
shares or
ADRs.
Information
with respect
to Foreign Financial
Assets
Certain U.S. Holders
may be required to report on Internal
Revenue Service
Form 8938 information
relating to an interest
in ordinary
shares or ADRs,
subject to certain
exceptions (including an exception for assets held
in accounts maintained by
certain financial institutions,
although the account
itself may be reportable
if held at a non-U.S. financial
institution).
U.S. Holders should
consult their
tax advisers regarding
the effect, if any, of this reporting requirement
on their acquisition,
ownership and disposition
of ordinary shares or ADRs.
U.S. Holders should
consult their
tax advisors
regarding application
of the information
reporting and
backup withholding
rules.
10F. DIVIDENDS AND PAYING AGENTS
Not applicable.
10G. STATEMENT BY EXPERTS
Not applicable.
10H. DOCUMENTS
ON DISPLAY
DRDGOLD files annual
reports on Form 20-F and reports
on Form 6-K with the SEC. You may access this information
at the SEC’s
home page (http://www.sec.gov). Copies of the documents referred to herein may be inspected at DRDGOLD Limited’s offices by
contacting
DRDGOLD Limited,
P.O. Box 390, Maraisburg,
Johannesburg,
South Africa
1700. Attn:
Company Secretary.
Tel No. +27-11-470-2600.
10I. SUBSIDIARY
INFORMATION
Not applicable.
ITEM 11. 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
and credit
risks. Refer to Item 18. ‘‘Financial Statements - Note 27 - Financial instruments’’ of the consolidated financial statements
for a qualitative and
quantitative
discussion
of our exposure
to these market
risks.
Our long-term strategy
is to
remain unhedged and
to keep
borrowings to a
minimum.
During fiscal 2022
we do
not hold
or issue
derivative financial instruments
for speculative purposes, nor did we hedge forward gold
sales.
However, in instances where we need
to incur
medium-term
borrowings
to finance
growth projects
that introduce
some liquidity
risk to
the Group,
we may
mitigate
this liquidity
risk by
entering
into an arrangement
to provide price
protection against
a possible decrease
in the Rand gold price
while borrowings
are in place.
For example in
fiscal 2019
we entered
into a hedging
instrument
in the form
of a collar
in respect
of 50,000 ounces
of gold that
expired at
the end of
May 2019.
Commodity
price risk
The rand 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,
rand gold prices
have fluctuated
widely and are
affected by numerous
industry factors
over which we
have no control.
The aggregate
effect of these
factors on the
rand gold price
is impossible
for us to predict.
The rand price
of gold may
not remain
at a level
allowing us
to economically
exploit our
reserves.
It is
our long-term
policy
not to
hedge
this commodity
price
risk. However,
in instances
where
we need
to incur
medium-term
borrowings
to finance growth
projects that introduce
some liquidity risk
to the Group, we may mitigate
this liquidity risk
by entering into an arrangement
to
provide price
protection
against a
possible decrease
in the Rand
gold price
while borrowings
are in place.
86
Concentration
of credit
risk
Credit risk
is the
risk of
financial
loss to
us if
a customer
or counterparty
to a
financial
instrument
fails to
meet its
contractual
obligations,
and arises
principally
from our trade
and other receivables
from customers
.
The Group manages its exposure to credit risk on cash and cash equivalents
and Guardrisk Cell Captive (classified
as investments in
rehabilitation
and other funds
in the statement
of financial
position), mandating
the Guardrisk
Cell Captive
to diversify
the funds across
a number
of major financial
institutions,
as well as
investing funds
in low-risk,
interest-bearing
cash and cash
equivalents.
The Group manages
its exposure
to credit risk
on trade receivables
by selling gold
on a cash on delivery
basis. The Group
manages its
exposure to credit risk
on other
receivables by dealing with
a number
of counterparties, ensuring that these
counterparties are of good
credit
standing
and transacting
on a
secured
or cash
basis where
considered
required.
Receivables
are regularly
monitored
and assessed
for recoverability.
Foreign currency
risk
Our reporting
and functional
currency
is South
African
rand. Although
gold is
sold in
US dollars,
the Company
is obliged
to convert
this
into rands. No
hedges were entered into during fiscal 2022.
We
are thus exposed to
fluctuations in the US dollar/rand exchange rate. Foreign
exchange
fluctuations
affect the
cash flow
that we
will realize
from our
operations
as gold
is sold
in US
dollars,
while production
costs are
incurred
primarily in
rands. Our results
are positively
affected when
the US dollar
strengthens
against the rand
and adversely
affected when the
US dollar
weakens against
the rand. Our
cash and cash
equivalent
balances are
mostly held
in South African
rands.
Liquidity risk - Long-term debt
Set out below is an analysis of our debt as at June 30, 2022 consisting of capital and interest related to lease liabilities. All of
our long-term debt is denominated in South African rand.
Interest rate
Total
6.4% - 10.3%
R'm
Repayment period
2023
22.4
2024
15.7
2025
8.4
2026
7.6
2027
3.4
2028
2.1
Total
59.6
Based on our fiscal year 2022 financial results, a hypothetical 100 basis points (increase)/decrease in interest rate activity would
(increase)/decrease our interest expense by R0.5 million.
ITEM 12. DESCRIPTION
OF SECURITIES
OTHER THAN EQUITY
SECURITIES
See Item 9.
"The Offer and
Listing Details".
12A. DEBT SECURITIES
Not applicable
.
12B. WARRANTS AND RIGHTS
Not applicable.
12C. OTHER SECURITIES
Not applicable.
87
12D. AMERICAN
DEPOSITARY SHARES
Depositary
Fees and Charges
DRDGOLD’s American Depository Shares,
or ADSs, each representing ten of DRDGOLD’s ordinary shares,
are traded on the New
York Stock Exchange, or
NYSE under
the symbol “DRD”
(until December
29, 2011 our ADSs
were traded
on the Nasdaq
Capital Market
under
the symbol “DROOY”). The ADSs are
evidenced by American Depository Receipts, or ADRs, issued by The
Bank of New
York
Mellon, as
Depository under
the Amended
and Restated
Deposit Agreement
dated as of August
12, 1996, as
amended and restated
as of October
2, 1996, as
further amended
and restated
as of August
6, 1998,
as further
amended and
restated
July 23, 2007,
among DRDGOLD
Limited, The
Bank of New
York
Mellon and owners and
beneficial owners of ADRs from
time to time.
ADR holders may have
to pay
the following service fees to
the
Depositary:
Service
Fees (USD)
Issuance of ADSs, including issuances resulting from a distribution of
ordinary shares or rights
$5.00 (or less) per 100 ADSs (or portion thereof)
1
Cancellation of ADSs for the purpose of withdrawal, including if the Deposit
Agreement terminates
$5.00 (or less) per 100 ADSs (or portion thereof)
1
Distribution of cash dividends or other cash distributions
2 cents (or less) per ADS (or portion thereof)
Distribution of securities distributed to holders of deposited securities which
are distributed by the Depositary to ADS registered holders
$5.00 (or less) per 100 ADSs (or portion thereof)
[1]
These fees are typically paid to the Depositary by the brokers on behalf of their clients receiving the newly-issued ADSs from the
Depositary or delivering the ADSs to the Depositary for cancellation. The brokers in turn charge these transaction fees to their clients.
In addition, ADR holders are responsible for certain fees and expenses incurred by the Depositary on their behalf including
(1) taxes and other governmental charges, (2) such registration fees as may from time to time be in effect for the registration of transfers
of ordinary shares generally on the share register and applicable to transfers of ordinary shares to the name of the Depositary or its
nominee or the Custodian or its nominee on the making of deposits or withdrawals, (3) such cable, telex and facsimile transmission
expenses as are expressly provided in the Deposit Agreement, and (4)
such expenses as are incurred by the Depositary in the conversion
of foreign currency to U.S. Dollars.
The Depositary collects its fees for delivery and surrender of ADSs
directly from investors depositing or surrendering ADSs for the
purpose of withdrawal or from intermediaries acting for them. The Depositary, collects fees for making distributions
to investors by deducting
those fees
from the amounts
distributed
or by selling
a portion of
distributable
property to
pay the fees.
The Depositary
may collect
its annual fee
for depositary services by deductions from cash distributions or by directly billing investors or by charging the book-entry system accounts of
participants
acting for them.
The Depositary
may generally
refuse to provide
fee-attracting
services until
its fees
for those services
are paid.
Depositary
Payments
The Bank of
New York Mellon, as
Depositary, has
agreed to
reimburse
DRDGOLD an
annual amount
of $75,000 mainly
consisting
of
accumulated contributions towards the Company’s
investor relations activities (including investor meetings, conferences and
fees of
investor
relations
service vendors).
After the
deduction
of other
fees, the
annual reimbursement
for the
year ended
June 30,
2022 amounts
to approximately
$11,721 (June 30, 2021: $51,944, June 30, 2020: $16,237). DRDGOLD is also entitled to a
25% share of the dividend fees which amounts to
approximately
$93,565for the
year ended
June 30, 2022
(June 30,
2021: $65,551,
June 30, 2020:
$nil).
88
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
None
ITEM 15. CONTROLS AND PROCEDURES
15A. Disclosure
Controls and
Procedures
As
of
June
30,
2022,
our
management,
with
the
participation
of
our
Chief
Executive
Officer
and
Chief
Financial
Officer
have
evaluated the effectiveness of our
disclosure controls and procedures (as
this term is defined in
Rules 13a-15(e) and 15d-15(e)
of the Exchange
Act).
Our
management,
including
the
Chief
Executive
Officer
and
Chief
Financial
Officer,
concluded
that
our
disclosure
controls
and
procedures were effective as of June 30, 2022.
Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by us
in the reports
that we file
or submit under
the Securities Exchange Act
of 1934 is
recorded, processed, summarized and
reported, within the
time periods specified in the
applicable rules and forms
and that such information required
to be disclosed by
us in the reports we
file or submit
under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
There are inherent limitations in the effectiveness of any system of disclosure controls and procedures.
These limitations include the
possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, any such system can only
provide
reasonable assurance of achieving the desired control objectives.
15B. Management’s Annual
Report on Internal
Control Over
Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial
reporting. Internal control
over financial reporting is
defined in Rule
13a-15(f) or 15d-15(f)
promulgated under the
Securities Exchange Act
of 1934 as
a process designed
by,
or under
the supervision
of, our
Chief Executive
Officer and
Chief Financial
Officer and
effected by
our board,
management and
other
personnel to provide
reasonable assurance regarding
the reliability of
financial reporting and
the preparation of
financial statements for
external
purposes in accordance
with IFRS. Under
Section 404(a) of
the Sarbanes Oxley
Act of 2002,
management is required
to assess our
internal
controls surrounding the
financial reporting process
as at the
end of each fiscal
year. Based
on that assessment, management
is to determine
whether or not our internal controls over financial reporting are effective.
Internal control over financial reporting includes those policies and procedures that:
●
pertain to the maintenance
of records that in reasonable
detail accurately and fairly
reflect the transactions and
dispositions of
our assets;
●
provide
reasonable
assurance
that
transactions
are
recorded
as
necessary
to
permit
preparation
of
financial
statements
in
accordance with
IFRS, and
that our
receipts and
expenditures are
being made
only in
accordance with
authorizations of
our
management and board; and
●
provide reasonable
assurance regarding
prevention or
timely detection
of unauthorized
acquisition, use
or disposition
of our
assets that could have a material effect on our financial statements.
Because of its inherent limitations, internal control
over financial reporting may not prevent
or detect misstatements. Instead, it must
be noted that even those systems that management
deems to be effective can only provide reasonable
assurance with respect to the preparation
and presentation of
our financial statements. Also,
projections of any evaluation
of effectiveness to
future periods are subject
to the risk that
controls may become inadequate because of changes in conditions, or the degree of compliance with the policies and procedures.
Our
management
assessed
the
effectiveness
of
our
internal
control
over
financial
reporting
as
of
June 30, 2022.
In
making
this
assessment, our
management used
the criteria
set forth
by the
Internal Control
-Integrated Framework
(2013)
issued by
the Committee
of
Sponsoring Organizations of the Treadway Commission (COSO). Based
on our assessment and those criteria,
our management concluded that
as of June 30, 2022 our internal control over financial reporting was effective.
15C. Attestation
Report of the
independent registered
public accounting
firm
The effectiveness of internal control over financial reporting as
of June 30, 2022 was audited by KPMG
Inc., independent registered
public accounting firm, as stated in their report on page F-1 of this Form 20-F.
15D. Changes
in Internal
Control Over
Financial Reporting
During the
year ended
June 30,
2022, there
have not
been any
changes in
our internal
control over
financial reporting
that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
89
ITEM 16. [RESERVED]
ITEM 16A. AUDIT
COMMITTEE FINANCIAL
EXPERT
Mr. J.A. Holtzhausen, Chairman
of the Audit Committee,
has been determined
by our board
to be an
audit committee financial expert
within the meaning
of the
Sarbanes-Oxley Act,
in accordance with
the Rules
of the New
York Stock Exchange, or
NYSE, and
rules promulgated
by the SEC
and independent both
under the New York Stock Exchange Rules and
the South African Johannesburg
Stock Exchange Rules.
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.
ITEM 16B. CODE
OF ETHICS
We have adopted a Code
of Conduct that
applies to all
senior executives including
our Non-Executive Chairman,
the Chief Executive
Officer, Chief Financial Officer, Chief Operating Officer and the Financial Directors and Managing Directors at
our mining operations as well
as
all
other
employees.
The
Code
of
Conduct
can
be
accessed
on
the
Company’s
website
at
the
following
web
address:
www.drdgold.com/about-us/governance.
ITEM 16C. PRINCIPAL ACCOUNTANT
FEES AND SERVICES
KPMG Inc. has served
as our independently
registered
public accountant
for the fiscal years
ended June 30, 2022,
2021 and 2020,
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
audit services
and other services
rendered by
KPMG Inc.
to us in fiscal
year 2022 and
2021:
Audit Fees
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.
Auditors' remuneration
Year ended
June 30,
2022
2021
R m
R m
Audit fees
8.6
9.1
All other fees
0.4
0.7
Total
9.0
9.8
All Other
Fees
The all other fees during fiscal year 2022 consist of the following:
●
R0.2 million with
respect to limited assurance
provided by KPMG on
specified items contained in
our Integrated Report
for fiscal
year 2021; and
●
R0.2 million with
respect to limited assurance
provided by KPMG on
specified items contained in
our Integrated Report
for fiscal
year 2022;
The all other fees during fiscal year 2021 consist of the following:
●
R0.5 million with
respect to limited assurance
provided by KPMG on
specified items contained in
our Integrated Report
for fiscal
year 2020; and
●
R0.2 million with
respect to limited assurance
provided by KPMG on
specified items contained in
our Integrated Report
for fiscal
year 2021
The Audit Committee
is directly responsible
for recommending the
appointment, re-appointment and
removal of the
external auditors
as well
as 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.
90
ITEM 16D. EXEMPTIONS
FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES
OF EQUITY SECURITIES
BY THE ISSUER
AND AFFILIATED PURCHASERS
Not applicable
ITEM 16F. CHANGE IN REGISTRANT'S
CERTIFYING ACCOUNTANT
To comply with section
10(1)(a) of
the Auditing
Profession
Act, 26 of
2005, the Independent
Regulatory
Board for Auditors
(“
IRBA
”)
published the
rule on Mandatory
Audit Firm
Rotation (“
MAFR
”) for auditors
of all public
interest
entities, as
defined in section
290.25 to 290.26
of the amended IRBA Code of Professional Conduct for Registered Auditors. An audit firm, including a network firm as defined in the IRBA
Code of
Professional Conduct for
Registered Auditors, shall
not
serve as
the appointed
auditor of
a
public interest
entity for
more than
10
consecutive
financial
years. Thereafter,
the audit
firm will
only be
eligible
for reappointment
as the
auditor after
the expiry
of at
least five
financial
years. The requirement
is effective for financial years
commencing on or after 1 April 2023. On October 20, 2022, BDO South
Africa Inc. was
appointed by DRDGOLD’s Board
of Directors as
the Company’s independent principal accountants for the
fiscal year ending June
30, 2023
(subject to
shareholder
approval), after
a formal tender
process to
appoint a new
independent
registered
public accounting
firm.
KPMG Inc.
(“
KPMG
”) will resign
as independent
principal accountants
of the group
upon completion
of their audit
of the Company’s
consolidated
financial
statements
as of and for
the year
ended June
30, 2022 and
the effectiveness
of internal
control over
financial
reporting as
of
June 30, 2022,
and the issuance
of their report
thereon.
The audit reports
of KPMG on the
Group’s consolidated
financial
statements as
of and for
the years ended
June 30, 2022
and 2021 did
not contain
any
adverse opinion or
disclaimer of opinion,
nor were
they qualified
or
modified as
to uncertainty,
audit scope,
or
accounting
principles.
The audit
reports
of KPMG
on the
effectiveness
of internal
control over
financial
reporting
as of
June 30,
2022 and
2021 did
not contain
any adverse opinion or
disclaimer of opinion, nor
were they qualified or
modified as to
uncertainty, audit scope, or
accounting principles. In
connection with
the
audits of
the
Company’s financial
statements for
each of
the
two
fiscal years
ended June
30,
2022,
there were
(i)
no
disagreements
with KPMG,
as that
term is
used in
Item 16F(a)(1)(iv)
of Form
20-F over
any matters
of accounting
principles
or practices,
financial
statement disclosure,
or auditing scope or procedures, which, if not resolved to the satisfaction of KPMG,
would have caused
KPMG to make
reference
to the matter
in their report
and (ii) there
were no “reportable
events” as
defined in Item
16F(a)(1)(v)
of Form 20-F.
DRDGOLD
has provided
KPMG with
a copy
of the foregoing
disclosure
and has
requested
KPMG to
provide it
with a
letter addressed
to the SEC stating
whether or
not KPMG agrees
with the above
statements.
A copy of such
letter, dated October
28, 2022 is filed
as an exhibit
to
this annual report
on Form 20-F, see “Item 19: Exhibits – 16.1"Letter
from KPMG Inc. to the Securities
and Exchange Commission
regarding a
change in registrant's
certifying accountant”.
ITEM 16G. CORPORATE GOVERNANCE
As a foreign private issuer with shares listed on the NYSE, we are subject to corporate governance
requirements imposed by NYSE.
Under section 303A.11 of the NYSE Listing Standards, a foreign private issuer such as us may
follow its home country corporate governance
practices in lieu
of certain of the NYSE Listing
Standards on corporate
governance. DRDGOLD's
home country corporate
governance practices
are regulated by the Listing Requirements of the
JSE
(the "
JSE Listing
Requirements
").
We
are also exempt from certain NYSE
corporate
governance requirements as a "controlled company". The following paragraphs summarize the
significant ways in which
DRDGOLD's home
country
corporate
governance
standards
and its
corporate
governance
practices
differ from
those followed
by domestic
companies
under the
NYSE
Listing Standards.
Shareholder meeting
quorum requirements
●
Section 310.00 of the NYSE
Listing Standards
provides that the
quorum required
for any meeting of holders
of common stock should
be
sufficiently high
to
insure a
representative vote.
Consistent with
the
practice of
companies incorporated
in
South
Africa, our
Memorandum of Incorporation requires a quorum of
three members present with sufficient voting
powers in person or
by proxy
to
exercise
in aggregate
25% of the voting
rights and
we have elected
to follow our
home country
rule.
●
The NYSE Listing
Standards require
that the non-management
directors of
US-listed companies
meet at regularly
scheduled executive
sessions without
management.
The JSE Listings
Requirements
do not require
such meetings
of listed
company non-executive
directors.
The board
has unrestricted access
to all
company information, records, documents and
property. Directors
may,
if necessary,
take
independent professional advice at the
Company’s expense and
non-executive directors have access to
management and may
meet
separately
with management,
without the
attendance
of executive
directors.
●
The NYSE Listing Standards
require U.S. listed companies
to have a nominating/corporate
governance committee
composed entirely
of independent
directors.
The JSE
Listing
Requirements
also require
the appointment
of such
a committee,
and stipulate
that all
members
of
this
committee must
be
non-executive
directors, the
majority of
whom
must
be
independent. DRDGOLD has
a
Nominations
Committee
which currently
comprises
five non-executive
directors,
all of
whom are
independent
under the
NYSE Listing
Standards
and
the JSE Listing
Requirements,
except for
T.J. Cumming. The Nominations
Committee
is chaired
by the Chairman
of DRDGOLD.
91
●
The NYSE
Listing Standards require
U.S. listed
companies to
have a
compensation committee composed entirely
of
independent
directors.
The JSE Listing
Requirements
merely require
the appointment
of such a committee
but not that its
members be
independent.
DRDGOLD has appointed
a Remuneration Committee,
currently comprising
five board members,
all of whom are independent
under
both the JSE
Listing Requirements
and the NYSE
Listing Standards,
except for
T.J. Cumming.
ITEM 16H. MINE
SAFETY DISCLOSURES
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
92
PART III
ITEM 17. FINANCIAL
STATEMENTS
Not applicable.
ITEM 18 FINANCIAL STATEMENTS
The following annual financial statements and related auditor’s report are filed as part of this Annual
Report
Page
Report of the Independent Registered Public Accounting Firm
-
KPMG
Firm ID
1025
F‑1
Consolidated statement of profit or loss and other comprehensive income for the years ended June 30, 2022,
2021 and 2020
F-4
Consolidated statement of financial position at June 30, 2022 and 2021
F‑5
Consolidated statement of changes in equity for the years ended June 30, 2022, 2021 and 2020
F‑6
Consolidated statement of cash flows for the years ended June 30, 2022, 2021 and 2020
F‑7
Notes to the consolidated financial statements
F‑8 to F‑44
Note
About these consolidated financial statements
1
Use of accounting assumptions, estimates and judgements
2
New standards, amendments to standards and interpretations
3
Performance
Revenue
4
Results from operating activities
5
Cost of sales
5.1
Other income
5.2
Administration expenses and other costs
5.3
Finance income
6
Finance expense
7
Earnings per share
8
Resource assets and related liabilities
Property, plant and equipment
9
Right of use assets and leases
10
Provision for environmental rehabilitation
11
Investment in rehabilitation and other funds
12
Working capital
Cash and cash equivalents
13
Cash generated by operations
14
Trade and other receivables
15
Trade and other payables
16
Inventories
17
Tax
Income tax
18
Income tax expense
18.1
Deferred tax
18.2
Employee matters
Employee benefits
19
Cash-settled tong-term incentive scheme
19.1
Equity settled tong-term incentive scheme
19.2
Transactions with key management personnel
19.3
Capital and equity
Capital management
20
Equity
21
Disclosure items
Interest in subsidiaries
22
Operating segments
23
Payments made under protest
24
Other investments
25
Contingencies
26
Financial instruments
27
Related parties
28
Subsequent events
29
F-1
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
DRDGOLD Limited:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We
have audited the
accompanying consolidated statements of
financial position of DRDGOLD
Limited and subsidiaries
(the Company) as
of June
30, 2022 and 2021, the
related consolidated statements of profit
or loss and other comprehensive
income, changes in equity,
and cash flows for each
of the
years in
the three-year
period ended
June 30,
2022, and
the related
notes (collectively,
the consolidated
financial statements).
We
also have
audited the
Company’s
internal control
over financial
reporting as
of June
30, 2022,
based on
criteria established
in Internal
Control –
Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as
of June 30,
2022 and 2021,
and the results of
its operations and its
cash flows for
each of the years
in the three-year
period ended June
30, 2022, in
conformity
with International
Financial Reporting
Standards
as issued
by the
International Accounting
Standards
Board. Also
in our
opinion, the
Company maintained,
in all material
respects, effective
internal control over
financial reporting as
of June
30, 2022 based
on criteria established
in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The
Company’s
management
is
responsible
for
these
consolidated
financial
statements,
for
maintaining
effective
internal
control
over
financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to
express an opinion on the Company’s consolidated
financial statements
and an
opinion on the
Company’s internal
control over financial
reporting based on
our audits. We
are a public
accounting firm registered
with the
Public Company Accounting
Oversight Board (United
States) (PCAOB) and
are required to
be independent with
respect to the
Company in accordance
with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our
audits in
accordance with
the standards
of the
PCAOB. Those
standards require
that we
plan and
perform the
audits
to obtain
reasonable assurance about whether the consolidated financial
statements are free of material
misstatement, whether due to error or fraud,
and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits
of the
consolidated financial
statements included
performing procedures
to assess
the risks
of material
misstatement of
the consolidated
financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a
test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
Our audit of internal control
over financial reporting included
obtaining an understanding of internal
control over financial reporting, assessing
the risk
that a material
weakness exists, and
testing and evaluating the
design and operating
effectiveness of internal
control based on
the assessed risk.
Our
audits also included
performing such other
procedures as we
considered necessary in
the circumstances. We believe that
our audits provide
a reasonable
basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A
company’s
internal
control over
financial
reporting
is
a process
designed
to provide
reasonable
assurance
regarding
the
reliability
of
financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail,
accurately and
fairly reflect
the transactions
and dispositions
of
the assets
of
the company;
(2) provide
reasonable assurance
that transactions
are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of
the company are
being made
only in
accordance with authorizations
of management
and directors of
the company; and
(3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have
a material effect on the financial statements.
Because of its
inherent limitations, internal
control over financial
reporting may
not prevent or
detect misstatements.
Also, projections of
any evaluation
of effectiveness to
future periods are subject
to the risk that
controls may become inadequate
because of changes in
conditions, or that the
degree of
compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical
audit matters
communicated below
are matters
arising from
the current
period audit
of the
consolidated financial
statements that
were
communicated or required
to be communicated
to the audit
committee and that:
(1) relate to
accounts or
disclosures that are
material to the
consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does
not alter in any way
our opinion on the consolidated
financial statements, taken as
a whole, and we are
not, by communicating the critical
audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the provision for environmental rehabilitation
As discussed in
note 11
to the consolidated
financial statements, the
Company has recorded
a provision for
environmental rehabilitation of
R 517.7
million
as
of
June
30,
2022.
The
Company’s
estimates
of
undiscounted
environmental
rehabilitation
costs
used
in
calculating
the
provision
are
F-2
determined with the
assistance of an
independent expert and
are based on
the Company’s
environmental management plans
which are developed
in
accordance
with
current
regulatory
requirements,
the
Company’s
life-of-mine
(“LOM”)
plan
(discussed
in
note
9
to
the
consolidated
financial
statements) and the planned method and timing of rehabilitation.
We
identified the evaluation
of the provision
for environmental rehabilitation
as a critical
audit matter.
Subjective auditor judgment
and specialized
skills and knowledge were required to evaluate the Company’s LOM plan, specifically the estimated quantities of economically recoverable gold
and
the estimated rand gold price, that impact the planned method of rehabilitation.
The following are the primary procedures we performed to address this critical audit matter:
●
We
evaluated the design
and tested the
operating effectiveness of
certain internal
controls relating to
the Company’s
process to determine
the
environmental rehabilitation provision. This
included controls related to the
determination of the Company’s
LOM plan, specifically related to
the estimated quantities of economically recoverable gold, and the estimated rand gold price which
impact the planned method of rehabilitation;
●
We
involved
environmental rehabilitation
professionals
with
specialized skills
and knowledge,
who assisted
in
evaluating
the
results of
the
Company’s undiscounted estimated environmental costs detailed in the independent environmental expert’s reports. This was performed by:
-
evaluating the objectivity, knowledge, skills and
ability of the Company’s independent
expert by comparing their
professional qualifications,
experience and affiliations against industry norms and obtained an understanding of their scope of work; and
-
evaluating the undiscounted estimated
environmental costs for a
selection of sites by
performing site inspections and
challenging the planned
method of rehabilitation that was determined for each selected site. This
was performed by comparing the planned method of rehabilitation
to the
approved LOM
plan, confirming
that it
is compliant
with the
environmental management
plans as
approved by
the Department
of
Mineral Resources and Energy, where applicable, aligned with current industry practices and regulatory requirements.
●
We evaluated the objectivity, knowledge,
skills and
ability of
the Company’s independent
mineral resources
experts, that reviewed
management’s
mineral reserves and resources estimates, by comparing their professional qualification, experience and affiliation against industry norms;
●
We
evaluated the
mineral resources
experts’ reports
by vouching
a selection
of the
reported reclamation
sites to
environmental approvals
or
mining
rights and
evaluated the
methodology
and certain
key assumptions
used to
measure the
quantities of
economically recoverable
gold
against industry norms;
●
We evaluated
the reasonableness of the total estimated quantities of economically recoverable gold as indicated
in the LOM plan by agreeing a
selection of
period-to-period movements to
the current
period actual
recovered gold
and increments
or adjustments
to the
data in
the mineral
resources expert’s report as well as assessing these movements considering our knowledge of the Company’s business and the industry; and
●
We
involved
valuation
professionals
with
specialized
skills
and
knowledge,
who
assisted
in
evaluating
the
estimated
rand
gold
price
by
comparing it to an independently developed range of rand gold prices based on analyst reports.
Evaluation of deferred tax liabilities related to the Ergo and FWGR operations
As discussed
in Note
18 to
the consolidated
financial statements,
the Company
has recorded
a deferred
tax liability
of R452
million as
of June
30,
2022, a portion of which
related to the Ergo and
FWGR operations. The deferred tax
liabilities related to the Ergo and
FWGR operations are calculated
by applying a
forecast weighted average tax
rate to the
temporary differences. The
calculation of the
forecast weighted average
tax rate requires the
use of assumptions
and estimates, including
the Company’s life-of-mine (“
LOM
”) plan (as
discussed in note
9 to the
consolidated financial statements)
that is applied to calculate the expected future profitability.
We identified the
valuation of deferred tax liabilities related to the Ergo
and FWGR operations as a critical audit matter.
Subjective auditor judgment
and specialized skills and knowledge were required
to evaluate the expected future profitability, that is based
on the LOM plan, which includes certain
key assumptions about the estimated quantities of economically recoverable gold and the estimated rand gold price.
The following are the primary procedures we performed to address this critical audit matter:
●
We
evaluated
the
design
and
tested
operating
effectiveness
of
certain
internal
controls
relating
to
the
Company’s
process
to
develop
the
assumptions and estimates used in
calculating the forecast weighted average tax
rate. This included controls related to
the determination of the
Company’s LOM
plan, specifically related to
the estimated rand gold
price and estimated quantities
of economically recoverable
gold that are
applied in determining the expected future profitability;
●
We
evaluated
the
objectivity,
knowledge,
skills
and
ability
of
the
Company’s
independent
mineral
resources
experts,
who
reviewed
management’s
mineral
reserves
and
resources
estimates,
by
comparing
their
professional
qualifications,
experience
and
affiliations
against
industry norms;
●
We
evaluated the
mineral resources
experts’ reports
by vouching
a selection
of the
reported reclamation
sites to
environmental approvals
or
mining
rights and
evaluated the
methodology
and certain
key assumptions
used to
measure the
quantities
of economically
recoverable gold
against industry norms;
●
We evaluated the
reasonableness of the total estimated quantities of economically recoverable gold as indicated in
the LOM plan by agreeing a
selection of
period-to-period movements to
the current period
actual recovered gold
and increments or
adjustments to the
data in the
expert’s
report, as well as assessing these movements considering our knowledge of the Company’s business and the industry;
●
We
involved
valuation
professionals
with
specialized
skills
and
knowledge,
who
assisted
in
evaluating
the
estimated
rand
gold
price
by
comparing it to an independently developed range of rand gold prices
based on analyst reports;
F-3
●
We
evaluated the Company’s
ability to accurately
forecast its expected
future profitability by
comparing the historical
projections of the
rand
gold price and estimated quantities of economically recoverable gold to actual results; and
●
We
performed sensitivity analyses to
assess the impact that
changes in the
estimated rand gold price
and estimated quantities
of economically
recoverable gold could have had on the expected future profitability and resultant calculated forecast weighted average tax rate.
Valuation
of the investment in Rand Refinery Proprietary Limited
As discussed in Note 25
to the consolidated financial statements,
the Company has an
unlisted equity investment in Rand
Refinery Proprietary Limited
(“
RR
”) that
is valued
at R 136.1
million as
of June 30,
2022. The fair
value of
the RR investment
includes the valuation
of the
refining operations
(excluding Prestige Bullion) using a
free cash flow (“
FCF
”) model and the valuation of
RR’s investment in
Prestige Bullion (Prestige) using a finite
life dividend discount (“
DD
”) model.
We identified the valuation of the investment in RR as a critical audit matter. Subjective auditor judgment and specialized
skills and knowledge were
required to
evaluate certain
key inputs
used in
the FCF
and DD
models, specifically
the forecasted
average gold
and silver
prices and
the discount
rates, including the weighted average
cost of capital of RR
and cost of equity
for Prestige (“
CoE
”), as well as
the marketability and minority discounts,
applied in the calculation of the total fair value for RR.
The following are the primary procedures we performed to address this critical audit matter:
●
We evaluated the design and tested the operating effectiveness of certain internal
controls related to the Company’s process to determine the fair
value of the investment in
RR. This included controls related
to the determination of the
forecasted average gold and
silver prices, discount rates,
and the marketability and minority discounts;
●
We involved valuation professionals with specialized skills and knowledge, who assisted in:
-
evaluating the forecasted
average gold and silver
prices used in the
FCF and DD models
by comparing them to
independent analysts’ reports;
-
evaluating the discount rates used by management in the FCF and DD valuation models as well as the marketability and minority discounts
by comparing them
against discount rate
ranges and marketability
and minority discounts
that we independently
developed using publicly
available macroeconomic indicators and market data for comparable entities;
-
developing an independent range of fair values, using the independently developed discount rates
and the forecasted average gold and silver
prices, and compared our range of fair values to the Company’s calculated fair value for the investment in RR; and
-
performing sensitivity analyses to assess the impact on the calculated fair
value of changes to the certain key inputs used in
the FCF and DD
models.
/s/
KPMG Inc.
We have served as the Company’s
auditor since 2003.
Johannesburg, Republic of South Africa
October 28, 2022
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended June 30, 2022
F-4
Amounts in R million
Note
2022
2021
2020
Revenue
4
5,118.5
5,269.0
4,185.0
Cost of sales
5.1
(3,741.5)
(3,388.2)
(2,937.9)
Gross profit from operating activities
1,377.0
1,880.8
1,247.1
Other income
5.2
91.3
0.1
0.7
Administration expenses and other costs
5.3
(161.2)
(64.0)
(309.9)
Results from operating activities
1,307.1
1,816.9
937.9
Finance income
6
225.8
216.2
109.8
Finance expense
7
(74.8)
(69.5)
(68.8)
Profit before tax
1,458.1
1,963.6
978.9
Income tax
18.1
(334.3)
(523.7)
(343.9)
Profit for the year
1,123.8
1,439.9
635.0
Other comprehensive income
Items that will not be reclassified to profit or loss, net of tax
Net fair value adjustment on equity investments at fair value through other
comprehensive income
(9.1)
(34.4)
190.6
Fair value adjustment on equity investments at fair value through other
comprehensive income
25
(15.7)
(28.2)
191.8
Deferred tax thereon
18.2
6.6
(6.2)
(1.2)
Total other comprehensive income for the year
(9.1)
(34.4)
190.6
Total comprehensive income for the year
1,114.7
1,405.5
825.6
Earnings per share
Basic earnings per share (SA cents per share)
8
131.2
168.4
82.5
Diluted basic earnings per share (SA cents per share)
8
130.6
167.2
81.0
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
at June 30, 2022
F-5
Amounts in R million
Note
2022
2021
ASSETS
Non-current assets
4,001.2
3,675.3
Property, plant and equipment
9
3,084.1
2,809.7
Investments in rehabilitation and other funds
1
12
710.8
652.2
Payments made under protest
24
40.4
40.5
Other investments
25
151.4
167.1
Deferred tax asset
18.2
14.5
5.8
Current assets
3,077.0
2,672.7
Inventories
17
389.3
340.0
Current tax receivable
12.6
8.6
Trade and other receivables
15
149.5
144.1
Cash and cash equivalents
13
2,525.6
2,180.0
TOTAL ASSETS
7,078.2
6,348.0
EQUITY AND LIABILITIES
Equity
5,439.9
4,820.4
Stated share capital
21.1
6,173.3
6,157.9
Retained earnings
(733.4)
(1,337.5)
Non-current liabilities
1,012.8
996.1
Provision for environmental rehabilitation
11
517.7
570.8
Deferred tax liability
18.2
451.9
377.1
Liability for post-retirement medical benefits
10.4
10.3
Lease liabilities
10.2
32.8
37.9
Current liabilities
625.5
531.5
Trade and other payables
16
598.4
509.8
Current portion of lease liabilities
10.2
19.5
16.9
Current tax liability
7.6
4.8
TOTAL LIABILITIES
1,638.3
1,527.6
TOTAL EQUITY AND LIABILITIES
7,078.2
6,348.0
1
Description of
the financial
statement caption
has changed
as it
now includes
funds other
than rehabilitation.
See note
12 for
more
detail.
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
for the year ended June 30, 2022
F-6
Stated
share
Other
Retained
Total
Amounts in R million
Note
capital
reserves
earnings
equity
Balance at June 30, 2019
5,072.8
453.6
(2,837.8)
2,688.6
Total comprehensive income
Profit for the year
635.0
635.0
Other comprehensive income
190.6
190.6
Total comprehensive income
-
-
825.6
825.6
Transactions with the owners of the parent
Contributions and distributions
Issue of ordinary shares
1,085.6
1,085.6
Expenses incurred on issue of ordinary shares
(0.5)
(0.5)
Reallocation of the equity instruments on exercise of the
Sibanye-Stillwater option
(453.6)
453.6
-
Dividend on ordinary shares
21.2
(565.1)
(565.1)
Equity settled share-based payment
19.2
6.0
6.0
Total contributions and distributions
1,085.1
(453.6)
(105.5)
526.0
Balance at June 30, 2020
6,157.9
-
(2,117.7)
4,040.2
Total comprehensive income
Profit for the year
1,439.9
1,439.9
Other comprehensive income
(34.4)
(34.4)
Total comprehensive income
-
-
1,405.5
1,405.5
Transactions with the owners of the parent
Contributions and distributions
Dividend on ordinary shares
21.2
(641.3)
(641.3)
Equity settled share-based payment
19.2
16.0
16.0
Total contributions and distributions
-
-
(625.3)
(625.3)
Balance at June 30, 2021
6,157.9
-
(1,337.5)
4,820.4
Total comprehensive income
Profit for the year
1,123.8
1,123.8
Other comprehensive income
(9.1)
(9.1)
Total comprehensive income
-
-
1,114.7
1,114.7
Transactions with the owners of the parent
Contributions and distributions
Dividend on ordinary shares
21.2
(513.6)
(513.6)
Treasury shares disposed of for the vesting of the equity-settled
share-based payment
21.1, 19.2
15.4
(15.4)
-
Equity settled share-based payment
19.2
18.4
18.4
Total contributions and distributions
15.4
-
(510.6)
(495.2)
Balance at June 30, 2022
21.1
6,173.3
-
(733.4)
5,439.9
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT
OF CASH FLOWS
for the year ended June 30, 2022
F-7
Amounts in R million
Note
2022
2021
2020
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
14
1,585.6
1,851.0
1,309.6
Finance income received
111.1
105.9
63.8
Dividends received
71.5
76.1
4.3
Finance expenses paid
(7.7)
(7.5)
(8.7)
Income tax paid
(262.7)
(452.1)
(240.1)
Net cash inflow from operating activities
1,497.8
1,573.4
1,128.9
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
(584.1)
(395.7)
(181.1)
Environmental rehabilitation payments to reduce decommissioning liabilities
11
(25.4)
(51.0)
(22.1)
Proceeds on disposal of property, plant and equipment
12.2
0.1
0.7
Investment in other funds
12
(28.9)
-
-
Net cash outflow from investing activities
(626.2)
(446.6)
(202.5)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of ordinary shares
21.1
-
-
1,085.6
Share issue expenses
-
-
(0.5)
Dividends paid on ordinary shares
(513.3)
(640.9)
(564.5)
Initial fees incurred on facility
-
(1.0)
-
Repayment of lease liabilities
10.2
(19.7)
(11.6)
(11.4)
Net cash (outflow)/inflow from financing activities
(533.0)
(653.5)
509.2
NET INCREASE IN CASH AND CASH EQUIVALENTS
338.6
473.3
1,435.6
Impact of fluctuations in exchange rate on cash held in foreign currencies
7.0
(8.4)
-
Cash and cash equivalents at the beginning of the year
2,180.0
1,715.1
279.5
CASH AND CASH EQUIVALENTS AT
THE END OF THE YEAR
13
2,525.6
2,180.0
1,715.1
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended June 30, 2022
F-8
1
ABOUT THESE CONSOLIDATED
FINANCIAL STATEMENTS
Reporting entity
The DRDGOLD
Group is
primarily involved
in the
retreatment of
surface gold.
The consolidated
financial statements
comprise
DRDGOLD Limited (the “
Company
”) and its subsidiaries
who are all wholly
owned subsidiaries and
solely operate in South
Africa
(collectively
the “
Group
” and
individually “
Group Companies
”).
The Company
is domiciled
in South
Africa
with a
registration
number of
1895/000926/06. The
registered address
of the
Company is
Constantia Office
Park, Cnr
14th Avenue
and Hendrik
Potgieter Road, Cycad House, Building 17, Ground Floor,
Weltevreden Park, 1709.
The DRDGOLD Group
is
50.1
% held by
Sibanye Gold Limited,
which in turn
is a wholly
owned subsidiary of
Sibanye Stillwater
Limited
(“
Sibanye-Stillwater
”).
Basis of accounting
The
consolidated
financial
statements
have
been
prepared
in
accordance
with
International
Financial
Reporting
Standards
(“
IFRS
”)
and
its
interpretations
issued
by
the
International
Accounting
Standards
Board
(“
IASB
”).
The
consolidated
financial
statements were approved by the board for issuance on October 28, 2022.
Functional and presentation currency
The functional and presentation currency of
DRDGOLD and its subsidiaries is
South African rand (“
Rand
”). The amounts in
these
consolidated financial statements
are rounded to
the nearest million
unless stated otherwise.
Significant exchange rates
during
the year are set out in the table below:
South African rand / US dollar
2022
2021
2020
Spot rate at year end
16.27
14.27
17.32
Average prevailing rate for the financial year
15.21
15.40
15.66
Basis of measurement
The consolidated financial statements are prepared on the historical cost basis, unless otherwise stated.
Basis of consolidation
Subsidiaries
Subsidiaries are
entities controlled
by the
Group. The
Group controls
an entity
when it
is exposed
to, or
has rights
to, variable
returns from its
involvement with the
entity and has
the ability to
affect those returns through
its power over
the entity. The financial
statements of subsidiaries
are included in
the consolidated financial
statements from the
date that control
commences until the
date that control ceases.
Loss of control
When the Group loses control
over a subsidiary,
it derecognises the assets and
liabilities of the subsidiary,
and any related NCI
and
other components
of equity.
Any
resulting gain
or
loss is
recognized in
profit
or
loss.
Any interest
retained in
the former
subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group
balances,
transactions
and
any
unrealised
gains
and
losses
or
income
and
expenses
arising
from
intra-group
transactions, are eliminated in preparing the consolidated financial statements.
2
USE OF ACCOUNTING ASSUMPTIONS, ESTIMATES
AND JUDGEMENTS
The preparation of the consolidated
financial statements requires management to
make accounting assumptions, estimates and
judgements that affect the application of the Group's accounting policies and reported
amounts of assets and liabilities, income
and expenses.
Accounting
assumptions,
estimates
and
judgements
are
reviewed
on
an
ongoing
basis.
Revisions
to
reported
amounts
are
recognised in the
period in which
the revision is
made and in
any future periods
affected. Actual
results may differ
from these
estimates.
Information about
assumptions and
estimates in
applying accounting
policies that
have the
most significant
effect on the
amounts
recognised in the consolidated financial statements are included in the notes:
NOTE 9
PROPERTY,
PLANT AND EQUIPMENT
NOTE 11
PROVISION FOR ENVIRONMENTAL REHABILITATION
NOTE 18
INCOME TAX
NOTE 24
PAYMENTS
MADE UNDER PROTEST
NOTE 25
OTHER INVESTMENTS
Information about
significant judgements
in applying
accounting policies
that have
the most
significant effect
on the
amounts
recognised in the consolidated financial statements are included in the notes:
NOTE 24
PAYMENTS
MADE UNDER PROTEST
NOTE 25
OTHER INVESTMENTS
NOTE 26
CONTINGENCIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-9
3
NEW STANDARDS,
AMENDMENTS TO STANDARDS
AND INTERPRETATIONS
New standards, amendments to standards and interpretations effective for the year ended June 30, 2022
During the financial year,
there were no new and revised
accounting standards, amendments to standards and
new interpretation
adopted by the Group.
New standards, amendments to standards and interpretations not yet effective
At the date
of authorisation
of these consolidated
financial statements, the
following relevant
standards, amendments to
standards
and interpretations that may be
applicable to the business of
the Group were in issue
but not yet effective and
may therefore have
an impact on
future consolidated financial
statements. These new
standards, amendments to
standards and interpretations
will
be adopted at their effective dates.
Annual Improvements to IFRS Standards 2018-2020 (Effective July 1, 2022)
As part of its process to
make non-urgent but necessary amendments to
IFRS
Standards, the International Accounting Standards
Board (“
IASB
”) has issued the
Annual Improvements to
IFRS Standards 2018–2020.
These are not
expected to have
a significant
impact on the Group.
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16) (Effective July 1, 2022)
The IASB has amended IAS
16
Property, Plant and Equipment
to provide guidance on
the accounting for such
sale proceeds and
the related production costs.
Under the amendments, proceeds from selling items before the related
item of property, plant and equipment (“
PPE
”) is available
for use should
be recognised in
profit or loss,
together with the
costs of producing
those items. IAS
2
Inventories
should be applied
in identifying and measuring these production costs.
The amendments apply retrospectively,
but only to items of property,
plant and equipment made available for use on or after the
beginning of the earliest period
presented in the financial statements
in which the amendments are adopted.
The amendment is
not expected to have a significant impact on the Group.
Definition of Accounting Estimate (Amendments to IAS 8) (Effective July 1, 2023)
The amendments introduce
a new definition for
accounting estimates: clarifying that
they are monetary
amounts in the financial
statements that are subject to measurement uncertainty.
The amendments also
clarify the relationship
between accounting policies
and accounting estimates
by specifying that
a company
develops an
accounting estimate
to achieve
the objective
set out
by an
accounting policy.
The amendment
is not
expected to
have a significant impact on the Group.
Deferred Tax
related to Assets and
Liabilities Arising from a single
transaction – Amendments to
IAS 12
Income Taxes
(Effective July 1, 2023)
IAS
12
Income
taxes
clarifies
how
companies
should
account
for
deferred
tax
on
certain
transactions
–
e.g.
leases
and
decommissioning provisions. The amendments
narrow the scope of
the initial recognition exemption
so that it does
not apply to
transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to recognize a deferred
tax asset
and a
deferred tax
liability for
temporary differences
arising on
initial recognition
of a
lease and
a decommissioning
provision. The amendment is not expected to have a significant impact on the Group.
Classification
of
liabilities
as
current
or
non-current
(Amendments
to
IAS
1
Presentation
of
Financial
Statements
)
(Effective July 1, 2023)
To
promote consistency in application and clarify the requirements on determining if a liability is current or non-current, the IASB
has amended IAS 1 as follows:
Right to defer settlement must have substance
Under existing IAS 1 requirements, companies classify a liability as current when they do not have an
unconditional right
to defer
settlement of the liability for at least twelve months after the end of the reporting period.
As part of its amendments, the IASB
has removed the requirement for a
right to be unconditional and instead,
now requires that
a right to defer settlement must have substance and exist at the end of the reporting period.
Classification of debt may change
A company
classifies a
liability as
non-current if
it has
a right
to defer
settlement for
at least
twelve months
after the
reporting
period. The IASB
has now clarified that
a right to defer
exists only if
the company complies with
conditions specified in
the loan
agreement at the end of the reporting period, even
if the lender does not test compliance until a
later date. The amendment is not
expected to have a significant impact on the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-10
3
NEW STANDARDS,
AMENDMENTS TO STANDARDS
AND INTERPRETATIONS
continued
New standards, amendments to standards and interpretations not yet effective
(continued)
Disclosure of Accounting Policy (Amendments to IAS 1 and IFRS Practice Statement 2) (Effective July 1, 2023)
The
Board
has
recently
issued
amendments
to
IAS
1
Presentation
of
Financial
Statements
and
an
update
to
IFRS
Practice
Statement 2
Making Materiality Judgements
to help companies provide useful accounting policy disclosures.
The key amendments to IAS 1 include:
●
requiring companies to disclose their material accounting policies rather than their significant accounting policies;
●
clarifying that accounting policies related to immaterial
transactions, other events or conditions are themselves immaterial and
as such need not be disclosed; and
●
clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves material
to a company’s financial statements.
The amendments are applied prospectively.
Management
has
commenced
an
evaluation
to
assess
the
impact
the
amendment
will
have
on
the
Group
from
a
disclosure
perspective. More detail will be disclosed in future financial statements.
4
REVENUE
ACCOUNTING POLICIES
Revenue comprises the sale of gold bullion and silver bullion (produced as a by-product).
Up to April
11,
2022 revenue is
measured based on the
consideration specified in a
contract with the
customer, which
is based
on the London Bullion
Market fixing price
on the date when
the Group transfers
control over the
goods to the
customer. The Group
recognises revenue at a point in time when Rand Refinery Proprietary Limited (“
Rand Refinery
”), acting as an agent for the sale
of all gold
produced by the
Group, delivers the
Gold to the
buyer and the
sales price is
fixed, as evidenced
by the certificate
of
sale. It is at this point that
the revenue can be measured reliably
and the recovery of the consideration
is probable. Rand Refinery
is contractually obliged to make payment to the Group within
two business days after the sale of the gold and
silver and therefore
no significant financing component exists.
Subsequent to April
11,
2022 revenue is
measured based on
the consideration specified
in a contract
with the customer,
being
South African
bullion banks.
The consideration
is based
on the
gold price
derived on
the gold
market on
the day
a contract
is
entered into with
the customer.
The Group recognises
revenue at a
point in time
when the Group
transfers the gold
bullion and
silver bullion to the bullion bank and the sale price is fixed, as evidenced by deal confirmations.
It is at this point that the customer obtains control of the gold bullion or silver bullion, which is the settlement date specified in the
contract. At this point that the revenue can be measured reliably and the recovery
of the consideration is probable. The customer
is contract
ually obliged
to make
payment
to the
Group on
the same
day that
the Group
settles
the contract
and therefore
no
significant financing component exists.
Amounts in R million
2022
2021
2020
Gold revenue
5,110.7
5,263.8
4,179.3
Silver revenue
7.8
5.2
5.7
Total
revenue
5,118.5
5,269.0
4,185.0
A disaggregation of revenue by operating segment is presented in note 23 OPERATING SEGMENTS.
MARKET RISK
Commodity price sensitivity
The Group's profitability
and the cash
flows are significantly affected
by changes in
the market price of
gold which is sold
in US
Dollars. The Group did not enter into any hedging arrangements during the year.
A change of
20
% in the average US Dollar gold price received during the financial year would
have increased/(decreased) equity
and profit/(loss)
by the
amounts shown
below.
This analysis
assumes that
all other
variables remain
constant and
specifically
excludes the impact on income tax.
Amounts in R million
2022
2021
2020
20
% increase in the US Dollar gold price
1,023.7
1,053.8
837.0
20
% decrease in the US Dollar gold price
(1,023.7)
(1,053.8)
(837.0)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-11
4
REVENUE
continued
Exchange rate sensitivity
The Group's profitability and the cash flows
are significantly affected by changes in the Rand
to the US Dollar exchange rate. The
Group did not enter into any hedging arrangements during the year.
A
change
of
20
%
in
the
average
Rand
to
US
Dollar
exchange
rate
received
during
the
financial
year
would
have
increased/(decreased) equity and profit/(loss)
by the amounts shown
below. This analysis assumes that
all other variables
remain
constant and specifically excludes the impact on income tax.
Amounts in R million
2022
2021
2020
20
% increase in the Rand to US Dollar exchange rate
1,023.7
1,053.8
837.0
20
% decrease in the Rand to US Dollar exchange rate
(1,023.7)
(1,053.8)
(837.0)
5
RESULTS FROM
OPERATING
ACTIVITIES
5.1
COST OF SALES
Amounts in R million
Note
2022
2021
2020
Cost of sales
(3,741.5)
(3,388.2)
(2,937.9)
Operating costs (a)
(3,506.5)
(3,122.5)
(2,692.1)
Movement in gold in process and finished inventories - Gold Bullion
30.4
(25.6)
3.1
Depreciation
9
(267.6)
(252.5)
(270.8)
Change in estimate of environmental rehabilitation
11
2.2
12.4
21.9
(a) The most significant components of operating costs include:
Consumable stores
(1,014.9)
(880.2)
(801.0)
Labour including short term incentives
(649.6)
(598.4)
(573.0)
Electricity
(547.3)
(488.2)
(420.9)
Specialist service providers
(610.2)
(510.7)
(447.5)
Machine hire
(139.0)
(127.4)
(95.2)
Security expenses
(133.0)
(122.8)
(87.8)
Water
(54.2)
(57.1)
(47.0)
RELATED PARTY
TRANSACTIONS
FWGR
entered
into
an
agreement
with
Sibanye-Stillwater
effective
July
31,
2018
for
the
pumping
and
supply
of
water
and
electricity to the FWGR operations for which FWGR is invoiced based on metered usage of water and electricity.
FWGR also entered into a smelting
agreement with Sibanye-Stillwater effective July 31,
2018 to smelt and recover gold
from gold
loaded carbon
produced at
FWGR,
and deliver
the gold
to Rand
Refinery.
As consideration
for this
service, Sibanye-Stillwater
receives a fee based on the smelting costs plus
10
% of the smelting costs.
Rand Refinery,
up to April 10,
2022, performed the final
refinement and marketing of
all gold and silver
produced by the Group.
As consideration for
this service, Rand
Refinery receives a
variable refining fee
plus fixed marketing
and administration fees.
From
April 11, 2022, Rand Refinery only performs the final refinement and administration of the gold bars delivered. As a result of this,
the marketing fee was
no longer incurred by
the Group. Rand Refinery
is a related party
to the Group through
Sibanye-Stillwater’s
shareholding in Rand Refinery.
All transactions and
outstanding balances with related
parties are to be
settled in cash within
30 days of
the invoice date. None
of the balances
are secured. No
expense has been
recognised in the
current year as
a credit loss
allowance in respect
of amounts
charged to related parties.
Amounts in R million
2022
2021
2020
Services rendered by related parties and included in operating costs:
Supply of water and electricity
1
79.2
68.1
50.0
Gold smelting and related charges
1
19.1
21.1
19.8
Other charges
1
0.3
0.7
1.6
Charges to Sibanye-Stillwater
2
-
-
(0.2)
Gold refining and related charges
3
6.9
6.8
4.9
105.5
96.7
76.1
1
Paid to Sibanye-Stillwater by FWGR
2
Miscellaneous charges to Sibanye-Stillwater
3
Paid to Rand Refinery
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-12
5
RESULTS FROM
OPERATING
ACTIVITIES
continued
5.2
OTHER INCOME
ACCOUNTING POLICIES
Other income is
recognised where it
is probable that
the economic benefits
associated with a
transaction will flow
to the Group
and it can be reliably measured.
Other income is generally income earned from transactions outside the course of the Group’s ordinary activities and may include
COVID-19 and other insurance payouts, gains on disposal of
property, plant and equipment and gains on financial instruments at
fair value through profit or loss.
Amounts in R million
2022
2021
2020
Gain on disposal of property, plant and equipment
6.6
0.1
0.7
Insurance claim (a)
84.7
-
-
91.3
0.1
0.7
(a) Insurance claim
During the 2020 financial year, a complex insurance claim process was
initiated for business interruption caused by the regulatory lockdowns
pursuant to the COVID-19 pandemic. Of the R
84.7
million included in other
income in profit and loss during the year, R
53.0
million was received before
June 30, 2022. R
31.7
million was received subsequent to year end.
84.7
-
-
5.3
ADMINISTRATION
EXPENSES AND OTHER COSTS
Amounts in R million
Note
2022
2021
2020
Included in administration expenses and other costs are the following:
Share based payment (expenses)/benefit
(18.4)
28.3
(224.1)
Cash settled Long-Term
Incentive ("
CLTI
") scheme
19.1
-
44.3
(218.1)
Equity settled Long-Term
Incentive ("
ELTI
") scheme
19.2
(18.4)
(16.0)
(6.0)
Exploration expenses and transaction costs
1
(15.2)
(3.1)
(1.4)
Other costs and administration expenses
2
(52.8)
(39.7)
(28.3)
1 Includes exploration expenses of R8.2 million paid to Sibanye-Stillwater for FY 2022.
2
Other costs and administration expenses are made
of short-term incentives and information technology
costs.
6
FINANCE INCOME
ACCOUNTING POLICY
Finance income includes interest received, growth in cash and cash equivalents in environmental rehabilitation trust funds,
growth
in investment in Guardrisk, growth in
the reimbursive right for environmental rehabilitation guarantees, dividends
received and the
unwinding of the Payments made under protest and foreign exchange gains.
Amounts in R million
Note
2022
2021
2020
Interest on financial assets measured at amortised cost
13
111.8
108.7
63.1
Growth in cash and cash equivalents in environmental rehabilitation trust
funds
12
14.8
22.5
33.3
Growth in reimbursive right for environmental rehabilitation guarantees
12
1.8
3.7
5.2
Growth in investment in Guardrisk
12
13.1
-
-
Dividends received
25
71.5
76.1
4.3
Unwinding of Payments made under protest
24
5.8
4.8
3.9
Unrealised foreign exchange gain
7.0
-
-
Other finance income
-
0.4
-
225.8
216.2
109.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-13
7
FINANCE EXPENSE
ACCOUNTING POLICY
Finance expenses
comprise interest
payable on
financial instruments
measured at
amortised cost
calculated using
the effective
interest method, unwinding of the provision for environmental rehabilitation, interest on lease liabilities, the discount recognised on
Payments made under protest and foreign exchange losses.
Amounts in R million
Note
2022
2021
2020
Interest on financial liabilities measured at amortised cost
(2.6)
(2.3)
(2.0)
Unwinding of provision for environmental rehabilitation
11
(45.0)
(44.7)
(52.0)
Discount recognised on Payments made under protest
24
(21.1)
(7.4)
(7.1)
Interest on lease liabilities
10.2
(4.2)
(4.5)
(5.1)
Unrealised foreign exchange loss
-
(8.4)
-
Other finance expenses
(1.9)
(2.2)
(2.6)
(74.8)
(69.5)
(68.8)
8
EARNINGS PER SHARE
Amounts in R million
2022
2021
2020
The calculations of basic and diluted earnings per ordinary share
are based on the following:
Profit for the year
1,123.8
1,439.9
635.0
Reconciliation of weighted average number of ordinary shares to
diluted weighted average number of ordinary shares
2022
2021
2020
Weighted average number of ordinary shares in issue adjusted for
treasury shares
856,760,797
855,113,791
769,941,874
Effect of Sibanye-Stillwater Option
-
-
9,464,684
Effect of equity-settled share-based payment
4,203,336
5,935,215
4,283,001
Diluted weighted average number of ordinary shares
860,964,133
861,049,006
783,689,559
SA cents per share
2022
2021
2020
Basic earnings per share
131.2
168.4
82.5
Diluted basic earnings per share
130.6
167.2
81.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-14
9
PROPERTY,
PLANT AND EQUIPMENT
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
Mineral reserves and resources estimates
The Group is required to determine and report
mineral reserves and resources in accordance with the
South African Code for the
Reporting
of
Exploration
Results,
Mineral
Resources
and Mineral
Reserves
(“
SAMREC Code
”).
In
order
to
calculate
mineral
reserves and
resources, estimates
and assumptions
are required
about a
range of
geological, technical
and economic
factors,
including but not
limited to quantities,
grades, production techniques,
recovery rates, production
costs, transport costs,
commodity
demand, commodity prices and exchange rates. Estimating the quantity
and/or grade of mineral reserves and resources
requires
the size, shape and
depth of reclamation sites
to be determined by
analysing geological data such
as the logging and
assaying
of
drill
samples.
This
process may
require complex
and
difficult
geological
judgements
and calculations
to
interpret
the data.
Because the assumptions used to estimate
mineral reserves and resources change from period
to period and because additional
geological
data is
generated
during
the course
of
operations, estimates
of mineral
reserves and
resources may
change from
period
to
period.
Mineral
reserves
and
resources
estimates
prepared
by
management
are
reviewed
by
independent
mineral
reserves and resources experts.
Changes
in
reported
mineral
reserves
and
resources
may
affect
the
Group’s
life-of-mine
plan,
financial
results
and
financial
position in a number of ways including the following:
• asset carrying values may be affected due to changes in estimated future cash flows;
• depreciation
charged to
profit or
loss may
change where
such charges
are determined
by the
units-of-production method,
or
where the useful lives of assets change;
• decommissioning, site restoration and environmental provisions may change where changes in
estimated mineral reserves and
resources affect expectations about the timing or cost of these activities; and
• the carrying value of deferred tax assets and liabilities may change due to changes in estimates of the likely recovery of the tax
benefits and charges.
Depreciation
The calculation of
the units-of-production rate
of depreciation could
be affected if
actual production in
the future varies
significantly
from
current
forecast
production.
This
would
generally
arise
when
there
are
significant
changes
in
any
of
the
factors
or
assumptions used in estimating mineral reserves and resources. These factors could include:
• changes in mineral reserves and resources;
• the grade of mineral reserves and resources may vary from time to time;
• differences between actual commodity prices and commodity price assumptions;
• unforeseen operational issues at mine sites including planned extraction efficiencies; and
• changes in capital, operating, mining processing and reclamation costs, discount rates and foreign exchange rates.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-15
9
PROPERTY,
PLANT AND EQUIPMENT
continued
ACCOUNTING POLICIES
Recognition and measurement
Property,
plant and equipment comprise
mine plant facilities and
equipment, mine property
and development (including mineral
rights) and
exploration assets.
These assets
(excluding exploration
assets) are
initially measured
at cost,
whereafter they
are
measured at cost
less accumulated depreciation
and accumulated impairment
losses. Exploration assets
are initially measured
at cost, whereafter they are measured at cost less accumulated impairment losses.
Cost includes expenditure
that is directly attributable
to the acquisition
or construction of the
asset, borrowing costs capitalised,
as well
as the
costs of
dismantling and
removing an
asset and
restoring the
site on
which it
is located.
Subsequent costs
are
included in
the asset’s
carrying amount
or recognised
as a
separate asset,
as appropriate,
only when
it is
probable that
future
economic benefits associated with the item
will flow to the Group and
the cost of the item can be
measured reliably.
Exploration
and evaluation
costs are capitalised
as exploration assets
on a
project-by-project basis, pending
determination of the
technical
feasibility and commercial viability of the project.
Exploration
assets
consists
of
costs
of
acquiring
rights,
activities
associated
with
converting
a
mineral
resource
to
a
mineral
reserve - the
process thereof includes
drilling, sampling and other
processes necessary to evaluate
the technical feasibility
and
commercial viability of a mineral
resource to prove whether a mineral
reserve exists. Exploration assets also
include geological,
geochemical and
geophysical studies
associated with
prospective projects
and tangible
assets which
comprise property,
plant
and equipment used
for exploratory activities. Costs
are capitalised to
the extent that
they are a directly
attributable exploration
expenditure and classified
as a separate class
of assets on a
project by project basis.
Once a mineral
reserve is determined or
the project
ready for
development, the
asset attributable
to the
mineral reserve
or project
is assessed
for impairment
and then
reclassified to the appropriate
class of assets. Depreciation
commences when the assets
are available for use.
Exploration and
evaluation expenses prior to acquiring rights to explore is recognised in profit or loss.
Depreciation
Depreciation of
mine plant
facilities and
equipment, as
well as
mining property
and development
(including mineral
rights) are
calculated using the units of production method which
is based on the life-of-mine of each site.
The life-of-mine is primarily based
on
proved
and
probable
mineral
reserves.
It
reflects
the
estimated
quantities
of
economically
recoverable
gold
that
can
be
recovered from
reclamation sites
based on
the estimated
gold price.
Changes in
the life-of-mine
will impact
depreciation on
a
prospective
basis.
The
life-of-mine
is
prepared
using
a
methodology
that
takes
account
of
current
information
to
assess
the
economically recoverable gold from specific reclamation sites and includes the consideration of historical experience.
The depreciation
method, estimated
useful lives
and residual
values are
reassessed annually
and adjusted
if appropriate.
The
current estimated useful lives
are based on the
life-of-mine of each site,
currently between
two
(2021:
three
; 2020:
four
) and
19
years (2021:
13
; 2020:
13
) years for Ergo mining
assets and between
two
(2021:
three
; 2020:
four
) and
20
years (2021:
18
; 2020:
20
) years for FWGR mining assets.
Impairment
The carrying
amounts of
property,
plant and
equipment are
reviewed at
each reporting
date to
determine whether
there is
any
indication
of
impairment,
or
whenever
events
or
changes
in
circumstances
indicate
that
the
carrying
amount
may
not
be
recoverable. If any
such indication exists,
the asset’s recoverable
amount is estimated.
For the
purposes of assessing
impairment,
assets
are
grouped at
the
lowest
levels
for
which
there are
separately identifiable
cash flows
(“
CGUs
”).
The key
assets
of
a
surface retreatment operation which constitutes a CGU are a reclamation site, a metallurgical plant and a tailings storage
facility.
These key
assets operate
interdependently to
produce gold.
The Ergo
and FWGR
operations each
have separately
managed
and monitored reclamation sites, metallurgical plants and tailings storage facilities and are therefore separate CGUs.
The recoverable amount
of an asset
or CGU is the
greater of its value
in use and its
fair value less costs
to sell. The estimated
future cash flows are discounted
to their present value using a
pre-tax discount rate that reflects
current market assessments of
the time value of
money and the
risks specific to the
asset. An impairment loss
is recognised in profit
or loss if the
carrying amount
of an asset or CGU exceeds its recoverable amount.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-16
9
PROPERTY,
PLANT AND EQUIPMENT
continued
Amounts in R million
Note
Mine plant
facilities and
equipment
Mine
property and
development
Exploration
assets
Total
June 30, 2022
Cost
2,733.9
2,419.6
14.2
5,167.7
Balance at the beginning of the year
2,604.3
2,154.0
110.5
4,868.8
Additions - property, plant and equipment owned
291.4
301.2
5.8
598.4
Additions - right-of-use assets
10.1
6.0
9.9
-
15.9
Lease modifications
10.1
-
1.2
-
1.2
Lease derecognitions
10.1
(1.6)
-
-
(1.6)
Disposals and scrapping
(185.3)
(61.6)
(0.9)
(247.8)
Change in estimate of decommissioning asset
11
(46.3)
(20.9)
-
(67.2)
Transfers between classes of property,
plant and
equipment
65.4
35.8
(101.2)
-
Accumulated depreciation and impairment
(1,017.0)
(1,056.9)
(9.7)
(2,083.6)
Balance at the beginning of the year
(1,074.0)
(975.4)
(9.7)
(2,059.1)
Depreciation
5.1
(125.1)
(142.5)
-
(267.6)
Lease derecognitions
1.6
-
-
1.6
Disposals and scrapping
180.5
61.0
-
241.5
Carrying value at end of the year
1,716.9
1,362.7
4.5
3,084.1
Comprising:
Property, plant and equipment owned
1,698.7
1,333.2
4.5
3,036.4
Right-of-use assets
10.1
18.2
29.5
-
47.7
Carrying value at end of the year
1,716.9
1,362.7
4.5
3,084.1
June 30, 2021
Cost
2,604.3
2,154.0
110.5
4,868.8
Balance at the beginning of the year
2,203.5
2,147.0
266.3
4,616.8
Additions - property, plant and equipment owned
237.7
113.3
44.7
395.7
Additions - right-of-use assets
10.1
16.7
-
-
16.7
Lease modifications
10.1
-
2.3
-
2.3
Lease derecognitions
10.1
(1.0)
-
-
(1.0)
Disposals and scrapping
(54.7)
(133.4)
-
(188.1)
Change in estimate of decommissioning asset
11
14.9
14.2
(2.7)
26.4
Transfers between classes of property,
plant and
equipment
187.2
10.6
(197.8)
-
Accumulated depreciation and impairment
(1,074.0)
(975.4)
(9.7)
(2,059.1)
Balance at the beginning of the year
(1,017.5)
(968.5)
(9.7)
(1,995.7)
Depreciation
5.1
(112.2)
(140.3)
-
(252.5)
Lease derecognitions
1.0
-
-
1.0
Disposals and scrapping
54.7
133.4
-
188.1
Carrying value at end of the year
1,530.3
1,178.6
100.8
2,809.7
Comprising:
Property, plant and equipment owned
1,509.7
1,150.1
100.8
2,760.6
Right-of-use assets
10.1
20.6
28.5
-
49.1
Carrying value at end of the year
1,530.3
1,178.6
100.8
2,809.7
CONTRACTUAL COMMITMENTS
Contractual commitments not provided for in the consolidated
financial statements at June 30, 2022 amounted to R
235.9
million
(2021: R
65.5
million).
Capital expenditure related to
material growth projects are
financed on a project-by-project
basis which may include
bank facilities
and existing cash
resources. Sustaining capital
expenditure is financed
from cash generated
from operations and
existing cash
resources.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-17
10
RIGHT OF USE ASSETS AND LEASES
ACCOUNTING JUDGEMENTS
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains a lease if the
contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration. The contract
must
also
be
enforceable.
To
assess
whether
a
contract
conveys
the
right
to
control
the
use
of
an
identified
asset,
requires
judgement particularly on contracts with service contractors, which may contain embedded leases.
The Group assesses whether:
•
the contract involves the use of an identified asset;
•
the Group has the right to obtain substantially
all the economic benefits from use of the asset
throughout the period of use; and
•
the Group has the right to direct the use of the asset.
At
inception
or on
reassessment
of a
contract
that contains
a
lease component,
the
Group allocates
the consideration
in
the
contract to each lease component on the
basis of their relevant stand-alone prices. However,
for the lease of land and buildings
in which
it is
a lessee,
the Group
has elected
not to
separate non-lease
components and
account for
the lease
and non-lease
component as a single lease component.
Some property leases contain
options to renew under
the contract. Judgement is
applied in whether the
renewable option periods
must be included in the lease term i.e. it is reasonably certain that the options to renew will be exercised. In applying judgement,
the
Group
also
considers
whether
the
lease
term
is
commensurate
with
estimated
future
mine
plans
requirements
and
environmental rehabilitation obligations associated with the property post reclamation.
ACCOUNTING POLICIES
Right of use asset
The right of use asset is initially measured at cost, which comprises the initial amount of the lease liability and is adjusted by any
lease payments
made at
or before
the commencement
date, plus
any initial
direct costs
incurred
and an
estimate of
costs to
dismantle and
remove the
underlying asset
or to
restore the
underlying asset
or the
site on
which it
is located,
less any
lease
incentives received. The Group recognises a right of use asset and lease liability at the lease commencement date.
The right of use asset
is subsequently depreciated using the
straight-line method from the commencement
date to the earlier of
the end of the useful life of the right of use asset or the end of
the lease term. The right of use asset carrying value is allocated to
the CGU it belongs to
and the CGU is reviewed at
each reporting date to determine
whether there is any indication
of impairment.
The carrying value is reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
Lease liability
The lease liability
is initially measured
at the present
value of the
outstanding lease payments
at commencement date
over the
lease
term,
discounted
using
the
interest
rate
implicit
in
the
lease
or
if
that
rate
is
undeterminable,
the
Group’s
incremental
borrowing rate. The lease term includes the non-cancellable period
for which the lessee has the right to use an underlying
asset
including optional periods when the Group is reasonably certain to exercise an option to extend a lease.
Lease payments comprise fixed payments, variable lease payments that depend on an index or rate, initially
measured using the
index or rate as at the commencement date, and the exercise price under a purchase option
that the Group is reasonably certain
to exercise.
The lease liability is measured using the effective interest rate method. The Group re-measures the lease liability when the lease
contract is modified and
this does not give
rise to modification accounting,
when the lease term
has been changed or
when the
lease payments have
changed as a
result of a change
in an index
or rate or a
change in the
assessment of a purchase
option.
Upon remeasurement, a corresponding adjustment is
made to the carrying
amount of the right of
use asset or is recorded
in profit
or loss if the carrying amount of the right of use asset has been reduced to zero.
Right of use assets
are presented in “property, plant and
equipment” and lease liabilities
are separately disclosed
in the statement
of financial position.
Short term leases and leases of low value assets
The Group has elected not to recognise right
of use assets and lease liabilities for short-term
leases of machinery and equipment
that have a lease term of 12 months
or less and leases of low value assets
which include IT equipment, security equipment and
administration equipment.
10.1
RIGHT OF USE ASSETS
Included in property, plant and equipment are the following leased assets:
Amounts in R million
Note
Mine plant
facilities and
equipment
Mine property
and
development
Total
June 30, 2022
Cost
31.2
58.4
89.6
Opening balance
26.8
47.3
74.1
Additions
6.0
9.9
15.9
Lease modifications
-
1.2
1.2
Lease derecognitions
(1.6)
-
(1.6)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-18
Accumulated depreciation
(13.0)
(28.9)
(41.9)
Opening balance
(6.2)
(18.8)
(25.0)
Depreciation
(8.4)
(10.1)
(18.5)
Lease derecognitions
1.6
-
1.6
Carrying value
18.2
29.5
47.7
June 30, 2021
Cost
26.8
47.3
74.1
Opening balance
11.1
45.0
56.1
Additions
16.7
-
16.7
Lease modifications
-
2.3
2.3
Lease derecognitions
(1.0)
-
(1.0)
Accumulated depreciation
(6.2)
(18.8)
(25.0)
Opening balance
(2.9)
(8.3)
(11.2)
Depreciation
(4.3)
(10.5)
(14.8)
Lease derecognitions
1.0
-
1.0
Carrying value
20.6
28.5
49.1
10.2
LEASE LIABILITIES
Amounts in R million
Note
2022
2021
Reconciliation of the lease liabilities balance:
Balance at the beginning of the year
54.8
47.1
New leases
9
15.9
16.7
Lease modifications
9
1.2
2.3
Interest charge on lease liabilities
7
4.2
4.5
Repayment of lease liabilities
(19.7)
(11.6)
Interest repaid
(4.1)
(4.2)
Balance at the end of the year
52.3
54.8
Current portion of lease liabilities
(19.5)
(16.9)
Non-current lease liabilities
32.8
37.9
Maturity analysis of undiscounted contractual cash flows:
Less than a year
22.4
20.5
One to five years
35.1
42.0
More than 5 years
2.1
1.3
Total
undiscounted lease liabilities at the end of the year
59.6
63.8
Lease payments not recognised as a liability but expensed during the year:
Short-term leases
(2.5)
(1.4)
Leases of low value assets
(8.6)
(7.7)
Cash flows included in cash generated from operating activities
(11.1)
(9.1)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-19
11
PROVISION FOR ENVIRONMENTAL
REHABILITATION
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
Estimates of future environmental
rehabilitation costs are determined
with the assistance of
an independent expert and
are based
on the
Group’s environmental
management plans
which are developed
in accordance
with regulatory
requirements, the
life-of-
mine plan
(as discussed
in note 9)
which influences
the estimated
timing of
environmental rehabilitation cash
outflows and
the
planned method of rehabilitation which in turn is influenced by developments in trends and technology.
An average nominal discount rate ranging
between
10.2
% and
10.3
% (2021: between
8.9
% and
9.0
%), average inflation rate of
5.5
% (2021:
5.2
%) and
the discount
periods as
per the
expected life-of-mine
were used
in the
calculation of
the estimated
net
present value of the rehabilitation liability.
ACCOUNTING POLICIES
The net present value of the
estimated rehabilitation cost as at reporting
date is provided for in
full. These estimates are reviewed
annually and are
discounted using a
pre-tax risk-free rate
that is adjusted to
reflect the current
market assessments of
the time
value of money and the risks specific to the obligation.
Annual changes
in the
provision consist
of financing
expenses relating
to the
change in
the present
value of
the provision
and
inflationary increases in the provision, as well as changes in estimates.
The present value
of dismantling and
removing the asset
created (decommissioning liabilities)
are capitalised to
property,
plant
and equipment against an increase in the rehabilitation provision. If a decrease in the liability exceeds the carrying
amount of the
asset, the excess is recognised in profit or loss. If the asset value is increased and there is
an indication that the revised carrying
value is not
recoverable, an impairment
test is performed
in accordance
with the accounting
policy dealing with
impairments of
property,
plant
and
equipment.
Over
time,
the
liability
is
increased
to
reflect
an
interest
element,
and
the
capitalised
cost
is
depreciated over the life of the related asset. Cash costs incurred to
rehabilitate these disturbances are charged to the provision
and are presented as investing activities in the statement of cash flows.
The present value
of environmental rehabilitation
costs relating to
the production of
inventories and sites
without related assets
(restoration liabilities) as well as changes
therein are expensed as incurred and
presented as operating costs within cost
of sales.
Cash costs incurred
to rehabilitate these
disturbances are presented
as operating activities
in the statement
of cash flows.
The
cost of ongoing rehabilitation is recognised in profit or loss as incurred.
Amounts in R million
Note
2022
2021
Opening balance
570.8
568.9
Unwinding of provision
7
45.0
44.7
Change in estimate of environmental rehabilitation recognised in profit or loss
5.1
(2.2)
(12.4)
Change in estimate of environmental rehabilitation recognised to decommissioning asset (a)
9
(67.2)
26.4
Environmental rehabilitation payments (b)
(28.7)
(56.8)
To
reduce decommissioning liabilities
(25.4)
(51.0)
To
reduce restoration liabilities
14
(3.3)
(5.8)
Closing balance
517.7
570.8
Environmental rehabilitation payments to reduce the liability
(28.7)
(56.8)
Ongoing rehabilitation expenditure
1
23
(31.6)
(48.3)
Total
cash spent on environmental rehabilitation
(60.3)
(105.1)
1
The Group also performs ongoing environmental rehabilitation
arising from its current activities concurrently with production.
These costs do
not represent a reduction of the above liability and
are expensed as operating costs
(a)
Change in estimate of environmental rehabilitation recognised to decommissioning asset
During the
current year,
updates were
made
to the
Ergo life
of mine,
resulting in
the inclusion
of the
Daggafontein TSF
as a
Mineral Reserve on
a planned basis
increasing the life
of mine. During
the current year,
updates were also
made to the FWGR
life of mine, changing the expected timing of environmental rehabilitation cash outflows.
(b)
Environmental rehabilitation payments
38ha of
the Brakpan/Withok
TSF,
3ha of
the Daggafontein
TSF and
17ha of
the Driefontein
4 TSF
were vegetated
during the
year.
GROSS COST TO REHABILITATE
The
Group
estimates
that,
based
on
the
life
of
mine
plan
and
current
environmental
and
regulatory
requirements,
the
total
undiscounted rehabilitation cost is approximately R
815.1
million (2021: R
742.2
million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-20
12
INVESTMENTS IN REHABILITATION
AND OTHER FUNDS
ACCOUNTING POLICIES
Cash and cash equivalents in environmental rehabilitation trusts
Cash
and
cash
equivalents
included
in
environmental
rehabilitation
trusts
comprise
low-risk,
interest-bearing
cash
and
cash
equivalents and are non-derivative financial assets categorised as financial assets measured at amortised cost.
Cash and cash
equivalents are initially
measured at fair
value. Subsequent to
initial recognition, cash
and cash equivalents
are
measured at amortised cost, which is equivalent to their fair value.
The
cash
and
cash
equivalents
in
environmental
rehabilitation
trusts
are
for
the
sole
use
of
material
future
environmental
rehabilitation payments and are therefore included in non-current assets.
Reimbursive right for environmental rehabilitation guarantees
(“old environmental rehabilitation policy”)
Funds held in the cell captive that secure the environmental rehabilitation guarantees issued are recognised as a right to receive
a reimbursement and are
measured at the
lower of the
amount of the
consolidated environmental rehabilitation liability
recognised
and the consolidated fair value of the fund assets.
Changes in the carrying value
of the fund assets, other
than those resulting from contributions and
payments, are recognised in
finance income.
The
funds
held
in
the
cell
captive
under
the
old
environmental
rehabilitation
policy
are
for
the
sole
use
of
material
future
environmental rehabilitation payments and are therefore included in non-current assets.
Investments in Guardrisk Cell Captive
Funds invested in the Guardrisk
Cell Captive, held within
Guardrisk Insurance Company Limited
(“
GICL
”) or “
Guardrisk
” are non-
derivative financial assets categorised as financial assets
measured at fair value through profit
and loss as the funds are invested
by Guardrisk in liquid money market
funds.
These assets are initially measured
at fair value and subsequent
changes in fair value
are recognised
in profit
or loss
as they
arise and
included in
finance income.
The investments
in GICL
are for
the sole
use of
environmental financial guarantees, Directors’ and Officers’ insurance and other insurance requirements.
The investment in the
Guardrisk Cell Captive is
for the sole
use as determined in
the insurance policies and
are therefore included
in non-current assets.
Investment in Guardrisk Cell Captive – Funding of environmental rehabilitation activities
(refer note 11)
During the current year
the Group made a
decision to change its
method of providing for
environmental rehabilitation from
funding
in
a
specific
rehabilitation
trust
to
financial
guarantees
which
is
an
allowed
method
in
terms
of
the
National
Environmental
Management
Act. A
new
ring-fenced policy
related
to the
funds
was concluded.
In
this
regard,
the rehabilitation
trust directly
transferred a total amount of R
579.5
million to the new ring-fenced policy with GICL in terms of which, GICL issued rehabilitation
financial guarantees. The new ring-fenced policy has replaced the old environmental rehabilitation
policy which lapsed during the
year. The funds are
ring-fenced for the sole objective of future rehabilitation during and at
the end of the relevant life of mine. All
the required approvals for the change in method and transfer of the rehabilitation trust funds were obtained from the Department
of Mineral Resources
and Energy (“
DMRE
”) and a
thorough consideration of
tax and legal
impacts were completed
prior to the
funds being transferred to GICL.
Environmental
rehabilitation
payments
to
reduce
the
environmental
rehabilitation
obligations
and
ongoing
rehabilitation
expenditure are mostly funded by cash generated from operations.
GICL has guarantees
in issue amounting
to R
614.0
million (2021: R
430.1
million) to the DMRE
on behalf of DRDGOLD
related
to
the
environmental
obligations.
The
funds
for
environmental
rehabilitation
in
the
cell
captive
serve
as
collateral
for
these
guarantees.
Investment in Guardrisk Cell Captive – Directors’ and Officers’ insurance
During
the current
year premiums
were paid
into the
Guardrisk Cell
Captive for
the creation
of self-insurance
for the
Group’s
Directors and Officers.
Investment in Guardrisk Cell Captive – Other funds
These are existing
funds within the cell
captive which were previously
part of the old
environmental rehabilitation policy held
for
purposes of obtaining environmental rehabilitation guarantees. The policy came to an end during the financial
year, but the funds
remained within the cell captive for future insurance applications.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-21
12
INVESTMENTS IN REHABILITATION
AND OTHER FUNDS
continued
Amounts in R million
Note
2022
2021
Cash and cash equivalents in environmental rehabilitation trust funds
-
564.7
Opening balance
564.7
542.2
Transfer to Investment in Guardrisk Cell Captive
(579.5)
-
Growth
6
14.8
22.5
Reimbursive right for environmental rehabilitation guarantees
-
87.5
Opening balance
87.5
83.8
Lapsing of old environmental rehabilitation policy retained in Guardrisk Cell Captive
(89.3)
-
Growth
6
1.8
3.7
Investment in Guardrisk Cell Captive (a)
710.8
-
Opening balance
-
-
Transfer to Guardrisk cell captive
668.8
-
Contributions
28.9
-
Growth
6
13.1
-
Investments in rehabilitation and other funds
710.8
652.2
(a) Investment in Guardrisk Cell Captive
The investment in the cell captive is allocated as follows:
710.8
-
Environmental rehabilitation
589.8
-
Directors’ and Officers’ insurance
29.5
-
Other funds
91.5
-
CREDIT RISK
The Group
is exposed
to credit
risk on
the total
carrying value
of the
investments held
in the
environmental rehabilitation
trust
funds and the Guardrisk Cell Captive.
The Group manages its exposure to credit risk
by mandating the Guardrisk Cell Captive to diversify
the funds across a number of
major financial institutions, as well as investing funds in low-risk, interest-bearing cash and cash equivalents.
MARKET RISK
Interest rate risk
A change of 100 basis points (bp) in interest rates at the reporting date would have increased/(decreased) equity and profit/(loss)
by the amounts shown below. This analysis assumes that all other variables, in particular the balance of the funds, remain
constant. The analysis excludes income tax.
Amounts in R million
2022
2021
100
bp increase
7.1
5.6
100
bp (decrease)
(7.1)
(5.6)
FAIR VALUE
OF FINANCIAL INSTRUMENTS
The fair
value of
investment in
Guardrisk Cell
Captive approximate
their carrying
value due
to the
short-term maturities
of the
underlying funds invested by Guardrisk
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-22
13
CASH AND CASH EQUIVALENTS
ACCOUNTING POLICIES
Cash and cash equivalents are short-term, highly liquid investments that are readily convertible to cash without significant risk of
changes in
value and
comprise cash
on hand,
demand deposits,
and highly
liquid investments which
are readily
convertible to
known amounts of cash.
Cash and cash equivalents are non-derivative financial assets categorised as financial assets measured at amortised
cost. Cash
and
cash
equivalents
are
initially
measured
at
fair
value.
Subsequent
to
initial
recognition,
cash
and
cash
equivalents
are
measured at amortised cost, which is equivalent to their fair value.
Amounts in R million
Note
2022
2021
Cash on hand
113.2
100.5
Access deposits and income funds
1
2,401.7
2,069.2
Restricted cash
2
10.7
10.3
2,525.6
2,180.0
Interest earned on cash and cash equivalents
6
111.8
108.7
1
These consist of access deposit notes and conservatively
managed income funds that are diversified
across the major financial institutions in
South Africa.
At reporting date all of these instruments had
same day or next day liquidity and effective
annualised yields of between
5.38
% and
6.38
%
2
This consists of cash held on call as collateral for guarantees
issued by the Standard Bank of South
Africa Limited on behalf of the Group for
environmental rehabilitation amounting to R
5.2
million and various utilities amounting to R
5.1
million.
CREDIT RISK
The Group is exposed to credit risk
on the total carrying value of its
cash and cash equivalents. The Group manages
its exposure
to credit risk
by investing cash
and cash equivalents
across several major
financial institutions, considering
the credit ratings
of
the respective financial institutions, funds and underlying instruments.
Impairment
on
cash
and
cash
equivalents,
if
any,
are
measured
on
a
12-month
expected
loss
basis
and
reflects
the
short
maturities of the
exposures. The Group considers
that its cash
and cash equivalents
have low credit
risk based on
the external
credit ratings of the counterparties.
MARKET RISK
Interest rate risk
A change of
100
basis points (bp) in the interest rates would have
increased/(decreased) equity and profit/(loss) by the amounts
shown below. This analysis is performed on the average balance of cash and cash equivalents for the year and assumes that
all
other variables remain constant. The analysis excludes income tax
.
Amounts in R million
2022
2021
100
bp increase
23.5
19.5
100
bp (decrease)
(23.5)
(19.5)
Foreign
denominated cash
is held
in a
foreign currency
bank
account accruing
negligible interest
and is
usually converted
to
South African Rand on the day of receipt. Foreign cash is therefore not exposed to significant interest rate risk.
Foreign currency risk
US
Dollars
received
on
settlement
of
the
trade
receivables
are
exposed
to
fluctuations
in
the
US
Dollar/South
African
Rand
exchange rate until it is converted to South African Rands.
US Dollars not converted to South African Rands at reporting date are as follows
:
Figures in USD million
2022
2021
Foreign denominated cash at 30 June
3.4
3.4
A
10
% strengthening of the Rand against the US Dollar at 30 June would have increased/(decreased) equity and profit/(loss) by
the amounts shown below. This analysis assumes that all other variables remain constant.
Amounts in R million
2022
2021
Strengthening of the Rand against the US Dollar
(5.5)
(4.9)
Weakening of the Rand against the US Dollar
5.5
4.9
FAIR VALUE
OF FINANCIAL INSTRUMENTS
The fair value of cash and cash equivalents approximates their carrying value due to their short-term maturities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-23
14
CASH GENERATED
FROM OPERATIONS
Amounts in R million
Note
2022
2021
2020
Profit for the year
1,123.8
1,439.9
635.0
Adjusted for
Income tax
18.1
334.3
523.7
343.9
Depreciation
9
267.6
252.5
270.8
Movement in gold in process and finished inventories - Gold Bullion
5.1
(30.4)
25.6
(3.1)
Change in estimate of environmental rehabilitation
11
(2.2)
(12.4)
(21.9)
Environmental rehabilitation payments to reduce the restoration liabilities
11
(3.3)
(5.8)
(8.1)
Share-based payment expense/(benefit)
5.3
18.4
(28.3)
224.1
Gain on disposal of property, plant and equipment
5.2
(6.6)
(0.1)
(0.7)
Insurance claim receivable
5.2
(31.7)
-
-
Finance income
6
(225.8)
(216.2)
(109.8)
Finance expense
7
74.8
69.5
68.8
Other non-cash items
3.8
(2.5)
2.6
Operating cash flows before other changes
1,522.7
2,045.9
1,401.6
Changes in
62.9
(194.9)
(92.0)
Trade and other receivables
25.7
6.9
(79.0)
Consumable stores and stockpiles
(18.9)
(44.7)
(26.4)
Payments made under protest
24
(15.2)
(8.1)
(10.6)
Trade and other payables
71.3
(149.0)
1
24.0
1
Cash generated from operations
1,585.6
1,851.0
1,309.6
1
Includes settlement of cash-settled long-term incentives
for 2021: R
183.3
million, 2020: R
41.5
million.
15
TRADE AND OTHER RECEIVABLES
ACCOUNTING POLICIES
Recognition and measurement
Trade
and other
receivables, excluding
Value
Added Tax
and prepayments,
are non-derivative
financial assets
categorised as
financial assets at amortised cost.
These assets are initially measured at fair value plus directly attributable transaction costs. Subsequent to initial recognition, they
are measured at
amortised cost using
the effective interest
method less any
expected credit losses
using the Group’s
business
model for managing its financial assets.
The Group derecognises
a financial asset when
the contractual rights to
the cash flows from
the asset expire, or
it transfers the
rights to receive the contractual cash flows in
a transaction in which substantially all of the risks
and rewards of ownership of the
financial asset are transferred,
or it neither transfers
nor retains substantially all
of the risks and
rewards of ownership and
does
not retain control over the transferred
asset. Any interest in such derecognised
financial assets that is created or
retained by the
Group is recognised as a separate asset or liability.
Impairment
The Group
recognises loss
allowances for
trade and
other receivables
at an
amount equal
to expected
credit losses
(“
ECLs
”).
The Group uses the simplified
ECL approach. When determining whether
the credit risk of a financial
asset has increased since
initial recognition
and when
estimating ECLs,
the Group
considers reasonable
and supportable
information that
is relevant
and
available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on informed
credit
assessments
and
including
forward-looking
information.
The
maximum
period
considered
when
estimating
ECLs
is
the
maximum contractual period over which the Group is exposed to credit risk.
ECLs are a probability
weighted estimate of credit losses.
Credit losses are measured as
the present value of
all cash shortfalls
(i.e. the
difference between
the cash
flows due
to the
entity in
accordance with
the contract
and the
cash flows
that the
Group
expects to receive). The Group assesses whether the
financial asset is credit impaired at each reporting date. A financial asset is
credit impaired when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset
have occurred, including but not limited to financial difficulty or default of payment. The Group will write off a financial asset when
there is no
reasonable expectation of
recovering it
after considering whether
all means
to recovery the
asset have
been exhausted,
or the counterparty has been liquidated and the Group has assessed that no recovery is possible.
Any impairment losses are recognised in the statement of profit or loss.
Trade receivables
relate to gold
sold to the bullion
banks. Settlement is
usually received on the
gold sold date. Previously
trade
receivables related to gold sold on the bullion market by Rand Refinery in its capacity as an agent for the Group. Settlement was
usually received
two working days
from gold sold date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-24
15
TRADE AND OTHER RECEIVABLES
continued
Amounts in R million
2022
2021
Trade receivables
-
56.5
Value Added Tax
75.1
50.2
Other receivables
1
57.4
21.2
Prepayments
19.2
17.4
Allowance for impairment
(2.2)
(1.2)
149.5
144.1
1 Other receivables includes the outstanding COVID-19
insurance claim amount of R
31.7
million (refer to note 5.2) which was received
subsequent to year end.
CREDIT RISK
The
Group is
exposed to
credit risk
on the
total carrying
value of
its trade
receivables and
other receivables
excluding Value
Added Tax
and prepayments.
The
Group
manages
its
exposure
to
credit
risk
on
trade
receivables
by
selling
gold
on
a
cash
on
delivery
basis.
The
Group
manages its
exposure to
credit risk
on other
receivables by
establishing a
maximum payment
period of
30
days, and
ensuring
that counterparties
are of
good credit
standing and
transacting on
a secured
or cash
basis where
considered necessary.
The
majority of other
receivables, excluding the COVID-19
insurance claim, comprises balances
with counterparties who have
been
transacting
with
the
Group
for
over
5 years
and
in
some
of
these
cases,
the
counterparties
are
also
suppliers
of
the
Group.
Receivables are regularly monitored and assessed for recoverability.
The balances of counterparties who have been assessed as being credit impaired at reporting date are as follows:
2022
2021
Amounts in R million
Non-credit
impaired
Credit
impaired
Non-credit
impaired
Credit
impaired
Trade receivables
-
-
56.5
-
Other receivables
55.2
2.2
20.0
1.2
55.2
2.2
76.5
1.2
Loss allowance
-
(2.2)
-
(1.2)
Movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:
Amounts in R million
2022
2021
Balance at the beginning of the year
(1.2)
(2.6)
Credit loss allowance/impairments recognised included in operating costs
(1.1)
(0.2)
Credit loss allowance/impairments reversed included in operating costs
0.1
1.3
Credit loss allowance written off against related receivable
-
0.3
Balance at the end of the year
(2.2)
(1.2)
MARKET RISK
Interest rate risk
Trade and other receivables do not earn interest and are therefore not subject to interest rate risk.
Foreign currency risk
Gold is
sold at
spot rates
and is
denominated in
US Dollars.
Gold sales
are therefore
exposed to
fluctuations in
the US
Dollar/South
African Rand
exchange rate.
All foreign
currency transactions
entered into
during the
year ended
June 30,
2022 were
at spot
rates and no foreign exchange rate hedges are entered into. From April 11, 2022, The USD to be received from bullion sales are
sold on the same date as the
respective bullion sale to settle in ZAR to
the Group. Prior to April 11,
2022, Rand Refinery,
acting
as an agent for the Group, sold the USD received from bullion sales on the same date as the respective bullion sale. As a result,
trade receivables are not exposed to fluctuations in the US Dollar/South African Rand exchange rate.
FAIR VALUE
OF FINANCIAL INSTRUMENTS
The fair value of trade and other receivables approximate their carrying value due to their short-term maturities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-25
16
TRADE AND OTHER PAYABLES
ACCOUNTING POLICIES
Trade and other payables, excluding Value Added Tax,
payroll accruals, accrued leave pay and provision for performance
based
incentives, are non-derivative financial liabilities categorised as financial liabilities measured at amortised cost.
These liabilities
are initially
measured at
fair value
plus directly
attributable transaction
costs. Subsequent
to initial
recognition,
they are
measured at
amortised cost
using the
effective interest
method. The
Group derecognises
a financial
liability when
its
contractual rights are discharged, or cancelled or expire.
Short-term employee benefits are
expensed as the related
service is provided. A
liability is recognised for
the amount expected
to be paid if the Group has
a present legal or constructive obligation to
pay this amount as a result
of past service provided by the
employee and the obligation can be estimated reliably.
Amounts in R million
Note
2022
2021
Trade payables and accruals
429.1
352.9
Value Added Tax
0.2
4.5
Accrued leave pay
55.7
53.2
Accrual for short term performance based incentives
87.5
74.2
Payroll accruals
25.9
25.0
598.4
509.8
Interest relating to trade payables and accruals included in profit or loss
(1.8)
(1.8)
RELATED PARTY
BALANCES
Trade payables and accruals include the following amounts payable to related parties:
Sibanye-Stillwater
25.8
12.0
Rand Refinery
-
0.6
LIQUIDITY RISK
Trade payables and accruals are all expected to be settled within 12 months from reporting date.
FAIR VALUE
OF FINANCIAL INSTRUMENTS
The fair value of trade payables and accruals approximate their carrying value due to their short-term maturities.
17
INVENTORIES
ACCOUNTING POLICIES
Gold
in process
is stated
at the
lower of
cost
and net
realisable value.
Costs are
assigned to
gold
in process
on a
weighted
average cost basis. Costs comprise all costs incurred to the stage immediately
prior to smelting, including costs of extraction and
processing as they are
reliably measurable at that
point. Gold bullion is
stated at the lower
of cost and net
realisable value. Selling
and general administration costs are excluded from inventory valuation.
Consumable stores
are stated
at cost
less allowances
for obsolescence.
Cost of
consumable stores
and stockpile
material is
based on
the weighted
average cost
principle and
includes expenditure
incurred in
acquiring inventories
and bringing
them to
their existing location and condition.
Net realisable value
is the estimated
selling price in
the ordinary course
of business, less
the estimated cost
of completion and
selling expenses.
Amounts in R million
2022
2021
Consumable stores
197.5
177.6
Ore stockpile
51.9
52.9
Gold in process
75.1
59.6
Finished inventories - Gold Bullion
64.8
49.9
Total inventories
389.3
340.0
Inventory carried at net realisable value includes:
Gold in process
8.5
-
Finished inventories - Gold Bullion
7.9
-
Write down to net realisable value included in movement in gold in process and finished
stock
(2.7)
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-26
18
INCOME TAX
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
Management periodically evaluates positions taken where tax regulations are subject to interpretation. This includes the
treatment
of both Ergo and FWGR as single mining operations respectively, pursuant to the relevant ring-fencing legislation.
The deferred tax liability is calculated by applying
a forecast weighted average tax rate that is based
on a prescribed formula. The
calculation of the
forecast weighted average
tax rate requires
the use of
assumptions and estimates
and are inherently
uncertain
and could
change materially
over time.
These assumptions
and estimates
include expected
future profitability
and timing
of the
reversal
of the
temporary differences.
Due to
the forecast
weighted
average tax
rate being
based on
a prescribed
formula that
increases the effective tax rate
with an increase in
forecast future profitability, and vice versa, the
tax rate can vary
significantly year
on year and can move contrary to current period financial performance.
A
100
basis points
increase in
the effective
tax rate
will result
in an
increase in
the net
deferred tax
liability at
June 30,
2022 of
approximately R
18.7
million (2021: R
14.2
million; 2020: R
10.3
million).
The assessment of the probability that future taxable
profits will be available against which the tax losses
and unredeemed capital
expenditure can be
utilised requires the
use of assumptions
and estimates and
are inherently uncertain
and could change
materially
over time.
Capital expenditure
is assessed
by the
South African
Revenue Service
(“
SARS
”) when
it is
redeemed against
taxable mining
income
rather
than
when
it
is
incurred.
A
different
interpretation
by
SARS
regarding
the
deductibility
of
these
capital
allowances
may
therefore become evident subsequent to the year of assessment when the capital expenditure is incurred.
ACCOUNTING POLICIES
Income tax expense comprises current and
deferred tax. Each company is
taxed as a separate entity
and tax is not set-off between
the companies.
Current tax
Current tax comprises the expected tax payable or receivable
on the taxable income or loss for the
year and any adjustment on tax
payable or receivable in respect of the previous year. Amounts are recognised in profit or loss except to the extent that it relates to
items recognised directly in equity
or OCI. The current tax
charge is calculated on the
basis of the tax laws
enacted or substantively
enacted at the reporting date.
Deferred tax
Deferred
tax is
recognised in
respect
of temporary
differences
between
the carrying
amounts
and
the tax
bases of
assets
and
liabilities.
Deferred
tax
is
not
recognised
on
the
initial
recognition
of
assets
or
liabilities
in
a
transaction
that
is
not
a
business
combination and that affects neither accounting nor taxable profit.
Deferred tax assets relating to
unutilised tax losses and unutilised capital
allowances are recognised to the
extent that it is
probable
that future taxable profits will be available against which the unutilised tax losses
and unutilised capital allowances can be utilised.
The recoverability of these assets is reviewed at each reporting date and adjusted if recovery is no longer probable.
Deferred tax related
to gold mining
income is measured
at a forecast
weighted average tax
rate that is
expected to be
applied to
temporary differences when they reverse, using tax rates enacted or substantively enacted
at the reporting date. The calculation of
the forecast weighted average
tax rate requires the
use of assumptions and estimates,
including the Group’s life-of-mine
plan (as
discussed in note 9 to the consolidated financial statements) that is applied to calculate the expected future profitability.
Current tax on
gold mining income
for the periods
presented was determined
based on a
formula: Y =
34 - 170/X
where Y is
the
percentage rate
of tax
payable and
X is
the ratio
of taxable
income, net
of any
qualifying capital
expenditure that
bears to
gold
mining income derived, expressed as a percentage. Non-mining income, which consists primarily
of interest accrued, is taxed at a
standard rate of
28
% for the periods presented.
All mining capital expenditure is deducted
in the year it is incurred
to the extent that it does not
result in an assessed loss. Capital
expenditure not deducted from mining income is carried forward as unutilised
capital allowances to be deducted from future mining
income.
Amendment in the corporate income tax rate and mining tax rate formula and broadening the tax base
On February
23, 2022 the
Minister of
Finance announced in
his budget speech
that the corporate
income tax
(“
CIT
”) rate will
be
lowered from
28
% to
27
% for companies with years of assessment commencing on
or after April 1, 2022. The mining operations of
the Group accounts for income tax using the gold mining tax formula
as opposed to the CIT rate. The gold mining tax formula was
changed to Y
= 33 -
165/X for years
of assessment commencing
on or after
April 1, 2022.
It was further
announced that the
lowering
of the CIT rate will
be implemented alongside additional amendments to
broaden the CIT base by
limiting interest deductions and
assessed
losses.
Section
23M
which
limits
the
deduction
of
interest
payable
to
certain
parties
who
are
not
subject
to
tax
was
significantly widened. A maximum of R
1
million or
80
% of assessed losses (whichever is greater) is permitted to be set-off against
taxable income.
The
deferred
tax
assets
and
liabilities
for
the
Group
have
been
calculated
taking
into
account
the
above
changes
as
they
are
effective for the financial year and year of assessment commencing July 1, 2022.
Deferred
tax is
recognised using
the gold
mining tax
formula to
calculate a
forecast
weighted average
tax rate
considering
the
expected timing of the
reversal of temporary differences.
The formula is calculated
as: Y = 33
– 165/X where Y
is the percentage
rate of tax
payable and X
is the
ratio of taxable
income, net of
any qualifying capital
expenditure that bears
to mining income
derived,
expressed as a percentage.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-27
18
INCOME TAX
continued
Amendment in the corporate income tax rate and mining tax rate formula and broadening the tax base
continued
Due to
the forecast
weighted average
tax rate
being based on
the expected
future profitability,
the tax
rate can
vary significantly
year-on-year and can move contrary to current year financial performance.
The forecast
weighted average
deferred tax
rate of
Ergo has
decreased from
25
% to
22
% as
a result
of the
change in
the gold
mining tax
formula and increase
in the life
of mine and
increases in operating
costs. The forecast
weighted average deferred
tax
rate of FWGR has decreased from
30
% to
29
% as a result of the change in the gold mining tax formula.
18.1
INCOME TAX EXPENSE
Amounts in R million
2022
2021
2020
Current tax
(261.6)
(423.7)
(263.2)
Mining tax
(250.2)
(423.7)
(263.2)
Non-Mining, company and capital gains tax
(11.4)
-
-
Deferred tax
(72.7)
(100.0)
(80.7)
Deferred tax charge - Mining tax
(119.9)
(104.0)
(59.1)
Deferred tax charge - Non-mining, company and capital gains tax
1.6
(19.1)
(2.1)
Deferred tax rate adjustment
45.6
-
(20.7)
Recognition of previously unrecognised tax losses
0.4
7.8
-
(Derecognition of previously recognised)/Recognition of previously unrecognised
tax losses of a capital nature
-
(1.2)
1.2
(Derecognition of previously recognised)/Recognition of previously unrecognised
deductible temporary differences
(0.4)
16.5
-
(334.3)
(523.7)
(343.9)
Tax reconciliation
Major items causing the Group's income tax expense to differ from the statutory rate
were:
Tax
on net profit before tax at the South African corporate tax rate of
28
%
(408.3)
(549.9)
(274.1)
Rate adjustment to reflect the actual realised company tax rates applying the
gold mining formula
36.4
3.7
(0.9)
Deferred tax rate adjustment (a)
45.6
-
(20.7)
Depreciation of property, plant and equipment exempt from deferred tax on
initial recognition (b)
(22.2)
(21.2)
(21.4)
Non-deductible expenditure (c)
(7.3)
(6.2)
(7.9)
Exempt income and other non-taxable income (d)
19.0
22.8
2.4
(Derecognition of previously recognised)/Recognition of previously unrecognised
deductible temporary differences
(0.4)
16.5
-
(Derecognition of previously recognised)Recognition of previously unrecognised
tax losses of a capital nature
-
(1.2)
1.2
Utilisation of tax losses for which deferred tax assets were previously
unrecognised
0.4
7.8
-
Current year tax losses for which no deferred tax was recognised
(1.4)
(0.1)
(23.5)
Other items
3.6
3.3
0.4
Tax
incentives
0.3
0.8
0.6
Income tax
(334.3)
(523.7)
(343.9)
(a) Deferred tax rate adjustment
Ergo’s forecast weighted average deferred tax rate decreased to
22
% (2021: remained unchanged at
25
%; 2020: increased from
22
% to
25
% due to an increase in forecast taxable income of Ergo).
FWGR’s forecast weighted average deferred tax rate decreased to
29
% (2021 and 2020: remained unchanged at
30
%).
(b) Depreciation of property, plant and equipment exempt from deferred tax on initial recognition
Depreciation of R
72.1
million (2021: R
68.7
million; 2020: R
73.2
million) on the
fair value of
FWGR’s property, plant and equipment
that was exempt from deferred tax on initial recognition in terms of IAS 12
Income Taxes
.
(c) Non-deductible expenditure
The most significant non-deductible expenditure incurred by the Group during the year includes:
●
R
21.1
million discount recognised on Payments made under protest (2021: R
7.4
million; 2020: R
7.1
million);
●
R
17.8
million expenditure
not incurred
in generation
of taxable
income or
capital in
nature (2021:
R
17.0
million; 2020:
R
2.7
million);
and
●
R
5.8
million net operating
cost related to
Ergo Business Development
Academy Not for
Profit Company that
is not deductible
as it is exempt from income tax (2021: R
nil
; 2020: R
14.6
million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-28
18
INCOME TAX
continued
18.1
INCOME TAX EXPENSE
continued
(d) Exempt income and other non-taxable income
The most significant exempt income earned by the Group during the year includes:
●
R
71.5
million dividends received (2021: R
76.1
million; 2020: R
4.3
million);
●
R
5.8
million unwinding recognised on Payments made under protest (2021: R
4.8
million; 2020: R
4.0
million); and
●
R
nil
net operating
income related
to Ergo
Business Development
Academy Not
for Profit Company
that is
not taxable
as it
is
exempt from income
tax (2021: R
1.0
million; 2020 Ergo
Business Development Academy
Not for Profit
Company incurred net
operating cost that is not deductible as it is exempt from income tax) – refer to (c) non-deductible expenditure.
18.2
DEFERRED TAX
Amounts in R million
2022
2021
Included in the statement of financial position as follows:
Deferred tax assets
14.5
5.8
Deferred tax liabilities
(451.9)
(377.1)
Net deferred tax liabilities
(437.4)
(371.3)
Reconciliation of the deferred tax balance:
Balance at the beginning of the year
(371.3)
(265.1)
Recognised in profit or loss
(72.7)
(100.0)
Recognised in other comprehensive income
6.6
(6.2)
Balance at the end of the year
(437.4)
(371.3)
The detailed components of the net deferred tax liabilities which result from the differences between the amounts of assets and
liabilities recognised for financial reporting and tax purposes are:
Amounts in R million
2022
2021
Deferred tax liabilities
Property, plant and equipment (excluding unredeemed capital allowances)
(537.6)
(494.4)
Environmental rehabilitation obligation funds
(63.3)
(60.2)
Other investments
(0.9)
(7.4)
Gross deferred tax liabilities
(601.8)
(562.0)
Deferred tax assets
Environmental rehabilitation obligation
105.6
124.5
Other provisions
49.3
46.7
Other temporary differences
1
4.6
14.3
Estimated tax losses
4.1
4.1
Estimated unredeemed capital allowances
0.8
1.1
Gross deferred tax assets
164.4
190.7
Net deferred tax liabilities
(437.4)
(371.3)
1
Includes the temporary differences on the lease liability
Deferred tax assets have not been recognised in respect of the following:
Amounts in R million
2022
2021
Estimated tax losses
18.1
16.7
Estimated tax losses - Capital nature
313.6
325.2
Unredeemed capital expenditure
252.0
253.3
Deferred tax
assets for
tax losses,
unredeemed capital
expenditure and
capital losses
have not
been recognised
where future
taxable profits against
which these can
be utilised are
not anticipated. These
do not have
an expiry date.
A maximum of
R
1
million
or
80
% of assessed losses (whichever is greater) is permitted to be set-off per year against taxable income.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-29
19
EMPLOYEE BENEFITS
ACCOUNTING POLICIES
Cash settled share-based payments (“outgoing long-term incentive” or “CLTI”)
Cash settled
share-based payments
are measured
at fair
value and
remeasured at
each reporting
date to
reflect the
potential
outflow of
cash resources
to settle
the liability,
with a
corresponding adjustment
in profit
or loss.
Vesting
assumptions for
non-
market conditions are reviewed at each reporting date to ensure they reflect current expectations.
Equity settled share-based payments (“new long-term incentive” or “ELTI”)
The grant date fair
value of equity settled
share-based payment arrangements is
recognised as an expense,
with a corresponding
increase in equity,
over the vesting period of
the awards. The expense is
adjusted to reflect the number
of awards for which the
related service
and non-market
performance conditions
are expected
to be
met, such
that the
amount ultimately
recognised is
based on the number of awards that meet the related service and non-market performance conditions at vesting date.
19.1
CASH SETTLED LONG-TERM INCENTIVE SCHEME
(“outgoing LTI
scheme” or “CLTI
scheme”)
Terms
of the November 2015 grant made under the DRDGOLD Group's outgoing LTI scheme are:
•
The scheme has a finite term of
5 years
and thus no top-up awards are made when the shares vest;
•
The phantom shares are issued
at an exercise price of
Rnil and will vest in 3
tranches:
20
%,
30
% and
50
% on the 3
rd,
4
th
and
5
th
anniversaries respectively, subject to individual service and performance conditions being met; and
•
The phantom shares will be settled at the 7 day volume weighted average price ("
VWAP
") of the DRDGOLD share.
The last
tranche of
the November
2015 grant
vested and
was fully
settled on
November 5,
2020. The
outgoing LTI
scheme is
replaced by a new equity settled long-term incentive scheme (refer note 19.2).
Amounts in R million
Note
2022
2021
Movements in the total liability for long-term incentive scheme is as follows:
Opening balance
-
227.6
Share-based payment (benefit)/expense - CLTI scheme
5.3
-
(44.3)
Vested and paid
-
(183.3)
Liability for CLTI scheme at the end of the year
-
-
Reconciliation of outstanding phantom shares
2022
2021
Weighted
Weighted
average
average
Shares
price
Shares
price
Number
R per share
Number
R per share
Opening balance
-
9,845,638
Vested and paid
-
-
(9,845,638)
18.62
Closing balance
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-30
19
EMPLOYEE BENEFITS
continued
19.2
EQUITY SETTLED LONG-TERM INCENTIVE SCHEME
(“new LTI scheme”
or “ELTI scheme”)
Amounts in R million
2022
2021
2020
Share-based payment expense - ELTI scheme
18.4
16.0
6.0
On December 2,
2019, the shareholders
approved a new
equity settled long-term
incentive scheme to
replace the cash
settled
long-term
incentive
scheme
established
in
November
2015.
Under
the
new
LTI
scheme,
qualifying
employees
are
awarded
conditional shares on
an annual
basis, comprising
performance shares
(
80
% of
the total
conditional shares
awarded) and
retention
shares (
20
% of the
total conditional shares
awarded). Conditional shares
will vest
3 years
after grant date
and will be
settled in
the form of DRDGOLD shares at a zero-exercise price.
The key conditions of the grants made under the ELTI scheme are:
Retention shares:
100
% of the retention shares will vest if the employee remains in the active
employ of the Company at vesting date, is not under
notice period and individual performance criteria are met.
Performance shares:
Total
shareholder’s return
(TSR) measured
against a
hurdle rate
of
15
%
referencing DRDGOLD’s
Weighted
Average
Cost of
Capital (“
WACC
”):
•
50
% of the performance shares are linked to this condition; and
•
all of these performance shares will vest if DRDGOLD’s TSR exceeds the hurdle rate over the vesting period
TSR measured
against a
peer group
of 3
peers (Sibanye-Stillwater,
Harmony Gold
Mining Company
Limited and
Pan-African
Resources Limited):
•
50
% of the performance shares are linked to this condition; and
•
The number of
performance shares which vest
is based on
DRDGOLD’s actual TSR
performance in relation to
percentiles of
peer group’s performance as follows:
Percentile of peers
% of performance shares
vesting
< 25th percentile
-
%
25th to < 50th percentile
25
%
50th to < 75th percentile
75
%
≥ 75th percentile
100
%
Reconciliation of the number of conditional shares
2022
2021
Shares
Number
Weighted
average price
R per share
Shares
Number
Weighted
average price
R per share
Opening balance
7,840,620
5,860,760
Granted
October 22, 2020
-
1,979,860
October 20, 2021
3,508,232
-
Vested
(2,862,654)
14.02
-
-
Forfeited
(892,528)
-
Closing balance
7,593,670
7,840,620
Vesting on
7,593,670
7,840,620
December 2, 2021
-
2,930,380
December 2, 2022
2,715,604
2,930,380
October 22, 2023
1,666,778
1,979,860
October 20, 2024
3,211,288
-
Fair value
The weighted average fair value of the performance and retention shares at grant date were determined using the Monte Carlo
simulation pricing model applying the following key inputs:
Grant date
October 20, 2021
October 22, 2020
December 2, 2019
Vesting date
October 20, 2024
October 22, 2023
December 2, 2022
Weighted average fair value of 80% performance shares
1
7.34
10.49
4.12
Weighted average fair value of 20% retention shares
12.32
18.67
5.49
Expected term (years)
3
3
3
Grant date share price of a DRDGOLD share
13.55
19.43
6.15
Expected dividend yield
3.15
%
1.33
%
3.81
%
Expected volatility
2
60.20
%
63.07
%
53.80
%
Expected risk free rate
5.78
%
3.82
%
6.80
%
1
The performance conditions are included in the
measurement of the grant date fair value as they
are classified as market-based performance
conditions
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-31
2
Expected volatility has been based on an evaluation
of the historical volatility of DRDGOLD’s share price,
commensurate with the expected
term of the options
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-32
19.3
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
Interests in contracts
None
of
the
directors,
officers
or
major
shareholders
of
DRDGOLD or,
to
the
knowledge
of
DRDGOLD’s
management,
their
families, had any interest, direct or indirect, in any transaction entered into during the year ended June 30, 2022 or
the preceding
financial years, or in any proposed
transaction which has affected or will
materially affect DRDGOLD or its subsidiaries other
than
disclosed in these financial statements. None of the directors or officers of DRDGOLD or any associate of such director or officer
is currently or has been at any time during the past financial year materially indebted to DRDGOLD.
Key management personnel remuneration
Amounts in R million
Note
2022
2021
2020
- Board fees paid
7.8
7.6
6.2
- Salaries paid
82.5
75.5
67.3
- Short term incentives relating to this cycle
84.1
73.8
63.6
- Market value of long-term incentives vested and transferred
19.2
40.1
-
-
- Long term incentives paid during the cycle
19.1
-
183.3
41.5
214.5
340.2
178.6
20
CAPITAL MANAGEMENT
The
primary
objective
of
the
Group's
capital
management
policy
is
to
ensure
that
adequate
capital
is
available
to
meet
the
requirements
of
the
Group
from
time
to
time,
including
capital
expenditure.
The
Group
considers
the
appropriate
capital
management strategy for specific growth projects as and when required. Lease liabilities are not considered to be debt.
Liquidity management
At June
30, 2022
and June
30, 2021
the Group’s
facilities included
an undrawn
Revolving Credit
Facility (“
RCF
”) which
was
initially secured
to finance
the development
of Phase
1 of
FWGR as
well as
the general
working capital
requirements of
the
Group. In December 2018, R
125
million of the RCF was committed to issue a guarantee to Ekurhuleni Local Municipality (refer
note 24).
In September 2020, the initial R
300
million RCF was amended to a R
200
million RCF and extended for an additional term of 2
years with a final repayment date of
September 14, 2022
.
The
initial
and
amended
RCF
permits
a
consolidated
debt
ratio
(net
debt
to
adjusted
EBITDA)
of
no
more
than
2:1
and
a
consolidated interest coverage ratio
(net interest to adjusted
EBITDA) of no less
than
4:1
calculated on a twelve-month
rolling
basis respectively. Management monitors
the covenant ratio
levels to ensure
compliance with the
covenants, as well
as maintain
sufficient facilities to ensure satisfactory liquidity for the Group. The covenant ratios were not breached as at or during the year
ended June 30, 2022 or June 30, 2021.
The amendment
included the
reduction of
the initial
interest rate
margin of
3.25
% to
2.75
%. A
pledge and
cession of
DRDGOLD’s
shares in
and shareholder
claims against
Ergo Mining
Proprietary Limited
and Far
West Gold
Recoveries Proprietary
limited
remains
in
place
as
security
for
the
RCF.
The
amended
RCF
does
not
include
any
commitment
towards
the
guarantee
to
Ekurhuleni Local Municipality.
No amounts
were drawn
under this
facility as
at June
30, 2022.
Pursuant to
the Group
having started
to evaluate
its funding
structure for its expanded budgeted capital expenditure programme in future years, a decision was made to not renew the RCF.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-33
21
EQUITY
ACCOUNTING POLICIES
Stated share capital
Ordinary shares and the cumulative preference shares are
classified as equity. Incremental costs directly attributable to the issue
of ordinary shares are recognised as a deduction from equity, net of any tax effect.
Repurchase and reissue of share capital (treasury shares)
When shares
recognised as
equity are
repurchased, the
amount of
the consideration
paid, which
includes directly
attributable
costs is
recognised as
a deduction
from equity.
Repurchased shares
are classified
as treasury
shares and
are presented
as a
deduction from stated share capital.
Dividends
Dividends are recognised
as a liability
on the date on
which they are declared
which is the date
when the shareholders’
right to
the dividends vests.
21.1
STATED
SHARE CAPITAL
All ordinary shares rank equally regarding the Company’s residual assets. Holders of ordinary shares are entitled to dividends as
declared from time to
time and are entitled to
one vote per share
at general meetings of the
Company. All
rights attached to the
Company’s shares held by the Group are suspended until those shares are reissued.
Preference shareholders participate only to the
extent of the face value of the
shares. Holders of preference shares do not
have
the right to participate in any additional dividends declared for ordinary shareholders. These shares do not have voting rights.
Amounts in R million
2022
2021
2020
Authorised share capital
1,500,000,000
, (2021 and 2020:
1,500,000,000
) ordinary shares of
no
par value
5,000,000
(2021 and 2020:
5,000,000
) cumulative preference shares of
10
cents each
0.5
0.5
0.5
Issued share capital
864,588,711
(2021 and 2020:
864,588,711
) ordinary shares of
no
par value
6,208.4
6,208.4
6,208.4
6,612,266
(2021 and 2020:
9,474,920
) treasury shares held within the Group (a)
(35.6)
(51.0)
(51.0)
5,000,000
(2021 and 2020:
5,000,000
) cumulative preference shares of 10 cents each
0.5
0.5
0.5
6,173.3
6,157.9
6,157.9
RELATED PARTY
RELATIONSHIPS AND TRANSACTIONS
(a)
Treasury shares
Shares
in
DRDGOLD Limited
are
held
in treasury
by
Ergo Mining
Operations Proprietary
Limited
("
EMO
").
No
shares were
acquired in the market during
the year ended June 30,
2022, the year ended June
30, 2021 or the
year ended June 30, 2020
.
During
the
year
ended
June
30,
2022
2,862,654
shares
were
used
to
settle
the
equity settled
share-based
payment,
at
nil
cashflow
to
the
Group.
R
15.4
million,
representing
the
average
cost
of
the
treasury
shares
used
to
settle
the
share
based
payment, was transferred to retained earnings.
21.2
DIVIDENDS
Amounts in R million
2022
2021
2020
Dividends paid during the year net of treasury shares:
Final dividend declared relating to prior year:
40
SA cents per share (2021:
35
SA cents
per share; 2020:
20
SA cents per share)
342.0
299.3
137.5
First interim dividend:
20
SA cents per share (2021:
40
SA cents per share; 2020:
25
SA
cents per share)
171.6
342.0
213.8
Second interim dividend nil SA cents per share (2021: nil SA cents per share; 2020:
25
SA cents per share)
-
-
213.8
Total
513.6
641.3
565.1
After June 30, 2022, a dividend of
40
cents per qualifying share amounting to R
342.0
million was approved by the directors as
a final dividend for the year ended June 30, 2022. The
dividend has not been provided as at June 30, 2022 and does not
have
any tax impact on the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-34
22
INTEREST IN SUBSIDIARIES
ACCOUNTING POLICIES
Significant subsidiaries
of the Group
are those subsidiaries
with the most
significant contribution to
the Group's profit
or loss or
assets.
Ergo Mining
Proprietary Limited
(“
Ergo
”) and
Far West
Gold Recoveries
Proprietary Limited
(“
FWGR
”) are
the only
significant
subsidiaries of the Group. They are both
wholly owned subsidiaries and are incorporated in
South Africa, are primarily involved in
the retreatment of surface gold and all their operations are based in South Africa.
23
OPERATING SEGMENTS
ACCOUNTING POLICIES
Operating segments
are reported
in a
manner consistent
with internal
reports that
the Group’s
chief operating
decision maker
(“
CODM
”) reviews
regularly in
allocating resources
and assessing
performance of
operating
segments. The
CODM has
been
identified as the
Group’s Executive Committee.
The Group has
one material revenue
stream, the sale
of gold. To identify operating
segments, management reviewed
various factors, including
operational structure and
mining infrastructure. It
was determined that
an
operating
segment
consists of
a single
or multiple
metallurgical plants
and reclamation
sites
that, together
with its
tailings
storage facility, is capable of operating independently.
When assessing profitability, the
CODM considers,
inter alia,
the revenue and cash operating costs of each segment. The net
of
these amounts
is the
segment operating
profit or
loss. Therefore,
segment operating
profit has
been disclosed
as the
primary
measure of profit or loss. The CODM also considers the additions to property, plant and equipment.
Ergo
is a surface gold retreatment operation
which treats old slime dams
and sand dumps to the south
of Johannesburg’s central
business district
as well
as the East
and Central
Rand goldfields. The
operation comprises
three plants.
The Ergo
and Knights
plants continue to operate as metallurgical plants. The City Deep plant
continues to operate as a pump/milling station feeding the
metallurgical plants.
FWGR
is a surface
gold retreatment operation
and treats old
slime dams in
the West
Rand goldfields. Phase
1, which entailed
the reconfiguration of the Driefontein 2 plant and relevant infrastructure to process tailings from the Driefontein 5 slimes
dam and
deposit residues on the Driefontein 4 Tailings
Storage Facility, was commissioned on April 1, 2019.
Corporate office
and other
reconciling items
(collectively referred
to as
"Other reconciling
items"
) represent
the items
to
reconcile
to
consolidated
financial
statements.
This
does
not
represent
a
separate
segment
as
it
does
not
generate
mining
revenue.
Note condensed during the current year. Changes also affected on comparatives.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-35
23
OPERATING SEGMENTS
continued
Other
2022
reconciling
Amounts in R million
Ergo
FWGR
items
Total
Revenue (External)
3,704.9
1,413.6
-
5,118.5
Cash operating costs
(3,009.8)
(454.0)
-
(3,463.8)
Movement in gold in process and finished inventories - Gold Bullion
35.2
(4.8)
-
30.4
Segment operating profit
730.3
954.8
-
1,685.1
Additions to property, plant and equipment
(436.2)
(162.2)
-
(598.4)
Reconciliation of segment operating profit to profit after tax
Segment operating profit
730.3
954.8
-
1,685.1
Depreciation
(134.5)
(131.6)
(1.5)
(267.6)
Change in estimate of environmental rehabilitation recognised in
profit or loss
2.3
-
(0.1)
2.2
Ongoing rehabilitation expenditure
(30.1)
(1.5)
-
(31.6)
Care and maintenance
-
-
(5.9)
(5.9)
Other operating costs
(4.9)
(0.2)
(0.1)
(5.2)
Other income
70.1
21.2
-
91.3
Administration expenses and other costs
(7.7)
(13.8)
(139.7)
(161.2)
Finance income
22.4
19.0
184.4
225.8
Finance expense
(58.8)
(10.8)
(5.2)
(74.8)
Current tax
(12.9)
(237.3)
(11.4)
(261.6)
Deferred tax
(45.3)
(29.6)
2.2
(72.7)
Profit after tax
530.9
570.2
22.7
1,123.8
Reconciliation of cost of sales to cash operating costs
Cost of sales
(3,141.8)
(592.1)
(7.6)
(3,741.5)
Depreciation
134.5
131.6
1.5
267.6
Change in estimate of environmental rehabilitation recognised in
profit or loss
(2.3)
-
0.1
(2.2)
Movement in gold in process and finished inventories - Gold Bullion
(35.2)
4.8
-
(30.4)
Ongoing rehabilitation expenditure
30.1
1.5
-
31.6
Care and maintenance
-
-
5.9
5.9
Other operating costs
4.9
0.2
0.1
5.2
Cash operating costs
(3,009.8)
(454.0)
-
(3,463.8)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-36
23
OPERATING SEGMENTS
continued
Other
2021
reconciling
Amounts in R million
Ergo
FWGR
items
Total
Revenue (External)
3,943.0
1,326.0
-
5,269.0
Cash operating costs
(2,666.5)
(406.2)
-
(3,072.7)
Movement in gold in process and finished inventories - Gold Bullion
(31.9)
6.3
-
(25.6)
Segment operating profit
1,244.6
926.1
-
2,170.7
Additions to property, plant and equipment
(250.9)
(143.3)
(1.5)
(395.7)
Reconciliation of segment operating profit to profit after tax
Segment operating profit
1,244.6
926.1
-
2,170.7
Depreciation
(135.6)
(115.6)
(1.3)
(252.5)
Change in estimate of environmental rehabilitation recognised in
profit or loss
7.2
-
5.2
12.4
Ongoing rehabilitation expenditure
(46.6)
(1.7)
-
(48.3)
Care and maintenance
-
-
(3.9)
(3.9)
Other operating expenses
2.4
-
-
2.4
Other income
0.1
-
-
0.1
Administration expenses and other costs
15.0
1.8
(80.8)
(64.0)
Finance income
21.0
17.2
178.0
216.2
Finance expense
(45.8)
(9.8)
(13.9)
(69.5)
Current tax
(196.1)
(227.6)
-
(423.7)
Deferred tax
(66.6)
(37.4)
4.0
(100.0)
Profit after tax
799.6
553.0
87.3
1,439.9
Reconciliation of cost of sales to cash operating costs
Cost of sales
(2,871.0)
(517.2)
-
(3,388.2)
Depreciation
135.6
115.6
1.3
252.5
Change in estimate of environmental rehabilitation recognised in
profit or loss
(7.2)
-
(5.2)
(12.4)
Movement in gold in process and finished inventories - Gold Bullion
31.9
(6.3)
-
25.6
Ongoing rehabilitation expenditure
46.6
1.7
-
48.3
Care and maintenance
-
-
3.9
3.9
Other operating income
(2.4)
-
-
(2.4)
Cash operating costs
(2,666.5)
(406.2)
-
(3,072.7)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-37
23
OPERATING SEGMENTS
continued
Other
2020
reconciling
Amounts in R million
Ergo
FWGR
items
Total
Revenue (External)
3,064.3
1,120.7
-
4,185.0
Cash operating costs
(2,274.0)
(352.0)
-
(2,626.0)
Movement in gold in process and finished inventories - Gold Bullion
1.8
1.3
-
3.1
Segment operating profit
792.1
770.0
-
1,562.1
Additions to property, plant and equipment
(114.4)
(68.0)
(0.3)
(182.7)
Reconciliation of segment operating profit to profit after tax
Segment operating profit
792.1
770.0
-
1,562.1
Depreciation
(150.4)
(119.6)
(0.8)
(270.8)
Change in estimate of environmental rehabilitation recognised in
profit or loss
19.1
2.1
0.7
21.9
Ongoing rehabilitation expenditure
(22.3)
(2.0)
-
(24.3)
Care and maintenance
-
-
(11.1)
(11.1)
Other operating expenses
(27.6)
(3.1)
-
(30.7)
Other income
0.7
-
-
0.7
Administration expenses and other costs
(131.6)
(20.7)
(157.6)
(309.9)
Finance income
28.9
28.1
52.8
109.8
Finance expense
(48.8)
(14.3)
(5.7)
(68.8)
Current tax
(145.8)
(117.4)
-
(263.2)
Deferred tax
6.6
(86.5)
(0.8)
(80.7)
Profit after tax
320.9
436.6
(122.5)
635.0
Reconciliation of cost of sales to cash operating costs
Cost of sales
(2,453.4)
(473.3)
(11.2)
(2,937.9)
Depreciation
150.4
119.6
0.8
270.8
Change in estimate of environmental rehabilitation recognised in
profit or loss
(19.1)
(2.1)
(0.7)
(21.9)
Movement in gold in process and finished inventories - Gold Bullion
(1.8)
(1.3)
-
(3.1)
Ongoing rehabilitation expenditure
22.3
2.0
-
24.3
Care and maintenance
-
-
11.1
11.1
Other operating costs
27.6
3.1
-
30.7
Cash operating costs
(2,274.0)
(352.0)
-
(2,626.0)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-38
24
PAYMENTS
MADE UNDER PROTEST
SIGNIFICANT ACCOUNTING JUDGEMENTS
Payments made under protest
The determination
of whether the
payments made under
protest give
rise to an
asset or
a contingent asset
or neither,
required
the use of significant judgement. The
definition of an asset in
the conceptual framework was applied as
well as the considerations
in the outcome
of the IFRS Interpretations
Committee (“
IFRIC
”) agenda decision
– Deposits relating to
taxes other than income
tax (IAS 37
Provisions, Contingent Liabilities and Contingent
Assets
) (“
IFRIC Agenda Decision
”) published in January 2019.
The
IFRIC Agenda Decision has a similar fact pattern to that of the payments made under protest. With the consideration of the facts
and circumstances
surrounding the
payments made
under protest
in applying
the definition
of an
asset and
the IFRIC
Agenda
Decision, management considered the following:
•
payments
were
made
under
protest
and
without
prejudice
or
admission
of
liability.
Such
payments
were
not
made
as
a
settlement of debt or recognition of expenditure;
•
the
Group
therefore
retains
a
right
to
recover
the
payments
from
the
City
of
Ekurhuleni
Metropolitan
Municipality
(“
Municipality
”) if the Group is successful in the Main Application (as defined below);
•
if the Group
is not successful
in the Main
Application, the
payments will
be used
to settle
the resultant
liability to the
Municipality;
and
•
these two possible outcomes
(i.e. success in
the Main Application or
not) therefore, will
lead to economic
benefits to the Group.
Therefore, the
right to
recover the
payments made
under protest
is not
a contingent
asset because
it meets
the definition
and
recognition
criteria
of
an
asset.
No
specific
guidance
exists
in
developing
an
accounting
policy
for
such
asset.
Therefore,
management applied judgement in developing an accounting policy that
would lead to information that is relevant to the users of
these financial statements and information that can be relied upon.
Contingent liabilities
The assessment
of whether
an obligating
event results
in a
liability or
a contingent
liability requires
the exercise
of significant
judgement of the outcome of future events that are not wholly within the control of the Group.
Litigation and other judicial
proceedings inherently entail complex
legal issues that are subject
to uncertainties and complexities
and are subject to interpretation.
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
The discounted amount of the
payments made under protest is
determined using assumptions about the
future that are inherently
uncertain and can change materially over time and includes the discount rate and discount period.
These assumptions about the future include estimating the timing of concluding on
the Main Application, i.e. the discount period,
the ultimate settlement terms, the discount rate applied and the assessment of recoverability.
ACCOUNTING POLICIES
Payments made under protest
Recognition and measurement
The
payment
made
under
protest
asset
that
arises
from
the
Municipality
Electricity
Tariff
Dispute
is
initially
measured
at
a
discounted amount, and any
difference between the face
value of payments made under
protest and the discounted
amount on
initial recognition is recognised in profit or loss
as a finance expense. Subsequent to initial recognition,
the payments made under
protest is measured using the effective interest method to unwind the discounted amount to the original face value less any write
downs for recovery. Unwinding of the carrying value and changes in the discount period are recognised in finance income.
Assessment of recoverability
The
discounted
amount of
the payments
under
protest is
assessed
at each
reporting date
to
determine whether
there is
any
objective
evidence
that
the
full
amount
is
no
longer
expected
to
be
recovered.
The
Group
considers
the
reasonable
and
supportable
information
related
to
the
creditworthiness
of
the
Municipality
and
events
surrounding
the
outcome
of
the
Main
Application.
Any write down is recognised in finance expense.
Contingent liabilities
A contingent liability
is a possible obligation
arising from past events
and whose existence will
be confirmed only
by occurrence
or non-occurrence of one
or more uncertain future
events not wholly within
the control of the
Group. A contingent liability
may also
be a present obligation arising from past events
but is not recognised on the basis that
an outflow of economic resources to settle
the obligation
is not
viewed as
probable, or
the amount
of the
obligation cannot
be reliably
measured. When
the Group
has a
present obligation, an outflow of economic resources
is assessed as probable and the Group
can reliably measure the obligation,
a provision is recognised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-39
24
PAYMENTS
MADE UNDER PROTEST
continued
Amounts in R million
Note
2022
2021
Balance at the beginning of the year
40.5
35.0
Payments made under protest
15.2
8.1
Discount on initial payment made under protest and change in estimate
7
(21.1)
(7.4)
Unwinding
6
5.8
4.8
Balance at the end of the year
40.4
40.5
Ekurhuleni Metropolitan Municipality ("Municipality") Electricity Tariff Dispute
There are primarily 3
(three) legal proceedings for
which relief has been sought
in the appropriate legal
fora and all of
which fall
within the
jurisdiction of
the High
Court of
South Africa, Gauteng
Local Division,
Johannesburg. These comprise
an application
brought by Ergo and actions brought under two summonses by the Municipality.
In order
to operate
the Ergo
Plant and
conduct its
business operations,
Ergo requires
a reliable
and steady
feed of
electricity
which it draws from the Ergo Central Substation.
Over the past several
years the Municipality has
charged Ergo for such
electricity, at the Megaflex tariff at
which ESKOM Holdings
SOC Limited (“
ESKOM
”) charges its large power users plus an additional surcharge, as it still does; and Ergo paid therefor.
Pursuant to
its own investigations,
and after having
sought legal
advice on the
matter,
Ergo determined
that only
ESKOM may
legitimately charge it
for the electricity so
drawn and consumed at
the Ergo Plant, specifically
from the Ergo Central
Substation.
Despite
this, ESKOM
refused to
either accept
payment from
Ergo in
respect of
such electricity
consumption or
to conclude
a
consumer agreement with it.
In December 2014, Ergo instituted legal proceedings
by way of an application (“
Main Application
”) against the Municipality and
ESKOM as well as the National Energy Regulator of
South Africa (“
NERSA
”), the Minister of Energy, the Minister of Co-operative
Governance &
Traditional
Affairs and
the South
African Local
Government Association,
the latter
4 (four)
respondents against
whom Ergo does not seek any relief.
Ergo seeks the undermentioned relief:
●
declaring that the Municipality does not supply electricity to it at the Ergo Plant;
●
declaring that
the Municipality
is in
breach of
its temporary
Distribution License
(issued by
NERSA) by
purporting to
supply
electricity to Ergo at the Ergo Plant;
●
declaring that neither the Municipality
nor ESKOM may lawfully insist
that only the Municipality may
supply electricity to Ergo
at the Ergo Plant;
●
declaring that ESKOM presently supplies electricity to Ergo at the Ergo Plant; and
●
directing ESKOM to
conclude a consumer
agreement with Ergo
for the supply
of electricity at
the Ergo Plant
at its Megaflex
tariff.
The Municipality has since issued two summonses (“
Summonses
”) for the recovery of arrears it alleges it
is owed amounting to
R
74.0
million and R
31.6
million, respectively.
In the interest of the proper administration of justice, the Main Application was postponed by agreement between the parties and
a case manager
was appointed to determine
a collaborative process to
facilitate the effective
and efficient court
scheduling and
coordination of both the Main Application and the Summonses.
In
order
to
secure
uninterrupted
supply
of
electricity,
Ergo
has
made
payment
and
continues
to
pay
for
consumption
at
the
amended and
lower “J-Tariff”,
albeit under
protest and
without prejudice
and/or admission
of liability.
Whilst still
deemed to
be
disproportionate, the J-Tarif is significantly lower than the previously imposed “D-Tariff”. The Group recognised an asset for these
payments that are made “under protest”.
Ergo
has
also
brought
an
application
for
the
consolidation
of
both
the
Main
Application
and
the
actions
brought
under
the
Summonses, which is still ongoing.
The Group supported by the
external legal team is
confident that there is a
high probability that Ergo will
be successful in the
Main
Application and defending
the Summonses. Therefore,
there is no
present obligation as
a result of
a past event
to pay the
amounts
claimed by the Municipality
(refer note 26.3).
The balance at the end of the year was based on the following assumptions:
●
discount rate:
11.80
% (2021:
11.68
%) representing the Municipality maximum cost of borrowing on bank loans as disclosed in
their June 30, 2021 annual report; and
●
discount period:
June 30, 2027
(2021:
June 30, 2024
) representing management’s
best estimate of
the date of
conclusion of
the Main Application and is supported by
external legal counsel. The discount period has
increased due to delays in obtaining
hearing dates due to back log cases at the court which began during the COVID-19 pandemic.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-40
25
OTHER INVESTMENTS
ACCOUNTING JUDGEMENTS
The Group has one (1) director representative on
the Rand Refinery board. Therefore, judgement had to be applied
to ascertain
whether significant influence exists, and
if the investment should be
accounted for as an associate
under IAS 28
Investments in
Associates
and
Joint
Ventures
.
The
director
representation
is
not
considered
significant
influence,
as
it
does
not
constitute
meaningful representation.
It represents
11.11
% of the entire board and
is proportional to the
11.3
% shareholding that the Group
has.
SIGNIFICANT ACCOUNTING ASSUMPTIONS AND ESTIMATES
The fair value of the listed equity instrument is determined
based on quoted prices on an active market. Equity instruments
which
are not listed on an
active market are measured using
other applicable valuation techniques depending
on the extent to which
the
technique maximises
the use
of relevant
observable inputs
and minimizes
the use
of unobservable
inputs. Where
discounted
cash flows are used, the estimated cash flows are based on management’s best estimate based on readily available information
at measurement
date. The
discounted cash
flows contain
assumptions about
the future
that are
inherently uncertain
and can
change materially over time.
ACCOUNTING POLICIES
On initial recognition of
an equity investment that is
not held for trading, the
Group may make an irrevocable
election to present
subsequent changes in
the investment’s
fair value in
other comprehensive income.
This election is
made on an
investment-by-
investment basis.
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition
they
are
measured
at
fair
value
and
changes
therein
are
recognised
in
other
comprehensive
income
(“
OCI
”),
and
are
never
reclassified to profit or loss, with dividends recognised in profit or loss unless the dividend clearly represents
a recovery of part of
the cost of the investment.
The Group’s listed and unlisted investments in equity securities are classified as equity instruments at fair value through OCI.
Amounts in R million
Shares
held
1
% held
1
2022
2021
Listed investments (Fair value hierarchy Level 1):
West Wits Mining Limited ("
WWM
")
47,812,500
2.4%
10.7
43.5
Total
listed investments
10.7
43.5
Unlisted investments (Fair value hierarchy Level 3):
Rand Refinery Proprietary Limited ("
Rand Refinery
")
44,438
11.3%
136.1
119.3
Rand Mutual Assurance Company Limited B Share Business Fund ("
RMA
")
2
12,659
2
1.3%
2
4.4
4.1
Guardrisk Insurance Company Limited (Cell Captive A170)
3
20
3
100.0%
3
0.1
0.1
Chamber of Mines Building Company Proprietary Limited
42,292
4.5%
0.1
0.1
Total
unlisted investments
140.7
123.6
Balance at the end of the year
151.4
167.1
Fair value adjustment on equity instruments at fair value through OCI
(15.7)
(28.2)
WWM
(32.8)
31.5
Rand Refinery
16.8
(59.1)
RMA
0.3
(0.6)
Dividends received on equity instruments at fair value through OCI
(71.5)
(76.1)
Rand Refinery
(70.1)
(72.3)
RMA
(1.4)
(3.8)
1
The number and percentage shares held remained
unchanged for the prior year with the exception
of WWM that issued new shares thereby
diluting DRDGOLD's effective shareholding from
3.5
% to
2.4
%
2
The "B Share Business Fund" shares relate to all
the businesses of the RMA Group that do not relate
to the Compensation for Occupational
Injuries and Diseases Act
3
The shares held entitles the holder to
100
% of the residual net equity of Cell Captive
A 170
MARKET RISK
Other market price risk
Equity price risk arises from changes in quoted market prices
of listed investments as well as changes in the fair
value of unlisted
investments due to changes in the underlying net asset values.
FAIR VALUE
OF FINANCIAL INSTRUMENTS
Listed investments
The
fair
values
of
listed
investments
are
determined
by
reference
to
published
price
quotations
from
recognised
securities
exchanges and constitute level 1 instruments in the fair value hierarchy.
Unlisted investments
The fair
values of
unlisted investments
are determined
through valuation
techniques that
include inputs
that are
not based
on
observable market data and constitute level 3 instruments in the fair value hierarchy.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-41
25
OTHER INVESTMENTS
continued
25.1
RAND REFINERY
Amounts in R million
2022
2021
Balance at the beginning of the year
119.3
178.4
Fair value adjustment on equity investments at fair value through other comprehensive income
16.8
(59.1)
Balance at the end of the year
136.1
119.3
In accordance
with IFRS
13
Fair Value
Measurement
, the
income approach
has been
established to
be the
most appropriate
basis
to estimate
the fair
value of
the investment
in Rand
Refinery.
This method
relies on
the future
budgeted cash
flows as
estimated by Rand Refinery. Management used a model developed by an external expert to perform the valuation.
Rand
Refinery’s
refining
operations
(excluding
Prestige
Bullion)
were
valued
using
the
Free
Cash
Flow
model,
whereby
an
enterprise
value using
a
Gordon Growth
formula for
the terminal
value was
estimated.
The forecasted
dividend income
to be
received
from Prestige
Bullion was
valued using
a
finite-life dividend
discount model
as Rand
Refinery’s
shareholding will
be
reduced to nil in 2032 per agreement with the South African Mint (partner in Prestige Bullion). These valuations revealed that the
fair value of the investment in Rand Refinery
consist mainly of Rand Refinery’s cash on
hand and the forecasted dividend income
to be received from Prestige Bullion.
The fair
value of
Rand Refinery
increased as
a result
of an
increase in
cash on
hand. The
enterprise value
of the
refining operations
of
Rand
Refinery
decreased
because
of
an
increase
in
budgeted
operating
costs.
The
value
of
the
forecasted
dividends
for
Prestige Bullion decreased as a result of a decrease in the discount period due to the model being finite.
The fair value measurement uses significant unobservable
inputs and relates to a fair value
hierarchy level 3 financial instrument.
Marketability and minority
discounts (both unobservable
inputs) of
16.5
% and
17.0
% (2021:
16.5
% and
17.0
%), respectively, were
applied. The
latest budgeted
cash flow
forecasts provided
by Rand
Refinery as
at June
30, 2022
was used,
and therefore
classified
as an unobservable input into the models. Other key observable/unobservable inputs into the model include:
Amounts in R million
Observable/unobservable input
Unit
2022
2021
Rand Refinery operations
Forecast average gold price
Observable input
R/kg
880,207
847,317
Forecast average silver price
Observable input
R/kg
11,209
11,751
Average South African CPI
Observable input
%
4.4
4.4
South African long-term government bond rate
Observable input
%
10.26
9.5
Terminal
growth rate
Unobservable input
%
4.4
4.4
Weighted average cost of capital
Unobservable input
%
15.9
15.1
Investment in Prestige Bullion
Discount period
Unobservable input
years
11
12
Cost of equity
Unobservable input
%
14.2
16.5
Sensitivity analysis
The fair value measurement is most
sensitive to the Rand denominated gold
price and operating costs. The higher the
gold price,
the higher the
fair value of
the Rand Refinery
investment. The higher
the operating costs,
the lower the
fair value of
Rand Refinery.
The fair
value measurement
is also
sensitive to
the discount
rate and
minority and
marketability discounts
applied. The
below
table indicates the extent of sensitivity of the Rand Refinery equity value to the inputs:
Input
Change in OCI, net of tax
Amounts in R million
% Increase
% Decrease
% Increase
% Decrease
Rand Refinery operations
Rand US Dollar exchange rate
Observable inputs
1
(1)
3.3
(3.3)
Commodity prices (Gold and silver)
Observable inputs
1
(1)
2.8
(2.8)
Operating costs
Unobservable inputs
1
(1)
(2.6)
2.6
Weighted average cost of capital
Unobservable inputs
1
(1)
(0.1)
0.1
Minority discount
Unobservable inputs
1
(1)
(1.2)
1.2
Marketability discount
Unobservable inputs
1
(1)
(1.2)
1.2
Investment in Prestige Bullion
Cost of equity
Unobservable inputs
1
(1)
(1.0)
1.0
Prestige Bullion dividend forecast
Unobservable inputs
1
(1)
0.3
(0.3)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-42
26
CONTINGENCIES
SIGNIFICANT ACCOUNTING JUDGEMENTS
The assessment
of whether
an obligating
event results
in a
liability or
a contingent
liability requires
the exercise
of significant
judgement
of
the
outcome
of
future
events
that
are
not
wholly
within
the
control
of
the
Group.
Litigation
and
other
judicial
proceedings
inherently
entail
complex
legal
issues
that
are
subject
to
uncertainties
and
complexities
and
are
subject
to
interpretation.
ACCOUNTING POLICIES
Contingent liabilities
A contingent liability is a possible obligation arising from
past events and whose existence will be confirmed only
by occurrence
or non-occurrence
of one
or more uncertain
future events not
wholly within
the control of
the Group.
A contingent liability
may
also be a present obligation arising from past events but is not recognised on
the basis that an outflow of economic resources to
settle the obligation is not
viewed as probable, or the amount
of the obligation cannot be
reliably measured. When the Group
has
a
present
obligation,
an
outflow
of
economic
resources
is
assessed
as
probable
and
the
Group
can
reliably
measure
the
obligation, a provision is recognised.
Contingent assets
Contingent assets are
possible assets whose
existence will be
confirmed by the
occurrence or
non-occurrence of uncertain
future
events that are not wholly within the control of the entity. Contingent assets are not recognised, but they are disclosed when it is
more likely
than not
that an
inflow
of benefits
will occur.
However,
when the
inflow
of
benefits
is virtually
certain
an asset
is
recognised in the statement of financial position, because that asset is no longer considered to be contingent.
26.1
CONTINGENT LIABILITY FOR OCCUPATIONAL
LUNG DISEASES
On May 3, 2018, former mineworkers and dependents of deceased mineworkers (“Applicants”) and Anglo American South
Africa Limited, AngloGold Ashanti Limited, Sibanye Gold Limited, Harmony Gold Mining Company Limited, Gold Fields Limited,
African Rainbow Minerals Limited and certain of their affiliates (“Settling Companies”) settled the class certification application
in which the Applicants in each sought to certify class actions against gold mining houses cited therein on behalf of mineworkers
who had worked for any of the particular respondents and who suffer from any occupational lung disease, including silicosis or
tuberculosis. The fund managing the compensation for the Applicants has started disbursing funds to the claim beneficiaries.
The DRDGOLD Respondents, DRDGOLD Limited and East Rand Proprietary Mines Limited, are not a party to the settlement
between the Applicants and Settling Companies and the settlement agreement is not binding on the DRDGOLD Respondents.
The dispute, insofar as the class certification application and appeal thereof is concerned, still stands and has not terminated in
light of the settlement agreement.
In terms of the class action, the DRDGOLD respondents has lodged an appeal against certain aspects of the class action, inter
alia the extension of the remedy entertained in the class action, and the inclusion of tuberculosis as a basis for liability. The
Appeal record has been finalised and the allocation of a date for the hearing of the Appeal is November 11, 2022.
DRDGOLD maintains the view that it is too early to consider settlement of the matter, mainly for the following reasons:
• the Applicants have as yet not issued and served a summons (claim) in the matter;
• there is no indication of the number of potential claimants that may join the class action against the DRDGOLD Respondents;
• many principles upon which legal responsibility is founded, are required to be substantially developed by the trial court (and
possibly subsequent courts of appeal) to establish liability on the bases alleged by the Applicants.
In light of the above there is inadequate information to determine if a sufficient legal and factual basis exists to establish liability,
and to quantify such potential liability.
26.2
CONTINGENT LIABILITY FOR ENVIRONMENTAL
REHABILITATION
Mine residue deposits may have a potential pollution impact on ground water through seepage. The Group has taken certain
preventative actions as well as remedial actions in an attempt to minimise the Group’s exposure and environmental
contamination.
The flooding of the western and central basins has the potential to cause pollution due to Acid Mine Drainage (“AMD”)
contaminating the ground water. The government has appointed Trans-Caledon Tunnel Authority (“TCTA”) to construct a partial
treatment plant to prevent the ground water being contaminated. TCTA completed the construction of the neutralisation plant
for the Central Basin and commenced treatment during July 2014. As part of the heads of agreement signed in December 2012
between EMO, Ergo, ERPM and TCTA, sludge emanating from this plant since August 2014 has been co-disposed onto the
Brakpan/Withok Tailings Storage facility. Partially treated water has been discharged by TCTA into the Elsburg Spruit.
This agreement includes the granting of access to the underground water basin through one of ERPM’s shafts and the rental of
a site onto which it constructed its neutralisation plant. In exchange, Ergo and its associate companies including ERPM have a
setoff against any future directives to make any contribution toward costs or capital of up to R250 million. Through this
agreement, Ergo also secured the right to purchase up to 30 Ml of partially treated AMD from TCTA at cost, to reduce Ergo’s
reliance on potable water for mining and processing purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-43
26
CONTINGENCIES
continued
26.2
CONTINGENT LIABILITY FOR ENVIRONMENTAL
REHABILITATION
continued
While the heads of agreement
should not be seen as
an unqualified endorsement of the state’s
AMD solution, and do not affect
our right to either challenge future directives or to implement our own initiatives should it become necessary, it is an encouraging
development.
In view of the limitation of current information for the accurate
estimation of a potential liability,
no reliable estimate can be made
for the possible obligation.
During the current
year, a
report was produced
regarding the extent
of ground water
seepage from the
Brakpan/Withok tailings
storage
facility
by
an
expert.
The
report
suggests
that
scavenger
boreholes
be
constructed
around
the
dam
to
deal
with
the
seepage. The majority of the scavenger boreholes have been
constructed and are currently operational and the results are being
monitored. Management is currently
investigating a sustainable solution
to deal with the
seepage post the closure
of the mine and
therefore no reliable estimate can be made for the post closure liability.
26.3
CONTINGENCIES
REGARDING
EKURHULENI
METROPOLITAN
MUNICIPALITY
ELECTRICITY
TARIFF
DISPUTE
Refer note 24 PAYMENTS
MADE UNDER PROTEST for a full description of the matter.
Contingent liability
The Municipality has issued two summonses for
the recovery of arrears it alleges
it is owed amounting to R
74.0
million and R
31.6
million, respectively.
The group supported by the
external legal team is confident
that there is a
high probability that Ergo will
be
successful in defending the Summonses. Therefore, there is no present obligation as a result of
a past event to pay the amounts
claimed by the Municipality.
Contingent asset
Ergo
instituted
a
counterclaim against
the
Municipality
for
the recovery
of
the
surcharges which
were
erroneously paid
to
the
Municipality in the
bona fide belief
that they were
due and payable
prior to the
Main Application of
approximately R
43
million (these
surcharges were expensed for accounting purposes).
27
FINANCIAL INSTRUMENTS
CLASSIFICATION AND MEASUREMENT OF FINANCIAL ASSETS
Financial
assets
are
not
reclassified
subsequent
to
their
initial
recognition
unless
the
Group
changes
its
business
model
for
managing financial assets, in
which case all affected
financial assets are reclassified
on the first day
of the first reporting
period
following the change in business model.
A financial asset shall be measured at amortised cost if both the following conditions are met:
●
the financial
asset is
held in
a business
model whose
objective is
to hold
financial assets
in order
to collect
contractual cash
flows; and
●
the contractual terms of
the financial asset give
rise on specified dates to
cash flows that are solely
payments of principal and
interest on the principal amount outstanding.
An investment is
measured at fair
value through other
comprehensive income if
it meets both
of the following
conditions and is
not designated as at fair value through profit or loss:
●
It is held with a business model whose objective achieved by both collecting
contractual cash flows and selling financial assets;
and
●
Its contractual terms give rise on specified dates to
cash flows that are solely payments of principal and interest
on the principal
amount outstanding.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-44
27
FINANCIAL INSTRUMENTS
continued
FINANCIAL RISK MANAGEMENT FRAMEWORK
Overview
The Group has exposure to credit risk, liquidity risks, as well as other market risks from its use of financial instruments. This note
presents information about the
Group’s exposure to
each of the above
risks, the Group’s
objectives and policies and
processes
for measuring
and managing risk.
The Group’s
management of capital
is disclosed in
note 20. This
note must be
read with the
quantitative disclosures included throughout these consolidated financial statements.
The board of
directors (“
Board
”) has
overall responsibility for
the establishment and
oversight of the
Group’s risk
management
framework. The Risk Committee
(“
RC
”) which is responsible
for developing and
monitoring the Group’s risk
management policies.
The committee reports regularly to the Board on its activities.
The Group’s risk management policies
are established to identify
and analyse the risks
faced by the Group,
to set appropriate risk
limits and controls, and
to monitor risks and
adherence to limits. Risk
management policies and systems
are reviewed regularly
to reflect
changes to
market conditions
and the
Group’s activities.
The Group,
through its
training and
management standards
and procedures, aims to develop
a disciplined and constructive control
environment in which all employees
understand their roles
and obligations.
The RC oversees
how management monitors
compliance with
the Group’s risk
management policies
and procedures, and
reviews
the adequacy of
the risk management
framework in relation
to the risks
faced by the
Group. The RC
is assisted in
its oversight
role by
the internal
audit function.
The internal
audit function
undertakes both
regular and
ad hoc
reviews of
risk management
controls and procedures, the results of which are reported to the RC.
CREDIT RISK
Credit risk is
the risk of
financial loss to
the Group
if a customer
or counterparty to
a financial instrument
fails to meet
its contractual
obligations, and arises principally from the Group’s trade and other receivables.
The Group’s financial instruments do not represent
a concentration of credit risk
due to the exposure to
credit risk being managed
as disclosed in the following notes:
NOTE 12
INVESTMENTS IN REHABILITATION
AND OTHER FUNDS
NOTE 13
CASH AND CASH EQUIVALENTS
NOTE 15
TRADE AND OTHER RECEIVABLES
MARKET RISK
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest rates and equity
prices will affect the consolidated profit or loss or the
value of its financial instruments. The objective of market risk management
is to manage and control market risk exposures within acceptable parameters, while optimising returns.
Commodity price risk
Additional disclosures are included in the following note:
NOTE 4
REVENUE
Other market risk
Additional disclosures are included in the following note:
NOTE 25
OTHER INVESTMENTS
Interest rate 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 is obliged
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
minimising risks. 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. Conversely,
higher interest rates
result in higher
interest payments
on loans and overdrafts.
Additional disclosures are included in the following notes:
NOTE 12
INVESTMENTS IN REHABILITATION
AND OTHER FUNDS
NOTE 13
CASH AND CASH EQUIVALENTS
Foreign currency risk
The Group
enters into
transactions denominated
in foreign
currencies, such
as gold
sales denominated
in US
dollar, in the
ordinary
course of business
The Group holds
cash denominated in
a foreign currency.
This exposes the
Group to fluctuations
in foreign
currency exchange rates.
Additional disclosures are included in the following notes:
NOTE 4
REVENUE
NOTE 15
TRADE AND OTHER RECEIVABLES
NOTE 13
CASH AND CASH EQUIVALENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2022
F-45
27
FINANCIAL INSTRUMENTS
continued
LIQUIDITY RISK
Liquidity risk is the
risk that the Group will
not be able to meet
its financial obligations as they
fall due. The Group’s approach
to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The
Group
ensures
that
it
has
sufficient
cash
on
demand
to
meet
expected
operational
expenses,
including
the
servicing
of
financial obligations;
this excludes
the potential impact
of extreme circumstances
that cannot reasonably
be predicted, such
as
natural disasters.
Additional disclosures are included in the following note:
NOTE 10.2
LEASES
NOTE 16
TRADE AND OTHER PAYABLES
NOTE 20
CAPITAL MANAGEMENT
28
RELATED PARTIES
Disclosures are included in the following notes:
NOTE 5.1
COST OF SALES
NOTE 5.3
ADMINISTRATION EXPENSES AND OTHER COSTS
NOTE 16
TRADE AND OTHER PAYABLES
NOTE 19.3
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
NOTE 21
EQUITY
NOTE 22
INTEREST IN SUBSIDIARIES
29
SUBSEQUENT EVENTS
There were no significant
subsequent events between the
year-end reporting date of
June 30, 2022 and
the date of issue
of these
financial statements other than described below and included in the preceding notes to the consolidated financial statements.
Declaration of dividend
On August
24 2022, the
Board declared a
final dividend
for the year
ended June
30, 2022 of
40
SA cents
per qualifying share
amounting to R
342.0
million, which was paid on September 26, 2022.
Receipt of COVID-19 insurance claim
During September and October, 2022, a total amount of R
31.7
million was received on the balance receivable at June 30, 2022.
Conditional shares granted
On 19 October
2022,
4,922,751
conditional shares were
granted to qualifying
employees under the
current equity settled
long-
term incentive scheme.
These are expected
to vest on
19 October 2025.
The number of
conditional shares granted
includes those
granted to directors and prescribed officers as follows:
Number of conditional
shares awarded
Executive directors
D J Pretorius
799,595
A J Davel
425,680
Prescribed officers
W J Schoeman
425,680
E Beukes
57,100
95
ITEM 19. EXHIBITS
The following
exhibits are
filed as a part
of this Annual
Report:
1.1
(1)
Memorandum of
Association
of DRDGOLD Limited.
1.2
(6)
Articles of
Association of
DRDGOLD Limited,
as amended on
November 8, 2002.
http://www.sec.gov/Archives/edgar/data/1023512/000104746902008746/a2096282zex-1_2.txt
1.3
(1)
Excerpts of
relevant provisions
of the South
African Companies
Act.
1.5
(9)
Memorandum of
Incorporation,
as amended on
November 30,
2012.
http://www.sec.gov/Archives/edgar/data/1023512/000120561313000188/ex1_5.htm
2.1
(1)
Excerpts of
relevant provisions
of the Johannesburg
Stock Exchange
Listings Requirements.
2.2
(4)
Indenture between
DRDGOLD Limited,
as Issuer, and The
Bank of New
York Mellon, as Trustee, dated
November
12, 2002.
http://www.sec.gov/Archives/edgar/data/1023512/000104746902008746/a2096282zex-2_2.txt
4.1
(2)
Deposit Agreement
among DRDGOLD
Limited, The
Bank of New York Mellon 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
6, 1998, as
further amended
and restated
July 23, 2007.
4.2
(3)
Form of Non-Executive
Employment Agreement.
4.3
(3)
Form of Executive
Employment Agreement.
4.4
(4)
Agreement between
DRDGOLD Limited
and Rand Refinery
Limited, dated
October 12,
2001.
http://www.sec.gov/Archives/edgar/data/1023512/000104746902008746/a2096282zex-4_36.txt
4.5
(12)
Local Mine Bullion
Refining Agreement
between DRDGOLD
Limited and Rand
Refinery Limited,
dated June 27,
2018.
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit4.htm
4.9
(8)
Sale of Shares and Claims Agreement entered into by Village
Main Reef Limited (“Village”),
DRDGOLD Limited
(“DRDGOLD”) (“Seller”), Business Venture
Investments No 1557 Proprietary Limited (“Purchaser”) and
Blyvooruitzicht Gold Mining Company Limited (“Blyvoor”)
dated February 11, 2012.
http://www.sec.gov/Archives/edgar/data/1023512/000120561312000150/ex4_140.htm
4.10
(9)
Heads of Agreement entered into by Trans
-Caledon Tunnel Authority (“TCTA’),
Ergo Mining Operations
Proprietary Limited (“EMO”), East Rand Proprietary Mines Limited (“ERPM”)
and Crown Gold Recoveries
Proprietary Limited (“CGR”) (collectively CGR, EMO and ERPM are called “the
Ergo Group”) dated November
28, 2012.
http://www.sec.gov/Archives/edgar/data/1023512/000120561313000188/ex4_39.htm
4.13(11)
Settlement Agreement between DRDGOLD Limited ("DRDGOLD") and
VMR Gold Investments 02 Proprietary
Limited ("VMR Gold") dated May 28, 2015.
http://www.sec.gov/Archives/edgar/data/1023512/000120561315000144/ex4_42.htm
8.1(13)
List of Subsidiaries
10.1(12)
DRD Exchange Agreement entered into by DRDGOLD Limited (“DRDGOLD”) and
Sibanye Gold Limited
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit10.htm
10.2(12)
Sibanye-Stillwater Exchange Agreement entered into by Sibanye
Gold Limited and K2017449061 (South Africa)
Proprietary Limited (to be renamed WRTRP
Proprietary Limited) and including DRDGOLD Limited
(“DRDGOLD”)
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit10002.htm
10.3(12)
DRD Guarantee issued by DRDGOLD Limited (“DRDGOLD”) to and
in favor of Sibanye Gold Limited.
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit10003.htm
95
ITEM 19. EXHIBITS
The following
exhibits are
filed as a part
of this Annual
Report:
10.5
(12)
Closing and
Amending Agreement,
dated 20 July
2018, among Sibanye
Gold Limited,
WRTRP Proprietary
Limited
and DRDGOLD
Limited; each
of the following
annexures are
incorporated
by reference
to Sibanye-Stillwater's
Schedule 13-D,
Exhibit 99.5
filed with the
Securities and
Exchange Commission
on July 31, 2018
Annexure A —
Approval of Financial
Surveillance
Department of
SARB;
Annexure B —
JSE Approval
of DRD Circular;
Annexure C —
TRP Approval of
DRD Circular;
Annexure D —
Approval in
Terms of Competition
Act;
Annexure E —
Press Announcement
Confirming Approval
of DRD Shareholders;
Annexure F —
Environmental
Authorisations
and Waste Management Licences;
Annexure G —
Confirmation
of VAT
Registration
of Issuing Party;
Annexure H —
Lender’s Consent
in Terms of the Rand
Revolving Credit
Facility; and
Annexure I —
Employees of
the Business
as at the Delivery
Date of the
Closing and
Amending Agreement.
http://www.sec.gov/Archives/edgar/data/1023512/000110465918048791/0001104659-18-048791-index.htm
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit10005.htm
10.6
(12)
Revolving Credit
Facility.
http://www.sec.gov/Archives/edgar/data/1023512/000102351218000003/exhibit10006.htm
10.8
(13)
ABSA Ergo Mining Performance Guarantee Number 175 02 0183033 G
10.9
(14)
Second Addendum to the Revolving Credit Facility Agreement entered into on August 1, 2018
12.1
(15)
Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
12.2
(15)
Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
13.1
(15)
Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
13.2
(15)
Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
16.1
(15)
Letter from KPMG Inc. to the Securities and Exchange Commission regarding a change in registrant's certifying
accountant
96.1
(15)
Technical Report Summary and Certification from Qualified person – FWGR
96.2
(15)
Technical Report Summary and Certification from Qualified person – Erg
101.INS
(15)
XBRL Instance
Document
101.SCH
(15)
XBRL Taxonomy Extension
Schema Document
101.CAL
(15)
XBRL Taxonomy Extension
Calculation
Linkbase Document
101.DEF
(15)
XBRL Taxonomy Extension
Definition Linkbase
Document
101.LAB
(15)
XBRL Taxonomy Extension
Label Linkbase
Document
101.PRE
(15)
XBRL Taxonomy Extension
Presentation
Linkbase Document
___________
97
ITEM 19. EXHIBITS
The following
exhibits are
filed as a part
of this Annual
Report:
(1)
Incorporated
by reference
to our Registration
Statement (File
No. 0-28800) on
Form 20-F.
(2)
Incorporated
by reference
to Amendment
No. 1 to our
Registration
Statement (File
No.
333-140850
) on Form F-6.
(3)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2000.
(4)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2002.
(5)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2005.
(6)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year ended
June 30, 2006.
(7)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2010.
(8)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2012.
(9)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2013.
(10)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2014.
(11)
Incorporated
by reference
to our Annual Report
on Form 20-F for
the fiscal
year ended June
30, 2015.
(12)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2018.
(13)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2019.
(14)
Incorporated
by reference
to our Annual
Report on Form
20-F for the
fiscal year
ended June 30,
2020.
(15)
Filed herewith.
98
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/ D.J. Pretorius
D.J. Pretorius
Chief Executive
Officer
By:
/s/ A.J. Davel
A.J. Davel
Chief Financial
Officer
Date: October
28, 2022