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, 2021
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
Riaan Davel
, Chief Financial Officer, Tel. no. +
27
11
470 2600
, Email
riaan.davel@drdgold.com
Mpho Mashatola, Group Financial Controller, 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
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
☑
☐
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
☑
☐
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
☑
☐
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
☐
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 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
☐
☐
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
☐
☑
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes
☐
☐
TABLE OF CONTENTS
Page
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
6
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
6
ITEM 3.
KEY INFORMATION
6
3A.
Selected Financial Data
6
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
25
4C.
Organizational Structure
33
4D.
Property, Plant And Equipment
34
ITEM 4A.
UNRESOLVED STAFF COMMENTS
41
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
42
5A.
Operating Results
42
5B.
Liquidity And Capital Resources
52
5C.
Research And Development, Patents And Licenses, Etc
53
5D.
Trend Information
53
5E.
Off-Balance Sheet Arrangements
57
5F.
Tabular Disclosure Of Contractual Obligations
57
5G.
Safe Harbor
57
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
57
6A.
Directors And Senior Management
57
6B.
Compensation
60
6C.
Board Practices
63
6E.
Share Ownership
67
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
70
7A.
Major Shareholders
70
7B.
Related Party Transactions
71
7C.
Interests Of Experts And Counsel
71
ITEM 8.
FINANCIAL INFORMATION
71
8A.
Consolidated statements And Other Financial Information
71
8B.
Significant Changes
71
ITEM 9.
THE OFFER AND LISTING
72
9A.
Offer And Listing Details
72
9B.
Plan Of Distribution
72
9C.
Markets
72
9D.
Selling Shareholders
72
9E.
Dilution
72
9F.
Expenses Of The Issue
72
ITEM 10.
ADDITIONAL INFORMATION
72
10A.
Share Capital
72
10B.
Memorandum of Incorporation
72
10C.
Material Contracts
75
10D.
Exchange Controls
76
10E.
Taxation
78
10F.
Dividends And Paying Agents
81
10G.
Statement By Experts
81
10H.
Documents On Display
81
10I.
Subsidiary Information
81
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
81
TABLE OF CONTENTS
Page
PART II
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
82
12A.
Debt Securities
82
12B.
Warrants and Rights
82
12C.
Other Securities
82
12D
American Depositary Shares
83
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
84
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
84
ITEM 15.
CONTROLS AND PROCEDURES
84
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
85
ITEM 16B.
CODE OF ETHICS
85
ITEM 16C.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
85
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
86
ITEM 16F
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
86
ITEM 16G.
CORPORATE GOVERNANCE
86
ITEM 16H.
MINE SAFETY DISCLOSURES
86
PART III
ITEM 17.
FINANCIAL STATEMENTS
88
ITEM 18.
FINANCIAL STATEMENTS
88
ITEM 19.
EXHIBITS
85
SIGNATURES
88
1
Preparation of Financial Information
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).
All financial information, except as otherwise noted is prepared in accordance with IFRS as issued by the IASB.
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 R14.27 per $1.00, the year end exchange rate on June 30, 2021.
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, 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, 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 cash operating costs, 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
Group” refer to the Company and its subsidiaries as appropriate in the context.
Acquisition of gold assets from Sibanye-Stillwater and subsequent exercise of option to purchase shares
Stillwater’s (“
Sibanye-Stillwater
”) West Rand Tailings Retreatment Project (“
WRTRP
”), subsequently renamed Far West Gold Recoveries
Proprietary Limited (“
FWGR
”). This acquisition significantly increased our assets and revenues and added 2.72 million ounces to our Ore
Reserves. In connection with the acquisition, we issued to Sibanye-Stillwater new shares in the Company 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 (the “
Option
”). On January 8, 2020, Sibanye-Stillwater exercised the
Option. On January 22, 2020 Sibanye-Stillwater subscribed for 168,158,944 DRDGOLD shares at an aggregate subscription price of R1,086
million. These shares were issued at a price of R6.46 per share, being a 10% discount to the 30-day volume weighted average traded price.
Special Note Regarding Forward-Looking Statements
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;
●
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 2022;
●
statements with respect to agreements with unions;
●
our prospects in litigation and disputes;
2
●
statements with respect to the legal review for increasing the deposition capacity of the Brakpan/Withok Tailings Storage Facility
(“
TSF
”), 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.
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:
●
the global impact of the COVID-19 pandemic and potential announcement of further national lockdowns, including in South Africa;
●
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;
●
challenges in replenishing mineral ore reserves;
●
changes in our competitive position;
●
changes in, or that affect our business strategy;
●
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 DRDGOLD’ 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, such as coronavirus (COVID-19); and
●
various other factors, including those set forth in Item 3D. Risk Factors.
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.
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
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.
3
Imperial units of measure and metric equivalents
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,
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.
$/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 minimum in-situ grade of ore blocks for which the cash operating costs per ounce, excluding overhead
costs, is equal to a projected gold price per ounce.
CIL Circuit
Carbon-in-leach circuit.
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.
Doré
Unrefined gold and silver bullion bars consisting of approximately 90% precious metals which will be further
refined to almost pure metal.
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.
Metallurgical plant
A processing plant (mill) erected to treat ore and extract the contained gold.
Mine call factor
The gold content recovered expressed as a percentage of the called gold content.
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.
Pay-limit
The minimum in-situ grade of ore blocks or sites for which cash operating costs, including all overhead costs,
are equal to a projected gold price per ounce.
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, and retrenchment costs.
5
Ore Reserves
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the
reserve determination.
Proven Ore Reserves
Reserves for which (a) the quantity is computed from dimensions revealed in outcrops, trenches, workings or
drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for
inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that
size, shape, depth, and mineral content of Ore Reserves are well established.
Probable Ore Reserves
Ore reserves for which quantity and grade and/or quality are computed from information similar to that used for
Proven Ore Reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise
less adequately spaced. The degree of assurance, although lower than that for Proven Ore Reserves, is high
enough to assume continuity between points of observation.
oz/t
Ounces per ton.
Refining
The final purification process of a metal or mineral.
Rehabilitation
The process of restoring mined land to a condition approximating its original state.
Reserves
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the
reserve determination.
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.
6
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. SELECTED FINANCIAL DATA
is derived from our consolidated financial statements set forth elsewhere in this Annual Report, which have been prepared in accordance with
IFRS, as issued by the IASB. These consolidated financial statements have been audited by KPMG Inc. The selected consolidated financial data
as at June 30, 2019, 2018 and 2017, and for the years ended June 30, 2018 and 2017 is derived from audited consolidated financial statements not
appearing in this Annual Report which have been prepared in accordance with IFRS, as issued by the IASB. The selected consolidated financial
data set forth below should be read in conjunction with Item 5. Operating and Financial Review and Prospects and with the consolidated financial
statements and the notes thereto and the other financial information appearing elsewhere in this Annual Report.
7
Selected Consolidated Financial Data
(in millions, except share, per share and ounce data)
Year ended June 30,
2021
1
2021
2020
2019
2018
2017
$’m
R'm
R'm
R'm
R'm
R'm
Profit or loss Data
Revenue
369.2
5,269.0
4,185.0
2,762.1
2,490.4
2,339.9
Results from operating activities
127.3
1,816.9
937.9
125.2
52.0
(24.6)
Profit/(loss) for the year attributable to
equity owners of the parent
100.9
1,439.9
635.0
78.5
6.5
13.7
Adjusted EBITDA
2
141.3
2,015.9
2
1,411.6
2
254.1
2
-
2
-
2
Per Share Data
Basic earnings/(loss) per share (cents)
11.8
168.4
82.5
11.8
1.5
3.2
Diluted earnings/(loss) per share (cents)
11.7
167.2
81.0
11.5
1.5
3.2
Dividends proposed per share for the
year (ZAR cents)
80.0
85.0
20.0
5.0
5.0
Dividends proposed per American
Depositary Shares for the year
(USD cents)
56.1
49.1
14.2
3.6
3.4
Exchange rate (USD1:ZAR)
1
14.27
17.32
14.07
13.72
14.68
Intraday high (USD1:ZAR)
17.78
19.34
15.69
14.57
14.75
Intraday low (USD1:ZAR)
13.39
13.80
13.07
11.50
12.42
Number of shares issued as at June 30
864,588,711
864,588,711
864,588,711
696,429,767
431,429,767
431,429,767
Statement of financial position data
Total assets
444.8
6,348.0
5,675.2
4,059.9
2,360.5
2,287.4
Equity (Net assets)
337.8
4,820.4
4,040.2
2,688.5
1,267.2
1,302.4
Stated share capital
3
431.5
6,157.4
6,157.4
5,072.3
4,177.2
4,177.2
2021
2021
2021
2021
2021
2021
September
August
July
June
May
April
Exchange Rate Data
Intraday high (USD1:ZAR)
15.25
15.39
14.99
14.40
14.54
14.84
Intraday low (USD1:ZAR)
14.06
14.22
14.15
13.39
13.67
14.14
1
Translations into Dollars in this table are for the purpose of convenience only and are computed at the closing exchange rate at June 30,
2021 of R14.27 per $1.00. You should not view such translations as a representation that such amounts represent actual Dollar amounts. All
other translations in this Annual Report are based on exchange rates quoted by local financial institutions.
2
Adjusted EBITDA is a non-IFRS financial measure. For a definition of Adjusted EBITDA see Glossary of Terms and Explanations.
Adjusted EBITDA (which is based on the definition of that term used in our Revolving Credit Facility ("RCF") agreement) 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.
The Group also considers Adjusted EBITDA for the purpose of evaluating compliance with the covenants imposed by the Company’s RCF.
The Group considers the presentation of Adjusted EBITDA provides useful information to investors. We began presenting Adjusted EBITDA
following the entry into our RCF in fiscal 2019. Adjusted EBITDA was not presented or considered by the Company before fiscal 2019. For
a reconciliation of Adjusted EBITDA from profit for the year, see Item 5.A. Operating and Financial Review and Prospects—Adjusted
earnings before interest, interest, depreciation and amortization
3
Ordinary share capital as of June 30, 2021 is stated after the deduction of R51 million (2020: R51 million, 2019: R50.7 million) share capital
relating to treasury shares held by the Group.
8
3B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
3D. RISK FACTORS
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 ownership in our ordinary shares or American Depositary Shares (ADSs); and
●
Risks related to climate change
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 elevated 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. Changes in these conditions in the future (e.g. global recovery from the COVID-19 pandemic) could
lead to a decrease of the gold price to pre-pandemic levels or lower. In addition, we were impacted by movements in the exchange rate of the rand
against the dollar during the COVID-19 pandemic as described below.
strengthened by 18% compared to June 30, 2020. The closing price of the rand against the dollar at June 30, 2020 weakened by 23% compared to
June 30, 2019. At September 30, 2021, the rand traded at R14.51 = $1.00 (based on closing rates), a 2% weakening of the rand against the Dollar
from June 30, 2021. The rand/dollar exchange rate remained volatile throughout the fiscal year 2021 mainly as a result of global, emerging market
and South Africa economic uncertainty including uncertainties resulting from the COVID-19 pandemic, global economic slowdown sentiment,
tensions between the USA and China, perceived political instability and fiscal strength and structurally weak economic growth of the South African
economy including a seemingly terminally distressed power utility, Eskom Holdings SOC Limited (“
Eskom
”).
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.
rate movements of the rand. We sell 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 is usually sold at the spot
price in the market on the date of trade. 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 Ore 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 Ore Reserves. A failure to acquire new Ore 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 Ore 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.
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
.
current business or products or that might otherwise offer us growth opportunities. The 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.
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.
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
future. Key projects include the development of the regional tailings storage facility as part of Phase 2 FWGR project as well as obtaining regulatory
approvals for alternative depositioning at Ergo
.
constraints in financing our existing projects or new business opportunities, which could render our projects unviable or less profitable than
planned.
capital expenditure and allocate considerable management resources in utilising our existing experience and know-how.
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 such as COVID-19;
• failure or delay of third-party service providers; and
• changes to regulations, such as environmental regulations.
rd
be obtained on the regulatory approvals for the submitted amended design. It is therefore anticipated that the construction of the Regional Storage
Facility, related to Phase 2, will be delayed from fiscal year 2022 to fiscal year 2024.
10
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.
affecting the viability of the project could have a material adverse effect on our business, cash flows, financial condition and prospects.
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, 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.
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.
recovered grades and costs. 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 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.
Company.
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.
operational down time due to planned or unplanned maintenance, 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.
March 26, 2020 pursuant to the announcement of the national lockdown in South African (“
Lockdown
”). Operations gradually recommenced
through April and May 2020 (Refer to Item 4D. ‘‘Property, plant and production – Ergo Production and FWGR production”), and have not been
impacted by subsequent lockdowns during fiscal 2021, but we remain subject to the risk of further lockdowns and other restrictions as a result of
the continuing COVID-19 pandemic.
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.
material adverse effect on our business, operating results and financial condition.
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.
11
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.
inter alia
:
• 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;
• environmental factors; and
• pollution.
Our production costs consist mainly of materials including reagents and steel, labor, electricity, specialized service providers, 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.
30, 2022 with a 5.9% average increase per annum across the ERGO workforce with individual increases ranging from 5.5% to 7% per annum.
The transitional arrangements regarding wage increases with the workforce at FWGR when these employees were incorporated into DRDGOLD
have now come to an end. As a consequence, negotiations are currently underway with organized labour at FWGR with the intention of trying to
reach a 3 year wage agreement.
reduce costs, such as 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.
Operations gradually recommenced through April and May 2020 (Refer to Item 4D. ‘‘Property, plant and production – Ergo Production and FWGR
production”) and have not been impacted by subsequent lockdowns during fiscal 2021. We remain subject to the risk of further lock-downs or
other restrictions to our operations and we also face the risk of disruptions to our suppliers' operations.
fatalities suffered by our workforce:
COVID statistics
Ergo
FWGR
Corporate office
Consolidated
Number of tests conducted
576
176
3
755
Number positive cases
142
34
3
179
Fatalities
2
1
0
3
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.
While we have implemented programs to address the risk of COVID-19 infections at our operations, the COVID-19 pandemic may have numerous
other consequences, including adverse impacts on our supply chain and availability of materials used in our operations. The risks associated with
an anticipated “new wave” of infection remain highly uncertain and could lead to increased employee infection risk decreasing productivity and
could result in further restrictive national lockdowns, which could lead to disruptions in our business operations.
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.
12
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.
estimated our aggregate group Provision for Environmental Rehabilitation at a net present value of R570.8 million which is included in our
statement of financial position as at June 30, 2021 (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 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. 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.
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. 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.
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 R11.35
billion, with a total loss limit of R650 million for the 2022 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 R1.5 billion insurance cover is in place for the 2020 fiscal year, subject to certain exclusions and limitations on coverage.
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.
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.
13
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.
(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.
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.
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
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 2021 the gold price reached a high of U$2,072 per ounce and a low of U$1,676. We benefited from a sustained
upswing in gold price in the first quarter, and in the fourth quarter, following the global response to the COVID-19 pandemic, the gold price surged
further to all-time highs.
surge in the average gold price during fiscal 2020 and fiscal 2021. The rand/dollar exchange rate remained volatile throughout fiscal 2021 mainly
as a result of economic uncertainty and perceived political instability, global market slowdown sentiment, tensions between the USA and China,
low economic growth, and a seemingly terminally distressed Eskom. Further volatility in the Rand was fueled by Moody’s downgrade of South
Africa’s sovereign credit rating to sub-investment grade as a result of “continuing deterioration in fiscal strength and structurally very weak
economic growth.”
14
USD – rand 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.
unproductive.
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.
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.
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.
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 Ore Reserve estimates.
reported in accordance with the requirements of Industry Guide 7 of the SEC. These estimates may not reflect actual reserves or future
production.
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 Ore
Reserves, particularly those containing relatively lower grades of mineralization. Under these circumstances, we would be required to re-evaluate
our Ore Reserves. Short-term operating factors relating to the ability to reclaim our Ore Reserves, at the required rate, such as an interruption or
reduction in the supply of electricity or a shortage of water may have the effect that we are unable to achieve critical mass, which may render the
recovery of Ore Reserve, or parts of the Ore Reserve no longer feasible, which could negatively affect production rate and costs and decrease our
profitability during any given period. Estimates of reserves 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 and
could result in reductions in our Ore Reserve 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.
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;
●
injuries to employees or fatalities due to falls from heights and accidents relating to mobile machinery or electrocution or other causes;
15
●
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
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.
frustration of society at large on slow reformative action being taken by all spheres of the South African government, in particular, in combating
high unemployment particularly in the youth of the country. Unemployment rates in South Africa reached an all-time high of 34.4% in June 2021
due in part, to South Africa’s COVID-19 related economic downturn. This frustration was a contributing factor that led to social unrest, people
committing crimes, vandalising property, and damaging infrastructure around our operations during July 2021. There is no assurance that a
prolonged economic downturn will not result in an extended period of high unemployment, further exacerbating anti-mining sentiments in South
Africa. Furthermore, the rise of ESG factors in investment decisions may result in divestment in the mining sector.
Inflation can adversely affect us.
Consumer Price Inflation Index (“
CPI
”), stood at 4.9% compared to 2.2% in June 2020 and 4.5% in June 2019. Annual CPI was 5.0% as at
September 30, 2021. Inflation in South Africa generally results in an increase in our rand operational costs, unless such inflation is accompanied
by a concurrent devaluation of the rand against the dollar or an increase in the dollar price of gold. 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.
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.
16
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.
business, financial results or condition.
cable. Our operations experience high incidents of copper cable theft despite the implementation of security measures. 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.
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.
and 20% when the grid is under pressure, but Eskom maintains uninterrupted power supply to the operations.
NERSA
”) initially approved an average tariff increase of 5.2% average effective April
1, 2021. In July 2020, the High Court of South Africa ordered that the average tariff for April 1, 2021 be increased by a further 9.8%. NERSA has
applied for leave to appeal this ruling. 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.
Subsequently, several notable developments have occurred:
●
The South African government provided Eskom with an additional R69 billion bailout over a three-year period, from 2019 to 2021.
Eskom subsequently challenged the multi-year price determination (MYPD), Regulatory Clearing Account (RCA) and NERSA’s
treatment of the bailout as a tariff subsidy in South African court. On July 28, 2020, the South African court ruled in favour of Eskom,
allowing the company to recover the additional R69 billion in a phased manner through future tariff increases. The revenue recovery of
R10 billion (of the R69 billion) would occur for the 2021 to 2022 year. The remaining R59 billion revenue recovery would occur outside
the MYPD period, likely in the 2022 to 2023 year and 2023 to 2024 year. Having accepted the decision on the merits of the case, NERSA
appealed the remedy.
●
NERSA has additionally allowed the revenue recovery of R6.6 billion in the 2021 to 2022 year (half of NERSA’s determination of a
R13.3 billion RCA amount for the period from 2018 to 2019), instead of the R27.3 billion amount that Eskom had applied for. The
remaining half will be recovered in the 2022 to 2023 year.
●
Additionally, in June 2020, Eskom succeeded in obtaining a judgment to recover a portion of the additional shortfall of R35 billion for
the periods from 2014 to 2015, 2015 to 2016 and 2016 to 2017, where NERSA had initially determined the RCA amount for those
periods to be R32 billion when Eskom had applied for an amount of R67 billion. Approximately R4.7 billion of the determination will
be liquidated in the 2021 to 2022 year.
15%, instead of the initially previously approved 5.2% increase. As a result of the judgments rendered in favour of Eskom, and the potential for
further RCA applications, it is likely that Eskom’s electricity tariffs will increase above-inflation in the future.
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 currently underway and is expected to be completed by December
2021 for the legal separation of the transmission function, and 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, its business operating results and financial condition may be adversely
impacted.
17
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
Our operations are also exposed to severe weather events that 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, the 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.
water restrictions remain in place as at September 30, 2021. 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 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 in the future. 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.
Government Regulation
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. 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.
operations.
(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.
18
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.
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.
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
”).
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.
setting aside of certain provisions in Mining Charter 2018.
as a prerequisite to the continuation of the lawsuit, as they have a direct and substantial interest in the outcome of the litigation.
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.
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.
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.
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
Empowerment Charter.
Government policies in South Africa may adversely impact our operations and profits related to financial provisioning for
rehabilitation.
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.
19
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.
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.
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.
Rehabilitation.
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.
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. 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 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.
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.
operating results and financial condition of our operations.
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.
could have an adverse effect on the business, operating results and financial condition of our operations.
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.
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.
material adverse effect on our cash flows, operations, capital investment decisions and financial condition.
operating results and financial condition of our operations.
20
SARS
”) assessed 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.
new South African labor laws.
our Ergo operations provided full-time employment for 771 employees while our main service providers deployed an additional 1,495 employees
to our operations, of whom approximately 82% are members of trade unions or employee associations.
2021, our FWGR operations provided full-time employment for 154 employees while our main service providers deployed an additional 343
employees to our operations, of whom approximately 93% 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.
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.
events at our operations or at our reclamation sites could have an adverse effect on our business, operating results and financial condition.
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.
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.
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.
21
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.
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
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.
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.
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.
22
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.
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 stock 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
retreatment in South Africa including exploration, extraction, processing and smelting.
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.
JSE
”), and the New York Stock Exchange.
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.
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 reporting date at which date the
23
decommissioning and rehabilitation of the last remining underground mining infrastructure was completed.
Ergo
Gold Recoveries Proprietary Limited (“
Crown
”), ERPM Cason Dump operation and the ErgoGold 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.
projects may be obtained through specific financing arrangements if required.
Brakpan/Withok TSF expansion
A legal review of the existing authorizations was undertaken for increasing the deposition capacity 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. Recommissioning and design studies are ongoing in anticipation of the DWAS
approval. We expect this could increase the potential deposition capacity by approximately 800Mt, and thus, our life of mine from 12 years to
more than 20 years.
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
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 envisions 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 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 2024.
Although the Phase 1 upgrade of the Driefontein 2 Plant was essentially complete by the end of fiscal 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 2021. A new thickener is under construction to optimise the slurry density for treatment
in the carbon in leach plant and is expected to be commissioned in November 2021. The conversion is expected to yield a 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 2021. The plant is
expected to result in an additional 1.2kg to 1.8kg 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
24
The Phase 2 project is a key project for us intended to extend potential resources in the West Rand.
Phase 2 includes 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.
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
The Definitive Feasibility Study (“
DFS
”) for Phase 2 was completed in the 3rd quarter of the fiscal year and that the project was found to be
economically viable in a number of scenarios.
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.
Sound Mining concluded that the Phase 2 Project is a low risk, based on the following:
●
The mineral assets are well defined
●
There are tried and tested technologies and processes
●
Established experienced management team with a solid track record
●
Significant expansion potential in the far West Rand region
●
Project economics indicate healthy operating margins
●
Legal aspects are being addressed
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 2024. 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 the next step in our Phase 2 project which entails the Front End Engineering Design of the CPP. 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
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.
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.
25
the Far East Vertical Shaft.
Crown
operation in March 2017.
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’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.
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.
acquisition represented a significant increase in our assets.
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
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
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
Gold Market
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
26
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.
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 2020 and 2021 as described below. The rand/dollar exchange rate remained volatile throughout the
fiscal year 2021 mainly as a result of global, emerging market and South Africa economic uncertainty including uncertainties resulting from the
COVID-19 pandemic, global economic slowdown sentiment, tensions between the USA and China, perceived political instability and fiscal
strength and structurally weak economic growth of the South African economy including a seemingly terminally distressed power utility, Eskom.
The average gold spot price increase by 18% from $1,562 per ounce to $1,850 per ounce during fiscal year 2021 after having increased
by 24% from $1,263 per ounce to $1,562 per ounce during the fiscal year 2020 and having decreased by 3% from $1,297 per ounce to $1,263
per ounce during the fiscal year 2019. As a result, the average gold price received by us in Rands for fiscal year 2021 increased by 19% to
R917,996 per kg compared to the previous year at R768,675 per kg and for fiscal year 2020 increased by 33% to R768,675 per kg compared to
the previous year at R577,483 per kg.
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. We benefited from a sustained upswing in gold price in fiscal 2020 and
fiscal 2021, following the global response to the COVID-19 pandemic, when the gold price surged to all-time highs. The increase in the spot gold
price is reflected in the increase in our gold price received and contributed to the increase in our total revenue for fiscal year 2021 amounting to
R5,269.0 million (2020: R4,185.0 million and 2019: R2,762.1 million). All our revenue is generated from our operations in South Africa.
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.
entered into in October 2001 and updated in July 2018. 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. The Group recognizes revenue from the sale of gold at a point in
time when Rand Refinery, acting as an agent for the sale of all gold produced by the Group, delivers the gold to the buyer. The sales price is fixed
at the London afternoon fixed dollar price on the day the gold is 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 the dollars are also sold on the day the gold is delivered
to the buyer. In exchange for this service, we pay Rand Refinery a variable refining fee plus fixed marketing and administration fees. We own
11.3% (fiscal year 2020 and 2019: 11.3%) of Rand Refinery.
Ore Reserves
Ore Reserve estimates in this Annual Report are reported in accordance with the requirements of the SEC’s Industry Guide 7.
Accordingly, as of the date of reporting, all ore reserves are planned to be mined under the life of mine plan within the period of our existing
rights to mine, or within the time period of assured renewal periods of our rights to mine. In addition, as of the date of this report, all ore
reserves are covered by required permits and governmental approvals. See Item 4D. Property, Plant and Equipment for a description of the
rights in relation to each mine.
In South Africa, we are legally required to publicly report Ore Reserves and Mineral Resources in compliance with the South African
Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves, or SAMREC Code. The SEC’s Industry Guide 7
does not currently recognize Mineral Resources. Accordingly, we do not include estimates of Mineral Resources in this Annual Report. The
SEC has adopted rules that will rescind Guide 7 from our next annual report on Form 20-F and,
inter alia
, require the inclusion of Mineral
Resources in additional to Mineral Reserves.
Ore Reserve calculations are subject to a review conducted in accordance with SEC Industry Guide 7. Ore Reserve tons, grade and
content are quoted as delivered to the gold plant. There are two types of methods available to select ore for mining. The first is pay-limit, which
includes cash operating costs, including overhead costs, to calculate the pay-limit grade. The second is the cut-off grade which includes cash
operating costs, excluding fixed overhead costs, to calculate the cut-off grade, resulting in a lower figure than the full pay-limit grade. The cut-off
grade is based upon direct costs from the mining plan, taking into consideration production levels, production efficiencies and the expected costs.
We use the pay-limit to determine which areas to mine as an overhead inclusive amount that is indicative of the break-even position.
overhead costs, including head office charges, are equal to a three-year historical average gold price per ounce for that year. This calculation also
considers the previous three years’ mining and milling efficiencies, which includes metallurgical and other mining factors and the production plan
for the next twelve months. Only areas above the pay-limit grade are considered for mining. The pay-limit grade is higher than the cut-off grade,
because this includes overhead costs, which indicates the break-even position of the operation.
27
●
The potential ore to be mined is well defined by an externally verified and approved geological model;
●
The potential ore, which is legally allowed to be mined, is also confined by the mine's lease boundaries; and
●
A business plan is prepared to mine the potential ore.
accordance with industry practice, converting mineral deposits to an Ore Reserve through the preparation of a mining plan. The Ore Reserve
estimates contained herein inherently include a degree of uncertainty and depend to some extent on statistical inferences. Ore reserve estimates
require revisions based on actual production experience or new information. Should we encounter mineralization or formations different from
those predicted by past drilling, sampling and similar examinations, ore reserve estimates may have to be adjusted and mining plans may have to
be altered in a way that might adversely affect our operations and actual gold recoveries may differ from those indicated in our Ore Reserves.
Moreover, if the price of gold declines, or stabilizes at a price that is lower than recent levels, or if our production costs increase or recovery rates
decrease, it may become uneconomical to recover Ore Reserves containing relatively lower grades of mineralization.
price at the time of the ore reserve determination.
Gold prices and exchange rates used for Ore Reserves and for our business plan are outlined in the following table.
June, 30
June, 30
June, 30
2021
2020
2019
Three-year
average gold
price
Prevailing gold
price
Three-year
average gold
price
Prevailing gold
price
Three-year
average gold
price
Prevailing gold
price
Reserve gold price –$/oz
1,559
1,796
1,375
1,666
1,272
1,369
Reserve gold price –R/kg
756,355
851,239
629,263
905,774
552,585
629,404
Exchange rate –R/$
15.09
14.74
14.24
16.91
13.53
14.30
Our Ore Reserves (imperial) changed in the past three fiscal years as follows:
●
Our Ore Reserves (imperial) 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. At FWGR there was a non-material increase in reserves due to adjustments
of bulk density assumptions to further test work performed.
●
Our Ore Reserves (imperial) decreased from 5.77 million ounces at June 30, 2019, to 5.73 million ounces at June 30, 2020, mainly
because of depletion through ongoing mining activities as well as the Grootvlei dump 6/L/16 of 0.3Moz no longer being classified
as an Ore Reserve. The decrease was offset by inclusion of Marievale dumps at Ergo of 0.5Moz.
The life-of-mine for Ergo based on proven and probable ore reserves under Industry Guide 7 of the SEC as at June 30, 2021, was 13
years (June 30, 2020: 13 years, June 30, 2019: 11 years).
The life of mine for FWGR based on proven and probable ore reserves under Industry Guide 7 of the SEC as at June 30, 2021 was 18
years (June 30, 2020: 20 years; June 30, 2019: 15 years).
28
DRDGOLD's Ore Reserves as of June 30, 2021 and 2020 are set forth in the tables below.
The Ore Reserves listed in the table below are estimates of what can be legally and economically recovered from operations, and, as stated, are estimates of tons delivered to the plant.
Ore Reserves: Imperial
At June 30, 2021
At June 30, 2020
Proven Ore Reserves
Probable Ore Reserves
Proven Ore Reserves
Probable Ore Reserves
Content
Content
Content
Content
(oz/ton)
(mill)
(oz/ton)
(oz/ton)
Surface
Ergo
32.36
0.01
0.28
279.54
0.01
2.53
50.01
0.01
0.44
291.99
0.01
2.69
FWGR
245.01
0.01
2.40
14.19
0.01
0.14
248.33
0.01
2.46
13.99
0.01
0.13
Total
277.37
0.01
2.68
293.73
0.01
2.67
298.34
0.01
2.90
305.99
0.01
2.82
Ore reserves: Metric
At June 30, 2021
At June 30, 2020
Proven Ore Reserves
Probable Ore Reserves
Proven Ore Reserves
Probable Ore Reserves
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
Tonnes
Grade
Gold
Content
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
(mill)
(g/tonne)
(tonnes)
Surface
Ergo
29.36
0.300
8.81
253.59
0.310
78.61
45.37
0.300
13.61
264.89
0.316
83.61
FWGR
222.27
0.337
74.79
12.88
0.330
4.24
225.29
0.340
76.55
12.70
0.330
4.19
Total
251.63
0.333
83.60
266.47
0.311
82.85
270.66
0.333
90.16
277.59
0.316
87.80
29
The measurement and classification of our Proven and Probable Ore Reserves are sensitive to an extent to the fluctuation of the rand
gold price. If we had used the different rand gold prices or as set forth below instead of the three-year average prices at the time of ore reserve
determination, as of June 30, 2021 and 2020 respectively, we would not have had significantly different ore reserves as of those dates. Using the
same methodology and assumptions as were used to estimate Ore Reserves but with different rand gold prices as detailed below, our Ore
Reserves as of June 30, 2021 and 2020 would be as follows:
Year ended June 30, 2021
Three-year average
gold price
Prevailing price
10% Below
prevailing price
10% Above
prevailing price
Rand gold price per kilogram
756,355
851,239
766,115
936,363
Dollar gold price per ounce
1,559
1,796
1,616
1,976
Ore Reserves (million ounces)
5.35
5.35
5.35
5.35
Year ended June 30, 2020
Three-year average
gold price
Prevailing price
10% Below
prevailing price
10% Above
prevailing price
Rand gold price per kilogram
629,263
905,774
815,197
996,351
Dollar gold price per ounce
1,375
1,666
1,499
1,833
Ore Reserves (million ounces)
5.73
5.73
5.73
5.73
The approximate mining recovery factors for the 2021 ore reserves shown in the above table are as follows:
Mine Call Factor
Metallurgical recovery factor
(%)
(%)
Ergo
100
49
FWGR
100
53
The approximate mining recovery factors for the 2020 ore reserves shown in the above table are as follows:
Mine Call Factor
Metallurgical recovery factor
(%)
(%)
Ergo
100
46
FWGR
100
53
The following table shows the average drill/sample spacing (rounded to the nearest foot) as at June 30, 2021 and 2020, for
each category of Ore Reserves at our mines calculated based on a three year average dollar price of gold.
Proven
Probable
Reserves
Reserves
Ergo and FWGR
328 ft. by 328 ft.
328 ft. by 328 ft.
The pay-limit grades based on the three year average rand price for gold amounting to R756,355/kg and costs used to
reserves as of June 30, 2021, are as follows:
Costs used to determine pay-
Pay-limit grade (g/t)
limit grade (R/t)
Ergo
0.200
84.10
FWGR
0.170
69.94
The pay-limit grades based on the three year average rand price for gold amounting to R629,263/kg and costs used to
reserves as of June 30, 2020, are as follows:
Costs used to determine pay-
Pay-limit grade (g/t)
limit grade (R/t)
Ergo
1
0.220
82.15
FWGR
0.220
61.12
1
We apply the pay-limit approach to the mineralized material database of our business in order to determine the tonnage and
grade available for mining.
30
Governmental regulations and their effects on our business
Common Law Mineral Rights and Statutory Mining 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
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, 2021 and
September 30, 2021 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
MRE Minister within six months of commencement of the MPRDA beginning May 1, 2004. The Mining Charter was initially published in August
2004 and was subsequently amended in September 2010. Its objectives include:
●
increased direct and indirect ownership of mining entities by qualifying parties as defined in the Mining Charter;
●
expansion of opportunities for persons disadvantaged by unfair discrimination under the previous political dispensation;
●
expansion of the skills base of such persons, the promotion of employment and advancement of the social and economic welfare of
mining communities; and
●
promotion of beneficiation.
The Mining Charter sets certain 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.
places significant emphasis on the compliance therewith. The Mining Charter and scorecard have a decisive effect on administrative action taken
under the MPRDA.
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.
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.
31
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)
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
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.
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.
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.
• 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.
aside of certain provisions in Mining Charter 2018.
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.
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.
Mine Health and Safety Regulation
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
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
32
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.
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 2021, we contributed approximately R4.3 million under the COID Act (2020: R3.7
million and 2019: R3.6 million) to a multi-employer industry fund administered by Rand Mutual Assurance Limited.
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.
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.
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.
mining operations cease. We fund these environmental rehabilitation costs by irrevocable contributions to environmental trust funds that function
under the authority of trustees that have been appointed by, and who owe a statutory duty of trust to the Master of the High Court of South Africa.
The funds held in these trusts are invested primarily in interest bearing call deposits. As of June 30, 2021, we held a total of R564.7 million (2020:
R542.2 million) in trust, the balance held in each fund being R127.2 million (2020: R122.1 million) for Ergo, R425.1 million (2020: R408.1
million) for FWGR and R12.4 million (2020: R12.0 million) for ERPM. Trustee meetings are held as required and quarterly reports on the financial
status of the funds, are submitted to our board of directors. If any of the operations are prematurely closed, the rehabilitation funds may be
insufficient to meet all the rehabilitation obligations of those operations.
MPRDA assumes a fully compliant fund at any given time. Insurance instruments may also be utilized to make up the shortfall in available cash
33
funds subject to the DMRE’s consent. The Company has subsequently made use of approved insurance products for a portion of its rehabilitation
liabilities. As of June 30, 2021, we held a total of R87.5 million (2020: R83.8 million) in funds held in insurance instruments. As at June 30, 2021
guarantees amounting to R430.1 million (2020: R427.3 million) were issued to the DMRE.
30, 2020.
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 R564.7 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
provisions will have to be made for these activities.
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.
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.
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, 2021 and as of September 30, 2021 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.
34
4D. PROPERTY, PLANT AND EQUIPMENT
Description of Significant Subsidiaries' Properties and Mining Operations
Ergo
Overview
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. ERPM’s Cason Dump surface tailings
retreatment operation was depleted in the first half of fiscal year 2015. At June 30, 2021, Ergo employed 771 full-time employees. In addition,
specialist service providers deployed a further 1,495 employees to our operations bringing the total number of in-house and outsourced employees
to 2,266 at June 30, 2021 (at June 30, 2020: 2,155
;
at June 30, 2019: 2,214
)
.
Properties
Gauteng on land owned by Ergo. Access to the Ergo plant is via the Ergo Road on the N17 Johannesburg-Springs motorway.
into a single surface retreatment operation in Ergo, these mining rights were transferred to Ergo in March 2014.
operated as a pump/milling station feeding the metallurgical plants until March 2017. The Crown sites have been cleared and the rehabilitation of
the Crown plant site has been completed.
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.
operate as a metallurgical plant.
As of June 30, 2021 and September 30, 2021, no material encumbrances exist on Ergo's property.
Mining and Processing
Ergo undertakes the retreatment of surface tailings.
Material processed by Ergo is sourced from primary surface sources namely, sand and slime. The surface sources have generally
undergone a complex depositional history resulting in grade variations associated with improvements in plant recovery over the period the
material was deposited.
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.
deposition facilities including the significant Brakpan/Withok TSF.
re-pulped with water and pumped to the plant. Slime is reclaimed using high pressure water monitoring guns also known as hydraulic
reclamation. 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.
Ergo Plant:
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.
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
35
Brakpan/Withok TSF. Due to the location of the Knights plant it deposits waster on the Brakpan/Withok TSF. The Knights plant has an
installed capacity to treat an estimated 3.6Mt per year.
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.
As of June 30, 2021, the net book value of Ergo’s mining assets was R1,427.8 million (2020: R 1,283.9 million).
Capital Expenditure
Prospects—Capital expenditure".
area of the Gauteng province and further extend the life of mine of ERGO. A legal review of the existing authorizations was undertaken for
increasing the deposition capacity of the Brakpan/Withok TSF. The results indicated that most of the current authorizations are sufficient. An
updated application was submitted to the DWAS for which we are awaiting approval. Recommissioning and design studies are ongoing in
anticipation of the DWAS approval. We expect this could increase the potential deposition capacity by approximately 800Mt, and thus, our life of
mine from 13 years to more than 20 years.
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.
who produces electricity, predominately from coal powered fire stations. In the current year the Company generated 404 609 tonnes of scope 2
carbon emissions (2020: 364 950 tonnes). A large percentage of the capital expenditure in the current year is expected to go towards our own solar
photovoltaic power generation plant and battery storage facility at Ergo. The successful completion of this project is expected to reduce our carbon
emissions footprint. The project is subject to regulatory approval.
Exploration and Development
material.
Environmental and Closure Aspects
environmental risks are associated with dust from various reclamation sites, and effective management of relocated process material on certain
tailings dams. The impact of windblown dust on the surrounding environment and community is addressed through a scientific monitoring and
evaluation process, with active input from Professor H. Annagran from the Cape Peninsula University of Technology and appropriate community
involvement. Environmental management programs, addressing a wide range of environmental issues, have been prepared by specialist
environmental consultants, which are audited annually. Water pollution is controlled by means of a comprehensive system of return water dams
which allow for used water to be recycled for use in Ergo’s metallurgical plants. Overflows of return water dams may, depending on their location,
pollute surrounding streams and wetlands. Ergo has 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.
organic dust suppression on recovery sites. Short-term dust control is accomplished through ridge ploughing the top surface of dormant tailings
dams. Additionally, environmentally friendly dust suppressants are applied. Dust fall-out is monitored through an extensive dust monitoring
network monthly, and is utilized as a management measure to ensure the effectiveness of mitigation measures employed. 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.
mine is in place. The surface reclamation process at Ergo has several environmental merits as it removes potential pollution sources and opens up
land for development.
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. 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. This map depicts the mining right boundaries, roads, rails, mine dumps, plants, rivers, pipeline routes, servitudes, way leaves, municipal
36
services and other spatial data relevant to our mining operations.
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, 2021 is approximately R445.8 million. As at June 30, 2021, a total of R127.2 million (2020: R122.1 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. In addition, a total of
R62.7 million (2020: R59.9 million) is held in insurance instruments.
Ore Reserves
June 30, 2020 due to depletion resulting from ongoing mining. A Mineral Reserves and Mineral Resources competent person is appointed at each
operation to review our Ore Reserve calculations for accuracy. For Ergo, Professor Steven Rupprecht is the designated competent person in terms
of the SAMREC Code responsible for the compilation and reporting of ore reserves.
Production
that increased from 20.2Mt to 23.0Mt, a consequence of more stable production during fiscal 2021 compared to fiscal 2020 which was affected by
the COVID-19 Lockdown, a cautious subsequent ramp-up and interruptions in power supply from Eskom and the City of Ekurhuleni. The impact
of this increase was offset by the decrease in the average yield from 0.197g/t in fiscal 2020 to 0.186g/t in fiscal 2021.
Act regulations subsequently issued by the Department of Co-operative governance and traditional affairs affirmed that gold mining and refining
are “essential services” and was therefore exempt from restrictions imposed by the Lockdown. ERGO recommenced operations on April 9, 2020
with limited sites and ramped up to almost full production in June 2020. ERGO’s Knights plant recommenced operations on May 7, 2020 and
ramped up to almost full production in June 2020. Subsequent lockdowns in fiscal 2021 did not result in any similar stoppages in production.
2021 mainly due to the 6% decrease in yield and a 15% tariff increase by power utility, Eskom, which came into effect in April 2021.
The following table details certain production and financial results of Ergo for the past two fiscal years.
2021
2020
Production (imperial)
Ore milled ('000 tons)
22,952
20,228
Recovered grade (oz/ton)
0.006
0.006
Gold produced (ounces)
137,059
128,249
Results of Operations
3,943.0
3,064.3
2,871.0
2,453.5
2,666.5
2,274.0
1
629,585
568,476
704,503
614,861
717,755
621,316
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.”
37
FWGR
Overview
in the West Rand Goldfield of Gauteng, 30km from Johannesburg, that include Driefontein 3 and 5, Kloof 1, Venterspost North and South,
Libanon, Driefontein 4, Driefontein 2 plant, Driefontein 3 plant, WRTRP pilot plant, and land for the development of a central processing
plant, regional tailings storage facility and return water dam associated with Sibanye-Stillwater’s WRTRP, subsequently renamed FWGR. This
acquisition represents a significant increase in our assets, which had a material impact on our results for fiscal years ended June 30, 2019.
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. On January 22, 2020
Sibanye-Stillwater subscribed for 168,158,944 DRDGOLD shares at an aggregate subscription price of R1,086 million. These 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
Asset (incl properties)
Description
Additional tailings dams
Surface tailings dams which form part of the gold assets of the WRTRP Assets and which include Driefontein
Dumps 3 and 5, Kloof 1, Venterspost North and South and Libanon Dump.
DP2 Plant
The Driefontein 2 Plant which is located on Portion 6 of Farm Blyvooruitzicht No 116 Registration Division I.Q.
and Remainder of Portion 1 of the Farm Driefontein No 113, Registration Division I.Q., Gauteng Province.
The DP2 Plant processed surface rock dumps (“
SRD
”) material, which was delivered by rail and truck.
Throughput is achieved through two Semi-Autogenous Grinding (“
SAG
”) mills and a ball milling circuit, cyanide
leaching and a Carbon-in-Pulp (“
CIP
”) plant. A Carbon-in-leach circuit was commissioned in 2014 at DP2 Plant
to improve recoveries by replacing the aging CIP circuit.
DP3 Plant
The Driefontein 3 Plant which is located on Portion 6 of Farm Blyvooruitzicht No 116, Registration Division I.Q.,
Gauteng Province. The DP3 Plant was originally designed as a uranium plant, but was converted to process low-
grade surface rock in 1998. Similar to DP2 Plant, SRD ore was delivered by rail and truck. This plant has four
SAG mills followed by cyanide leaching and a CIP circuit.
Driefontein 4
The current active tailings deposition facility which forms part of the gold assets of the WRTRP Assets.
Pilot Plant
The 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 as part of the WRTRP Assets and located at
Driefontein 1 Plant.
Plan and Materials
Any and all drawings, plans, studies (including feasibility studies of a geological or geotechnical nature), surveys,
reports (including sampling and assaying reports), maps (including geophysical, geological and/or drill maps),
statements, schedules and other data in whatever form of a financial, technical, labour, marketing, administrative,
accounting or other matters pertaining to the WRTRP Assets.
Transferring Land
The land upon which:
·
35 and 73, Gauteng Province; and
·
Active Tailings Dams
The Driefontein 1 and 2, Kloof 2 and Leeudoorn currently active tailings dams are also required to be transferred
under the acquisition agreement, for no additional consideration, once they have been decommissioned by
Sibanye-Stillwater.
Licences to Operate
All the licences, 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:
·
·
pumping and supplying, at the cost of WRTRP, the required quantities of water, as licenced, for the WRTRP
Assets;
·
existing and proposed pipeline routes; servitudes; wayleaves and surface right permits; and
·
As of June 30, 2021 and September 30, 2021, no material encumbrances exist on FWGR's property.
38
to our operations bringing the total number of in-house and outsourced employees to 497.
Mining and Processing
FWGR undertakes the retreatment of surface tailings. Slime is reclaimed using high pressure water monitoring guns also known as
hydraulic reclamation. The re-pulped slime is pumped to the DP2 plant and the reclaimed material is treated using screens, cyclones, ball mills
and Carbon-in-Leach, or CIL, technology to extract the gold.
material per year based on 92% availability. Material is sourced from
Driefontein Dump 5
. 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.
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. 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. This agreement is expected to be in place until FWGR obtains its own precious metals beneficiation
license.
The Mineral Resources and Mineral Reserves held by FWGR were acquired from Sibanye Gold Limited (Sibanye Gold), a subsidiary
of Sibanye-Stillwater Limited, in a transaction in which common law ownership was established over the various tailings dams 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 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 which FWGR operates,
pending the transfer to FWGR of those that are transferable.
Capital Expenditure
expenditure".
capital expenditure incurred on the development of Phase 1 of FWGR of approximately R330.7 million were financed through a combination of
borrowings (refer to the Revolving Credit Facility described in Item 10C. Material Contracts) and cash resources and operational cash flows of
the Group.
2 project. The available information was independently reviewed by an external consultant, Sound Mining. The project includes the
construction of a new CPP with a capacity of between 1.2 Mtpm to 2.4Mtpm 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 3Mtpm
to a capacity of approximately 800Mt. The definitive feasibility study was concluded in the current year and is subject to obtaining regulatory
approvals on the amended design of the RTSF.
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.
Exploration and Development
material, as well as exploratory and development activities around Phase 2 of the project.
Environmental and Closure Aspects
material on certain tailings dams. The impact of nuisance dust fallout on the surrounding environment and community is addressed through a
comprehensive monitoring network, with active input from Professor H. Annagran from the Cape Peninsula University of Technology and
appropriate community involvement. Environmental management programs, addressing a wide range of environmental issues, have been prepared
by independent specialist environmental consultants, which are audited annually. Water pollution where appropriate is controlled by means of a
comprehensive system of return water dams which allow for used process water to be returned for use in FWGR’s metallurgical plant and hydraulic
reclamation. FWGR has an ongoing monitoring program to ensure that its water balances (in its reticulation system, on its tailings and its return
39
water dams) are maintained at levels that are sensitive to the capacity of return water dams.
management of our activities. These mitigation measures include environmentally friendly dust suppressants applied to high impact areas, active
wetting of access roads by water bowsers, a network of high velocity sprayers on our active TSF. Dust fall-out is monitored through an extensive
dust monitoring network monthly and is utilized as a management measure to ensure the effectiveness of mitigation measures employed. In the
long-term, dust suppression and water pollution will be managed through concurrent rehabilitation of the tailings dam, thus reducing water ingress
and dust from exposed areas.
reclamation process at FWGR has several environmental merits as it removes pollution sources and opens up land for development.
commitments made within the EMPs and Water Use Licenses to aid in keeping the operation compliant to its statutory obligations. The existing
and most recent specialist studies are used to supplement the management components with regards to the compliance parameters. The individual
management items are integrated to provide a holistic overview of the state of the operation. Spatial data pertaining to the operation is stored on a
Geographical Information System (GIS) which provides a spatial overview of the operation which includes environmental monitoring systems,
right boundaries, roads, rails, mine dumps, plants, rivers, wetlands, pipeline routes, servitudes, way leaves, municipal services and other spatial
data relevant to our mining operations.
While the ultimate amount of rehabilitation costs to be incurred is uncertain, we have estimated that the total cost for FWGR, in current
monetary terms as at June 30, 2021 is approximately R116.4 million (June 30, 2020: R103.3 million). As at June 30, 2021, a total of R425.1 million
is held in the Ergo Rehabilitation Trust Fund for the benefit of FWGR’s rehabilitation. The Ergo Rehabilitation Trust Fund 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.
Ore Reserves
at June 30, 2020. The small increase in reserves despite depletion through ongoing mining activities is due to the application of revised
modifying factors i.e. being the dilution from footwall soil and mining loss. A Mineral Reserves and Mineral Resources competent person is
appointed to review our Ore Reserve calculations for accuracy. For FWGR, Mr. Vaughn Duke is the designated competent person in terms of the
SAMREC Code responsible for the compilation and reporting of ore reserves.
Production
volume throughput that increased from 6.1Mt in fiscal 2020 to 6.2Mt in fiscal 2021. The average yield remained stable at 0.237g/t.
Act regulations subsequently issued by the Department of Co-operative governance and traditional affairs affirmed that gold mining and refining
are “essential services” and was therefore exempt from restrictions imposed by the Lockdown. FWGR was able to recommence operations on
April 3, 2020 and was able to ramp up production to almost full capacity in May and June 2020, respectively. Subsequent lockdowns in fiscal
2021 did not result in any similar stoppages in production.
inter alia
, the reconfiguration of the DP2
plant and relevant infrastructure to process tailings from the Driefontein 5 slimes dam and deposit residues on the Driefontein 4 Tailings
Storage Facility. During this construction phase, some gold was produced at the adjacent Driefontein 3 plant (“
DP3
”). Early-stage
commissioning of the DP2 plant commenced on December 6, 2018 with the pumping of reclaimed tailings into the carbon in leach (“
CIL
”)
circuit. Testing of the reconfigured plant and ramp-up of production continued during the third quarter of the fiscal year ended June 30, 2019.
Management considered,
inter alia
, the design capacity of the plant, recoveries and the ability to sustain production in determining the date of
commercial production. The date of commercial production for Phase 1 (excluding the milling section) was determined to be April 1, 2019.
The mills were subsequently commissioned in September 2019.
mainly due to FY2021 being FWGR’s first full year of milling.
40
The following table details certain production and financial results of FWGR for the past two fiscal years.
2021
2020
Production (imperial)
Ore milled ('000 tons)
6,159
6,052
Recovered grade (oz/ton)
0.008
0.008
Gold produced (ounces)
46,940
46,136
Results of Operations
1,326.0
1,120.7
517.1
473.3
406.2
352.0
1
276,174
243,542
377,210
299,792
400,829
311,597
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.”
See Item 5A. Operating Results – Capital expenditure for a discussion on capital expenditure.
ERPM
Overview
OroTree
”).
The revised agreements consisted of a disposal of ERPM's underground mining and prospecting rights and an option agreement, at the sole
discretion of OroTree, to purchase the underground mining infrastructure exercisable on or before June 30, 2019. The disposal of the underground
mining and prospecting rights were concluded in the second half of the financial year ended June 30, 2019. OroTree’s option to purchase the
underground mining infrastructure lapsed on June 30, 2019 when it did not exercise said option. The underground mining infrastructure remains
under care and maintenance. Certain infrastructure was demolished during fiscal 2021.
operations are included in ‘Corporate office and other reconciling items’ in the financial statements for segmental reporting purposes for all three
years presented.
Property
ERPM is situated on the Central Rand Goldfield located within and near the northern margin of the Witwatersrand Basin in the town
of Boksburg, 20 miles (32 kilometers) east of Johannesburg on land owned by ERPM. Access is via Jet Park Road on the N12 Boksburg-
Benoni highway. Historically underground mining and recovery operations comprised relatively shallow remnant pillar mining in the central
area and conventional longwall mining in the south-eastern area. Until underground mining was halted in October 2008, the mine exploited
the conglomeratic South Reef, Main Reef Leader and Main Reef in the central area and the Composite Reef in the south-eastern area. ERPM
concluded the disposal of its underground mining and prospecting rights in the second half of the financial year ended 2019.
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, 2021, and September 30, 2021, no encumbrances exist on ERPM's property.
At June 30, 2021, the net book value of ERPM’s mining assets was zero (2020: zero).
Mining and Processing
assets were transferred to Ergo as part of the restructuring which took place on July 1, 2012.
Exploration and Development
Extension 2, for an additional area of 5,500ha (13,590 acres) to OroTree Limited during the second half of the fiscal year ended June 30, 2019.
41
Environmental and Closure Aspects
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.
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 Acid Mine Drainage (“
AMD
”), a day, from TCTA at cost, in order to reduce
Ergo’s reliance on potable water for mining and processing purposes.
present discounted value of the total cost of rehabilitation for ERPM is approximately R8.6 million (2020: R17.9 million). A total of R12.4 million
(2020: R12.0 million) is held in the Ergo Rehabilitation Trust Fund for the benefit of ERPM and R24.8 million (2020: R23.8 million) is held in
insurance instruments and is available for the settlement of these rehabilitation costs. The Ergo Rehabilitation Trust Fund 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.
Ongoing Legal Proceedings
Ekurhuleni Metropolitan Municipality (“Municipality”) Electricity Tariff Dispute
Refer to Item 18. ‘‘Financial Statements - Note 24 – Payments made under Protest”.
Silicosis Litigation
Refer to Item 18. ‘‘Financial Statements - Note 26.1 – Contingencies”.
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, 2020 with fiscal year ended June 30, 2019
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,
2020.
42
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.
, the following:
●
gold production increased by 6% to 5,723kg together with an increase in gold sold by 5% to 5,734kg. The increase in production reflected
an 11% increase in throughput to 29,111t, offsetting the 4% decrease in average yield to 0.197g/t; and
●
the average rand gold price received increased by 19%.
Key drivers of our operating results and principal factors affecting our operating results
The principal uncertainties and variables facing our business and, therefore, the key drivers of our operating results are:
●
the price of gold, which fluctuates 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; and
●
general economic factors, such as exchange rate fluctuations and inflation, and factors affecting mining operations in South Africa.
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 COVID19
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 2020 and 2021.
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 2021 and 2020 fiscal years:
2021 fiscal year
2020 fiscal year
Change
$ per ounce
$ per ounce
%
Closing gold spot price on June 30,
1,770
1,781
(1)
Lowest gold spot price during the fiscal year
1,676
1,382
21
Highest gold spot price during the fiscal year
2,072
1,785
16
Average gold spot price for the fiscal year
1,850
1,562
18
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 37% from
R17,914 per ounce in 2019 to R24,466 per ounce in 2020, and increased by 16% to R28,490 per ounce in 2021.
An increase/(decrease) of 20% in the US dollar gold price throughout fiscal year 2021 would have increased/(decreased) revenue by
approximately R1,053.8 million (2020: R837.0 million).
An increase/(decrease) of 20% in the Rand to US dollar exchange rate throughout fiscal year 2021 would have increased/(decreased)
revenue by approximately R1,053.8 million (2020: R837.0 million).
43
Gold production
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 Ergo’s gold production which increased to 137,059 ounces in fiscal year 2021 (produced from 23.0 million tonnes milled at an average
yield of 0.186g/t) from 128,249 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.
In fiscal year 2020, gold production increased to 174,385 ounces (produced from 26.3 million tonnes milled at an average yield of
0.206g/t) from 155,159 ounces in fiscal year 2019 (produced from 24.4 million tonnes milled at an average yield of 0.197g/t). This was mainly
due to the first full year of gold production of FWGR resulting in production of 46,136 ounces (produced from 6.1 million tonnes milled at an
average yield of 0.237g/t), mitigating the impact of Ergo’s gold production which decreased to 128,249 ounces in fiscal year 2020 (produced
from 20.2 million tonnes milled at an average yield of 0.197g/t) from 144,453 ounces in fiscal year 2019 (produced from 23.2 million tonnes
milled at an average yield of 0.194g/t). This was a consequence of the Lockdown, subsequent cautious ramp-up and interruptions in power supply
from Eskom and the City of Ekurhuleni.
Cash operating costs
(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”.
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, 2021 with fiscal year ended June 30, 2020”.
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 2021 and 2020, 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 2021 the Rand gold price received increased by 19% compared to fiscal year 2020, outperforming the combined impact
of the average Dollar gold price which increased by 18% and the average exchange rate of the rand against the dollar that strengthened by 2%.
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).
For example in fiscal year 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.
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:
44
Fiscal year ended
Year ended June 30,
2021
2020
2019
(%)
(%)
(%)
The average rand/dollar exchange rate (strengthened)/weakened by:
(2)
10
10
CPI (inflation rate)
4.9
2.2
4.5
Production stoppages due to the impact of the COVID-19 pandemic on current operations
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. (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.
Operating data
Year ended June 30,
2021
2020
Revenue (R'm)
5,269.0
4,185.0
Gold production (ounces)
183,999
174,385
Gold production (kilograms)
5,723
5,424
Gold sold (ounces)
184,352
174,804
Gold sold (kilograms)
5,734
5,437
Average spot gold price (R/kilogram)
915,972
786,601
Average gold price received (R/kilogram)
917,996
768,675
Cost of sales (R'm)
3,388.2
2,937.9
Operating costs (R'm)
3,122.5
2,692.1
Cash operating costs (R'm)
3,072.7
2,626.0
Cash operating costs (R/kilogram)
540,338
482,417
All-in sustaining costs (R/kilogram)
626,247
541,475
All-in costs (R/kilogram)
643,338
551,646
Additions to property, plant and equipment (R'm)
395.7
182.7
Ore Reserves (million ounces)
5.35
5.73
(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 increased by 26% to R5,269.0 million in fiscal year 2021 from R4,185.0 million in fiscal year 2020 mainly due to the 5%
increase in gold sold from 5,437 kilograms in fiscal 2020 to 5,734 kilograms in fiscal 2021 and the average rand gold price received that increased
by 19% to R917,996 per kilogram.
discussion regarding the gold price received and sales volumes.
Ore Reserves
June 30, 2020. The decrease was mainly because of depletion through ongoing mining activities. The decrease was offset by a non-material
increase in FWGR’s ore reserves despite depletion through ongoing mining activities due to the application of revised modifying factors i.e.
being the dilution from footwall soil and mining loss. The table below sets forth our Ore Reserves as of the date indicated:
45
Year ended June 30,
2021
2020
Ore Reserves
Ounces
Tonnes
Ounces
Tonnes
‘m ozs
‘m ozs
Ergo
2.81
87.42
3.13
97.22
FWGR
2.54
79.03
2.60
80.74
Total Ore Reserves
5.35
166.45
5.73
177.96
Capital expenditure
During fiscal year 2021 capital expenditure increased by R214.6 million to R395.7 million from R181.1 million in fiscal year 2020.
Ergo’s capital expenditure during fiscal year 2021 increased by R136.5 million to R250.9 million from R114.4 million in fiscal year
2020. This was mainly due to infrastructure development for reclamation of the 4L3 and 4L4 dumps amounting to R47.5 million, upgrading
of the Brakpan plant’s carbon in leach circuit to provide more capacity and achieve better efficiencies amounting to R10.8 million, the
installation of a third regeneration kiln amounting to R13.2 million, both for additional carbon regeneration capacity to manage the planned
higher plant throughput and as back-up for the two existing kilns and improved tailings deposition and recommissioning studies and designs
for the Brakpan/Withok TSF expansion amounting to R10.2 million.
FWGR’s capital expenditure during fiscal year 2021 increased by R83.2 million to R143.3 million from R60.1 million in fiscal year
2020. This was mainly due to the construction of an additional thickener amounting to R40.3 million at reporting date (total cost is expected
to be approximately R88 million), feasibility studies and designs for Phase 2 amounting to R32.5 million and the installation of a copper elusion
circuit amounting to R12 million.
During fiscal year 2020, capital expenditure was R181.1 million primarily consisting of expenditure incurred on sustaining capital
expenditure on the Brakpan/Withok TSF, upgrade of CIL tanks and site establishment costs and authorisations for reclamation sites.
Critical accounting policies
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
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
Electricity Tariff Dispute (refer Item 18. ‘‘Financial Statements - Note 24 Payments made under protest”) requires the exercise of significant
judgement.
and complexities and are subject to interpretation.
Contingencies
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
46
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
Depreciation: Estimation of life-of-mine
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
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.
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
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
uncertain and can change materially over time and includes the discount rate and discount period.
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
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.
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.
47
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:
Amounts in R million
Observable/unobservable
Unit
2021
2020
Rand Refinery operations
Average gold price
Observable input
R/kg
Average silver price
Observable input
R/kg
Average South African CPI
Observable input
%
4.4
4.8
South African long-term government bond rate
Observable input
%
9.5
9.5
Terminal growth rate
Unobservable input
%
4.4
5.0
Weighted average cost of capital
Unobservable input
%
15.1
15.1
Investment in Prestige Bullion
Discount period
Unobservable input
Year
12
13
Cost of equity
Unobservable input
%
16.5
13.2
respectively. The latest budgeted cash flow forecasts provided by Rand Refinery as at June 30, 2021 was used, and therefore classified as an
unobservable input into the models.
New standards, amendments to standards and interpretations
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, 2021 with fiscal year ended June 30, 2020
Gold revenue
The following table illustrates the year-on-year change in gold revenue for fiscal year 2021 in comparison to fiscal year 2020:
R million
Total
Impact of change in amount
of gold sold
Impact of
change in
gold price
Net change
Total
gold revenue
gold revenue
2020
2021
Ergo
3,060.5
221.3
658.0
879.3
3,939.9
FWGR
1,118.7
6.2
199.0
205.2
1,323.9
Consolidated
4,179.2
227.5
857.0
1,084.5
5,263.8
Gold revenue increased by R1,084.5 million, or 26%, to R5,263.8 million during fiscal year 2021. This was mainly due to the average
rand gold price received which increased by 19% to R917,996 per kilogram as well as gold sold having increased by 5%. The increase is mainly
due to Ergo’s gold production which increased by 7%, a consequence of more 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.
Cost of sales
of R252.5 million, movement in gold in process of R25.6 million and a positive movement in the change in estimate of environmental
rehabilitation of R12.4 million. These are discussed as follows:
Operating costs
increase is mainly due to a 13% increase in Ergo’s throughput to 23.0Mt compared to 20.2Mt in fiscal year 2020 and a 15% electricity tariff
increase by power utility Eskom which came into effect in April 2021.
48
Depreciation
Depreciation charges were R252.5 million for fiscal year 2021 compared to R270.8 million for fiscal year 2020. Depreciation charges
decreased as a result of an increase in the life of mine for both Ergo and FWGR.
Change in estimate of environmental rehabilitation
As of June 30, 2021, we estimate our total environmental rehabilitation provision, being the discounted estimate of future costs, to
be R570.8 million as compared to R568.9 million at June 30, 2020. A change in estimate of environmental rehabilitation of R12.4 million was
recognized due to changes in the estimated timing of the vegetation of reclamation sites, as well as an increase in contractor rates for the
establishment of vegetation based on ongoing test work performed.
A total of R564.7 million was invested in our various environmental trust funds as at the end of fiscal year 2021, as compared to
R542.2 million at the end of fiscal year 2020. The increase is attributable primarily due to R 22.5 million interest received on these funds
during fiscal year 2021. A total of R87.5 million (2020: R83.8 million) is invested in funds held in insurance instruments to secure financial
guarantees provided to the DMR through an insurance cell captive company, the Guardrisk Cell Captive. The increase is attributable to R3.7
million interest received on these funds during fiscal year 2021. As at June 30, 2021, guarantees amounting to R430.1 million were in issue to
the DMR (2020: R427.3 million). The 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.
Movements in gold in process
Movement in gold in process in fiscal year 2021 amounted to R25.6 million mainly due to a decrease 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 decreased by R245.9 million from R309.9 million in fiscal year 2020 to R64.0 million in
fiscal year 2021. Administration expenses and general costs in fiscal year 2021 included a share-based payments benefit of R44.3 million
(2021: share-based payments expense of R218.1 million). The share-based payment benefit in 2021 is 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.
Finance income
Finance income increased from R109.8 million in fiscal year 2020 to R216.2 million in fiscal year 2021, mainly due to a dividend
received from Rand Refinery of R72.3 million (2020: nil) and an increase in interest income earned of R46.7 million mainly due to higher cash
and cash equivalents balances during the year.
Finance expense
Finance expenses increased from R68.8 million in fiscal year 2020 to R69.5 million in fiscal year 2021, mainly attributable to the
unrealized foreign exchange loss of R8.4 million in fiscal 2021 compared to nil in fiscal 2020. The unwinding of the provision for
environmental rehabilitation decreased by R7.3 million as a result of a lower provision estimated as at June 30, 2020.
Income tax
Income tax amounted to a charge of R523.8 million for fiscal year 2021 (2020: charge of R343.9 million) and consisted of a current
tax charge of R423.7 million (2020: charge of R263.2 million) and deferred tax charge of R100.0 million (2020: deferred tax charge of R80.7
million).
The current tax increased to R423.7 million in fiscal 2021 from R263.2 million in fiscal 2020 mostly due to an increase in the taxable
mining income of both Ergo and FWGR resulting mainly from the increase in the Rand gold price received. The current tax expense was
mitigated by the full redemption of capital expenditure incurred during the fiscal year 2021 and resulted in the deferred tax charge of R100.0
million.
The forecast weighted average deferred tax rate for both Ergo and FWGR remained unchanged in fiscal year 2021 at 25.0% and
30.0% respectively.
49
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 2019. The Group considers the presentation of Adjusted EBITDA provides useful information to investors
to enable investors to assess compliance with our covenants in the RCF agreement.
Year ended, June 30
Reconciliation of adjusted EBITDA
2021
2020
Profit for the year
1,439.9
635.0
Income tax
523.7
343.9
Profit before tax
1,963.6
978.9
Finance expense
69.5
68.8
Finance income
(216.2)
(109.8)
Results from operating activities
1,816.9
937.9
Depreciation
252.5
270.8
Share based payment (benefit)/expense
(28.3)
224.1
Change in estimate of environmental rehabilitation recognised in profit or loss
(12.4)
(21.9)
Gain on disposal of property, plant and equipment
(0.1)
(0.7)
IFRS 16 Lease payments
1
(15.8)
-
Transaction costs
3.1
1.4
Adjusted earnings before interest, tax depreciation and amortisation ("Adjusted EBITDA")
2,015.9
1,411.6
1
The amended RCF includes IFRS 16 lease payments in the calculation of the adjusted EBITDA.
2
See Glossary of Terms for definitions.
50
Cash operating costs, cash operating costs per kilogram, all-in sustaining costs and all-in costs per kilogram
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.
51
For fiscal year 2021, consolidated cash operating costs per kilogram increased by 12% to R540,338 per kilogram from R482,417 per
kilogram in fiscal year 2020. Consolidated all-in sustaining costs per kilogram increased by 16% to R626,247 per kilogram in fiscal year 2021
from R541,475 per kilogram in fiscal year 2020. Consolidated all-in costs per kilogram increased by 17% to R643,338 per kilogram of gold
in fiscal 2021 from R551,646 per kilogram of gold in fiscal year 2020.
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 a 13% increase in Ergo’s throughput to 23.0Mt in fiscal year 2021 compared
to 20.2Mt in fiscal year 2020 and a 15% tariff increase by power utility Eskom which came into effect in April 2021. At FWGR, there was
increased electricity usage due to fiscal 2021 being the first full year of milling.
The increase in sustaining capital expenditure during fiscal year 2021 contributed to the increase in all-in sustaining costs per
kilogram. The increase in growth capital expenditure incurred during fiscal year 2021 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
2021
2020
Cost of sales
3,388.2
2,937.9
Depreciation
(252.5)
(270.8)
Change in estimate of environmental rehabilitation
12.4
21.9
Movement in gold in process
(25.6)
3.1
Operating costs
3,122.5
2,692.1
Ongoing rehabilitation expenditure
(48.3)
(24.3)
Care and maintenance costs
(3.9)
(11.1)
Other operating income/(costs)
1
2.4
(30.7)
Cash operating costs
3,072.7
2,626.0
Movement in gold in process
25.6
(3.1)
Administration expenses and other costs excluding non-recurring items
109.7
96.1
Other operating income/(costs)
(2.4)
30.7
Change in estimate of environmental rehabilitation
(12.4)
(21.9)
Unwinding of rehabilitation provision
44.7
52.0
Sustaining capital expenditure
353.0
164.2
All-in sustaining costs
2
3,590.9
2,944.0
Care and maintenance costs
3.9
11.1
Ongoing rehabilitation expenditure
48.3
24.3
Transaction costs
3.1
1.4
Growth capital expenditure
42.7
18.5
All-in costs
3,688.9
2,999.3
Gold produced (kilograms)
5,723
5,424
Cash operating costs per kilogram (R per kilogram)
540,338
482,417
All-in sustaining costs per kilogram (R per kilogram)
626,247
541,475
All-in costs per kilogram (R per kilogram)
643,338
551,646
Reconciliation of sustaining capital expenditure and growth capital expenditure
Additions - property, plant and equipment owned
395.7
182.7
Less
Growth capital expenditure
42.7
18.5
Sustaining capital expenditure
353.0
164.2
1
Decrease from 2020 to 2021 of other operating costs as a result of reduction in costs at the Company's
training centre as a result of a change in structure of the centre
2
See Glossary of Terms for definitions.
52
Cash operating costs
2020
.
R million
Cash operating
costs
Impact of change in
throughput
Impact of change in
costs
Net change
Cash operating
costs
2020
2021
Ergo
2,274.0
306.2
86.3
392.5
2,666.5
FWGR
352.0
6.2
48.0
54.2
406.2
Total
2,626.0
312.4
134.3
446.7
3,072.7
Cash operating costs in fiscal year 2021 increase by R446.7 million to R3,072.7 million compared to cash operating costs of R2,626.0
million in fiscal year 2020.The increase is mainly due to a 13% increase in Ergo’s throughput to 23.0Mt in fiscal year 2021 compared to 20.2Mt
in fiscal year 2020 and a 15% tariff increase by power utility Eskom which came into effect in April 2021 and an increase in electricity usage
at FWGR due to fiscal 2021 being the first full year of milling.
below respectively:
Ergo
FWGR
Years ended
Year ended
Costs
2021
2020
Costs
2021
2020
Consumables
28%
30%
Consumables
33%
31%
Labor
19%
22%
Labor
20%
22%
Electricity and water
18%
18%
Specialized service providers
9%
9%
Specialized service providers
16%
17%
Electricity and water
19%
12%
Machine hire
4%
4%
Machine hire
2%
2%
Security expenses
4%
3%
Security expenses
5%
4%
Other costs
11%
6%
Other costs
12%
20%
5B. LIQUIDITY AND CAPITAL RESOURCES
Cash flows from operating activities
in the average rand gold price received to R917,996 per kilogram. In addition, interest received increased by R42.2 million to R105.9 million,
mainly due to higher cash and cash equivalents balances during the year and the Group received dividends from Rand Refinery amounting to
R72.3 million (2020: nil).
movement in working capital that amounted to a cash outflow of R194.9 million in fiscal year 2021.
Cash flows from investing activities
Net cash utilized by investing activities amounted to R446.6 million in fiscal year 2021 compared to R202.5 million in fiscal year 2020.
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.
In fiscal year 2020, net cash utilized by investing activities consisted mainly of R181.1 million in additions to property, plant and
equipment and R22.1 million spent on environmental rehabilitation payments. These outflows were reduced by R0.7 million proceeds on the
disposal of property, plant and equipment.
Cash flows from financing activities
53
Net cash outflow from financing activities was R653.5 million in fiscal year 2021 compared to net cash inflows of R509.2 million in
fiscal year 2020.
During fiscal year 2021, the net cash outflow consisted mostly of dividends paid on ordinary shares amounting to R640.9 million.
During fiscal year 2020, the net cash inflow consisted mostly of proceeds received on the issue of ordinary shares to Sibanye-Stillwater
amounting to R1,085.6 million offset by dividends paid on ordinary shares amounting to R564.5 million.
Cash and cash equivalents
2020. Substantially all of our cash and cash equivalent balances were denominated in South African rand. Cash and cash equivalent denominated
in foreign currency amounted to USD 3.4 million at June 30, 2021 compared to nil at the end of fiscal year 2020.
at the end of fiscal year 2020.
Borrowings and funding
At June 30, 2021 and September 30, 2021, our external sources of capital included our RCF described in Item 10C. Material
Contracts’’.
In September 2020 the RCF was amended as described in Item 10C. “Material Contracts”. The amendments include a reduction in
the size of the facility from R300million 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, 2021 or September 30, 2021.
Anticipated funding requirements and sources
resources, net cash generated from operations and the availability of negotiated funding facilities will be sufficient to meet the anticipated
commitments of our existing operations for fiscal year 2022. As a result of the significant increase in the gold price, at September 30, 2021 the
Group has a cash and cash equivalents balance of R1,898.9 million. In addition, the Group has an undrawn R200 million RCF available as
additional backstop liquidity. 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, 2021 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
In response to the COVID-19 pandemic and measures taken to address 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 2020 and 2021. The
rand/dollar exchange rate remained volatile throughout the year mainly as a result of economic uncertainty and perceived political instability,
global market slowdown sentiment, tensions between the USA and China, low economic growth, and a seemingly terminally distressed Eskom.
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.
unit cost of approximately R600,000 per kilogram and expect a capital investment of approximately R600 million.
54
Reconciliation of budgeted cost of sales to budgeted cash operating costs (R’million)
Cost of sales
3,502.9
Reconciling items
1
(327.5)
Cash operating costs
3,175.4
1
Includes expected depreciation of R270.6 million, ongoing environmental expenses of R49.7 million, care and maintenance expenses of R6.7 million and other
operating expenses of R0.5 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 by COVID-19 in a number of ways, including potential further national
lockdowns, stoppages in production due to outbreaks of infections 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, electricity and water; crude oil and steel costs. Unforeseen changes in ore grades and recoveries, unexpected changes
in the quality 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 2022 and cause us to fail to meet our
targets for the year.
trends in the US Dollar gold price as well as exchange rates impacting our business.
Operating results for the quarter ended September 30, 2021
55
Quarter ended
Quarter ended
Sep 30, 2021
Jun 30, 2021
% change
Production
Gold produced
kg
1,449
1,357
7%
oz
46,587
43,629
7%
Gold sold
kg
1,428
1,365
5%
oz
45,912
43,886
5%
Ore milled
Metric (000't)
7,421
7,506
-1%
Yield
Metric (g/t)
0.195
0.181
8%
Reconciliation of adjusted EBITDA
Profit for the period
217.3
240.7
Income tax
87.8
67.6
Profit before tax
305.1
308.3
Finance expense
12.6
24.7
Finance income
(35.0)
(78.8)
Results from operating activities
282.7
254.2
Depreciation
68.8
62.9
Share based payment (benefit)/expense
4.2
4.7
Change in estimate of environmental
-
(12.4)
Gain on disposal of property, plant and
-
-
IFRS 16 Lease payments
1
(5.2)
(7.9)
Transaction costs
0.3
1.6
Adjusted EBITDA
1,2*
350.8
303.1
1
The amended RCF includes IFRS 16 lease
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
892.6
851.7
Depreciation
(68.8)
(62.9)
Change in estimate of environmental
-
12.4
Movement in gold in process
37.9
(0.5)
Operating costs
861.7
800.7
Ongoing rehabilitation expenditure
(9.6)
(7.5)
Care and maintenance costs
(2.2)
1.6
Other operating income/(costs)
(3.3)
18.3
Cash operating costs
846.6
813.1
Movement in gold in process
(37.9)
0.5
Administration expenses and other costs
excluding non-recurring items
27.5
16.3
Other operating costs
3.3
(18.3)
Change in estimate of environmental
-
(12.4)
Unwinding of rehabilitation provision
12.2
8.6
Sustaining capital expenditure
74.8
106.7
All-in sustaining costs
1
926.5
914.5
Care and maintenance costs
2.2
(1.6)
Ongoing rehabilitation expenditure
9.6
7.5
Transaction costs
0.3
1.6
Growth capital expenditure
13.9
9.1
All-in costs
952.5
931.3
56
Quarter ended
Quarter ended
September 30,
June 30, 2021
% change
Price and costs
Average gold price received
R per kg
839,983
821,647
2%
US$ per oz
1,786
1,810
-1%
Cash operating costs
R/t
114
108
6%
US$/t
8
8
-
Cash operating costs
R per kg
566,317
595,824
-5%
US$ per oz
1,204
1,312
-8%
All-in sustaining costs **
R per kg
648,880
669,744
-3%
US$ per oz
1,380
1,475
-6%
All-in cost **
R per kg
667,157
681,905
-2%
US$ per oz
1,419
1,550
-8%
Capital expenditure
Sustaining
Rm
74.8
106.7
-30%
US$m
5.1
7.6
-33%
Non-sustaining/growth
Rm
13.9
9.1
53%
US$m
1
0.6
67%
Average R/US$ exchange rate
14.63
14.12
4%
Reconciliation of sustaining capital
Additions - property, plant and equipment
88.7
115.8
Less
74.8
106.7
Sustaining capital expenditure
13.9
9.1
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
.
5% to 1,428kg.
number of gold units produced and sold resulted in a 5% decrease in cash operating costs per kilogram to R566,317/kg. The cash operating cost
per ton of material processed increased by 6% to R114/t.
on quarter mainly due to a decrease in sustaining capital expenditure.
2% increase in the average Rand gold price received of R839,983/kg.
of R173.5 million at September 30, 2021 reduced cash and cash equivalents by R276.8 million to R1,903.2 million at September 30, 2021 (June
30, 2021: R2, 180 million). External borrowings remained at Rnil as at September 30, 2021 (June 30, 2021: Rnil).
inter alia
, be applied towards the Company’s extended capital expenditure
programme for the fiscal year ending June 30, 2022. Despite the capital expenditure planned for the fiscal year, the Company remains in a
favourable position to, in the absence of unforeseen events, consider declaring an interim cash dividend in February 2022.
57
5E. OFF-BALANCE SHEET ARRANGEMENTS
The Company does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt obligations,
unconsolidated special purposes entities or unconsolidated affiliates.
5F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
Estimated and actual payments due by period
Total
Less than
Between
Between
More than
5 years
1 year
1-3 years
3-5 years
R m
R m
R m
R m
R m
Provision for environmental rehabilitation
2
570.8
53.0
134.9
91.7
291.2
Lease liabilities
54.8
16.9
26.9
10.0
1.0
Trade and other payables
509.8
509.8
-
-
-
Purchase obligations – contracted capital expenditure
1
65.5
65.5
-
-
-
Other contractual obligations
1.4
1.4
-
-
-
Total contractual and cash obligations
1,202.3
646.6
161.8
101.7
292.2
1
2
regulations establish certain conditions on the conduct of our operations. Pursuant to environmental regulations, we are also obliged to close
our operations and reclaim and rehabilitate the lands upon which we have conducted our mining and gold recovery operations. The estimated
closure costs at existing operating mines and mines in various stages of closure are reflected in this table. For more information on
environmental rehabilitation obligations, see Item 4D. “Property, Plant and Equipment” and Note 11 - “Provision for environmental
rehabilitation” under Item 18. “Financial Statements".
5G. SAFE HARBOR
See ‘Special Note Regarding Forward-Looking Statements”.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6A. DIRECTORS AND SENIOR MANAGEMENT
Directors and Executive Officers
ten directors.
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.
from December 1, 2021. Mr Timothy Cumming, a non-executive director of the Company, will replace Mr Campbell as chairman of the Board
and the nominations committee with effect from December 1, 2021 subject to shareholder approval at the Annual General Meeting to be 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.
committee with effect from August 19, 2021
Executive Directors
Daniël (Niel) Johannes Pretorius (54)
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.
58
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
executive director in December 2003 and Non-executive Chairman in October 2005. A qualified geologist, he has worked on gold mines in Wales
and Canada. He spent 15 years as a stockbroker before becoming a fund manager, managing the Merrill Lynch Investment Managers Gold and
General Fund, one of the largest gold mining investment funds. He was also research director for Merrill Lynch Investment Managers. Geoffrey
is a director of Oxford Abstracts Limited. Geoffrey chairs the Nominations Committee of DRDGOLD.
Edmund Abel Jeneker (59)
. Edmund Jeneker was appointed Non-executive Director in November 2007 and Lead Independent Non-
executive Director in August 2017. He has more than 30 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.
He spent over 13 years at Absa Bank and Barclays Africa, where he was
Managing Executive and served as director on the boards of several subsidiary companies in the ABSA Bank 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 National Social Ethics Forum of the Institute of Directors, Chairman of the BADISA Investment Committee and
serves on the board of the Cape Town Philharmonic Orchestra. He is a Chartered Director (SA) with a focus on Board Development and
Strategy, Climate Change and ESG. Edmund chairs the Social & Ethics Committee and is a member of the Remuneration Committee and the
Nominations Committee of DRDGOLD.
Johan Andries Holtzhausen (75)
. 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 42 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.
Johan currently serves as a voluntary independent director and chairman of the Audit and Risk Committee of the Tourism Enterprise
Partnership. 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.
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 Northam Platinum
. Jean chairs the Remuneration Committee and is a member of the Audit Committee and
the Risk Committee of DRDGOLD.
Toko Victoria Buyiswa Nomalanga Mnyango
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
as a chartered accountant in December 2005 after serving her articles at PricewaterhouseCoopers Incorporated. A member of the South African
Institute of Chartered Accountants, with extensive experience in corporate finance, financial management, investor relations and the mining
industry, she is currently Chief Executive Officer of TriAlpha Investment Management and Non-executive director of Growthpoint Properties
Limited and lemas Financial Services Co-operative Limited. Prudence chairs the Risk Committee and is a member of the Nominations
Committee and the Audit Committee of DRDGOLD.
Timothy John Cumming
Politics and Economics from Oxford University. 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. 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. Timothy started out as an engineer at the Anglo American Corporation of South Africa Limited working
59
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). Timothy is a member of the Risk Committee, Remuneration
Commmittee, and Nominations Committee of DRDGOLD.
Charmel Diane Flemming (38)
(South Africa) with 10 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
(Dip Analytical Chemistry, BTech Analytical Chemistry). 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.
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 (59)
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.
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.
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.
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.
60
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, 2021 was R62.6 million.
●
Base fee as Non-Executive Chairman of R1,388,518 per annum up to December 1, 2020 and R1,457,944 thereafter;
●
Base fee as Lead Independent Non-Executive Director of R640,261 per annum up to December 1, 2020 and R672,274 thereafter;
●
Base fee as Non-Executive Directors of R617,119 per annum up to December 1, 2020 and R647,975 thereafter;
●
Annual fee for Audit Committee Chairman of R30,856 (excluding fee received as a committee member) up to December 1, 2020 and
R32,399 thereafter;
●
Annual fee for Audit Committee member of R30,856 up to December 1, 2020 and R32,399 thereafter;
●
Annual fee for the chairman of Remuneration Committee, Nominations Committee and Social and Ethics Committee of R23,142
(excluding fee received as a committee member) up to December 1, 2020 and R24,299 thereafter;
●
Annual fee for members of Remuneration Committee and Social and Ethics Committee of R23,142 each up to December 1, 2020 and
R24,299 thereafter;
●
Daily fee of R23,142 up to December 1, 2020 and R24,299 thereafter;
●
Hourly rate of R3,086 up to December 1, 2020 and R3,240 thereafter;
●
Half-day fee for participating by telephone in special board meetings of R11,571 up to December 1, 2020 and R12,150 thereafter; and
●
The Chairman of the board, Lead Independent Non-Executive Director and other Non-Executive Directors to receive committee fees.
The following table sets forth the compensation for our directors and prescribed officers for the year ended June 30, 2021.
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
Discretionary
Short-Term
Incentives
recognised
related to this
cycle (1)
Long-term
Incentives paid
during this
cycle
Total
remuneration
related to this
cycle
R'000
R'000
R'000
R'000
R'000
Executive directors
D J Pretorius
7,253
6,927
1,732
21,627
37,539
A J Davel
4,089
3,891
973
12,150
21,103
11,342
10,818
2,705
33,777
58,642
Non-executive directors
G C Campbell
1,545
-
-
-
1,545
E A Jeneker
794
-
-
-
794
J Holtzhausen
712
-
-
-
712
T B V N Mnyango
724
-
-
-
724
J J Nel
756
-
-
-
756
K P Lebina
769
-
-
-
769
T J Cumming
681
-
-
-
681
C D Flemming
674
-
-
-
674
6,655
-
-
-
6,655
Prescribed officers (2)
W J Schoeman
3,877
3,891
973
12,150
20,891
E Beukes
1,357
1,292
-
-
2,649
5,234
5,183
973
12,150
23,540
Total
23,231
16,001
3,678
45,927
88,837
(1)
(2)
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.
61
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 19.2 – 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 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 FY2021 are as follows:
Strategic Initiatives Modifiers
Environmental: 4%
Safety: 4%
Social development: 4%
Labour development: 4%
Transformation: 4%
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
62
< 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
• 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.
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, 2021.
On July 1, 2019 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, 2022 Mr. D.J. Pretorius receives from us a guaranteed remuneration package of R6.2 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 cash-settled long-term incentive scheme (awarded 2,323,009 phantom shares in November 2015)
and the equity-settled long-term incentive scheme (awarded 1,069,321 conditional shares in December 2019 and 332,497 conditional shares
in October 2020).
63
Mr. A.J. Davel entered into a new employment agreement effective from July 1, 2019 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 R3.4 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 cash-settled long-
term incentive scheme (awarded 1,305,033 phantom shares in November 2015) and the equity-settled long-term incentive scheme (awarded
517,522 conditional shares in December 2019 and 160,919 conditional shares in October 2020)
Holtzhausen has a service agreement which runs for a fixed period until April 25, 2022. 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 Charmel Diane 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.
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, 2021 and as at September 30, 2021, the board of directors comprises two Executive Directors (Mr. D.J. Pretorius and
Mr. A.J. Davel), and eight Non-Executive Directors (Messrs. G.C. Campbell, J.J. Nel, E.A. Jeneker, J.A. Holtzhausen, T.J. Cumming 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. G.C.
Campbell 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
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
64
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
at June 30, 2021:
Director
Title
Year first
appointed
Term of
current office
Unexpired
term of
current office
D.J. Pretorius
Chief Executive Officer
2008
3 years
12 months
A.J. Davel
Chief Financial Officer
2015
3 years
12 months
G.C. Campbell
Non-Executive Director
2002
2 years
4 months
E.A. Jeneker
Non-Executive Director
2007
2 years
4 months
J. Holtzhausen
Non-Executive Director
2014
2 years
9 months
T.V.B.N. Mnyango
Non-Executive Director
2016
2 years
19 months
J.J Nel
Non-Executive Director
2018
2 years
19 months
K.P Lebina
Non-Executive Director
2019
2 years
22 months
T.J. Cumming
Non-Executive Director
2020
2 years
13 months
C.D. Flemming
Non-Executive Director
2020
2 years
13 months
Executive Committee
E. Beukes.
The Executive Committee meets on a 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
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.
Committees of the Board of Directors
Nominations Committee
As at June 30, 2021 the Nominations Committee consisted of G C Campbell (Chairman), E A Jeneker, J A Holtzhausen, T V B N
Mnyango, K P Lebina, and T J Cumming.
65
The Nominations Committee meets on an
ad hoc
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 an independent 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 nominations responsibilities of the 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, 2021 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, 2021 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.
●
appointment and oversight of external auditors, audit process and financial reporting;
●
oversight of internal audit;
●
overseeing the integrated reporting and assurance model;
●
overseeing the development and annual review of a policy and plan for risk management;
●
ensuring that risk management assessments are performed on a continuous basis;
●
ensuring that reporting on risk management assessment is complete, timely, accurate and accessible;
●
ensuring that frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks;
●
ensuring that continuous risk monitoring by management takes place.
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 December 2, 2020 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 of the board following the Audit Committee.
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.
66
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, 2021 the Risk Committee consisted of K.P. Lebina (Chairwoman), Mr D.J. Pretorius, J.J. Nel, C.D. Flemming and
T.J. Cumming.
All members of the Risk Committee are independent according to the definition set out in the NYSE Rules, except for T 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, 2021, the Social and Ethics Committee consisted of Mr. E.A. Jeneker (Chairman), Mr. A.J. Davel, Mrs. TVBN
Mnyango and C.D. Flemming
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
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.
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.
67
directly employed by us and our subsidiary companies. Of the 1026 employees directly employed by us and our subsidiary companies, 34
employees are on a fixed term employment contract.
who are directly employed by us and our subsidiary companies. Of the 953 employees directly employed by us and our subsidiary companies, 43
employees are on a fixed term employment contract.
Labor Relations
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.
30, 2022 with a 5.9% average increase per annum across the ERGO workforce with individual increases ranging from 5.5% to 7% per annum.
The transitional arrangement regarding wage increases with the workforce at FWGR when these employees were incorporated into DRDGOLD
have now come to an end. As a consequence, negotiations are currently underway with organized labour at FWGR with the intention of trying to
reach a 3-year wage agreement.
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.
Safety statistics
our fiscal 2021 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,
2021
2020
2021
2020
2021
2020
Lost time injury frequency rate (LTIFR)
1
0.78
1.25
0.97
1.3
0.80
1.27
Reportable incidence frequency rate (RIFR)
1
0.47
0.9
1.3
0.40
0.96
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
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, 2021, directors and prescribed officers do not hold any options to purchase ordinary shares.
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’’
68
During fiscal year 2016, DRDGOLD’s Remuneration Committee approved a revised 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 is 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 Remuneration
Committee has the authority to amend in part or in its entirety or withdraw the long-term incentive scheme at any time.
No phantom shares were granted during fiscal year 2021 (2020: nil, 2019: 388,547). No phantom shares were outstanding June 30,
2021 (2020: 9,845,638; 2019: 16,157,058).
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
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):
69
• 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.
70
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7A. MAJOR SHAREHOLDERS
As of September 30, 2021, our issued capital consisted of:
●
864,588,711 ordinary shares of no par value; and
●
5,000,000 cumulative preference shares.
foreign government, other than the controlling interest held by Sibanye-Stillwater.
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.
●
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.
●
each of our directors and prescribed officers; and
●
any person whom the directors are aware of as at September 30, 2021 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.
Shares Beneficially owned
Holder
Number
Percent of outstanding
ordinary shares
Directors/prescribed officers
D.J. Pretorius
475,255
*
A.J. Davel
200,000
*
Other
Sibanye-Stillwater
433,158,944
50.10%
The Bank of New York Mellon
227,674,416
26.33%
Government Employees Pension Fund
31,135,434
3.60%
GSI Equity Seperation Account
14,739,438
1.70%
CLEARSTREAM BANKING S.A LUXEMBOURG
11,078,446
1.28%
Ergo Mining Operations Proprietary Limited
9,474,920
1.10%
* Indicates share ownership of less than 1% of our outstanding ordinary shares.
No shareholder has voting rights which differ from the voting rights of any other shareholder.
71
Cumulative Preference Shares
registered address is Suite 25, Katherine & West Building, Corner of Katherine and West Streets, Sandown, Sandton, 2196.
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 5.2 – 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 of Incorporation.
8B. SIGNIFICANT CHANGES
Significant changes that have occurred since June 30, 2021, 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.
72
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.
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
.
9D. SELLING SHAREHOLDERS
Not applicable.
9E. DILUTION
Not applicable.
9F. EXPENSES OF THE ISSUE
ITEM 10. ADDITIONAL INFORMATION
10A. SHARE CAPITAL
Not applicable.
10B. MEMORANDUM OF INCORPORATION
As of June 30, 2021, we had authorized for issuance 1,500,000,000 ordinary shares of no par value (as of September 30, 2021:
1,500,000,000), and 5,000,000 cumulative preference shares of R0.10 par value (as of September 30, 2021: 5,000,000). On this date, we had issued
864,588,711 ordinary shares (as of September 30, 2021: 864,588,711) and 5,000,000 cumulative preference shares (as of September 30, 2021:
5,000,000).
Africa and the JSE Listings Requirements, all as in effect on June 30, 2021 and September 30, 2021. 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.
of Incorporation, the main object and business of our company is mining and exploration for gold and other minerals.
Borrowing Powers
73
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
Voting by Directors
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.
may be called at any meeting of directors.
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.
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.
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 2019 AGM on December 2, 2019 to increase the NED remuneration.
care and skill in discharging their responsibilities. These common law duties have now been codified by the Companies Act.
Age Restrictions
Election of Directors
(“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.
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
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.
15 days advance written notice of that meeting. For any other general meeting of our shareholders, 15 days advance written notice is required.
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
74
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.
Dividends
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
or securities convertible into our ordinary shares.
Winding-up
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, 2021 and September 30, 2021, 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
limitation, any stated capital, capital redemption reserve fund and share premium account by making distributions and buying back our shares.
Amendment of the
MOI
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
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
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 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.
75
Time limit for dividend entitlement
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
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
shareholders to liability to further capital calls.
Provision that would delay/prevent change of control
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
Amendment and extension to ZAR300 million Revolving Credit Facility
On September 14, 2020, DRDGOLD Limited amended the initial R300 million Revolving Credit Facility (“
RCF
”) secured with
ABSA Bank Limited (acting through its Corporate and Investment Banking division) to a R200 million RCF and simultaneously extended the
final repayment date to September 14, 2022. The RCF remained undrawn at June 30, 2021.
The RCF bears interest at JIBAR plus a margin of 275 basis points (initial RCF: 325 basis points) nominal annual compounded
quarterly. A commitment fee of 35% of the applicable margin per annum is due on the undrawn RCF. A debt origination fee of 0.5% (initial
RCF: 1%) is payable on the available commitment of R200 million.
Relevant covenants include that, during any rolling 12 month period, (i) the interest cover
1
debt
2
1 Interest cover means the ratio of Adjusted EBITDA to Total Net Interest (interest charged on Financial Indebtedness after deducting all interest received on Cash and cash
equivalents (excluding interest received on restricted cash)).
2 Means Total Net Debt after deducting Cash and cash equivalents (excluding restricted cash)
The description of the amended RCF is qualified by reference to the addendum to the RCF filed herewith as an Exhibit to our
Annual Report on Form 20-F for the year ended June 30, 2020.
Performance Guarantee
On December 10, 2018, ABSA Bank Limited (acting through its Corporate and Investment Banking division) issued a performance
guarantee (“
Guarantee
”) to Ekurhuleni Metropolitan Municipality (refer to Item 18. “Financial Statements - Note 24 – Payments made under
protest”). R125 million of the initial R300 million RCF was committed to the Guarantee.
The amended R200 million RCF dated September 14, 2020 does not include any commitment towards the Guarantee.
The description of the performance guarantee issued to the Municipality is qualified by reference to the Addendum to the RCF and
the Performance Guarantee filed herewith as Exhibits to this report.
76
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
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.
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.
and the Kingdoms of Lesotho and Swaziland. Transactions between residents of the Common Monetary Area are not subject to these exchange
control regulations.
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.
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.
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.
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
77
●
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.
African residents in respect of fixed and ascertained foreign exchange commitments covering the movement of goods.
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.
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
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
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
our ordinary shares.
78
10E. TAXATION
Material South African Income Tax Consequences
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.
pay tax in South Africa except in the following circumstances:
Income Tax and Withholding Tax on Dividends
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.
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.
Group is subject, were 34% and 28%, respectively. The formula for determining the South African gold mining tax rate for fiscal years ended
2021 and 2020 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.
“
hybrid debt instrument
” is deemed to be a dividend
in specie
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.
U.S. Federal Income Tax Considerations
of ordinary shares or ADRs. It deals only with U.S. holders who hold ordinary shares or ADRs as capital assets for U.S. federal income tax
purposes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, published rulings, judicial
decisions and the Treasury regulations, all as currently in effect and all of which are subject to change, possibly on a retroactive basis. This
discussion has no binding effect or official status of any kind; we cannot assure holders that the conclusions reached below would be sustained by
a court if challenged by the Internal Revenue Service.
circumstances and does not address special classes of U.S. holders subject to special treatment (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). This discussion addresses only U.S. federal income tax considerations and does not address the effect of any
state, local, or foreign tax laws that may apply, the alternative minimum tax, the Medicare tax or the application of the federal estate or gift tax.
79
For purposes of this discussion, a “U.S. holder” is a beneficial owner of ordinary shares or ADRs who or 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 or any political subdivision thereof;
●
an estate, the income of which is subject to U.S. federal income tax without regard to its source; or
●
a trust, 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 if the trust has made a valid election to be treated as a
U.S. person.
treatment of a partner will generally depend on the status of the partner and on the activities of the partnership. Partners in partnerships holding
any ordinary shares or ADRs are urged to consult their tax advisors.
the U.S. federal income tax considerations applicable to their particular situations as well as any considerations to them arising under the tax laws
of any foreign, state or local taxing jurisdiction.
Ownership of Ordinary Shares or ADRs
represented by those ADRs. Exchanges of ordinary shares for ADRs and ADRs for ordinary shares generally will not be subject to U.S. federal
income tax.
shares or ADRs, other than distributions in liquidation and distributions in redemption of stock that are treated as exchanges, will be taxed to U.S.
holders as ordinary dividend income to the extent that the distributions do not exceed our current and accumulated earnings and profits. For U.S.
federal income tax purposes, the amount of any distribution received by a U.S. holder will equal the dollar value of the sum of the South African
rand payments made (including the amount of South African income taxes, if any, withheld with respect to such payments), determined at the
“spot rate” on the date the dividend distribution is includable in such 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 and accumulated earnings and profits will constitute a non-taxable return of capital and will be applied against and
reduce the holder's basis in the ordinary shares or ADRs.
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 with respect to
our ordinary shares or ADRs will constitute dividend income.
maximum U.S. federal income tax rate applicable to capital gains. This reduced rate generally would apply to dividends paid by us if, at the time
such dividends are paid, either (i) we are eligible for benefits under a qualifying income tax treaty with the United States or (ii) our ordinary shares
or ADRs with respect to which such dividends were paid are readily tradable on an established securities market in the United States. However,
this reduced rate is subject to certain important requirements and exceptions, including, without limitation, certain holding period requirements
and an exception applicable if we are treated as a passive foreign investment company as discussed under the heading “Passive Foreign Investment
Company”. U.S. holders are urged to consult their tax advisors regarding the U.S. federal income tax rate that will be applicable of
��
to their receiptany dividends paid with respect to the ordinary shares and ADRs.
for currency under a “spot contract” in a free market and involving representative amounts. A “spot contract” is a contract to buy or sell a currency
on or before two business days following the date of the execution of the contract. If such a spot rate cannot be demonstrated, the U.S. Internal
Revenue Service has the authority to determine the spot rate.
allowed to a U.S. corporation under Section 243 of the Code. Dividend income will be treated as foreign source income for foreign tax credit and
other purposes. In computing the separate foreign tax credit limitations, dividend income should generally constitute “passive category income,”
or in the case of certain U.S. holders, “general category income.”
80
Passive Foreign Investment Company
or PFIC. We would be a PFIC for U.S. federal income tax purposes if for any taxable year either (i) 75% or more of our gross income, including
our pro rata share of the gross income of any company in which we are considered to own 25% or more of the shares by value, were passive income
or (ii) 50% or more of our average total assets (by value), including our pro rata share of the assets of any company in which we are considered to
own 25% or more of the shares by value, were assets that produced or were held for the production of passive income. If we were a PFIC, U.S.
holders of the ordinary shares or ADRs would be subject to special rules with respect to (i) any gain recognized upon the disposition of the ordinary
shares or ADRs and (ii) any receipt of an excess distribution (generally, any distributions to a U.S. holder during a single 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;
●
the amount allocated to the taxable year in which a U.S. holder realizes the gain or excess distribution will be taxed as ordinary income;
●
the amount allocated to each prior year (other than a pre-PFIC year), with certain exceptions, will be taxed at the highest tax rate in effect
for that year; and
●
the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year (other
than a pre-PFIC year).
if we cease to satisfy the requirements for PFIC classification, 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.
Secretary of Treasury may require.
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 as of the close of the taxable year between 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 mark-to-market
election with respect to ordinary shares or ADRs is in effect on the date of a U.S. holder's death, the tax basis of the ordinary shares or ADRs in
the hands of a U.S. holder who acquired them from a decedent will be the lesser of the decedent's tax basis or the fair market value of the ordinary
shares or ADRs. U.S. holders desiring to make the mark-to-market election are urged to consult their tax advisors with respect to the application
and effect of making the election for the ordinary shares or ADRs.
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 supply
U.S. holders with the information needed to report income and gain pursuant to a “qualified electing fund” election in the event that we are classified
as a PFIC.
require to be measured and classified in accordance with U.S. federal income tax principles. Our analysis is based on our financial statements as
prepared in accordance with IFRS, which may substantially differ from U.S. federal income tax principles. Therefore, no assurance can be given
that we were not a PFIC. Furthermore, the tests for determining whether we would be a PFIC for any taxable year are applied annually and it is
difficult to make accurate predictions of future income and assets, which are relevant to this determination. In addition, certain factors in the PFIC
determination, such as reductions in the market value of our capital stock, are not within our control and can cause us to become a PFIC.
Accordingly, there can be no assurance that we will not become a PFIC.
The rules relating to PFICs are very complex. U.S. holders are urged to 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
disposition of ordinary shares or ADRs, a U.S. holder will recognize gain or loss in an amount equal to the difference between the U.S. dollar value
of the amount realized on the sale or exchange and such holder's adjusted tax basis in the ordinary shares or ADRs. Subject to the application of
the “passive foreign investment company” rules discussed above, such gain or loss generally will be capital gain or loss and will be long-term
capital gain or loss if the U.S. holder has held the ordinary shares or ADRs for more than one year. 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 generally will be treated as U.S.-source
gain or loss for U.S. foreign tax credit purposes.
81
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.
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 Internal Revenue Service. In the event that an accrual basis 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
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
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 2021 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
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.
82
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.
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
.
trust funds (classified as investments in rehabilitation obligation funds in the statement of financial position), by investing cash and cash equivalents
across several major financial institutions, considering the credit ratings of the respective financial institutions, funds and underlying instruments.
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
hedges were entered into during fiscal 2021. 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. Holdings denominated in other currencies are not material.
Liquidity risk - Long-term debt
Set out below is an analysis of our debt as at June 30, 2021 consisting of capital and interest related to lease liabilities. All of
our long-term debt is denominated in South African rand.
Interest rate
Total
8.8% - 10.3%
R'm
Repayment period
2022
20.5
2023
18.3
2024
12.6
2025
5.9
2026
5.2
2027
1.3
Total
63.8
Based on our fiscal year 2021 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
12A. DEBT SECURITIES
Not applicable
.
12B. WARRANTS AND RIGHTS
Not applicable.
12C. OTHER SECURITIES
Not applicable.
83
12D. AMERICAN DEPOSITARY SHARES
Depositary Fees and Charges
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]
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, 2021 amounts to approximately
$51,944 (June 30, 2020: $16,237, June 30, 2019: $5,974). DRDGOLD is also entitled to a 25% share of the dividend fees which amounts to
approximately $65,551 for the year ended June 30, 2021 (June 30, 2020: $nil, June 30, 2019: $20,195).
84
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, 2021, 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, 2021.
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, 2021. 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, 2021 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, 2021 was audited by KPMG Inc., independent registered
public accounting firm, as stated in their report on page F-1 of this Form 20-F.
85
15D. Changes in Internal Control Over Financial Reporting
During the year ended June 30, 2021, 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.
ITEM 16.
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 Director at our mining operation 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, 2021, 2020 and 2019, for
which audited financial statements appear in this Annual Report. The Annual General Meeting elects the auditors annually.
year 2021 and 2020:
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,
2021
2020
R m
R m
Audit fees
9.1
8.4
All other fees
0.7
0.4
Total
9.8
8.8
All Other Fees
●
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;
●
R0.2 million with respect to limited assurance provided by KPMG on specified items contained in our Integrated Report for fiscal
year 2019; and
●
R0.2 million with respect to limited assurance provided by KPMG on specified items contained in our Integrated Report for fiscal
year 2020
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.
86
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
Not applicable.
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 six 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.
●
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.
●
The NYSE Listings Standards require U.S. listed companies to have an Audit Committee composed entirely of independent directors.
The South African Companies Act requires that the audit committee be approved by shareholders on an annual basis at a company’s
annual general meeting. The Companies Act and the JSE Listings Requirements also require an audit committee composed entirely of
independent non-executive directors. DRDGOLD has appointed an Audit Committee, currently comprised of four board members, all
of whom are non-executive and independent, as defined under both the JSE Listings Requirements and the NYSE Listing Requirements
●
The Companies Act and the JSE Listings Requirements require the appointment of a Social and Ethics Committee, and DRDGOLD has
appointed a Social and Ethics Committee, comprising four directors, three of whom are independent non-executive directors.
ITEM 16H. MINE SAFETY DISCLOSURES
Not applicable.
87
88
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
F‑1
Consolidated statement of profit or loss and other comprehensive income for the years ended June 30, 2021,
2020 and 2019
F-4
Consolidated statement of financial position at June 30, 2021 and 2020
F‑5
Consolidated statement of changes in equity for the years ended June 30, 2021, 2020 and 2019
F‑6
Consolidated statement of cash flows for the years ended June 30, 2021, 2020 and 2019
F‑5
Notes to the consolidated financial statements
F‑1 to F‑29
About these consolidated financial statements
1
Use of accounting assumptions, estimates and judgements
2
New standards, amendments to standards and interpretations not yet adopted
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 obligation 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, 2021 and 2020, 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, 2021, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2021, 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, 2021 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 570.8
million as of June 30, 2021. The Company’s estimates of undiscounted environmental rehabilitation costs used in calculating the provision are
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 of rehabilitation.
We identified the evaluation of the provision for environmental rehabilitation as a critical audit matter. Subjective auditor judgment and specialized
F-2
skills and knowledge were required to evaluate the current regulatory requirements, the Company’s LOM plan, specifically the estimated quantities of
economically recoverable gold, and 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 implementation and operating effectiveness of certain internal controls relating to the Company’s process
to determine the environmental rehabilitation provision. This included controls related to the assessment of current regulatory requirements,
determination of the Company’s LOM plan, specifically related to the estimated quantities of economically recoverable gold, and the planned
method of rehabilitation;
●
We involved environmental rehabilitation professionals with specialised 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 expert by comparing their professional qualifications, experience
and affiliations against industry norms and obtained and understanding of their scope of work; and
-
evaluating a selection of sites by performing site inspections and challenging the planned method of rehabilitation that was determined in
respect of each selected site. This was performed by comparing the planned method of rehabilitation to the estimated quantities of
economically recoverable gold as indicated in 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, and comparing selected inputs to the Company’s mineral reserves and resources report that was reviewed by the
Company’s independent mineral resources expert.
●
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; and
●
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.
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 R377.1 million as of June 30,
2021, 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 specialised 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 forecasted 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 certain key assumptions
about the forecasted 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;
●
We evaluated the forecast rand gold price by comparing it to independent analyst reports;
●
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 a sensitivity analysis to assess the impact that changes in the forecasted 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 25.1 to the consolidated financial statements, the Company has an unlisted equity investment in Rand Refinery Proprietary
Limited (RR) that is valued at R119.3 million as of 30 June 2021. The fair value of the RR investment includes the valuation of the refining operations
F-3
(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 specialised 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 discount rates,
including the weighted average cost of capital, cost of equity and the marketability and minority discount rates, applied to calculate the overall 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 key inputs including the forecasted average gold and silver
prices and discount rates;
●
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 by comparing them against the discount rate ranges
that were 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 a 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, 2021
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended June 30, 2021
F-4
Amounts in R million
Note
2021
2020
2019
Revenue
4
5,269.0
4,185.0
2,762.1
Cost of sales
5.1
(3,388.2)
(2,937.9)
(2,553.9)
Gross profit from operating activities
1,880.8
1,247.1
208.2
Other income
5.2
0.1
0.7
7.9
Administration expenses and other costs
5.3
(64.0)
(309.9)
(90.9)
Results from operating activities
1,816.9
937.9
125.2
Finance income
6
216.2
109.8
58.3
Finance expense
7
(69.5)
(68.8)
(78.4)
Profit before tax
1,963.6
978.9
105.1
Income tax
18.1
(523.7)
(343.9)
(26.6)
Profit for the year
1,439.9
635.0
78.5
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
(34.4)
190.6
(5.9)
Fair value adjustment on equity investments at fair value through other
comprehensive income
25
(28.2)
191.8
(5.9)
Deferred tax thereon
18.2
(6.2)
(1.2)
0
Total other comprehensive income for the year
(34.4)
190.6
(5.9)
Total comprehensive income for the year
1,405.5
825.6
72.6
Earnings per share
Basic earnings per share (SA cents per share)
8
168.4
82.5
11.8
Diluted earnings per share (SA cents per share)
8
167.2
81.0
11.5
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at June 30, 2021
F-5
Amounts in R million
Note
2021
2020
ASSETS
Non-current assets
3,675.3
3,485.4
Property, plant and equipment
9
2,809.7
2,621.1
Investments in rehabilitation obligation funds
12
652.2
626.0
Payments made under protest
24
40.5
35.0
Other investments
25
167.1
195.3
Deferred tax asset
18.2
5.8
8.0
Current assets
2,672.7
2,189.8
Inventories
17
340.0
323.4
Current tax receivable
8.6
4.9
Trade and other receivables
15
144.1
146.4
Cash and cash equivalents
13
2,180.0
1,715.1
TOTAL ASSETS
6,348.0
5,675.2
EQUITY AND LIABILITIES
Equity
4,820.4
4,040.2
Stated share capital
21.1
6,157.9
6,157.9
Retained earnings
(1,337.5)
(2,117.7)
Non-current liabilities
996.1
889.1
Provision for environmental rehabilitation
11
570.8
568.9
Deferred tax liability
18.2
377.1
273.1
Liability for post-retirement medical benefits (2020: Employee benefits)
10.3
10.1
Lease liabilities
10.2
37.9
37.0
Current liabilities
531.5
745.9
Trade and other payables
16
509.8
478.8
Liability for cash-settled long-term incentive scheme (2020: Employee benefits)
19.1
0
227.6
Current portion of lease liabilities
10.2
16.9
10.1
Current tax liability
4.8
29.4
TOTAL LIABILITIES
1,527.6
1,635.0
TOTAL EQUITY AND LIABILITIES
6,348.0
5,675.2
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended June 30, 2021
F-6
Stated
share
Other
Retained
Total
Amounts in R million
Note
capital
reserves
earnings
equity
Balance at June 30, 2018
4,177.7
0
(2,910.4)
1,267.3
Total comprehensive income
Profit for the year
78.5
78.5
Other comprehensive income
(5.9)
(5.9)
Total comprehensive income
-
-
72.6
72.6
Transactions with the owners of the parent
Contributions and distributions
Equity instruments issued as purchase consideration for the
acquisition of Far West Gold Recoveries ("
FWGR
")
895.7
453.6
1,349.3
Expenses incurred on issue of ordinary shares
(0.3)
(0.3)
Treasury shares acquired through subsidiary
21.1
(0.3)
(0.3)
Total contributions and distributions
895.1
453.6
0
1,348.7
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
21.1
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
21.2
(453.6)
453.6
0
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
0
(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
0
0
(625.3)
(625.3)
Balance at June 30, 2021
21.1
6,157.9
0
(1,337.5)
4,820.4
The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended June 30, 2021
F-7
Amounts in R million
Note
2021
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
14
1,851.0
1,309.6
282.0
Finance income received
105.9
63.8
16.8
Dividends received
76.1
4.3
0
Finance expenses paid
(7.5)
(8.7)
(9.3)
Income tax paid
(452.1)
(240.1)
(1.2)
Net cash inflow from operating activities
1,573.4
1,128.9
288.3
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment
(395.7)
(181.1)
(347.4)
Environmental rehabilitation payments to reduce decommissioning liabilities
11
(51.0)
(22.1)
(16.6)
Proceeds on disposal of property, plant and equipment
5.2
0.1
0.7
5.8
Funds received from environmental obligation funds
12
0
0
55.2
Net cash outflow from investing activities
(446.6)
(202.5)
(303.0)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of ordinary shares
21.1
0
1,085.6
0
Share issue expenses
0
(0.5)
(0.3)
Acquisition of treasury shares
21.1
0
0
(0.3)
Dividends paid on ordinary shares
(640.9)
(564.5)
0
Borrowings raised
0
0
192.0
Borrowings paid
0
0
(192.0)
Initial fees incurred on facility
(1.0)
0
(3.6)
Repayment of lease liabilities
10.2
(11.6)
(11.4)
(3.7)
Net cash (outflow)/inflow from financing activities
(653.5)
509.2
(7.9)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
473.3
1,435.6
(22.6)
Impact of fluctuations in exchange rate on cash held
(8.4)
0
0
Cash and cash equivalents at the beginning of the year
1,715.1
279.5
302.1
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
13
2,180.0
1,715.1
279.5
The accompanying notes are an integral part of these consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended June 30, 2021
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, 2021.
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
2021
2020
2019
Spot rate at year end
14.27
17.32
14.07
Average prevailing rate for the financial year
15.40
15.66
14.18
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 forme r
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, 2021
F-9
3 NEW STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS
New standards, amendments to standards and interpretations effective for the year ended June 30, 2021
During the financial period, the following relevant new and revised accounting standards, amendments to standards and new
interpretation were adopted by the Group:
Definition of Material (Effective July 1, 2020)
The amendment clarifies the definition of material to make it easier to understand and provides guidance on how the definition
should be applied. The changes in the definition now ensures that the definition is consistent across all IFRS standards and the
Conceptual Framework.
●
old definition (IAS 1): Omissions or misstatements of items are material if they could, individually or collectively, influence the
economic decisions that users make on the basis of the financial statements;
●
new definition (IAS 1): Information is material if omitting, misstating or obscuring it could reasonably be expected to influence
the decisions that the primary users of general-purpose financial statements make on the basis of those financial statements,
which provide financial information about a specific reporting entity.
The definition of material omissions or misstatements from IAS 8
Accounting Policies, Changes in Accounting Estimates
and
Errors
The amendments to IAS 1 and IAS 8 did not have a significant impact on the Group.
Amendments to References to Conceptual Framework in IFRS (Effective July 1, 2020)
The IASB decided to revise the Conceptual Framework because certain important issues were not covered and certain guidance
was unclear or out of date. The revised Conceptual Framework, issued by the IASB in March 2018, includes:
●
new concepts on measurement including factors to be considered when selecting the measurement basis;
●
new concepts on presentation and disclosure, including when to classify income and expenses in other comprehensive income;
●
new guidance on when assets and liabilities are removed from financial statements;
●
updated definitions of an asset and liability;
●
updated recognition criteria for including assets and liabilities in financial statements;
●
clarified concepts of prudence, stewardship, measurement uncertainty and substance over form; and
●
the IASB also updated references to the Conceptual Framework in IFRS by issuing Amendments to References to the
Conceptual Framework in IFRS.
The amendments to the References to the Conceptual Framework did not have a significant impact on 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.
These new standards, amendments to standards and interpretations are not expected to have a significant impact on the Group
unless stated otherwise.
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 IASB International Accounting
Standards Board has issued the
Annual Improvements to IFRS Standards 2018–2020.
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
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. Management has
begun performing evaluation of whether the amendment will have a significant impact on the Group. More detail will be disclosed
in future financial statements.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-10
3 NEW STANDARDS, AMENDMENTS TO STANDARDS AND INTERPRETATIONS
continued
New standards, amendments to standards and interpretations not yet effective
(continued)
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
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.
Classification of liabilities as current or non-current (Amendments to IAS 1) (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
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.
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
Statement 2
Making Materiality Judgements
The key amendments to IAS 1 include:
●
●
as such need not be disclosed; and
●
to a company’s financial statements.
The amendments are applied prospectively.
Management has commenced an evaluation of the impact of the amendment will have on the Group. More detail will be disclosed
in future financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-11
4 REVENUE
ACCOUNTING POLICIES
Revenue comprises the sale of gold bullion and silver bullion (produced as a by-product). 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, 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.
Amounts in R million
2021
2020
2019
Gold revenue
5,263.8
4,179.3
2,758.8
Silver revenue
5.2
5.7
3.3
Total revenue
5,269.0
4,185.0
2,762.1
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 forward sales of gold production, derivatives or other hedging arrangements to establish a
commodity price in advance for the sale of future gold production 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
2021
2020
2019
20
% increase in the US Dollar gold price
1,053.8
837.0
552.4
20
% decrease in the US Dollar gold price
(1,053.8)
(837.0)
(552.4)
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 forward sales of US Dollars, derivatives or other hedging arrangements to establish an exchange rate in
advance for the sale of US Dollars to be received in the future.
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
2021
2020
2019
20
% increase in the Rand to US Dollar exchange rate
1,053.8
837.0
552.4
20
% decrease in the Rand to US Dollar exchange rate
(1,053.8)
(837.0)
(552.4)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-12
5 RESULTS FROM OPERATING ACTIVITIES
5.1 COST OF SALES
Amounts in R million
Note
2021
2020
2019
Cost of sales
(3,388.2)
(2,937.9)
(2,553.9)
Operating costs (a)
(3,122.5)
(2,692.1)
(2,471.1)
Movement in gold in process and finished inventories - Gold Bullion
(25.6)
3.1
32.6
Depreciation
9
(252.5)
(270.8)
(169.1)
Change in estimate of environmental rehabilitation
11
12.4
21.9
60.0
Retrenchment costs (b)
0
0
(6.3)
The most significant components of operating costs include:
Consumable stores
(880.2)
(801.0)
(866.5)
Labour including short term incentives
(598.4)
(573.0)
(476.7)
Electricity
(488.2)
(420.9)
(399.4)
Specialist service providers
(510.7)
(447.5)
(437.1)
Machine hire
(127.4)
(95.2)
(77.7)
Security expenses
(122.8)
(87.8)
(59.9)
Water
(57.1)
(47.0)
(44.1)
Pre-production costs capitalised
0
0
93.7
Voluntary staff retrenchments
0
0
(6.3)
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 performs 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.
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
2021
2020
2019
Services rendered by related parties and included in operating costs:
Supply of water and electricity
68.1
50.0
16.9
Gold smelting and related charges
21.1
19.8
12.9
Other charges
0.7
1.6
0
Charges to Sibanye-Stillwater
0
(0.2)
(6.5)
Gold refining and related charges
6.8
4.9
3.6
96.7
76.1
26.9
1
2
costs from Sibanye-Stillwater. 2020 charges relate to miscellaneous items
3
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
gains on disposal of property, plant and equipment and gains on financial instruments at fair value through profit or loss
.
Amounts in R million
2021
2020
2019
Gain on disposal of property, plant and equipment
0.1
0.7
5.8
Gain on financial asset at fair value through profit or loss
0
0
2.1
0.1
0.7
7.9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-13
5 RESULTS FROM OPERATING ACTIVITIES
continued
5.3 ADMINISTRATION EXPENSES AND OTHER COSTS
Amounts in R million
Note
2021
2020
2019
Included in administration expenses and other costs are the following:
Share based payment benefit/(expenses)
28.3
(224.1)
(21.4)
Cash settled Long-Term Incentive ("
CLTI
") scheme
19.1
44.3
(218.1)
(21.4)
Equity settled Long-Term Incentive ("
ELTI
") scheme
19.2
(16.0)
(6.0)
0
6 FINANCE INCOME
ACCOUNTING POLICY
Finance income includes interest received, growth in cash and cash equivalents in environmental rehabilitation trust funds, growth
in the reimbursive right for environmental rehabilitation guarantees, dividends received and the unwinding of the Payments made
under protest
Amounts in R million
Note
2021
2020
2019
Interest on financial assets measured at amortised cost
13
108.7
63.1
16.9
Growth in cash and cash equivalents in environmental rehabilitation trust
funds
12
22.5
33.3
30.5
Growth in reimbursive right for environmental rehabilitation guarantees
12
3.7
5.2
7.9
Dividends received
25
76.1
4.3
0
Unwinding of Payments made under protest
24
4.8
3.9
3.0
Other finance income
0.4
0
0
216.2
109.8
58.3
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
2021
2020
2019
Interest on financial liabilities measured at amortised cost
(2.3)
(2.0)
(10.2)
Interest on financial liabilities measured at amortised cost capitalised
0
0
9.4
Unwinding of provision for environmental rehabilitation
11
(44.7)
(52.0)
(66.3)
Discount recognised on Payments made under protest
24
(7.4)
(7.1)
(6.5)
Interest on lease liabilities
10.2
(4.5)
(5.1)
(2.0)
Unrealised foreign exchange loss
(8.4)
0
0
Other finance expenses
(2.2)
(2.6)
(2.8)
(69.5)
(68.8)
(78.4)
8 EARNINGS PER SHARE
Amounts in R million
2021
2020
2019
The calculations of basic and diluted earnings per ordinary share
are based on the following:
Profit for the year
1,439.9
635.0
78.5
Reconciliation of weighted average number of ordinary shares to
diluted weighted average number of ordinary shares
Note
2021
2020
2019
Weighted average number of ordinary shares in issue
855,113,791
769,941,874
664,553,283
Effect of Sibanye-Stillwater Option
21.1
0
9,464,684
15,387,695
Effect of equity-settled share-based payment
19.2
5,935,215
4,283,001
0
Diluted weighted average number of ordinary shares
861,049,006
783,689,559
679,940,978
SA cents per share
2021
2020
2019
Basic earnings per share
168.4
82.5
11.8
Diluted earnings per share
167.2
81.0
11.5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
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 an independent mineral
resources expert.
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.
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 of 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 tested for impairment and then
reclassified to the appropriate class of assets. Depreciation commences when the assets are available for use.
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.
Changes to the useful lives may affect prospective depreciation rates. The current estimated useful lives are based on the life-of-
mine of each site, currently between
three
four
; 2019:
three
) and 13 years(2020:
13
; 2019:
11
) years for Ergo mining assets
and between
three
four
; 2019:
five
) and 18 years (2020:
20
; 2019:
15
) years for FWGR mining assets.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-15
ACCOUNTING POLICIES continued
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 recoverable
amount was determined by estimating the value in use. 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.
Amounts in R million
Note
Mine plant
facilities and
equipment
Mine
property and
development
Exploration
assets
Total
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
0
0
16.7
Lease modifications
10.1
0
2.3
0
2.3
Lease derecognitions
10.1
(1.0)
0
0
(1.0)
Disposals and scrapping
(54.7)
(133.4)
0
(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)
0
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)
0
(252.5)
Lease derecognitions
1.0
0
0
1.0
Disposals and scrapping
54.7
133.4
0
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
0
49.1
Carrying value at end of the year
1,530.3
1,178.6
100.8
2,809.7
June 30, 2020
Cost
2,203.5
2,147.0
266.3
4,616.8
Balance at the beginning of the year
2,156.2
2,106.8
256.7
4,519.7
Impact of adopting IFRS 16 on July 1, 2019
7.5
23.4
0
30.9
Additions - property, plant and equipment owned
121.2
46.5
15.0
182.7
Additions - right-of-use assets
3.8
14.2
0
18.0
Lease modifications
0
7.5
0
7.5
Lease derecognitions
(26.7)
(0.1)
0
(26.8)
Disposals and scrapping
(1.6)
0
0
(1.6)
Change in estimate of decommissioning asset
11
(56.7)
(51.5)
(5.4)
(113.6)
Transfers between classes of property, plant and
equipment
(0.2)
0.2
0
0
Accumulated depreciation and impairment
(1,017.5)
(968.5)
(9.7)
(1,995.7)
Balance at the beginning of the year
(909.9)
(824.8)
(9.7)
(1,744.4)
Depreciation
5.1
(127.1)
(143.7)
0
(270.8)
Lease derecognitions
17.9
0
0
17.9
Disposals and scrapping
1.6
0
0
1.6
Carrying value at end of the year
1,186.0
1,178.5
256.6
2,621.1
Comprising:
Property, plant and equipment owned
1,177.8
1,141.8
256.6
2,576.2
Right-of-use assets
10.1
8.2
36.7
0
44.9
Carrying value at end of the year
1,186.0
1,178.5
256.6
2,621.1
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-16
9 PROPERTY, PLANT AND EQUIPMENT
continued
CONTRACTUAL COMMITMENTS
Contractual commitments not provided for in the consolidated financial statements at June 30, 2021 amounted to R
65.5
(2020: R
130.6
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.
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 straightline 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-17
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, 2021
Cost
26.8
47.3
74.1
Opening balance
11.1
45.0
56.1
Additions
16.7
0
16.7
Lease modifications
0
2.3
2.3
Lease derecognitions
(1.0)
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
0
1.0
Carrying value
20.6
28.5
49.1
June 30, 2020
Cost
11.1
45.0
56.1
Impact of adopting IFRS 16 on July 1, 2019
Right-of-use assets recognised on July 1, 2019
7.5
23.4
30.9
Transfers and other movements
26.5
0
26.5
Additions
3.8
14.2
18.0
Lease modifications
0
7.5
7.5
Lease derecognitions
(26.7)
(0.1)
(26.8)
Accumulated depreciation
(2.9)
(8.3)
(11.2)
Impact of adopting IFRS 16 on July 1, 2019
Transfers and other movements
(15.9)
0
(15.9)
Depreciation
5.1
(4.9)
(8.3)
(13.2)
Lease derecognitions
17.9
0
17.9
Carrying value
8.2
36.7
44.9
1
reassessed as right-of-use assets upon adoption of IFRS 16 as of July 1, 2019
10.2 LEASE LIABILITIES
Amounts in R million
Note
2021
2020
Reconciliation of the lease liabilities balance:
Balance at the beginning of the year
47.1
11.0
Impact of adopting IFRS 16 on July 1, 2019
9
0
30.9
New leases
9
16.7
18.0
Lease modifications
2.3
7.5
Leases derecognised
0
(8.9)
Interest charge on lease liabilities
7
4.5
5.1
Repayment of lease liabilities
(11.6)
(11.4)
Interest repaid
(4.2)
(5.1)
Balance at the end of the year
54.8
47.1
Current portion of lease liabilities
(16.9)
(10.1)
Non-current lease liabilities
37.9
37.0
Maturity analysis of undiscounted contractual cash flows:
Less than a year
(20.5)
(13.0)
One to five years
(42.0)
(37.0)
More than 5 years
(1.3)
(9.0)
Total undiscounted lease liabilities at the end of the year
(63.8)
(59.0)
Lease payments not recognised as a liability but expensed during the year:
Short-term leases
(1.4)
(2.4)
Leases of low value assets
(7.7)
(5.0)
Cash flows included in cash generated from operating activities
(9.1)
(7.4)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-18
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 discount rate ranging between
8.9
% and
9.0
% (2020: between
8.1
% and
9.5
%), average inflation rate of
5.2
% (2020:
5.1
%) 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. 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
2021
2020
Opening balance
568.9
682.6
Unwinding of provision
7
44.7
52.0
Change in estimate of environmental rehabilitation recognised in profit or loss (a)
5.1
(12.4)
(21.9)
Change in estimate of environmental rehabilitation recognised to decommissioning asset (b)
9
26.4
(113.6)
Environmental rehabilitation payments (c)
(56.8)
(30.2)
To reduce decommissioning liabilities
(51.0)
(22.1)
To reduce restoration liabilities
14
(5.8)
(8.1)
Closing balance
570.8
568.9
Environmental rehabilitation payments to reduce the liability
(56.8)
(30.2)
Ongoing rehabilitation expenditure
23
(48.3)
(24.3)
Total cash spent on environmental rehabilitation
(105.1)
(54.5)
1
not represent a reduction of the above liability and are expensed as operating costs
(a)
Change in estimate of environmental rehabilitation recognised in profit or loss
This is as a result of changes in the estimated timing of the vegetation of reclamation sites.
(b) Change in estimate of environmental rehabilitation recognised to decommissioning asset
Increase is as a result of an increase in contractor rates for the establishment of vegetation based on ongoing test work performed
as well as inflationary increases on other contractor rates.
(c) Environmental rehabilitation payments
69ha of the Brakpan/Withok TSF, 20ha of the Daggafontein TSF, 6ha of the Crown Complex TSF, and 19ha of the Driefontein 4
TSF was vegetated during the year. 1ha of the Dam 5 tailings dam was concurrently vegetated.
GROSS COST TO REHABILITATE
The Group estimates that, based on current environmental and regulatory requirements, the total undiscounted rehabilitation cost
is approximately R
742.2
752.5
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-19
12 INVESTMENTS IN REHABILITATION OBLIGATION 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
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 are for the sole use of material future environmental rehabilitation payments and are therefore
included in non-current assets
Funding of environmental rehabilitation activities
(refer note 11)
Environmental rehabilitation payments to reduce the environmental rehabilitation obligations and ongoing rehabilitation
expenditure are mostly funded by cash generated from operations.
Guardrisk Insurance Company Limited ("
Guardrisk
") has guarantees in issue amounting to R
430.1
427.3
to the Department of Mineral Resources and Energy ("
DMRE
") on behalf of DRDGOLD related to the environmental obligations.
The funds in the cell captive serve as collateral for these guarantees.
Amounts in R million
Note
2021
2020
Cash and cash equivalents in environmental rehabilitation trust funds
564.7
542.2
542.2
508.9
6
22.5
33.3
Reimbursive right for environmental rehabilitation guarantees
87.5
83.8
83.8
78.6
6
3.7
5.2
652.2
626.0
CREDIT RISK
The Group is exposed to credit risk on the total carrying value of the investments held in the environmental rehabilitation trust
funds.
The Group manages its exposure to credit risk by diversifying these investments 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
2021
2020
100
bp increase
5.6
5.4
100bp (decrease)
(5.6)
(5.4)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the cash and cash equivalents in the environmental rehabilitation trust funds approximate their carrying value
due to their short-term maturities.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-20
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
2021
2020
Cash on hand
100.5
63.5
Access deposits and income funds
2,069.2
1,632.3
Restricted cash
10.3
19.3
2,180.0
1,715.1
Interest earned on cash and cash equivalents
6
108.7
63.1
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
4
% and
5.6
%
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
5.1
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
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
2021
2020
100
bp increase
19.5
10.0
100bp (decrease)
(19.5)
(10.0)
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
2021
2020
Foreign denominated cash at 30 June
3.4
0
A
10
% strengthening of the Rand against the US Dollar at 30 June would have increased/(decreased) equity and profit/(loss) by
Amounts in R million
2021
2020
Strengthening of the Rand against the US Dollar
(4.9)
0
Weakening of the Rand against the US Dollar
4.9
0
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, 2021
F-21
14 CASH GENERATED FROM OPERATIONS
Amounts in R million
Note
2021
2020
2019
Profit for the year
1,439.9
635.0
78.5
Adjusted for
Income tax
18.1
523.7
343.9
26.6
Depreciation
9
252.5
270.8
169.1
Movement in gold in process and finished inventories - Gold Bullion
5.1
25.6
(3.1)
(32.6)
Change in estimate of environmental rehabilitation
11
(12.4)
(21.9)
(60.0)
Environmental rehabilitation payments
11
(5.8)
(8.1)
(10.9)
Share-based payment (benefit)/expense
5.3
(28.3)
224.1
21.4
Gain on disposal of property, plant and equipment
5.2
(0.1)
(0.7)
(5.8)
Finance income
6
(216.2)
(109.8)
(58.3)
Finance expense
7
69.5
68.8
78.4
Other non-cash items
(2.5)
2.6
1.8
Operating cash flows before other changes
2,045.9
1,401.6
208.2
Changes in
(194.9)
(92.0)
73.8
Trade and other receivables
6.9
(79.0)
22.5
Consumable stores and stockpiles
(44.7)
(26.4)
(24.8)
Payments made under protest
24
(8.1)
(10.6)
(11.7)
Trade and other payables and employee benefits
(149.0)
24.0
87.8
Cash generated from operations
1,851.0
1,309.6
282.0
Includes settlement of cash-settled long-term incentives of R
183.3
41.5
15.5
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 on the bullion market by Rand Refinery in its capacity as an agent. Settlement is usually
received two working days from gold sold date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-22
15 TRADE AND OTHER RECEIVABLES
Amounts in R million
2021
2020
Trade receivables
56.5
23.1
Value Added Tax
50.2
83.5
Other receivables
21.2
17.3
Prepayments
17.4
25.1
Allowance for impairment
(1.2)
(2.6)
144.1
146.4
1
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 maintaining a short term cycle to settlement of
2
days. The Group manages its exposure to credit risk on other receivables by establishing a maximum payment period of
30
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 comprises of 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:
2021
2020
Amounts in R million
Non-credit
impaired
Credit
impaired
Non-credit
impaired
Credit
impaired
Trade receivables
56.5
0
23.1
0
Other receivables
20.0
1.2
14.7
2.6
76.5
1.2
37.8
2.6
Loss allowance
-
(1.2)
-
(2.6)
Movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:
Amounts in R million
2021
2020
Balance at the beginning of the year
(2.6)
(4.9)
Credit loss allowance/impairments recognised included in operating costs
(0.2)
(0.2)
Credit loss allowance/impairments reversed included in operating costs
1.3
0.4
Credit loss allowance written off against related receivable
0.3
2.1
Balance at the end of the year
(1.2)
(2.6)
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 are entered into during the year ended June 30, 2021 were at spot
rates and no hedges are entered into. Rand Refinery, acting as an agent for the Group, sells the USD to be received from bullion
sales on the same date as the respective bullion sale since November 2020. As a result, trade receivables are not exposed to
fluctuations in the US Dollar/South African Rand exchange rate from this date.
Figures in USD million
2021
2020
Foreign denomination of trade receivables at June 30
0
1.3
A
20
% 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
2021
2020
Strengthening of the Rand against the US Dollar
0
(2.3)
Weakening of the Rand against the US Dollar
0
2.3
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, 2021
F-23
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
2021
2020
Trade payables and accruals
352.9
348.0
Value Added Tax
4.5
0
Accrued leave pay
53.2
46.9
Provision for short term performance based incentives
74.2
50.5
Payroll accruals
25.0
33.4
509.8
478.8
Interest relating to trade payables and accruals included in profit or loss
(1.8)
(1.9)
RELATED PARTY BALANCES
Trade payables and accruals include the following amounts payable to related parties:
Sibanye-Stillwater
12.0
14.0
Rand Refinery
0.6
0.2
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
2021
2020
Consumable stores
177.6
165.6
Ore stockpile
52.9
9.0
Gold in process (a)
59.6
86.6
Finished inventories - Gold Bullion
49.9
62.2
Total inventories
340.0
323.4
During 2021, the Group disaggregated “Gold in process” into “Gold in process” and “Ore stockpile” respectively to present material items
separately
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-24
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
approximately R
14.2
10.3
8.6
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 substantially enacted at the reporting date.
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.
Tax on gold mining income is 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 all 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
On February 24, 2021 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 1 April 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. These additional amendments have not been announced to date.
The lowering of the CIT rate is therefore inextricably linked to the additional amendments to the CIT laws that are not known at
the date of the budget speech or at the date of publishing of these consolidated financial statements. As a result, the lowering of
the CIT rate is not regarded as having been substantively enacted to date due to a significant degree of uncertainty that exists if
the proposed lowering of the CIT rate from
28
% to
27
% as announced will be promulgated by the South African parliament in a
substantially unchanged manner.
The mining operations of the Group accounts for income tax using the gold mining formula as opposed to the CIT rate. Only Group
companies that do not conduct mining operations account for income tax by applying the CIT. These Group companies do not
generate significant taxable income. As a result, the change in the CIT rate is not expected to have a material impact on the
consolidated financial statements of the Group. A final assessment will be completed on the promulgation of the additional
amendments to the CIT laws.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-25
18 INCOME TAX
continued
18.1 INCOME TAX EXPENSE
Amounts in R million
2021
2020
2019
Current tax
(423.7)
(263.2)
1.6
Mining tax
(423.7)
(263.2)
0
Non-Mining, company and capital gains tax
0
0
1.6
Deferred tax
(100.0)
(80.7)
(28.2)
Deferred tax charge - Mining tax
(104.0)
(59.1)
(14.8)
Deferred tax charge - Non-mining, company and capital gains tax
(19.1)
(2.1)
1.6
Deferred tax rate adjustment
0
(20.7)
(15.0)
Recognition of previously unrecognised tax losses
7.8
0
0
(Derecognition)/recognition of previously unrecognised tax losses of a capital
nature
(1.2)
1.2
0
Recognition of previously unrecognised deductible temporary differences
16.5
0
0
(523.7)
(343.9)
(26.6)
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
%
(549.9)
(274.1)
(30.2)
Rate adjustment to reflect the actual realised company tax rates applying the
gold mining formula
3.7
(0.9)
7.4
Deferred tax rate adjustment (a)
0
(20.7)
(15.0)
Depreciation of property, plant and equipment exempt from deferred tax on
initial recognition (b)
(21.2)
(21.4)
(4.9)
Non-deductible expenditure (c)
(6.2)
(7.9)
(7.0)
Exempt income and other non-taxable income (d)
22.8
2.4
4.4
Recognition of previously unrecognised deductible temporary differences
16.5
0
0
(Derecognition)/recognition of previously unrecognised tax losses of a capital
nature
(1.2)
1.2
0
Utilisation of tax losses for which deferred tax assets were previously
unrecognised
7.8
0
0
Current year tax losses for which no deferred tax was recognised
(0.1)
(23.5)
(2.7)
Other items
3.3
0.4
16.8
Tax incentives
0.8
0.6
1.7
Over provided in prior periods
0
0
2.9
Income tax
(523.7)
(343.9)
(26.6)
During 2021, the Group disaggregated “Non-deductible expenditure” into “Non-deductible expenditure” and “Depreciation of property, plant
and equipment exempt from deferred tax on initial recognition” respectively to present material items separately
(a) Deferred tax rate adjustment
Ergo’s forecast weighted average deferred tax rate remained unchanged at
25.0
% (2020: increased from
22.0
% to
25.0
% due to
the increase in forecast taxable income of Ergo; 2019: increased from
20.3
% to
22.0
% due to an increase in forecast taxable
income of Ergo).
FWGR’s forecast weighted average deferred tax rate remained unchanged at
30.0
% (2020:
30.0
%; 2019:
30.0
%).
(b) Depreciation of property, plant and equipment exempt from deferred tax on initial recognition
Depreciation of R
68.7
73.2
16.6
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
7.4
7.1
6.5
●
17.0
2.7
6.0
million); and
●
exempt from income tax (2020: R
14.6
11.3
(d) Exempt income and other non-taxable income
The most significant exempt income earned by the Group during the year includes:
●
R
76.1
4.3
●
4.8
4.0
3.0
●
1.0
as it is exempt from income tax (2020 and 2019 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).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-26
18 INCOME TAX
continued
18.2 DEFERRED TAX
Amounts in R million
2021
2020
Included in the statement of financial position as follows:
Deferred tax assets
5.8
8.0
Deferred tax liabilities
(377.1)
(273.1)
Net deferred tax liabilities
(371.3)
(265.1)
Reconciliation of the deferred tax balance:
Balance at the beginning of the year
(265.1)
(183.2)
Recognised in profit or loss
(100.0)
(80.7)
Recognised in other comprehensive income
(6.2)
(1.2)
Balance at the end of the year
(371.3)
(265.1)
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
2021
2020
Deferred tax liabilities
Property, plant and equipment (excluding unredeemed capital allowances)
(494.4)
(422.4)
Environmental rehabilitation obligation funds
(60.2)
(51.4)
Other investments
(7.4)
(1.2)
Gross deferred tax liabilities
(562.0)
(475.0)
Deferred tax assets
Environmental rehabilitation obligation
124.5
126.5
Other provisions
46.7
72.6
Other temporary differences
14.3
8.5
Estimated tax losses
4.1
0
Estimated tax losses - Capital nature
0
1.2
Estimated unredeemed capital allowances
1.1
1.1
Gross deferred tax assets
190.7
209.9
Net deferred tax liabilities
(371.3)
(265.1)
1
Deferred tax assets have not been recognised in respect of the following:
Amounts in R million
2021
2020
Provisions
0
20.3
Estimated tax losses
16.7
22.0
Estimated tax losses - Capital nature
325.2
324.0
Unredeemed capital expenditure
253.3
254.7
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-27
19 EMPLOYEE BENEFITS
ACCOUNTING POLICIES
Cash settled share-based payments (“outgoing long-term incentive”)
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”)
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
• The phantom shares are issued at an exercise price of nil and will vest in 3 tranches:
20
%,
30
% and
50
% on the 3
rd,
th
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
2021
2020
Movements in the total liability for long-term incentive scheme is as follows:
Opening balance
227.6
51.0
Share-based payment (benefit)/expense - CLTI scheme
5.3
(44.3)
218.1
Vested and paid
(183.3)
(41.5)
Liability for CLTI scheme at the end of the year
0
227.6
The total liability for long-term incentive scheme is expected to be settled as follows:
0
227.6
Within 12 months after reporting date
0
227.6
After 12 months after reporting date
-
-
Reconciliation of outstanding phantom shares
2021
2020
Weighted
Weighted
average
average
Shares
price
Shares
price
Number
R per share
Number
R per share
Opening balance
9,845,638
16,157,058
Vested and paid
(9,845,638)
18.62
(5,674,252)
7.31
Forfeited
0
0
(637,168)
7.08
Closing balance
0
9,845,638
Fair value
The fair value of the liability for the long-term incentive scheme is mostly influenced by the DRDGOLD Limited share price. Other
inputs influencing the fair value are the forward dividend yield and estimates of staff retention and performance conditions. The
inputs most significantly influencing the measurement of the fair values are as follows
:
2021
2020
Grant date
7-day VWAP of the DRDGOLD Limited share
0
25.14
2.26
Annualised forward dividend yield
0
1.0%
4.3%
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-28
19 EMPLOYEE BENEFITS
continued
19.2 EQUITY SETTLED LONG-TERM INCENTIVE SCHEME (“new LTI scheme” or “ELTI scheme”)
Amounts in R million
2021
2020
2019
Share-based payment expense - ELTI scheme
16.0
6.0
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
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 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
0%
25th to < 50th percentile
25%
50th to < 75th percentile
75%
Reconciliation of the number of conditional shares
2021
2020
Opening balance
5,860,760
0
Granted
December 2, 2019
-
5,860,760
October 22, 2020
1,979,860
-
Closing balance
7,840,620
5,860,760
Vesting on
7,840,620
5,860,760
December 2, 2021
2,930,380
2,930,380
December 2, 2022
2,930,380
2,930,380
October 22, 2023
1,979,860
0
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 22, 2020
December 2, 2019
Vesting date
October 22, 2023
December 2, 2022
December 2, 2021
Weighted average fair value of 80% performance shares
10.49
4.12
4.26
Weighted average fair value of 20% retention shares
18.67
5.49
5.69
Expected term (years)
3
3
2
Grant date share price of a DRDGOLD share
19.43
6.15
6.15
Expected dividend yield
1.33%
3.81%
3.86%
Expected volatility
63.07%
53.80%
53.80%
Expected risk free rate
3.82%
6.80%
6.68%
1
2
term of the options
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-29
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, 2021 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
2021
2020
2019
- Board fees paid
7.6
6.2
5.8
- Salaries paid
75.5
67.3
61.7
- Short term incentives relating to this cycle
73.8
63.6
31.5
- Long term incentives paid during the cycle
19.1
183.3
41.5
15.5
- Retrenchments
0
0
1.6
340.2
178.6
116.1
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, 2021 and June 30, 2020 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
note 24).
In September 2020, the initial R
300
200
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 (refer note 23) of no more than
2:1
4:1
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, 2021 or June 30, 2020.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-30
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.
In terms of an ordinary resolution passed at the previous annual general meeting, the remaining unissued ordinary shares in the
company are under the control of the directors until the next general meeting.
Amounts in R million
2021
2020
2019
Authorised share capital
1,500,000,000
, (2020 and 2019:
1,500,000,000
) ordinary shares of
0
5,000,000
5,000,000
) cumulative preference shares of
10
0.5
0.5
0.5
Issued share capital
864,588,711
864,588,711
, 2019:
696,429,767
) ordinary shares of no par value (a)
6,208.4
6,208.4
5,123.3
9,474,920
9,474,920
, 2019:
9,361,071
) treasury shares held within the Group (b)
(51.0)
(51.0)
(51.0)
5,000,000
5,000,000
) cumulative preference shares of 10 cents each
0.5
0.5
0.5
6,157.9
6,157.9
5,072.8
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
(a) Ordinary shares issued
Sibanye-Stillwater and its subsidiaries and associates became related parties to the Group on July 31, 2018 when the acquisition
of FWGR became unconditional. DRDGOLD issued
265
38.05
% of its outstanding shares) and an
option to subscribe for new ordinary shares up to a total of
50.1
% of the total issued ordinary shares of DRDGOLD (“
Option
”)
as purchase consideration for these assets.
On January 8, 2020 Sibanye-Stillwater exercised the Option and on January 22, 2020 it subscribed for
168,158,944
(“
Subscription Shares
”) at an aggregate subscription price of R
1,085.6
issued at a price of R
6.46
10
% discount to the 30-day volume weighted average traded price of a Share on
the day immediately prior to the date of exercise of the Option.
(b) Treasury shares
Shares in DRDGOLD Limited are held in treasury by Ergo Mining Operations Proprietary Limited ("
EMO
").
NaN
acquired in the market during the year ended June 30, 2021 or the year ended June 30, 2020 (June 30, 2019
113,849
were acquired at an average price of R
2.68
).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-31
21 EQUITY
continued
21.2 DIVIDENDS
Amounts in R million
2021
2020
2019
Dividends paid during the year net of treasury shares:
Final dividend declared relating to prior year:
35
20
per share; 2019: nil SA cents per share)
299.3
137.5
0
First interim dividend:
40
25
cents per share)
342.0
213.8
0
Second interim dividend nil SA cents per share (2020:
25
SA cents per share)
0
213.8
0
Total
641.3
565.1
0
After June 30, 2021, a dividend of
40
342.0
a final dividend for the year ended June 30, 2021. The dividend has not been provided as at June 30, 2021 and does not have
any tax impact on the Group.
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 and Far West Gold Recoveries Proprietary Limited 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 in the segment
report as the primary measure of profit or loss. The CODM also considers other costs that, in addition to the segment operating
profit or loss, result in the segment working profit or loss (before and after property, plant and equipment additions).
Ergo
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
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 1 April 2019.
Corporate office and other reconciling items
"Other reconciling items"
) are taken into
consideration in the strategic decision-making process of the chief operating decision maker and are therefore included in the
disclosure here, even though they do not earn revenue. This includes taking into consideration the Group’s adjusted EBITDA for
the purpose of the covenants imposed by the Company’s borrowings that was initially entered into to finance the development of
Phase 1 of FWGR and working capital requirements of the Group (refer note 20).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-32
23
OPERATING SEGMENTS
Other
2021
reconciling
Amounts in R million
Ergo
FWGR
items
Financial performance
Revenue (External)
3,943.0
1,326.0
0
5,269.0
Cash operating costs
(2,666.5)
(406.2)
0
(3,072.7)
Movement in gold in process and finished inventories - Gold Bullion
(31.9)
6.3
0
(25.6)
Segment operating profit
1,244.6
926.1
0
2,170.7
Administration expenses and other costs
15.0
1.8
(80.8)
(64.0)
Interest income
1.3
0.1
107.7
109.1
Dividends received
7.1
0
69.0
76.1
Interest expense
(4.2)
(0.3)
(12.9)
(17.4)
Current tax
(196.1)
(227.6)
0
(423.7)
Working profit before additions to property, plant and equipment
1,067.7
700.1
83.0
1,850.8
Additions to property, plant and equipment
(250.9)
(143.3)
(1.5)
(395.7)
Working profit after additions to property, plant and equipment
816.8
556.8
81.5
1,455.1
1
2
environmental rehabilitation
Reconciliation of cost of sales to cash operating costs
Cost of sales
(2,871.0)
(517.2)
0
(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)
0
(5.2)
(12.4)
- Movement in gold in process and finished inventories - gold Bullion
31.9
(6.3)
0
25.6
- Ongoing rehabilitation expenditure
46.6
1.7
0
48.3
- Care and maintenance
0
0
3.9
3.9
- Other operating income/(costs)
(2.4)
0
0
(2.4)
Cash operating costs
(2,666.5)
(406.2)
0
(3,072.7)
Reconciliation of profit for the year to working profit before additions to property, plant and equipment
Profit for the year
751.7
528.8
159.4
1,439.9
- Deferred tax
66.6
37.4
(4.0)
100.0
- Net other operating costs/(income)
45.4
24.2
(68.1)
1.5
- Ongoing rehabilitation expenditure
46.6
1.7
0
48.3
- Discount recognised on Payments made under protest including
subsequent unwinding
2.6
0
0
2.6
- Unwinding of provision for environmental rehabilitation
34.2
9.5
1.0
44.7
- Growth in investment in environmental obligation funds
(7.7)
(17.1)
(1.4)
(26.2)
- Other income
(0.1)
0
0
(0.1)
- Change in estimate of environmental rehabilitation recognised in
profit or loss
(7.2)
0
(5.2)
(12.4)
- Depreciation
135.6
115.6
1.3
252.5
Working profit before additions to property, plant and equipment
1,067.7
700.1
83.0
1,850.8
Statement of cash flows
Cash inflows from operating activities
842.2
649.7
81.5
1,573.4
Cash outflows from investing activities
(290.8)
(149.2)
(6.6)
(446.6)
Cash (outflows)/inflows from financing activities
(549.9)
(501.4)
397.8
(653.5)
Reconciliation of adjusted EBITDA
Profit for the year
1,439.9
Income tax
523.7
Profit before tax
1,963.6
Finance expense
69.5
Finance income
(216.2)
Results from operating activities
1,816.9
Depreciation
252.5
Share-based payment benefit
(28.3)
Change in estimate of environmental rehabilitation recognised in profit
or loss
(12.4)
Gain on disposal of property, plant and equipment
(0.1)
IFRS 16 lease payments
' 1
(15.8)
Transaction costs
3.1
Adjusted EBITDA
2,015.9
1
2
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-33
23
OPERATING SEGMENTS
Other
2020
reconciling
Amounts in R million
Ergo
FWGR
items
Financial performance
Revenue (External)
3,064.3
1,120.7
0
4,185.0
Cash operating costs
(2,274.0)
(352.0)
0
(2,626.0)
Movement in gold in process and finished inventories - Gold Bullion
1.8
1.3
0
3.1
Segment operating profit
792.1
770.0
0
1,562.1
Administration expenses and other costs
(131.6)
(20.7)
(157.6)
(309.9)
Interest income
13.9
2.9
46.3
63.1
Dividends received
0
0
4.3
4.3
Interest expense
(5.2)
0
(4.5)
(9.7)
Current tax
(145.8)
(117.4)
0
(263.2)
Working profit/(loss) before additions to property, plant and equipment
523.4
634.8
(111.5)
1,046.7
Additions to property, plant and equipment
(114.4)
(68.0)
(0.3)
(182.7)
Working profit/(loss) after additions to property, plant and equipment
409.0
566.8
(111.8)
864.0
1
2
for environmental rehabilitation
3
dividends received
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)
0
(3.1)
- Ongoing rehabilitation expenditure
22.3
2.0
0
24.3
- Care and maintenance
0
0
11.1
(11.1)
- Other operating income/(costs)
27.6
3.1
0
30.7
Cash operating costs
(2,274.0)
(352.0)
-
-
(2,626.0)
Reconciliation of profit/(loss) for the year to working profit/(loss) before additions to property, plant and equipment
Profit/(loss) for the year
297.1
424.9
(87.0)
635.0
- Deferred tax
(6.6)
86.5
0.8
80.7
- Net other operating costs/(income)
51.5
14.8
(24.5)
41.8
- Ongoing rehabilitation expenditure
22.3
2.0
0
24.3
- Discount recognised on Payments made under protest including
subsequent unwinding
3.2
0
0
3.2
- Unwinding of provision for environmental rehabilitation
36.5
14.3
1.2
52.0
- Growth in investment in environmental obligation funds
(11.2)
(25.2)
(2.1)
(38.5)
- Other income
(0.7)
0
0
(0.7)
- Change in estimate of environmental rehabilitation recognised in
profit or loss
(19.1)
(2.1)
(0.7)
(21.9)
- Depreciation
150.4
119.6
0.8
270.8
Working profit/(loss) before additions to property, plant and equipment
523.4
634.8
(111.5)
1,046.7
Statement of cash flows
Cash inflows from operating activities
546.1
563.1
19.7
1,128.9
Cash outflows from investing activities
(135.7)
(60.1)
(6.7)
(202.5)
Cash (outflows)/inflows from financing activities
(405.5)
(500.8)
1,415.5
509.2
Reconciliation of adjusted EBITDA
Profit for the year
635.0
Income tax
343.9
Profit before tax
978.9
Finance expense
68.8
Finance income
(109.8)
Results from operating activities
937.9
Depreciation
270.8
Share-based payment expense
224.1
Change in estimate of environmental rehabilitation recognised in
profit or loss
(21.9)
Gain on disposal of property, plant and equipment
(0.7)
Transaction costs
1.4
Adjusted EBITDA
1,411.6
1
Adjusted EBITDA (that was considered from the year ended 30 June 2019 following the initial RCF agreement) 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-34
23
OPERATING SEGMENTS
Other
2019
reconciling
Amounts in R million
Ergo
FWGR
items
Financial performance
Revenue (External)
2,577.5
184.6
0
2,762.1
Cash operating costs
(2,311.1)
(111.8)
0
(2,422.9)
Movement in gold in process and finished inventories - Gold Bullion
16.4
16.2
0
32.6
Segment operating profit
282.8
89.0
0
371.8
Retrenchment costs
(1.6)
(4.7)
0
(6.3)
Administration expenses and other costs
(12.0)
(2.3)
(76.6)
(90.9)
Interest income
6.5
0
10.4
16.9
Interest expense
(2.4)
0
(3.2)
(5.6)
Current tax
1.6
0
0
1.6
Working profit/(loss) before additions to property, plant and equipment
274.9
82.0
(69.4)
287.5
Additions to property, plant and equipment
(22.8)
(330.7)
(0.2)
(353.7)
Working profit/(loss) after additions to property, plant and equipment
252.1
(248.7)
(69.6)
(66.2)
1
Interest income excludes the unwinding of the Payments made under protest
2
Interest expense excludes the discount recognised on the initial recognition of the Payments made under protest
Reconciliation of cost of sales to cash operating costs
Cost of sales
(2,414.7)
(131.3)
(7.9)
(2,553.9)
- Depreciation
142.8
25.7
0.6
169.1
- Change in estimate of environmental rehabilitation recognised in
profit or loss
(58.6)
0
(1.4)
(60.0)
- Movement in gold in process and finished inventories - gold Bullion
(16.4)
(16.2)
0
(32.6)
- Ongoing rehabilitation expenditure
16.6
1.7
0
18.3
- Care and maintenance
0
0
8.8
8.8
- Other operating income/(costs)
19.2
8.3
(0.1)
27.4
Cash operating costs
(2,311.1)
(111.8)
0
(2,422.9)
Reconciliation of profit/(loss) for the year to working profit/(loss) before additions to property, plant and equipment
Profit/(loss) for the year
82.3
28.7
(32.5)
78.5
- Deferred tax
16.2
13.4
(1.4)
28.2
- Net other operating costs/(income)
40.2
15.4
(25.7)
29.9
- Ongoing rehabilitation expenditure
16.6
1.7
0
18.3
- Discount recognised on Payments made under protest including
subsequent unwinding
3.5
0
0
3.5
- Unwinding of provision for environmental rehabilitation
45.4
19.6
1.3
66.3
- Other income
(2.2)
0
(5.7)
(7.9)
- Growth in environmental rehabilitation obligation funds
(11.3)
(22.5)
(4.6)
(38.4)
- Change in estimate of provision for environmental rehabilitation
recognised in profit or loss
(58.6)
0
(1.4)
(60.0)
- Depreciation
142.8
25.7
0.6
169.1
Working profit/(loss) before additions to property, plant and equipment
274.9
82.0
(69.4)
287.5
Statement of cash flows
Cash inflows/(outflows) from operating activities
221.7
89.3
(22.7)
288.3
Cash (outflows)/inflows from investing activities
(39.4)
(324.4)
60.8
(303.0)
Cash (outflows)/inflows from financing activities
(291.7)
236.7
47.1
(7.9)
Reconciliation of adjusted EBITDA
Profit for the year
78.5
Income tax
26.6
Profit before tax
105.1
Finance expense
78.4
Finance income
(58.3)
Results from operating activities
125.2
Depreciation
169.1
Share-based payment expense
21.4
Change in estimate of environmental rehabilitation recognised in profit
(60.0)
Gain on financial instruments at fair value through profit or loss
(2.1)
Gain on disposal of property, plant and equipment
(5.8)
Retrenchment costs
6.3
Adjusted EBITDA
1
254.1
1
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-35
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;
• 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 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 the Municipality and events surrounding the outcome of the Main
Application. Any write down is recognised in profit or loss.
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, 2021
F-36
24 PAYMENTS MADE UNDER PROTEST
continued
Amounts in R million
Note
2021
2020
Balance at the beginning of the year
35.0
27.6
Payments made under protest
8.1
10.6
Discount on initial payment made under protest
7
(7.4)
(7.1)
Unwinding
6
4.8
3.9
Balance at the end of the year
40.5
35.0
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 of 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:
●
●
electricity to Ergo at the Ergo Plant;
●
at the Ergo Plant;
●
●
tariff.
The Municipality has since issued two summonses (“
Summonses
”) for the recovery of arrears it alleges it is owed amounting to
R
74.0
31.6
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
.
The balance at the end of the year was based on the following assumptions:
●
11.68
% (2020:
11.68
%) representing the Municipality maximum cost of borrowing on bank loans as disclosed in
their June 30, 2020 annual report; and
●
June 30, 2024
June 30, 2022
) representing management’s best estimate of the date of conclusion of
the Main Application and is supported by external legal counsel.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-37
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 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 other
comprehensive income (OCI).
Amounts in R million
Shares
% held
2021
2020
Listed investments (Fair value hierarchy Level 1):
West Wits Mining Limited ("
WWM
")
47,812,500
3.5%
43.5
12.0
Total listed investments
43.5
12.0
Unlisted investments (Fair value hierarchy Level 3):
Rand Refinery Proprietary Limited ("
Rand Refinery
")
44,438
11.3%
119.3
178.4
Rand Mutual Assurance Company Limited B Share Business Fund ("
RMA
")
12,659
2
1.3%
4.1
4.7
Guardrisk Insurance Company Limited (Cell Captive A170)
20
3
100.0%
0.1
0.1
Chamber of Mines Building Company Proprietary Limited
42,292
4.5%
0.1
0.1
Total unlisted investments
123.6
183.3
Balance at the end of the year
167.1
195.3
Fair value adjustment on equity instruments at fair value through OCI
(28.2)
191.8
Dividends received on equity instruments at fair value through OCI
(76.1)
(4.3)
Rand Refinery
(72.3)
0
RMA
(3.8)
(4.3)
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
5.1
% to
3.5
%
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 after settlement of the reimbursive right
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, 2021
F-38
25 OTHER INVESTMENTS
continued
25.1 RAND REFINERY
Amounts in R million
2021
2020
Balance at the beginning of the year
178.4
0
Fair value adjustment on equity investments at fair value through other comprehensive income
(59.1)
178.4
Balance at the end of the year
119.3
178.4
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 enterprise value of Rand Refinery’s refining operations decreased mainly due to a decrease in forecast gold prices, a
decrease in budgeted production volumes, and an increase in budgeted operating costs. The value of the forecasted dividends
for Prestige Bullion decreased mainly due to a decrease in the demand in Krugerrands and an increase in the discount rate applied
to the forecasted dividends of Prestige Bullion. The discount rate increased due to an increase in the risk premium to account for
increased volatility in demand for Krugerrands in the medium- to long-term.
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
% (2020:
16.5
% and
17.0
%), respectively, were
applied. The latest budgeted cash flow forecasts provided by Rand Refinery as at June 30, 2021 was used, and therefore classified
as an unobservable input into the models. Key observable/unobservable inputs into the model include:
Amounts in R million
Observable/unobservable input
Unit
2021
2020
Rand Refinery operations
Forecast average gold price
Observable input
R/kg
847,317
852,098
Forecast average silver price
Observable input
R/kg
11,751
9,453
Average South African CPI
Observable input
%
4.4
4.8
South African long-term government bond rate
Observable input
%
9.5
9.5
Terminal growth rate
Unobservable input
%
4.4
5.0
Weighted average cost of capital
Unobservable input
%
15.1
15.1
Investment in Prestige Bullion
Discount period
Unobservable input
years
12
13
Cost of equity
Unobservable input
%
16.5
13.2
Sensitivity analysis
The fair value measurement is most sensitive to the Rand denominated gold price and volumes. The higher the gold price and
volumes, the higher the fair value of the Rand Refinery investment. 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)
3.8
(3.8)
Commodity prices (Gold and silver)
Observable inputs
1
(1)
3.0
(3.0)
Volumes
Unobservable inputs
1
(1)
2.6
(2.6)
Weighted average cost of capital
Unobservable inputs
1
(1)
(0.3)
0.3
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)
(1.5)
1.5
Prestige Bullion dividend forecast
Unobservable inputs
1
(1)
0.4
(0.4)
Impact of the COVID-19 pandemic
The COVID-19 pandemic had an impact on the gold market and the operations of Rand Refinery as a result of the South African
national lockdown and the assumptions as disclosed were adjusted with relevant information at the reporting date.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-39
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 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, comprising DRDGOLD Limited and East Rand Proprietary Mines Limited, are not a party to the
settlement between the Applicants and Settling Companies. 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.
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.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-40
26 CONTINGENCIES
continued
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
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
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:
●
flows; 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:
●
and
●
amount outstanding.
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. During the current year the Board established the Risk Committee (“
RC
”) (previously a subcommittee of the Audit and
Risk Committee), 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 OBLIGATION FUNDS
NOTE 13 CASH AND CASH EQUIVALENTS
NOTE 15 TRADE AND OTHER RECEIVABLES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-41
27 FINANCIAL INSTRUMENTS continued
continued
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.
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
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.
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. This exposes the Group to fluctuations in foreign currency exchange rates.
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.
28 RELATED PARTIES
Disclosures are included in the following notes:
NOTE 5.1 COST OF SALES
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, 2021 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 25 2021, the Board declared a final dividend for the year ended June 30, 2021 of
40
amounting to R
342.0
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
continued
for the year ended June 30, 2021
F-42
29 SUBSEQUENT EVENTS continued
Conditional shares granted
On 20 October 2021,
3,508,232
term incentive scheme. These are expected to vest on 20 October 2024. 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
549,986
A J Davel
292,796
Prescribed officers
W J Schoeman
292,796
E Beukes
39,375
88
SIGNATURES
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, 2021