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DEAR SHAREHOLDER
INTRODUCTION
The 2019 financial year was exceptionally challenging, not just for DRDGOLD, but
for the industry as a whole – a year fraught with disruptive labour action; the near-
collapse of power utility Eskom; and a loss of investor confidence, as evidenced by
capital freeze and high-profile corporate emigrations.
In the final analysis, therefore, the high-level features of our year flagged below
are not just contrary to the industry trend but are testimony also to the resilience
of a business model that has been several years in the making.
– We acquired the FWGR project (a subject of discussion for more than a
decade) in July 2018; invested R330.7 million in capital infrastructure and
refurbishment for Phase 1, funded in part by way of a R192 million draw-
down from our Revolving Credit Facility (“RCF”); achieved early-stage
commissioning in December 2018; and achieved commercial production on
1 April 2019. Incidentally, at the time, our investment represented more than
15% of our market capitalisation.
– The whole of the above RCF has since been repaid, and the Group’s cash
position has moved only marginally from R302.1 million on 1 July 2018 to
R279.5 million on 30 June 2019.
– This is the twelfth consecutive financial year of the Company paying a dividend.
We are delighted that this financial year’s dividend of 20 SA cents per share
is four times the interim dividend declared in the financial year ended 30 June
2018. We stated at the time of acquiring FWGR that we were determined
to ensure that the consequent 38% dilution of earnings from Ergo would
be compensated for by the 62% our existing shareholders would acquire in
the new project. We are delighted, therefore, that this acquisition not just
matched the dilution, but was accretive to the net cash earnings of our existing
shareholder base.
PRODUCTION REVIEW
The Group’s total gold production was 6% higher at 4 977kg, mainly due to 484kg
produced by FWGR. The total gold production includes 151kg (4 855oz) produced
by FWGR before the date of commercial production.
Gold production from Ergo was 4% lower at 4 493kg due to a 5% decline in ore
milled to 23 162 000t.
Ergo’s average yield was slightly higher at 0.194g/t, a consequence both of higher-
grade sand material milled and higher-grade Knights material retreated.
COST REVIEW
The discussion that follows excludes the costs related to the 151kg (4 855oz) of
gold produced by FWGR before the date of commercial production.
Group cash operating unit costs were up 9% at R499 749/kg due mainly to a 12%
increase in Ergo’s cash operating unit costs to R512 439/kg, the latter increase
reflecting the impact of lower production, the inclusion of sand milling costs for
the first time and year-on-year increases in the cost of consumables at Ergo.
In FY2019, the weighted average cost of power increased by 8.3%; of water by
12.2% and of reagents by 6.2%.
FWGR’s cash operating unit costs were R313 443/kg.
Group all-in sustaining costs (“AISC”) were up 4% to R524 713/kg. Ergo’s AISC
were up 3% to R521 907/kg, a consequence primarily of higher operating cash
costs, offset by a decrease in sustaining capital expenditure. FWGR’s AISC of
R450 820/kg, contributed to lower Group AISC.
Total non-sustaining capital expenditure amounted to R331.2 million,
R323.8 million of which was incurred for FWGR Phase 1. Ergo’s non-sustaining
capital expenditure was substantially lower at R7.4 million, reflecting the
completion of three capital projects by the end of FY2018: 4L50 slimes dam
reclamation; conversion to zinc precipitation; and the installation of ball mills for
sand milling.
FINANCIAL REVIEW
Total revenue increased by 11% to R2 762.1 million – R2 577.5 million from Ergo
and R184.6 million from FWGR. Ergo’s revenue was 3% higher due to the higher
average Rand gold price received reducing the impact of lower gold sales.
Consolidated operating profit was up 5% to R371.8 million after accounting for
consolidated cash operating costs of R2 422.9 million. FWGR’s contribution was
R89.0 million after accounting for cash operating costs of R111.8 million while
that of Ergo was 20% lower at R282.8 million after accounting for cash operating
costs 7% higher at R2 311.1 million.
The operating margin was 6% lower at 13.5%, while the AISC margin was
considerably higher, up from 5.5% to 9.1%.
Headline earnings were substantially higher, increasing to R72.7 million (10.9 SA
cents per share) from R7.0 million (1.7 SA cents per share). The increase includes
a non-recurring credit of R60.0 million relating to a change in estimate of the
provision for environmental rehabilitation.
The cash flow statement reflects that the RCF of R192 million was raised and
repaid in the current financial year and that R347.4 million cash was spent on
property, plant and equipment, mostly related to FWGR Phase 1. The Group ended
the year with cash and cash equivalents of R279.5 million.
SUSTAINABLE DEVELOPMENT
The sustainability development review relates only to Ergo.
Human capital
In 2019, the percentage of historically disadvantaged South African people in
management, core and critical skills positions remained unchanged at 70% of the
total workforce in these positions.
Women in mining increased from 20% to 21%. Women in core positions increased
from 12% to 13% and women in management from 16% to 18% of the total
workforce in these positions.
Some 1 633 individual training courses took place at a total cost to company
of R8.5 million, compared with 1 546 at a total cost to company of R9.0 million
in 2018.
Social capital
R16.6 million was spent on various skills and other development projects of
benefit to communities compared with R14.5 million in 2018.
Natural capital
Dust: 1 201 samples from sites were analysed. There were eight exceedances,
representing 0.67% of the total number of measurements. This compares with
1 188 samples and seven exceedances in 2018, representing 0.59% of the total
number of measurements. High winds in the first quarter of the financial year
contributed to the slight increase.
A total of R44.1 million was spent on environmental management compared
with R51.6 million in 2018, including rehabilitation of 31.5 ha on Brakpan/Withok
Tailings Storage Facility and 24 ha on the Crown Complex.
Water: usage of externally sourced potable water continued to decline, down 21%
to 2 656Ml, mostly due to continued delivery by the water distribution system
completed in 2017. Usage of TCTA-treated acid mine drainage (“AMD”) water
increased by almost 30% to 964Ml.
Land: by year-end, clearance certificates were received from the National Nuclear
Regulator (NNR) for redevelopment for 135.5 ha of land.
DIVIDEND
The DRDGOLD board of directors (“Board”) has declared a final cash dividend of
20 South African (“SA”) cents per ordinary share for the year ended 30 June 2019
as follows:
• the dividend has been declared out of income reserves;
• the local Dividend Withholding Tax rate is 20% (twenty per cent);
•
the gross local dividend amount is 20 SA cents per ordinary share for
shareholders exempt from Dividend Withholding Tax;
• the net local dividend amount is 16 SA cents per ordinary share for shareholders
liable to pay Dividend Withholding Tax;
• DRDGOLD currently has 696 429 767 ordinary shares in issue (which includes
9 474 920 treasury shares); and
• DRDGOLD’s income tax reference number is 9160/013/60/4.
In compliance with the requirements of Strate Proprietary Limited (“Strate”) and
the JSE Limited Listings Requirements, given the Company’s primary listing on
the Johannesburg Stock Exchange (“JSE”), the salient dates for payment of the
dividend are as follows:
• last date to trade ordinary shares cum dividend: Monday, 23 September 2019;
• ordinary shares trade ex-dividend: Wednesday, 25 September 2019;
• record date: Friday, 27 September 2019; and
• payment date: Monday, 30 September 2019.
On payment date, dividends due to holders of certificated securities on the SA
share register will either be electronically transferred to such shareholders’ bank
accounts or, in the absence of suitable mandates, dividend cheques will be posted
to such shareholders.
Dividends in respect of dematerialised shareholdings will be credited to such
shareholders’ accounts with the relevant Central Securities Depository Participant
CSDP or broker.