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UNITED STATES
 
SECURITIES
 
AND EXCHANGE
 
COMMISSION
WASHINGTON, D.C. 20549
FORM
20-F
REGISTRATION STATEMENT PURSUANT
 
TO SECTION 12(b)
 
OR (g) OF
 
THE SECURITIES
 
EXCHANGE ACT
 
OF 1934
OR
ANNUAL REPORT
 
PURSUANT TO
 
SECTION 13
 
OR 15(d) OF
 
THE SECURITIES
 
EXCHANGE ACT
 
OF 1934 For
 
the fiscal
 
year
ended
June 30, 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
 
(Address
 
of principal
 
executive offices)
Riaan Davel
, Chief Financial
 
Officer, Tel. no. +
27
11
470 2600
, Email
riaan.davel@drdgold.com
Mpho Mashatola,
 
Group Financial
 
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
 
ordinary shares
 
of no par value
 
outstanding
 
as of June 30,
 
2021.
 
Indicate
 
by
 
check
 
mark
 
if
 
the
 
registrant
 
is
 
a
 
well-known
 
seasoned
 
issuer,
 
as
 
defined
 
in
 
Rule
 
405
 
of
 
the
 
Securities
 
Act.
Yes
No
If this report
 
is an annual
 
report or transition
 
report, indicate
 
by check mark if
 
the registrant
 
is not required
 
to file reports
 
pursuant
to Section 13
 
or 15(d) of the
 
Securities
 
Exchange Act
 
of 1934
 
Yes
 
No
Indicate by check
 
mark whether the
 
registrant
 
(1) has filed all
 
reports required
 
to be filed by Section
 
13 or 15(d) of the
 
Securities
Exchange Act
 
of 1934 during
 
the preceding
 
12 months (or
 
for such shorter
 
period that the
 
registrant was
 
required to file
 
such reports),
 
and
(2) has been
 
subject to
 
such filing requirements
 
for the past
 
90 days.
 
Yes
 
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Date File required to be submitted
pursuant to Rule 405
 
of Regulation S-T (§
 
232.405 of this chapter) during
 
the preceding 12 months (or
 
for such shorter period that
 
the
registrant was required to submit such files).
Yes
 
No
Indicate
 
by check
 
mark whether
 
the registrant
 
is a
 
large accelerated
 
filer, an
 
accelerated
 
filer, a
 
non-accelerated
 
filer, or
 
an emerging
growth company.
 
See definition of
 
“large accelerated filer,” “accelerated filer,”
 
and “emerging growth
 
company” in Rule
 
12b-2 of
 
the
Exchange Act.
Large accelerated
 
filer
 
Accelerated filer
 
Non-accelerated
 
filer
Emerging growth
 
company
If any emerging
 
growth company
 
that prepares
 
its financial
 
statements in
 
accordance with
 
U.S. GAAP, indicate by check
 
mark if
the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
 
standards
provided pursuant
 
to Section 13(a)
 
of the Exchange
 
Act
 
 
The term
 
“new or
 
revised
 
financial
 
accounting
 
standard”
 
refers to
 
any update
 
issued by
 
the Financial
 
Accounting
 
Standards
 
Board
to its Accounting
 
Standards Codification
 
after April
 
5, 2012.
Indicate by
 
check
 
mark
 
whether
 
the
 
registrant has
 
filed
 
a
 
report
 
on
 
and
 
attestation to
 
its
 
management’s
 
assessment of
 
the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
 
the
registered
 
public accounting
 
firm that prepared
 
or issued its
 
audit report.
Indicate
 
by check
 
mark which
 
basis of
 
accounting
 
the registrant
 
has used
 
to prepare
 
the financial
 
statements
 
included
 
in this filing
.
U.S. GAAP
 
International
 
Financial Reporting
 
Standards as
 
issued by the
International Accounting Standards Board
 
Other
If “Other”
 
has been
 
checked in
 
response to
 
the previous question,
 
indicate by check
 
mark which
 
financial statement item
 
the
registrant
 
has elected to
 
follow.
 
Item 17
 
Item 18
If this
 
is an
 
annual report, indicate by
 
check mark
 
whether the
 
registrant is a
 
shell company (as
 
defined in
 
Rule 12b-2
 
of the
Exchange Act).
 
Yes
 
No
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
 
No
 
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
 
 
We are a South African
 
company and
 
currently
 
all our operations
 
are located
 
in South Africa.
 
Accordingly, our books
 
of account
 
are
maintained
 
in South African
 
Rand. Our financial statements included in our corporate filings are prepared in accordance with International
Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).
 
 
Our consolidated financial statements included in this Annual Report are prepared in accordance with IFRS as issued by the IASB.
All financial information, except as otherwise noted is prepared in accordance with IFRS as issued by the IASB.
 
 
We present our financial information in rand, which is our presentation and reporting currency.
 
All references
 
to “dollars”
 
or “$”
herein are
 
to United States
 
Dollars and
 
references
 
to “rand” or
 
“R” are to
 
South African
 
rands. Solely for your convenience, this Annual Report
contains translations of certain rand amounts into dollars at specified rates. These rand amounts do not represent actual dollar amounts, nor
could they necessarily have been converted into dollars at the rates indicated. Unless otherwise indicated, rand amounts have been translated
into dollars at the rate of R14.27 per $1.00, the year end exchange rate on June 30, 2021.
 
In this Annual Report, we present certain non-IFRS financial measures such as the financial items “cash operating costs per
kilogram”, “all-in sustaining costs per kilogram” and “all-in costs per kilogram” which have been determined using industry guidelines
promulgated by the World Gold Council, 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
 
When used in
 
this Annual
 
Report, the
 
term the “Company”
 
refers to DRDGOLD
 
Limited and
 
the terms “we,”
 
“our,” “us” or
 
“the
Group” refer
 
to the Company
 
and its subsidiaries
 
as appropriate
 
in the context.
 
Acquisition
 
of gold assets
 
from Sibanye-Stillwater
 
and subsequent
 
exercise of
 
option to purchase
 
shares
 
On July 31, 2018, we completed the acquisition of the gold assets associated with Sibanye Gold Limited, trading as Sibanye-
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
 
This Annual
 
Report contains
 
certain “forward-looking”
 
statements
 
within the meaning
 
of Section
 
21E of the
 
U.S. Securities
 
Exchange
Act of 1934,
 
regarding expected
 
future events,
 
circumstances,
 
trends and expected
 
future financial
 
performance
 
and information
 
relating to
 
us
that are
 
based on the
 
beliefs of
 
our management,
 
as well as
 
assumptions
 
made by and
 
information
 
currently available
 
to our management.
 
Some
of these forward-looking
 
statements
 
include phrases
 
such as “anticipates,”
 
“believes,”
 
“could,” “estimates,”
 
“expects,”
 
“intends,”
 
“may,”
“should,” or
 
“will continue,”
 
or similar
 
expressions
 
or the negatives
 
thereof or
 
other variations
 
on these expressions,
 
or similar
 
terminology, or
discussions
 
of strategy, plans
 
or intentions,
 
including statements in connection with, or relating
 
to, among other things:
 
our reserve calculations and underlying assumptions;
the trend information discussed in Item 5D.- Trend Information, including target gold production and cash operating costs;
life of mine and potential increase in life of mine;
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.
 
 
Such statements
 
reflect our
 
current views
 
with respect
 
to future events
 
and are subject
 
to risks, uncertainties
 
and assumptions.
 
Many
factors could
 
cause our
 
actual results,
 
performance
 
or achievements
 
to be materially
 
different from
 
any future
 
results, performance
 
or
achievements
 
that may be
 
expressed or
 
implied by
 
such forward-looking
 
statements,
 
including, among
 
others:
 
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.
 
 
For a discussion
 
of such risks,
 
see Item
 
3D. Risk Factors.
 
The risk factors
 
described above
 
and in Item
 
3D. could affect
 
our future
results, causing
 
these results
 
to differ materially
 
from those
 
expressed in
 
any forward-looking
 
statements.
 
These factors
 
are not necessarily
 
all of
the important
 
factors that
 
could cause
 
our results
 
to differ materially
 
from those
 
expressed
 
in any forward-looking
 
statements.
 
Other unknown
 
or
unpredictable
 
factors could
 
also have
 
material
 
adverse effects
 
on future results.
 
Investors
 
are cautioned
 
not to place
 
undue reliance
 
on these forward-looking
 
statements,
 
which speak
 
only as of the
 
date thereof.
 
We
do not undertake
 
any obligation
 
to update
 
publicly or
 
release
 
any revisions
 
to these forward-looking
 
statements
 
to reflect events
 
or circumstances
after the
 
date of this
 
Annual Report
 
or to reflect
 
the occurrence
 
of unanticipated
 
events.
Special Note
 
Regarding Links
 
to External,
 
or Third-party
 
Websites
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
 
The table
 
below sets
 
forth units
 
stated in this
 
document, which
 
are measured
 
in Imperial
 
and Metric.
 
Metric
Imperial
Imperial
Metric
1 metric tonne
1.10229 short tons
1 short ton
0.9072 metric tonnes
1 kilogram
2.20458 pounds
1 pound
0.4536 kilograms
1 gram
0.03215 troy ounces
1 troy ounce
31.10353 grams
1 kilometer
0.62150 miles
1 mile
1.609 kilometers
1 meter
3.28084 feet
1 foot
0.3048 meters
1 liter
0.26420 gallons
1 gallon
3.785 liters
1 hectare
2.47097 acres
1 acre
0.4047 hectares
1 centimeter
0.39370 inches
1 inch
2.54 centimeters
1 gram/tonne
0.0292 ounces/ton
1 ounce/ton
34.28 grams/tonnes
0 degree Celsius
32 degrees Fahrenheit
0 degrees Fahrenheit
- 18 degrees Celsius
4
Glossary of Terms and Explanations
The table below sets forth a glossary of terms used in this Annual Report:
Adjusted EBITDA
Adjusted
 
EBITDA
 
means
 
earnings
 
before
 
interest,
 
tax,
 
depreciation,
 
amortisation,
 
share-based
 
payment
(benefit)/expense, change in estimate of environmental rehabilitation recognised in profit
 
or loss, gain/(loss) on
disposal
 
of
 
property,
 
plant
 
and
 
equipment,
 
gain/(loss)
 
on
 
financial
 
instruments,
 
IFRS
 
16
 
lease
 
payments,
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
 
The following
 
selected
 
consolidated
 
financial
 
data as at June
 
30, 2021 and 2020
 
and for the
 
years ended June
 
30, 2021, 2020
 
and 2019
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
 
In conducting
 
our business, we
 
face many
 
risks that
 
may interfere
 
with our
 
business objectives. Some of
 
these risks
 
relate to
 
our
operational processes,
 
while others relate
 
to our business environment.
 
It is important to understand
 
the nature of these
 
risks and the impact
 
they
may have on our
 
business, financial
 
condition and
 
operating results.
 
Some of these
 
risks are summarized
 
below and have
 
been organized
 
into the
following categories:
Risks related
 
to our business
 
and operations;
Risks related
 
to the gold
 
mining industry;
Risks related
 
to doing business
 
in South Africa;
 
Risks related to 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.
 
Exchange rates are influenced by global economic trends. The closing exchange rate of
 
the rand against the dollar
 
at June 30,
 
2021
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
”).
 
A decrease in the dollar gold price
 
and/or a strengthening
 
of the rand against the dollar
 
results
 
in a decrease in our profitability. If the
rand was to appreciate against
 
the dollar or the gold price were to decrease
 
for a continued time, our operations
 
could experience a reduction
 
in
cash flow
 
and profitability,
 
and this would adversely affect our business, operating results and financial condition.
 
 
We typically do not enter into forward
 
contracts to reduce
 
our exposure to market
 
fluctuations
 
in the dollar gold price
 
or the exchange
rate movements
 
of the
 
rand. 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.
 
If we are not
 
successful in increasing reserves
 
in future years, our
 
reserves could decrease, and
 
such reduction would adversely
 
affect
our business, operating results and financial condition.
 
We may be unable to
 
make desirable
 
acquisitions
 
or to integrate
 
successfully
 
any businesses
 
we acquire,
 
including the
 
development
of Phase 2
 
of the FWGR
 
assets acquired
 
from Sibanye-Stillwater
.
 
Our future
 
success may
 
depend in
 
part on the
 
acquisition
 
of businesses
 
or technologies
 
intended to
 
complement,
 
enhance or
 
expand our
current business
 
or products or that
 
might otherwise
 
offer us growth opportunities.
 
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.
 
Any acquisition that we do make would pose risks related
 
to the integration of the new business or technology
 
with our business and
organization.
 
We cannot be certain
 
that we will
 
be able to
 
achieve the
 
benefits we
 
expect from
 
a particular
 
acquisition
 
or investment.
 
Acquisitions
may also strain
 
our managerial
 
and operational
 
resources,
 
as the challenge
 
of managing
 
new operations
 
may divert
 
our management
 
from day-to-
day operations of
 
our existing
 
business. Furthermore, we may
 
have difficulty integrating
 
employees, business systems, and
 
technology. The
controls, processes
 
and procedures
 
of acquired
 
businesses
 
may also not adequately
 
ensure compliance
 
with laws and
 
regulations
 
and we may fail
to identify compliance
 
issues or liabilities.
 
Our business,
 
financial condition
 
and results
 
of operations
 
may be materially
 
and adversely
 
affected if
we fail
 
to coordinate
 
our resources
 
effectively
 
to manage
 
both our existing
 
operations
 
and any businesses
 
we acquire.
 
Acquisitions
 
can also result
in unforeseen
 
liabilities.
 
Moreover, our
 
resources
 
are limited
 
and our
 
decision
 
to pursue
 
a transaction
 
has opportunity
 
costs;
 
accordingly, if
 
we pursue
 
a particular
transaction,
 
we may need
 
to forgo the
 
prospect of
 
entering into
 
other transactions
 
that could
 
help us achieve
 
our financial
 
or strategic
 
objectives.
Limited deposition
 
capacity
Our operations
 
are based on ultra-volume
 
and almost nano-gold
 
extraction.
 
The volume of reclaimed
 
material delivered
 
has one of the
most profound impacts on the gold
 
output of our metallurgical plants.
 
The large volumes of
 
material that are processed at our operations are
deposited on tailings facilities
 
which have a finite capacity. Alternative facilities
 
will be required to ensure adequate deposition
 
capacity for the
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
.
 
 
Our large projects, most notably
 
the development of FWGR, are
 
subject to schedule delays and
 
cost overruns, and we
 
may face
constraints
 
in financing our existing
 
projects or new
 
business opportunities,
 
which could render
 
our projects unviable
 
or less profitable
 
than
planned.
 
The development of our projects are capital intensive
 
processes carried out over long durations
 
and requires us to commit significant
capital expenditure
 
and allocate
 
considerable
 
management
 
resources in
 
utilising our
 
existing experience
 
and know-how.
 
Projects like
 
the development
 
of Phase 2 of the
 
FWGR assets acquired
 
from Sibanye-Stillwater
 
is subject to
 
the risk of delays
 
and cost
overruns which
 
are inherent
 
in any large
 
construction
 
project including,
inter alia
:
 
shortages
 
or unforeseen
 
increases
 
in the cost
 
of equipment,
 
labor and
 
raw
 
materials;
 
unforeseen
 
design and
 
engineering
 
problems;
 
changes in
 
construction
 
plans that
 
may require
 
new or amended
 
planning permissions;
 
 
unforeseen
 
construction
 
problems;
 
unforeseen
 
delays
 
commissioning
 
sections
 
of the project;
 
inadequate
 
phasing of activities;
 
labor disputes;
 
inadequate
 
workforce
 
planning or
 
productivity
 
of workforce;
 
inadequate
 
management
 
practices;
 
natural disasters
 
and adverse
 
weather conditions;
 
national work
 
stoppages
 
as a result
 
of infectious
 
deceases and
 
pandemics
 
such as COVID-19;
 
failure or
 
delay of third-party
 
service providers;
 
and
 
changes to
 
regulations,
 
such as environmental
 
regulations.
 
The Phase 2 definitive
 
feasibility
 
study was completed
 
in the 3
rd
 
quarter of fiscal
 
year 2021, however
 
regulatory approval
 
still needs
 
to
be obtained
 
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
 
In addition,
 
if the
 
assumptions
 
we make
 
in assessing
 
the viability
 
of our
 
projects,
 
including
 
those relating
 
to commodity
 
prices,
 
exchange
rates, interest rates, inflation
 
rates and
 
discount rates,
 
prove to
 
be incorrect or
 
need to
 
be significantly revised, this
 
may adversely affect
 
the
profitability or even
 
the viability of our projects.
 
The uncertainty and volatility
 
in the gold market makes it more difficult
 
to accurately evaluate
the project
 
economics
 
and increases
 
the risk that
 
the assumptions
 
underlying
 
our assessment
 
of the viability
 
of the project
 
may prove incorrect.
 
As the
 
development of FWGR is
 
particularly material to DRDGOLD, significant cost overruns
 
or adverse changes
 
in assumptions
affecting the
 
viability of
 
the project
 
could have
 
a material
 
adverse effect
 
on our business,
 
cash flows,
 
financial condition
 
and prospects.
 
 
Our operating cash flow and available banking facilities may be insufficient to meet our capital expenditure plans and requirements,
depending on the timing and cost of development of our existing projects and any further projects we may pursue. As a result, new sources of
capital may
 
be needed to meet
 
the funding requirements
 
of these projects
 
and to fund ongoing
 
business activities.
 
Our ability to
 
raise and service
significant
 
new sources
 
of capital
 
will be a
 
function of,
inter alia
, macroeconomic
 
conditions,
 
our credit
 
rating, our
 
gearing and
 
other risk
 
metrics,
the condition
 
of the financial
 
markets, future
 
gold prices,
 
the prospects
 
for our industry, our
 
operational
 
performance
 
and operating
 
cash flow and
debt position.
 
In the event of operating or financial
 
challenges, any dislocation
 
in financial markets
 
or new funding limitations,
 
our ability to pursue
new business
 
opportunities,
 
invest in
 
existing and
 
new projects,
 
fund our ongoing
 
business activities
 
and pay dividends,
 
could be
 
constrained,
 
any
of which could
 
have a material
 
adverse effect
 
on our business,
 
operating results
 
cash flows
 
and financial
 
condition.
 
We may not be able
 
to meet our
 
cash requirements
 
because of
 
a number of
 
factors, many
 
of which are
 
beyond our
 
control.
 
Management’s estimates on future cash flows are subject to risks and uncertainties,
 
such as the rand gold price, production volumes,
recovered grades and costs. 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.
 
 
Any interruption
 
in gold production at any of our two mining
 
operations generating
 
cash flows, will have an adverse
 
effect on the
Company.
 
We have two mining
 
operations
 
generating
 
cash flows,
 
namely Ergo and
 
FWGR.
 
Ergo’s
 
reclamation
 
sites,
 
processing
 
plants,
 
pump
stations and
 
the Brakpan/Withok
 
TSF are linked
 
through pipeline
 
infrastructure.
 
The Ergo plant
 
is currently
 
our major
 
processing
 
plant. FWGR’s
reclamation
 
site, DP2 processing
 
plant, pump
 
stations and
 
the Driefontein
 
4 Tailings Storage
 
Facility are
 
linked through
 
pipeline infrastructure.
 
 
Our reclamation sites, plants,
 
pipelines
 
infrastructure and the
 
deposition/storage facilities are exposed to
 
numerous risks, including
operational
 
down time due
 
to planned or
 
unplanned maintenance,
 
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.
 
 
We
 
have suffered interruptions in gold production. For example: the Group temporarily halted its operations at Ergo and FWGR on
March 26, 2020 pursuant to the
 
announcement of the national lockdown in South African (“
Lockdown
”). Operations gradually recommenced
through April
 
and May 2020 (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.
 
 
Our FWGR operations
 
are reliant on the use to and
 
access of Sibanye-Stillwater’s
 
mining infrastructure,
 
related services
 
including the
smelting and recovery of gold
 
from gold loaded carbon produced at
 
FWGR as well
 
as the
 
use of various
 
rights, permits and licenses held by
Sibanye Gold
 
pursuant to
 
which FWGR
 
operates,
 
pending the
 
transfer
 
to FWGR of
 
those that
 
are transferable.
 
Any disruption
 
in the supply
 
of, or
our ability to
 
use and access
 
the Sibanye-Stillwater
 
mining infrastructure,
 
related services
 
and rights, permits
 
and licenses,
 
could have an
 
adverse
impact on
 
our operations.
 
Each of these conditions or other weather
 
conditions or other interruptions
 
could adversely impact
 
our operations which could have
 
a
material
 
adverse effect
 
on our business,
 
operating results
 
and financial
 
condition.
 
Flooding at
 
our discontinued
 
underground
 
operations
 
may cause
 
us to incur
 
liabilities
 
for environmental
 
damage.
 
If the rate of rise of water is not controlled,
 
water from our abandoned
 
underground mining
 
areas could potentially
 
rise and come into
contact
 
with naturally
 
occurring
 
underground
 
water or
 
decant into
 
surrounding
 
underground
 
mining areas
 
and could
 
ultimately
 
also rise
 
to surface.
Progressive flooding
 
of
 
these abandoned
 
underground mining
 
areas and
 
surrounding underground mining
 
areas could
 
eventually cause
 
the
discharge of
 
polluted water
 
to the surface
 
and to local
 
water sources.
 
 
 
 
 
 
 
 
 
 
 
11
 
Should underground water levels
 
not reach a natural subterranean
 
equilibrium, and if underground
 
water rises to the surface, we may
face claims
 
relating
 
to environmental
 
damage.
 
Any such
 
claims
 
may have
 
a material
 
adverse
 
effect on
 
our business,
 
operating
 
results
 
and financial
condition.
 
An increase
 
in production
 
costs could
 
have an adverse
 
effect on our results
 
of operations.
 
 
An increase
 
in our production
 
costs will
 
impact our
 
results of
 
operations.
 
Production
 
costs are
 
affected by,
inter alia
:
 
 
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.
 
 
 
On February 28, 2021,
 
ERGO signed a one
 
year wage extension
 
agreement,
 
with organized labour,
 
for the period July
 
1, 2021 to June
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.
 
Increases in production
 
costs, if material,
 
will adversely
 
impact our results
 
of operations.
 
In addition, any initiatives
 
that we pursue to
reduce costs,
 
such as reducing
 
our labor force, a reduction
 
of the corporate
 
overhead, negotiating
 
lower price increases
 
for consumables
 
and cost
controls
 
may not
 
be successful
 
or sufficient
 
to offset
 
the increases
 
affecting
 
our operations
 
and could
 
adversely
 
affect our
 
business,
 
operating
 
results
and financial
 
condition.
 
 
Uncertainties
 
regarding the
 
impact of the
 
COVID-19 pandemic
 
on current
 
and future
 
operations
 
 
We face risks relating
 
to the COVID-19
 
pandemic and
 
measures taken
 
to address
 
the outbreak.
 
The Group temporarily halted
 
its operations at Ergo and FWGR on March 26, 2020 pursuant to the announcement
 
of the 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.
 
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.
 
The table
 
below outlines
 
the number
 
of COVID-19
 
tests conducted,
 
the number
 
of COVID-19
 
positive
 
cases and
 
the COVID-19
 
related
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
 
The risk related
 
to the impact of the COVID-19
 
pandemic is not isolated
 
to health and safety
 
for our employees
 
and disruptions to
 
our
operations, but has manifested as a risk in terms of
 
social stability as well as economic activity and growth both in South
 
Africa and globally.
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.
 
We have benefitted
 
from the increase
 
in dollar gold
 
prices and
 
weakening of the
 
rand/dollar
 
exchange rate
 
driven at least
 
in part by the
impact of
 
the COVID-19
 
pandemic.
 
Dollar gold
 
prices may
 
decrease and
 
the rand/dollar
 
exchange rate
 
may strengthen
 
as the global
 
impact of
 
the
COVID-19 pandemic
 
is alleviated.
 
Our operations
 
are subject
 
to extensive
 
environmental
 
regulations
 
which could
 
impose significant
 
costs and liabilities.
12
 
Our operations are subject to increasingly extensive laws and regulations governing the protection
 
of the environment under various
state, provincial
 
and
 
local
 
laws,
 
which
 
regulate air
 
and
 
water
 
quality,
 
hazardous waste
 
management and
 
environmental rehabilitation and
reclamation.
 
Our mining and related activities have
 
the potential to impact the environment, including land,
 
habitat, streams and environment
near the mining sites. Failure to comply with environmental
 
laws or delays in obtaining,
 
or failures to obtain
 
government permits
 
and approvals
may adversely impact
 
our operations.
 
In addition, the regulatory
 
environment
 
in which we operate
 
could change in ways
 
that could substantially
increase
 
costs of compliance,
 
resulting in
 
a material
 
adverse effect
 
on our profitability.
 
We have incurred, and expect to incur in the future, expenditures to comply with these
 
environmental laws and regulations.
 
We have
estimated our aggregate
 
group Provision for
 
Environmental Rehabilitation at a
 
net present
 
value of
 
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.
 
 
Damage to
 
tailings dams
 
and excessive
 
maintenance
 
and rehabilitation
 
costs could
 
result in
 
lower production
 
and health,
 
safety and
environmental
 
liabilities.
Our tailings
 
facilities
 
are exposed to
 
numerous risks
 
and events,
 
the occurrence
 
of which may
 
result in the
 
failure, breach
 
or damage of
such a facility. These may include sabotage, failure by our employees
 
to adhere to the codes of practice and natural disasters such as excessive
rainfall and seismic events, any of which could
 
force us to stop
 
or limit operations. In addition, the dams could
 
overflow or a side wall
 
could
collapse and the health
 
and safety of our employees and
 
communities living
 
around these dams could
 
be jeopardized. In the event
 
of damage to
our tailings facilities, our operations will be adversely affected and this in turn could have a material adverse effect on our
 
business, operating
results and
 
financial
 
condition.
 
Due to the
 
nature of our
 
business, our
 
operations
 
face extensive
 
health and safety
 
risks and regulation
 
of those risks.
Gold mining
 
is exposed
 
to
 
numerous risks
 
and events,
 
the occurrence
 
of
 
which may
 
result in
 
the death
 
of, or
 
personal injury,
 
to
employees.
 
According to
 
section 54
 
of the Mine,
 
Health and
 
Safety Act
 
of 1996, if
 
an inspector
 
believes
 
that any
 
occurrence,
 
practice or
 
condition
at a mine
 
endangers
 
or may endanger
 
the health
 
or safety
 
of any person
 
at the mine,
 
the inspector
 
may give
 
any instruction
 
necessary
 
to protect
 
the
health or safety
 
of persons at
 
the mine. These
 
instructions
 
could include
 
the suspension
 
of operations
 
at the whole
 
or part of the
 
mine. Health
 
and
safety incidents
 
could lead to mine operations
 
being halted and that will
 
increase our unit production
 
costs, which could
 
have a material adverse
effect on our
 
business,
 
operating results
 
and financial
 
condition.
 
Events may
 
occur for which
 
we are not
 
insured which
 
could affect
 
our cash flows
 
and profitability.
 
Because of
 
the nature of
 
our business,
 
we may become
 
subject to liability
 
for pollution
 
or other hazards
 
against which
 
we are unable
 
to
insure or are
 
not insured, including those in
 
respect of past mining activities. Our existing property,
 
business interruption and other insurance
contains certain
 
exclusions and
 
limitations on coverage.
 
The insured value for property
 
and loss of profits
 
due to business interruption
 
is 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.
 
 
Insurance coverage
 
may not cover the extent of claims brought against us, including
 
claims for environmental,
 
industrial or pollution
related accidents,
 
for which coverage is not available. If we are required
 
to meet the costs of claims, which exceed our insurance
 
coverage, this
could have
 
a material
 
adverse effect
 
on our business,
 
operating results
 
and financial
 
condition.
If we are
 
unable to attract
 
and retain
 
key personnel
 
our business
 
may be harmed.
 
The success
 
of our
 
business
 
will depend,
 
in large
 
part, upon
 
the skills
 
and efforts
 
of a
 
small
 
group of
 
management
 
and technical
 
personnel
including the positions
 
of Chief Executive Officer
 
and Chief Financial Officer. In addition, we compete with mining and other companies on a
global basis to
 
attract and retain key
 
human resources at
 
all levels with
 
appropriate technical skills and operating
 
and managerial experience
necessary to operate the
 
business. Factors critical to retaining our present staff and attracting additional highly qualified
 
personnel include our
ability to
 
provide these individuals with
 
competitive compensation arrangements, and other benefits. If
 
we are
 
not successful in
 
retaining or
attracting highly
 
qualified individuals
 
in key management positions,
 
our business may be harmed.
 
We do not maintain “key man” life insurance
policies on
 
any members
 
of our executive
 
team. The loss
 
of any of our
 
key personnel
 
could delay
 
the execution
 
of our business
 
plans, which
 
may
result in
 
decreased
 
production,
 
increased
 
costs and decreased
 
profitability.
 
We are subject to
 
operational
 
risks
 
associated
 
with our flotation
 
and fine-grind
 
(FFG) project.
 
Our flotation
 
and fine-grind
 
project, implemented
 
in fiscal
 
year 2014, is
 
designed to
 
improve extraction
 
efficiencies.
 
13
 
Certain
 
components
 
of the FFG
 
were temporarily
 
halted in
 
the first
 
quarter
 
of fiscal
 
year 2020
 
to perform
 
an evaluation
 
and compare
 
the
additional revenues earned from additional gold extracted
 
from the most recently integrated reclamation sites compared to the cost incurred to
operate the FFG circuit.
 
The remaining components
 
of the FFG continue to operate.
 
Testing on the newly integrated material
 
has suggested that
some of these
 
halted components
 
will only operate
 
in subsequent
 
years once the
 
related reclamation
 
sites have
 
been brought
 
online in accordance
with the current life of mine plan for ERGO. These halted components
 
are classified as idle assets until
 
they are brought back into operation
 
as
described.
 
The
 
success of
 
the
 
FFG is
 
directly dependent
 
on
 
the
 
material type
 
and
 
material mix
 
processed through
 
it.
 
Therefore, the
 
halted
components will
 
remain idle
 
pending the continuation
 
and conclusion
 
of various test
 
work regarding
 
the material
 
type and material
 
mix of future
reclamation
 
sites.
 
Firm decisions
 
have also
 
not yet
 
been made
 
by the executive
 
committee
 
and the
 
Board of
 
Directors
 
on the
 
future of
 
the FFG.
 
We
remain subject
 
to operations
 
risks relating
 
to the FFG
 
project.
A disruption
 
in our information
 
technology
 
systems, including
 
incidents
 
related to
 
cyber security,
 
could adversely
 
affect our
business
 
operations.
 
We
 
rely
 
on
 
the
 
accuracy,
 
availability and
 
security
 
of
 
our
 
information technology
 
systems. Despite
 
the
 
measures
 
that
 
we
 
have
implemented,
 
including
 
those
 
related
 
to cyber
 
security, our
 
systems
 
could be
 
breached
 
or damaged
 
by computer
 
viruses
 
and systems
 
attacks,
 
natural
or man-made
 
incidents,
 
disasters
 
or unauthorized
 
physical or
 
electronic
 
access.
 
 
Any system
 
failure, accident or
 
security breach could
 
result in
 
business disruption, theft
 
of our
 
intellectual property, trade
 
secrets
(including
 
our proprietary
 
technology),
 
unauthorized
 
access to,
 
or disclosure
 
of, personnel
 
or supplier
 
information,
 
corruption
 
of our data
 
or of our
systems,
 
reputational
 
damage
 
or litigation.
 
We may also
 
be required
 
to incur
 
significant
 
cost to
 
protect
 
against
 
or repair
 
the damage
 
caused
 
by these
disruptions or
 
security breaches in
 
the future,
 
including, for
 
example, rebuilding internal
 
systems, implementing additional threat
 
protection
measures, defending
 
against litigation,
 
responding to regulatory
 
inquiries or
 
actions, paying
 
damages, or taking
 
other remedial
 
steps with respect
to third parties.
 
 
These threats
 
are constantly
 
evolving,
 
thereby
 
increasing
 
the difficulty
 
of successfully
 
defending
 
against
 
them or
 
implementing
 
adequate
preventative
 
measures and
 
we remain
 
subject to
 
additional
 
known or unknown
 
threats.
 
In some instances,
 
we may be
 
unaware of
 
an incident
 
or its
magnitude and effects. We
 
may be
 
susceptible to new and emerging
 
risks,
 
including cyber-attacks and phishing, in the evolving landscape of
cybersecurity
 
threats. Given
 
the increasing
 
sophistication
 
and evolving
 
nature of
 
these threats,
 
DRDGOLD cannot
 
rule out the
 
possibility
 
of them
occurring in the future. An extended
 
failure of critical system
 
components, caused by accidental,
 
or malicious actions, including
 
those resulting
from a cyber
 
security attack,
 
could result
 
in a significant
 
environmental
 
incident, commercial
 
loss or interruption
 
to operations.
 
In addition,
 
from
 
time
 
to time,
 
we implement
 
updates
 
to our
 
information
 
technology
 
systems
 
and software,
 
which
 
can disrupt
 
or shutdown
our information
 
technology
 
systems.
 
Information
 
technology
 
system disruptions,
 
if not
 
appropriately
 
addressed
 
or mitigated,
 
could have
 
a material
adverse effect
 
on our operations.
Risks related
 
to the gold
 
mining industry
 
 
A change in
 
the dollar
 
price of gold,
 
which in the
 
past has fluctuated
 
widely, is beyond
 
our control.
Historically,
 
the gold
 
price has
 
fluctuated
 
widely and
 
is affected
 
by numerous
 
industry factors
 
over which
 
we have
 
no control
 
including:
 
a significant
 
amount of above-ground
 
gold in the
 
world that
 
is used for
 
trading by investors;
 
the physical supply of gold from world-wide production and scrap sales, and the purchase, sale or divestment by central banks of their gold
holdings;
 
the demand
 
for gold for
 
investment
 
purposes, industrial
 
and commercial
 
use, and in
 
the manufacturing
 
of jewelry;
 
speculative
 
trading activities
 
in gold;
 
 
the overall
 
level of forward
 
sales by other
 
gold producers;
 
 
the overall
 
level and cost
 
of production
 
of other gold
 
producers;
 
 
international
 
or regional
 
political
 
and economic
 
events or
 
trends;
 
 
the strength
 
of the dollar
 
(the currency
 
in which gold
 
prices generally
 
are quoted)
 
and of other
 
currencies;
 
 
financial
 
market expectations
 
regarding the
 
rate of inflation;
 
 
interest rates;
 
 
gold hedging and de-hedging by gold producers; and
 
actual or expected gold sales by central banks and the International Monetary Fund.
During fiscal year 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.
 
 
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 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
 
COVID-19 (or
 
an alleviation
 
of the pandemic)
 
or other factors
 
mentioned above
 
could put negative
 
pressure on
 
the price of
 
gold or the
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.
 
The
 
exploration
 
of
 
mineral
 
properties
 
is
 
highly
 
speculative
 
in
 
nature,
 
involves
 
substantial
 
expenditures,
 
and
 
is
 
frequently
unproductive.
 
Exploration is highly speculative
 
in nature and requires
 
substantial expenditure for drilling,
 
sampling and analysis of
 
ore bodies to
quantify the extent of the gold reserve. Many gold
 
exploration
 
programs,
 
including some
 
of ours, do
 
not result
 
in the discovery
 
of mineralization
and any mineralization
 
discovered may not be of sufficient
 
quantity or quality to be mined profitably. If we discover
 
a viable deposit, it usually
takes several years from the initial phases of exploration
 
until production is possible.
 
During this
 
time, the economic
 
feasibility of
 
production
may change.
 
 
Moreover, we rely on
 
the evaluations of professional geologists, geophysicists, and
 
engineers for estimates in determining whether
to commence or continue mining. These estimates
 
generally rely on scientific and economic assumptions, which
 
in some instances may not be
correct, and
 
could result
 
in the
 
expenditure of
 
substantial amounts
 
of money
 
on a
 
deposit before
 
it can
 
be determined
 
with any
 
degree of
accuracy whether
 
the deposit
 
contains economically
 
recoverable mineralization.
 
Uncertainties as
 
to the
 
metallurgical recovery
 
of any
 
gold
discovered may not warrant mining based on available technology.
 
Our future
 
growth and profitability
 
will depend,
 
in part, on
 
our ability
 
to identify
 
and acquire
 
additional
 
mineral rights,
 
and on the costs
and results
 
of our continued
 
exploration
 
and development
 
programs. Our business focuses
 
mainly on the extraction of gold from tailings, which
is a
 
volume driven
 
exercise. Only
 
significant deposits
 
within proximity
 
of services
 
and infrastructure
 
that contain
 
adequate gold
 
content to
justify the significant capital investment associated with plant,
 
reclamation and deposition infrastructure are suitable for exploitation
 
in terms
of our model. There is a limited supply of these deposits which may inhibit exploration and developments,
 
especially in a declining gold price
environment.
 
 
Because of these uncertainties, we may not successfully acquire additional mineral rights, or identify new Proven and Probable Ore
Reserves in sufficient quantities to justify commercial operations in any of our operations. The costs incurred on exploration activities that do
not identify commercially exploitable reserves of gold are not likely to be recovered and therefore are likely to be impaired.
 
There is inherent uncertainty in Ore Reserve estimates.
 
Our Ore Reserve figures described in this document
 
are the best estimates of our current management as
 
of the dates stated and are
reported
 
in
 
accordance
 
with
 
the
 
requirements
 
of
 
Industry
 
Guide
 
7
 
of
 
the
 
SEC.
 
These
 
estimates
 
may
 
not
 
reflect
 
actual
 
reserves
 
or
 
future
production.
 
 
Should we encounter mineralization
 
or formations different from those
 
predicted by past drilling,
 
sampling and similar examinations,
reserve estimates
 
may have to be adjusted
 
and mining plans
 
may have to be altered
 
in a way that might ultimately
 
cause our 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.
 
The business of gold
 
mining is exposed to numerous
 
risks and events, the
 
occurrence of which
 
may result in the
 
death of or personal
injury to
 
employees, the
 
loss of mining
 
and reclamation
 
equipment, damage
 
to or
 
destruction of
 
mineral properties
 
or production
 
facilities,
monetary losses,
 
delays in
 
production, environmental
 
damage, loss
 
of the
 
license to
 
mine and
 
potential legal
 
claims. The
 
risks and
 
events
associated with the business of gold mining include:
 
environmental
 
hazards and pollution,
 
including dust generation,
 
toxic chemicals,
 
discharge of metals, pollutants,
 
radioactive materials
and other hazardous
 
material
 
into the air
 
and water;
flooding, landslides,
 
sinkhole formation,
 
ground subsidence,
 
ground and
 
surface water
 
pollution and
 
waterway
 
contamination;
a decrease
 
in labor productivity
 
due to labor
 
disruptions,
 
work stoppages,
 
disease, slowdowns
 
or labor strikes;
unexpected
 
decline of
 
ore grade;
metallurgical
 
conditions or
 
lower than
 
expected gold
 
recovery;
failure of
 
unproven or evolving
 
technologies;
mechanical
 
failure or breakdowns
 
and ageing
 
infrastructure;
energy and electrical
 
power supply
 
interruptions;
availability
 
of water;
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
 
 
Political or
 
economic
 
instability
 
in South Africa
 
may reduce
 
our production
 
and profitability.
 
We are incorporated
 
in South
 
Africa
 
and all
 
our operations
 
are currently
 
in South
 
Africa.
 
As a
 
result,
 
political
 
and economic
 
risks relating
to South Africa could have a significant
 
effect on our production and profitability. Large
 
parts of the South African population
 
are unemployed
and do not
 
have access
 
to adequate
 
education,
 
health care,
 
housing and
 
other services,
 
including water
 
and electricity.
 
Government
 
policies aimed
at alleviating and
 
redressing the disadvantages suffered by
 
most citizens under previous
 
governments may increase our
 
costs and
 
reduce our
profitability. In
 
recent years,
 
South Africa
 
has experienced
 
high levels of
 
crime. These
 
problems may
 
impede fixed
 
inward investment
 
into South
Africa and
 
increase emigration
 
of skilled
 
workers and
 
as a result,
 
we may have
 
difficulties
 
retaining qualified
 
employees.
 
 
The COVID-19
 
pandemic has
 
increased the
 
risk of
 
social unrest
 
in
 
our surrounding communities already
 
created from
 
a growing
frustration of society
 
at large on slow reformative
 
action being taken
 
by all spheres of the
 
South African
 
government,
 
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.
 
The inflation rate in South Africa is relatively high compared to developed,
 
industrialized
 
countries. As of June 30, 2021, the annual
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.
 
The treatment of
 
occupational health diseases and
 
the potential liabilities related
 
to occupational health
 
diseases may have
 
an
adverse effect
 
on the results
 
of our operations
 
and our financial
 
condition.
We may be subject
 
to claims
 
relating to occupational
 
health diseases
 
and we are
 
currently
 
subject to
 
legal action
 
described below.
In January 2013, DRDGOLD, East Rand Proprietary Mines Limited (“
DRDGOLD Respondents
”) and 23
 
other mining companies
(“
Other Respondents
”) (collectively
 
referred
 
to as "
Respondents
") were
 
served with
 
a court
 
application
 
issued in
 
the High
 
Court of
 
South Africa
for
 
a
 
class certification
 
on
 
behalf of
 
former mineworkers
 
and
 
dependents of
 
deceased mineworkers
 
(“
Applicants
”).
 
In
 
the
 
application the
Applicants allege
 
that
 
the
 
Respondents conducted
 
underground mining
 
operations in
 
a
 
negligent and
 
complicit manner
 
causing the
 
former
mineworkers to contract
 
occupational lung diseases.
 
The Applicants have as yet not quantified
 
the amounts which they are demanding
 
from the
Respondents
 
in damages.
On May
 
3, 2018, former mineworkers and dependents of
 
deceased mineworkers (“
Applicants
”) and
 
Anglo American South Africa
Limited,
 
AngloGold
 
Ashanti
 
Limited,
 
Sibanye
 
Gold Limited
 
trading as
 
Sibanye-Stillwater,
 
Harmony Gold
 
Mining Company
 
Limited,
 
Gold Fields
Limited, African Rainbow Minerals Limited and certain of their affiliates (“
Settling Companies
”) settled the class certification application in
which the Applicants
 
in each sought to certify
 
class actions against
 
gold mining houses
 
cited therein on behalf
 
of mineworkers who
 
had worked
for any of
 
the particular
 
respondents
 
and who suffer
 
from any occupational
 
lung disease,
 
including silicosis
 
or tuberculosis.
The DRDGOLD
 
Respondents,
 
are not a
 
party to the
 
settlement
 
between the
 
Applicants
 
and Settling
 
Companies.
 
The dispute,
 
insofar as
the class certification
 
application
 
and appeal
 
thereof is concerned,
 
still stands
 
and has not
 
terminated
 
in light of the
 
settlement
 
agreement (refer to
Item 18. “Financial
 
Statements
 
- Note 26 – Contingencies”).
An adverse judgment in the claim described above or any other claim could have an adverse impact on us.
 
 
We have experienced
 
an increase
 
in organised
 
crime activities
 
which have
 
started to
 
target gold
 
plants.
16
 
In October
 
2019, a number
 
of companies,
 
including our
 
Knights and
 
Ergo plants,
 
were subject
 
to armed attacks
 
targeting the
 
gold in the
plants or high-grade
 
gold bearing material.
 
These incidents were
 
very well organised and
 
in all the incidents the
 
thieves were armed.
 
In some of
the incidents
 
employees
 
of companies
 
were also held
 
hostage until
 
the targeted
 
material was
 
obtained. In
 
the 2019 incident,
 
a security
 
officer was
fatally injured.
 
 
Any such incidents have
 
and may
 
still result in losses
 
of gold
 
or other damage which
 
could have a
 
material adverse impact on our
business,
 
financial
 
results or
 
condition.
 
 
Theft at our
 
sites, particularly
 
of copper, may result
 
in greater
 
risks to employees
 
or interruptions
 
in production.
 
Crime statistics
 
in South Africa
 
indicate an
 
increase
 
in theft.
 
This together
 
with price
 
increases
 
for copper
 
has resulted
 
in theft
 
of copper
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.
 
The group has a load-curtailment agreement in place with Eskom in terms of which we
 
reduce power consumption by between 10%
and 20% when the grid is under pressure, but Eskom maintains uninterrupted power supply to the operations.
 
The National
 
Energy Regulator
 
of South
 
Africa
 
(“
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.
 
Combined, these
 
outcomes will
 
impact the
 
tariff increase
 
implemented on
 
1 April 2021,
 
which resulted
 
in an increase
 
of approximately
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.
 
 
In February
 
2019, the
 
President of
 
South Africa
 
announced the
 
vertical unbundling of
 
Eskom. While
 
full state
 
ownership will
 
be
maintained, the unbundling is expected to result in the
 
separation of Eskom’s generation, transmission and distribution functions into separate
entities,
 
which may require
 
legislative
 
and/or policy
 
reform. The
 
unbundling
 
is 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.
 
 
For example,
 
dry weather
 
conditions
 
have prompted
 
level 2
 
water restrictions
 
on residential
 
water users
 
in the Johannesburg
 
area. These
water restrictions remain in place as at September 30, 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
 
Government
 
policies in
 
South Africa
 
may adversely
 
impact our operations
 
and profits.
 
The mining
 
industry in
 
South Africa
 
is extensively
 
regulated through legislation
 
and regulations issued
 
through the
 
government’s
administrative
 
bodies. These
 
involve directives
 
in respect
 
of health
 
and safety, the
 
mining and
 
exploration
 
of minerals
 
and managing
 
the impact
 
of
mining operations on
 
the environment. A
 
variety of
 
permits and
 
authorities are
 
required to
 
mine lawfully,
 
and the
 
government enforces its
regulations
 
through the various
 
government
 
departments.
 
The formulation or implementation of government policies may
 
be discretionary and
unpredictable on
 
certain issues, including
 
changes in conditions
 
for the issuance
 
of licenses insofar
 
as social and
 
labor plans are
 
concerned,
transformation of
 
the workplace, laws
 
relating to
 
mineral rights, ownership
 
of mining
 
assets and the
 
rights to prospect
 
and mine,
 
additional
taxes on the mining industry
 
and in extreme cases, nationalization. A
 
change in regulatory or government
 
policies could adversely affect our
business.
 
 
 
Mining royalties
 
and other
 
tax reform
 
could have
 
an adverse
 
effect on the
 
business,
 
operating results
 
and financial
 
condition
 
of our
operations.
 
The
 
Mineral
 
and
 
Petroleum
 
Resources
 
Royalty
 
Act,
 
No.28
 
of
 
2008
 
and
 
the
 
Mineral
 
and
 
Petroleum
 
Resources
 
Royalty
 
Act
(Administration),
 
No.29 of 2008
 
govern royalty
 
rates for
 
gold mining
 
in South Africa.
 
These acts
 
provide for
 
the payment
 
of a royalty, calculated
through a
 
royalty rate
 
formula (using
 
rates of
 
between 0.5%
 
and 5.0%)
 
applied against
 
gross revenue
 
per year, payable
 
half yearly
 
with a third
 
and
final payment
 
thereafter.
 
The royalty
 
is tax
 
deductible
 
and the
 
cost after
 
tax amounts
 
to a
 
rate of
 
between
 
0.33% and
 
3.3% at
 
the prevailing
 
marginal
tax rates
 
applicable
 
to the taxed
 
entity. The royalty
 
is payable
 
on old
 
unconverted
 
mining rights
 
and new
 
converted
 
mining rights.
 
Based on
 
a legal
opinion
 
the
 
Company
 
obtained,
 
mine
 
dumps
 
created
 
before
 
the
 
enactment
 
of
 
the
 
Mineral
 
and
 
Petroleum
 
Resources
 
Development
 
Act
(“
MPRDA
”) fall outside the ambit of
 
this royalty and consequently the Company does not pay any royalty on any
 
dumps created prior to the
MPRDA. Introduction
 
of further
 
revenue
 
based royalties
 
or any adverse
 
future tax
 
reforms
 
could have
 
an adverse
 
effect on
 
our business,
 
operating
results and
 
financial
 
condition.
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.
 
In April
 
2018, judgment
 
was handed
 
down by the
 
North Gauteng
 
High Court
 
in Pretoria
 
against a
 
provision in
 
the 2010 Mining
 
Charter
regarding
 
the “once
 
empowered
 
always
 
empowered”
 
principle.”
 
This principle
 
refers
 
to whether
 
a mining
 
company, after
 
the exit
 
of a
 
Black
 
partner
that held a
 
stake in the
 
company consequent
 
to a result
 
of a Black
 
Economic Empowerment
 
(“
BEE
”) transaction,
 
continues to
 
be BEE compliant.
 
The judgment
 
was appealed
 
by the DMRE.
 
The DMRE
 
in August
 
2020, withdrew
 
their notice
 
to appeal
 
to the
 
Supreme
 
Court of
 
Appeal in
 
respect
of the judgment
 
issued in
 
April 2018
 
by the Pretoria
 
High Court.
 
 
On September
 
27, 2018
 
the Broad-Based
 
Socio-Economic
 
Empowerment
 
Charter
 
for the
 
Mining and
 
Minerals
 
Industry, 2018
 
(“
Mining
Charter 2018
”) was
 
published in
 
Government Gazette No.
 
41934 of
 
Government Notice No.
 
639 on
 
September 27,
 
2018 superseding and
replacing all previous
 
charters, including
 
the Reviewed Broad-Based
 
Black Economic Empowerment
 
Charter for the South African
 
Mining and
Minerals
 
Industry, 2016 (“
Mining Charter
 
III
”).
 
Mining Charter
 
2018 requires,
inter alia
, an enduring
 
30% BEE
 
interest
 
in respect
 
of new mining
 
rights.
 
It also
 
has extensive
 
provisions
in
 
respect
 
of
 
Historically Disadvantaged
 
Persons
 
(“
HDP
”)
 
representation at
 
board
 
and
 
management, as
 
well
 
provisions
 
relating
 
to
 
local
procurement
 
of goods and
 
services.
 
The procurement
 
target of the
 
total spend
 
on services
 
from South
 
African companies
 
has been pegged
 
at 80%
(up from 70%
 
in Mining
 
Charter III)
 
and 60% of
 
the aggregate
 
spend thereof
 
must be apportioned
 
to BEE entrepreneurs.
 
 
In March 2019,
 
the Mineral
 
Council of
 
South Africa
 
brought an application
 
in the High
 
Court, Pretoria
 
for a judicial
 
review and
setting aside
 
of certain
 
provisions in
 
Mining Charter
 
2018.
 
In June
 
2020, the
 
High Court
 
ordered
 
the Minerals
 
Council
 
to join
 
parties
 
representing
 
communities,
 
trade unions
 
and BEE
 
entrepreneurs
as a prerequisite
 
to the continuation
 
of the lawsuit,
 
as they have
 
a direct and
 
substantial
 
interest in
 
the outcome
 
of the litigation.
 
 
On September
 
21, 2021,
 
the High
 
Court of
 
South Africa
 
ruled that
 
the Mining
 
Charter
 
2018 is
 
not binding
 
subordinate
 
legislation
 
but an
instrument of policy. This ruling affirmed that the Minister
 
of Mineral Resources and Energy (“
MRE Minister
”) was not entitled to make law
through the
 
Mining Charter
 
2018 to require
 
30% HDP ownership
 
for the renewal
 
of existing
 
mining rights.
 
DRDGOLD cannot guarantee
 
that it will meet all the targets set out by the Mining Charter 2018. For example,
 
if the Mining Charter
2018 were
 
to remain
 
in its current
 
form, there
 
is no assurance
 
that the goods,
 
services
 
and supplies
 
in South Africa
 
would be sufficient
 
to allow us
to
 
meet the
 
targets.
 
More specifically,
 
DRDGOLD may
 
not
 
be
 
able to
 
meet the
 
requirement that 80%.
 
of total
 
mining goods
 
and services
procurement spend be on South African-manufactured
 
goods due to an insufficient number of suppliers in South Africa
 
with heavy equipment.
DRDGOLD may be required to increase participation by HDP in senior positions and allocate additional resources
 
for the development of the
mine community, human resources,
 
sustainability, procurement
 
and enterprise. DRDGOLD
 
may also be required to make further adjustment
 
to
the ownership
 
structure of
 
its South African
 
mining assets,
 
including increasing
 
the ownership
 
of HDP, in order to meet
 
the Mining Charter
 
2018
requirements.
 
Any such additional
 
measures could
 
have a material
 
adverse effect
 
on our business,
 
operating results
 
and/or financial
 
condition.
 
In addition,
 
if we are
 
unable to
 
obtain sufficient
 
representation
 
of HDP at
 
the board
 
level and
 
in management
 
positions
 
or if there
 
are not
sufficient succession
 
plans in place, this could have a material adverse
 
effect on our business (including resulting
 
in the imposition of fines and
having
 
a
 
negative effect
 
on
 
production levels),
 
operating results
 
and
 
financial position.
 
In
 
relation
 
to
 
this,
 
the
 
mining
 
industry,
 
including
DRDGOLD, continues
 
to experience a global shortage of qualified senior
 
management and technically
 
skilled employees.
 
DRDGOLD may be
unable to hire
 
or retain appropriate
 
senior management,
 
technically
 
skilled employees
 
or other management
 
personnel, or
 
may have to
 
pay higher
levels of
 
remuneration
 
than it currently
 
intends in
 
order to do
 
so.
 
Also, there is no
 
guarantee that
 
any steps DRDGOLD has
 
already taken or
 
might take in
 
the future will
 
ensure the retention
 
of its
existing mining rights, the successful renewal of its existing mining rights, the granting of applications for
 
new mining rights or that the terms
of renewals of its mining
 
rights would not be significantly less favourable
 
than the terms of its current
 
mining rights. Any further adjustment
to
 
the
 
ownership
 
structure of
 
DRDGOLD’s South
 
African mining
 
assets in
 
order
 
to
 
meet the
 
abovementioned
 
requirements
 
could have
 
a
material adverse effect on the value of DRDGOLD’s securities
 
Refer to
 
Item 4B.
 
Business
 
Overview –
 
Governmental
 
regulations
 
and their
 
effect on
 
our business
 
 
The Broad
 
Based Socio-Economic
Empowerment
 
Charter.
 
Government
 
policies in
 
South Africa
 
may adversely
 
impact our operations
 
and profits
 
related to
 
financial
 
provisioning
 
for
rehabilitation.
 
 
An amendment to the MPRDA was first proposed in 2013. The amendment bill, if implemented, would have had a material adverse
impact
 
on the Group's
 
estimated
 
financial
 
provisions
 
for environmental
 
remediation
 
and management
 
due to
 
the proposed
 
inclusion
 
of historic
 
and
old mine dumps
 
in the definition
 
of “residue
 
stockpiles”
 
as well as the
 
extension of
 
the liability
 
for rehabilitation
 
beyond the
 
issuance
 
of a closure
certificate and the requirement to maintain financial provision for
 
closed sites within a
 
period of 20
 
years after a
 
site is
 
closed. The MPRDA
Amendment Bill
 
was withdrawn
 
in August 2018
 
by the MRE Minister,
 
citing, amongst
 
other things,
 
the adequacy
 
of the current
 
MPRDA to deal
with all regulatory
 
matter pertaining
 
to the mining
 
and petroleum
 
industries.
19
 
Revised
 
Financial Provisioning
 
Regulations (“
FPR
”)
 
were
 
published on
 
November 20,
 
2015
 
under
 
the
 
National
 
Environmental
Management Act, 107 of 1998 (“
NEMA
”) and became effective from the date of publication thereof. Proposed
 
amendments to the FPRs were
published
 
for public
 
comment
 
GNR 1228
 
GG 41236
 
of November
 
10, 2017
 
(“
Draft
 
Regulations
”), which
 
seek
 
to address
 
some challenges
 
relating
to the implementation
 
thereof. Under
 
these FRPs to
 
be implemented
 
by the DMRE,
 
existing environmental
 
rehabilitation
 
trust funds
 
may only be
used for post
 
closure activities
 
and may no
 
longer be utilised
 
for their
 
intended purpose
 
of concurrent
 
and final rehabilitation
 
and closure.
 
 
Several further proposed amendments to
 
the FPRs,
 
(“
Proposed Amendments
”) were
 
published subsequently. The
 
latest Proposed
Amendments
 
were published
 
in August
 
2021 which,
inter alia
, extends
 
the compliance
 
with these
 
regulations
 
to three
 
months following
 
the fiscal
year end June
 
30, 2022.
 
 
The Proposed Amendments,
 
in their current form and which are still subject
 
to the approval of the DMRE and Treasury, allow under
certain circumstances for the withdrawal against financial
 
provision (which is currently not contemplated in the FPR). It is
 
therefore uncertain
whether these
 
provisions relating
 
to withdrawal
 
will remain
 
in their current
 
form, or at
 
all.
 
 
See discussion
 
in
 
4.B. Business
 
Overview –
 
Governmental regulations and their
 
effect on
 
our business
 
 
Financial Provision for
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.
 
The Carbon Tax Act No
 
15 of 2019, or the
 
CTA, came into effect from
 
June 1, 2019. The
 
CTA is based on the polluter-pays-principle
and will be implemented across
 
phases. The first phase will run from June 1, 2019 to December
 
31, 2022 and is applicable to scope 1 emitters.
The First phase did not have a
 
material financial impact. 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.
 
 
Regulations detailing
 
the tax-free emission allowances
 
during the second phase have not been published
 
to date. The second phase of
implementation of the
 
Carbon Tax
 
may have
 
a material
 
direct and/or indirect
 
adverse effect on
 
our business, operating
 
results and
 
financial
condition if the tax-free emission allowances
 
are significantly reduced or the scope of implementation
 
of the CTA
 
is significantly increased.
 
In
addition, the
 
potential increases
 
in costs resulting
 
from suppliers
 
passing through
 
their Carbon
 
Tax exposure to
 
the Company
 
may have a
 
direct or
indirect
 
material adverse
 
effect on our
 
business,
 
operating results
 
and financial
 
condition.
 
Ring-fencing
 
of unredeemed
 
capital
 
expenditure
 
for South
 
African
 
mining
 
tax purposes
 
could
 
have
 
an adverse
 
effect on
 
the business,
operating results
 
and financial
 
condition of
 
our operations.
 
The Income Tax Act No 58 of 1962,
 
or the ITA, contains certain
 
ring-fencing
 
provisions in
 
section 36 specifically
 
relating to different
mines
 
regarding
 
the deduction
 
of certain
 
capital
 
expenditure
 
and the
 
carry
 
over to
 
subsequent
 
years.
 
After the
 
restructuring
 
of the
 
surface
 
operations,
effective July 1, 2012,
 
Ergo is treated as
 
one taxpaying operation
 
pursuant to the
 
relevant ring-fencing
 
legislation.
 
It is expected that
 
FWGR will
also be
 
treated as
 
one taxpaying
 
operation
 
pursuant to
 
the relevant
 
ring-fencing
 
legislation.
 
In the event
 
that we
 
are unsuccessful
 
in confirming
 
our
position or should
 
the South African
 
Revenue Service
 
have a different interpretation
 
of section 36 of the ITA, it could have
 
an adverse effect on
our business,
 
operating results
 
and financial
 
condition.
 
Draft amendments
 
to the
 
ITA regarding
 
claiming
 
accelerated
 
capital expenditure
 
allowances
 
for South
 
African
 
mining tax
 
purposes
could have
 
an adverse
 
effect on the
 
business,
 
operating results
 
and financial
 
condition
 
of our operations.
 
The National Treasury
 
has proposed a prospective
 
amendment to the
 
preamble of section
 
15 of the ITA to limit the accelerated
 
capital
expenditure
 
allowances
 
applicable
 
to taxpayers
 
conducting
 
mining
 
operations
 
to only
 
those
 
taxpayers
 
that hold
 
a mining
 
right
 
as defined
 
in section
1 of the Mineral
 
and Petroleum
 
Resources Development
 
Act in respect of
 
the mine where
 
those mining
 
operations
 
are carried
 
on
”. In addition,
 
in
relation
 
to section
 
36 of
 
the ITA, the
 
National
 
Treasury has
 
proposed
 
an amendment
 
to the
 
heading
 
in order
 
to limit
 
the application
 
of the
 
provisions
in respect
 
of the calculation
 
of the redemption
 
allowance
 
and balance
 
of unredeemed
 
capital
 
expenditure,
 
to certain
 
mining operations.
 
 
DRDGOLD, as a surface miner, conducts mining
 
operations for its own benefit (i.e.
 
it is not a contract miner) but DRDGOLD is not
required to hold
 
a mining right
 
in terms of the
 
MPRDA.
 
The proposed requirement
 
by the ITA to require a miner
 
to hold a mining
 
right in terms
of the MPRDA
 
will preclude
 
DRDGOLD from
 
claiming accelerated
 
capital expenditure
 
allowances
 
in terms
 
of sections
 
15 and 36 of
 
the ITA.
 
 
If these proposed amendments are adopted, it will accelerate
 
cash outflows resulting from current
 
tax expenditure.
 
This could have a
material adverse
 
effect on our
 
cash flows,
 
operations,
 
capital investment
 
decisions
 
and financial
 
condition.
 
 
Assessment
 
of unredeemed
 
capital expenditure
 
by the South
 
African Revenue
 
Service could
 
have an adverse
 
effect on the business,
operating results
 
and financial
 
condition of
 
our operations.
20
 
The South African
 
Revenue Service
 
(“
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.
 
 
Since our
 
South African
 
labor force
 
has substantial
 
trade union
 
participation,
 
we face
 
the risk
 
of disruption
 
from labor
 
disputes
 
and
new South African
 
labor laws.
 
Labor costs
 
are significant
 
for Ergo, constituting
 
19% of Ergo’s
 
production
 
costs for
 
fiscal year
 
2021 (2020:
 
22%). As
 
of June
 
30, 2021,
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.
 
 
Labor costs
 
are significant
 
for FWGR, constituting
 
20% of FWGR’s production
 
costs for fiscal
 
year 2021 (2020:
 
22%). As of June
 
30,
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.
 
In recent
 
years, labor
 
laws in South
 
Africa have
 
changed in
 
ways that
 
significantly
 
affect our
 
operations.
 
In particular,
 
laws that
 
provide
for mandatory
 
compensation
 
in the event
 
of termination
 
of employment
 
for operational
 
reasons and
 
that impose
 
large monetary
 
penalties for
 
non-
compliance with the administrative
 
and reporting requirements of affirmative action
 
policies could result in significant costs to us. In addition,
future South
 
African
 
legislation
 
and regulations
 
relating
 
to labor
 
may further
 
increase
 
our costs
 
or alter
 
our relationship
 
with our
 
employees.
 
Labor
cost increases
 
could have
 
an adverse
 
effect on our
 
business,
 
operating results
 
and financial
 
condition.
 
 
Labor unrest
 
could affect
 
production.
 
During December 2018 to April 2019 there was strike action by staff
 
at the Sibanye-Stillwater gold mines adjacent to FWGR.
 
Such
events at
 
our operations
 
or at our reclamation
 
sites could
 
have an adverse
 
effect on our
 
business,
 
operating results
 
and financial
 
condition.
 
We use a
 
third
 
party service
 
provider
 
for the
 
management
 
of our
 
reclamation
 
sites
 
as well
 
as on
 
our Brakpan/Withok
 
TSF and
 
Driefontein
4 TSF.
 
Any labor
 
unrest or other
 
significant
 
issue at
 
this third
 
party service
 
provider may
 
impact the
 
operation of
 
this facility.
 
 
Strike action and
 
intimidation at mining
 
operations adjacent to our
 
FWGR mining operations
 
could have
 
an adverse
 
effect on
 
our
business,
 
operating results
 
and financial
 
condition.
 
Our financial flexibility could be materially constrained by South African currency restrictions.
South African law provides for exchange control regulations, which restrict the export of capital from South Africa, the Republic of
Namibia, and the
 
Kingdoms of Lesotho
 
and Eswatini, known
 
collectively as the
 
Common Monetary Area
 
(the “
CMA
”). The Exchange
 
Control
Department of the South African Reserve Bank, or SARB, is responsible for the administration of exchange control regulations. In particular,
South African companies:
are generally not permitted to export capital from South Africa or to hold foreign currency without the approval of the SARB;
are generally required to repatriate, to South Africa, profits of foreign operations; and
are limited in their ability to utilize profits of one foreign business to finance operations of a different foreign business.
 
While the
 
South African
 
Government has
 
relaxed exchange
 
controls in
 
recent years,
 
South African
 
companies remain
 
subject to
restrictions on their ability to deploy capital outside of the CMA and it is difficult to predict whether such relaxation of controls will
 
continue
in
 
the
 
future.
 
As
 
a
 
result,
 
DRDGOLD’s
 
ability
 
to
 
raise
 
and deploy
 
capital
 
outside
 
the
 
CMA
 
is
 
restricted.
 
These
 
restrictions
 
could
 
hinder
DRDGOLD’s
 
financial
 
and
 
strategic
 
flexibility,
 
particularly
 
its
 
ability
 
to
 
fund
 
acquisitions,
 
capital
 
expenditures
 
and
 
exploration
 
projects
outside South Africa. For further information see Item 10D. Exchange Controls.
We
 
could be adversely affected
 
by violations of
 
the U.S. Foreign Corrupt
 
Practices Act and
 
similar anti-bribery laws outside
 
of
the United States.
 
21
 
The U.S. Foreign
 
Corrupt Practices
 
Act, or the FCPA, and similar
 
anti-bribery laws
 
in other jurisdictions
 
generally prohibit
 
companies
and their
 
intermediaries
 
from
 
making improper
 
payments
 
to government
 
officials
 
or other
 
persons
 
for the
 
purpose
 
of obtaining
 
or retaining
 
business.
This includes
 
aggressive
 
investigations
 
and enforcement
 
proceedings
 
by both the
 
U.S. Department
 
of Justice
 
and the SEC,
 
increased
 
enforcement
activity by
 
non-
 
U.S. regulators,
 
and increases
 
in criminal
 
and civil proceedings
 
brought against
 
companies
 
and individuals.
 
Our policies
 
mandate
compliance
 
with the FCPA and other applicable
 
anti-bribery laws.
 
Our internal control
 
policies and procedures
 
may not protect us from
 
reckless
or criminal
 
acts committed
 
by our employees,
 
the employees
 
of any of
 
our businesses,
 
or third
 
party intermediaries.
 
In the event
 
that we
 
believe or
have reason to believe that our employees or agents have
 
or may have violated applicable anti-corruption
 
laws, including the FCPA, we would
investigate or have outside
 
counsel investigate the relevant facts and
 
circumstances, which can be expensive and
 
require significant time and
attention
 
from senior
 
management.
 
Violations of
 
these laws
 
may result
 
in criminal
 
or civil
 
sanctions,
 
inability
 
to do
 
business
 
with existing
 
or future
business partners
 
(either as a result of express prohibitions
 
or to avoid the appearance of impropriety),
 
injunctions against
 
future conduct, profit
disgorgements,
 
disqualifications
 
from directly
 
or indirectly
 
engaging in
 
certain
 
types of
 
businesses,
 
the loss of
 
business
 
permits,
 
reputational
 
harm
or other restrictions
 
which could
 
disrupt our
 
business and
 
have a material
 
adverse effect
 
on our business,
 
financial
 
condition, results
 
of operations
or liquidity.
 
 
We face risks with respect to compliance with
 
the FCPA and similar anti-bribery laws through
 
our acquisition of new companies
 
and
the due diligence
 
we perform in connection
 
with an acquisition
 
may not be sufficient
 
to enable us fully to assess
 
an acquired company’s historic
compliance
 
with applicable
 
regulations.
 
Furthermore,
 
as we make acquisitions
 
such as the acquisition
 
of FWGR, our post-acquisition
 
integration
efforts may
 
not be
 
adequate
 
to ensure
 
our system
 
of internal
 
controls
 
and procedures
 
are fully
 
adopted and
 
adhered
 
to by
 
acquired
 
entities,
 
resulting
in increased
 
risks of non-compliance
 
with applicable
 
anti-bribery
 
laws.
 
Risks related to ownership of our ordinary shares or ADSs
 
 
It may
 
not be
 
possible for
 
you to
 
effect service
 
of legal
 
process, enforce
 
judgments of
 
courts outside
 
of South
 
Africa or
 
bring
actions based on securities laws of jurisdictions other than South Africa against us or against members of our board.
Our Company,
 
certain members
 
of our
 
board of
 
directors and
 
executive officers
 
are residents
 
of South
 
Africa. All
 
our assets
 
are
located outside the United States and a major portion with
 
respect to the assets of members of our board
 
of directors and executive officers are
either wholly or
 
substantially located outside
 
the United States.
 
As a result,
 
it may not
 
be possible for
 
you to effect
 
service of legal
 
process,
within the United States or elsewhere including in South Africa, upon most of
 
our directors or officers, including matters arising under United
States federal securities laws or applicable United States state securities laws.
 
Moreover,
 
it may
 
not be
 
possible for
 
you to
 
enforce against
 
us or
 
the members
 
of our
 
board of
 
directors and
 
executive officers’
judgments obtained in courts outside South Africa, including the United States, based on the civil liability provisions of the securities laws of
those countries, including
 
those of the
 
United States. A foreign judgment is not directly enforceable
 
in South Africa, but constitutes
 
a cause of
action which
 
will be enforced
 
by South African
 
courts provided
 
that:
 
the court which
 
pronounced the
 
judgment had
 
jurisdiction
 
to entertain
 
the case according
 
to the principles
 
recognized by
 
South African
law with reference
 
to the jurisdiction
 
of foreign
 
courts;
 
the judgment
 
is final and
 
conclusive
 
(that is,
 
it cannot be
 
altered by
 
the court which
 
pronounced
 
it);
 
the judgment
 
has not lapsed;
 
the recognition
 
and enforcement
 
of the judgment
 
by South African
 
courts would
 
not be contrary
 
to public
 
policy, including
 
observance
of the rules
 
of natural
 
justice which
 
require that
 
no award
 
is enforceable
 
unless the
 
defendant
 
was duly
 
served with
 
documents initiating
proceedings,
 
that he
 
was given
 
a fair
 
opportunity
 
to be heard
 
and that
 
he enjoyed
 
the right
 
to be legally
 
represented
 
in a free
 
and fair
 
trial
before an
 
impartial
 
tribunal;
 
the judgment
 
was not obtained
 
by fraudulent
 
means;
 
the judgment
 
does not involve
 
the enforcement
 
of a penal
 
or revenue
 
law; and
the enforcement
 
of the judgment
 
is not otherwise
 
precluded by
 
the provisions
 
of the Protection
 
of Business
 
Act, 1978 (as
 
amended), of
South Africa.
 
It is
 
the policy
 
of South
 
African
 
courts to
 
award compensation
 
for the
 
loss or
 
damage sustained
 
by the
 
person to
 
whom the
 
compensation
is awarded.
 
Although the
 
award of punitive
 
damages is
 
generally unknown
 
to the South
 
African legal
 
system that
 
does not mean
 
that such
 
awards
are necessarily
 
contrary to
 
public policy.
 
Whether a
 
judgment was
 
contrary to
 
public policy
 
depends on
 
the facts
 
of
 
each case.
 
Exorbitant,
unconscionable, or excessive
 
awards will generally be contrary to public policy. South African courts cannot enter into the merits of
 
a foreign
judgment and cannot
 
act as a court of appeal
 
or review over the
 
foreign court.
 
South African
 
courts will usually
 
implement their
 
own procedural
laws and,
 
where an
 
action based
 
on an international
 
contract
 
is brought
 
before a
 
South African
 
court, the
 
capacity
 
of the parties
 
to the contract
 
will
usually be
 
determined
 
in accordance
 
with South African
 
law.
 
 
It is doubtful whether
 
an original action
 
based on United States
 
federal securities
 
laws may be brought before
 
South African courts.
 
A
plaintiff who is not
 
resident in South Africa may be
 
required to provide security for costs in the
 
event of proceedings being initiated in South
Africa. Furthermore,
 
the Rules of
 
the High Court
 
of South Africa
 
require that
 
documents
 
executed outside
 
South Africa
 
must be authenticated
 
for
use in South African courts.
 
It may not be
 
possible therefore for an
 
investor to seek
 
to impose liability on
 
us in a South
 
African court arising
from a violation of United States federal securities laws.
Dividend withholding tax will reduce the amount of dividends received by beneficial owners.
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
 
DRDGOLD
 
Limited, or
 
DRDGOLD, is
 
a
 
South
 
African domiciled
 
company
 
that
 
holds
 
assets engaged
 
in
 
surface gold
 
tailings
retreatment
 
in South Africa
 
including exploration,
 
extraction,
 
processing
 
and smelting.
 
 
 
We are a public limited liability company, incorporated
 
in South Africa on February
 
16, 1895, as Durban Roodepoort Deep,
 
Limited.
On December 3, 2004,
 
the company changed
 
its name from Durban
 
Roodepoort Deep
 
Limited to DRDGOLD
 
Limited. Our operations
 
focus on
South Africa's
 
Witwatersrand Basin,
 
which has
 
been a gold
 
producing
 
region for
 
over 120 years.
 
 
Our shares
 
and/or related
 
instruments
 
trade on the
 
Johannesburg
 
Stock Exchange
 
(“
JSE
”),
 
and the New
 
York Stock Exchange.
 
Our registered office and
 
business address is Constantia Office
 
Park,
 
Cnr 14th
 
Avenue and
 
Hendrik Potgieter Road,
 
Cycad House,
Building 17, Ground Floor,
 
Weltevreden Park,
 
1709,
 
South Africa. The postal address is
 
P.O. Box
 
390, Maraisburg, 1700, South Africa. Our
telephone number is (+27
 
11) 470-2600 and our facsimile number
 
is (+27 86) 524-3061. We are registered under the South African
 
Companies
Act 71, 2008 under registration number
 
1895/000926/06. For our ADSs,
 
the Bank of New York
 
Mellon, at 101 Barclay Street,
 
New York,
 
NY
10286, United
 
States, has
 
been appointed
 
as agent.
The SEC maintains
 
an internet
 
site that contains
 
reports, proxy
 
and information
 
statements
 
and other information
 
regarding issuers
 
that
file electronically with the SEC, which can be found
 
at http://www.sec.gov. Our internet address is http://www.drdgold.com.
 
The information
contained on
 
our website
 
is not incorporated
 
by reference
 
and does not
 
form part
 
of this annual
 
report.
 
All of our
 
operations
 
are conducted
 
in South Africa.
 
Our
 
operations primarily
 
consist
 
of
 
Ergo
 
and
 
FWGR.
 
Our
 
Ergo
 
operations include
 
the
 
historic
 
Crown
 
operations (which
 
were
restructured
 
into Ergo during fiscal
 
year 2012 and have substantially
 
been rehabilitated
 
as at the end of fiscal year
 
2018).
 
East Rand Proprietary
Mines
 
Limited's
 
(“
ERPM
”)
 
underground
 
mining
 
infrastructure was
 
under
 
care
 
and
 
maintenance up
 
to
 
reporting
 
date
 
at
 
which
 
date
 
the
23
decommissioning
 
and rehabilitation
 
of the last
 
remining underground
 
mining infrastructure
 
was completed.
Ergo
 
Ergo was formed
 
in June 2007. Ergo is the surface tailings retreatment operation which consists
 
of what was historically the Crown
Gold Recoveries
 
Proprietary
 
Limited (“
Crown
”), ERPM
 
Cason Dump
 
operation
 
and
 
the 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.
 
Capital expenditure for the
 
Ergo projects is
 
mainly financed through
 
operational cash flows while
 
financing for significant growth
projects may
 
be obtained
 
through specific
 
financing arrangements
 
if required.
 
Brakpan/Withok TSF expansion
 
 
To extend the life of our Ergo operation, it is necessary to increase residue tailings deposition capacity at our Brakpan/Withok TSF.
 
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
 
On July 31, 2018, we acquired certain gold surface processing assets and tailing storage facilities that included Driefontein 3 and 5,
Kloof 1,
 
Venterspost
 
North and
 
South, Libanon,
 
Driefontein 4,
 
Driefontein 2
 
plant, Driefontein
 
3 plant,
 
WRTRP
 
pilot plant,
 
and the
 
land
owned by Sibanye-Stillwater that was earmarked for the
 
future development of a central processing plant,
 
regional tailings storage facility and
return
 
water
 
dam
 
(together,
 
the
 
WRTRP
 
Assets
”)
 
associated
 
with
 
Sibanye-Stillwater’s
 
WRTRP,
 
subsequently
 
renamed
 
FWGR.
 
This
acquisition represented a significant
 
increase in our assets, which
 
impacted our results in
 
fiscal 2019, 2020 and
 
2021. In connection with
 
the
acquisition, we
 
issued to
 
Sibanye-Stillwater new
 
shares equal
 
to 38.05%
 
of outstanding
 
shares and
 
granted Sibanye-Stillwater
 
an option
 
to
acquire up to a total
 
of 50.1% of our shares
 
within a
 
period of
 
2 years
 
from the
 
effective
 
date of
 
the acquisition
 
at a
 
10% discount
 
to the
 
prevailing
market value.
 
On January 8,
 
2020, Sibanye-Stillwater exercised the
 
option and on
 
January 22, 2020 subscribed
 
for 168,158,944 DRDGOLD
shares at an aggregate subscription price of R1,086 million, (R6.46 per DRDGOLD share).
The assets acquired are to be developed in two phases – Phase 1 and Phase 2.
 
FWGR Phase 1
Phase 1
 
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
 
ERPM was
 
acquired
 
in October,
 
2002 and
 
consists
 
of an
 
underground
 
mine which
 
has been
 
under care
 
and maintenance
 
since fiscal
 
year
2009. Underground mining
 
at ERPM was halted in October
 
2008. On July 1, 2012, ERPM sold its
 
surface mining
 
assets and its 65% interest
 
in
ErgoGold to Ergo
 
in exchange
 
for shares
 
in Ergo as part
 
of the restructuring
 
of our surface
 
operations.
 
 
In December
 
2018,
 
ERPM concluded
 
revised agreements
 
to dispose certain
 
of its underground
 
assets to OroTree
 
Limited (“
Orotree
”).
The disposal of the
 
underground mining and prospecting rights were concluded in
 
the second half of
 
the financial year ended June
 
30, 2019.
Orotree did
 
not exercise
 
an option to
 
purchase the
 
underground mining
 
infrastructure.
 
25
 
In fiscal
 
2021, ERPM
 
completed
 
the decommissioning
 
and rehabilitation
 
of the
 
last remaining
 
underground
 
mining infrastructure,
 
being
the Far East
 
Vertical Shaft.
Crown
 
 
Crown was
 
acquired
 
on September
 
14, 1998.
 
Due to the
 
depletion
 
of ore
 
reserves
 
in the western
 
Witwatersrand,
 
the Crown
 
plant ceased
operation in
 
March 2017.
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.
 
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-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.
 
On July 31,
 
2018, we acquired
 
the gold assets
 
associated with Sibanye-Stillwater’s
 
WRTRP,
 
subsequently renamed FWGR.
 
This
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
 
Surface tailings
 
retreatment
 
involves the
 
extraction
 
of gold from
 
old mine dumps
 
and slimes
 
dams,
 
comprising
 
the waste material
 
from
earlier
 
underground
 
gold mining
 
activities.
 
This is
 
done by
 
reprocessing
 
sand dumps
 
and slimes
 
dams.
 
Sand dumps
 
are the
 
result
 
of the
 
less efficient
stamp-milling
 
process employed
 
in earlier
 
times. They
 
consist of coarse-grained
 
particles which
 
generally contain
 
higher quantities
 
of gold. Sand
dumps are reclaimed
 
mechanically
 
using front
 
end loaders
 
that load sand
 
onto conveyor
 
belts. The
 
sand is fed
 
onto a screen
 
where water
 
is added
to wash the sand into a sump, from where it is pumped to the plant. Most sand dumps have already been retreated using more efficient milling
methods.
 
Lower
 
grade slimes
 
dams were
 
the product
 
of the
 
“tube
 
and ball
 
mill”
 
recovery
 
process.
 
The economic
 
viability
 
of processing
 
this material
has improved due to improved treatment
 
methods such as the treatment
 
of large volumes of this material.
 
The material from the slimes dams is
broken down using
 
monitor guns
 
that spray jets
 
of high pressure
 
water at the target
 
area. The resulting
 
slurry is then
 
pumped to a treatment
 
plant
for processing.
Exploration
 
Exploration activities
 
are focused on the extension
 
of existing ore reserves
 
and identification
 
of new ore reserves both
 
at existing sites
and at undeveloped
 
sites. Once a potential
 
site has been identified,
 
exploration is extended
 
and intensified
 
in order to enable clearer
 
definition of
the site
 
and the
 
portions with
 
the
 
potential to
 
be
 
mined. Geological techniques
 
are
 
constantly refined to
 
improve the
 
economic viability
 
of
exploration
 
and exploitation.
 
Our Metallurgical
 
Plants and
 
Processes
 
A detailed
 
review of the
 
metallurgical
 
plants and
 
processes is
 
provided under
 
Item 4D.
 
Property, Plant and
 
Equipment.
Gold Market
 
The gold market
 
is relatively
 
liquid compared
 
to other commodity
 
markets, and
 
the price of
 
gold is quoted
 
in dollars. Physical
 
demand
for gold is primarily
 
for manufacturing
 
purposes,
 
and gold is traded
 
on a world-wide
 
basis. Refined
 
gold has a variety
 
of uses, including
 
jewelry,
electronics,
 
dentistry, decorations,
 
medals and official
 
coins. In addition,
 
central banks,
 
financial
 
institutions
 
and private individuals
 
buy, sell and
hold gold bullion
 
as an investment
 
and as a store
 
of value.
The use
 
of gold
 
as a store
 
of value
 
and the
 
large quantities
 
of gold
 
held for
 
this purpose
 
in relation
 
to annual
 
mine production
 
have meant
that historically the potential total supply of gold has been far greater than demand. Thus, while current supply and
 
demand play some part in
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.
 
Looking ahead we believe that the global economic environment
 
(particularly during
 
the COVID-19 pandemic), including
 
escalating
sovereign
 
and personal
 
levels
 
of debt,
 
economic
 
volatility
 
and the
 
oversupply
 
of foreign
 
currency, will
 
continue
 
to make
 
gold attractive
 
to investors.
The supply
 
of gold
 
has shrunk
 
in recent
 
years and
 
is likely
 
to shrink
 
even more
 
due to
 
the significantly
 
reduced
 
capital
 
expenditure
 
and development
occurring in the sector.
 
We believe that this, coupled with
 
global economic
 
uncertainty, is likely to provide
 
support to the gold
 
price in the long
term.
 
 
All gold
 
we produce
 
is sold
 
on our
 
behalf
 
by Rand
 
Refinery
 
Proprietary
 
Limited
 
(Rand
 
Refinery)
 
in accordance
 
with a
 
refining
 
agreement
entered into
 
in October
 
2001 and updated
 
in July
 
2018.
 
The 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.
 
 
The pay-limit approach
 
is based on the minimum in-situ
 
grade of reclamation
 
sites, for which the
 
production costs,
 
which includes all
overhead costs,
 
including head
 
office charges,
 
are equal to a
 
three-year historical
 
average gold
 
price per ounce
 
for that year. This
 
calculation
 
also
considers
 
the previous
 
three 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.
 
 
When delineating
 
the economic
 
limits to the
 
ore bodies,
 
we adhere
 
to the following
 
guidelines:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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.
 
 
Our Ore Reserves figures are estimates,
 
which may not reflect actual ore reserves or future production.
 
These figures are prepared in
accordance with industry practice, converting mineral deposits to an Ore
 
Reserve through the preparation of a
 
mining plan. The Ore
 
Reserve
estimates contained
 
herein inherently 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.
 
 
Our Ore
 
Reserves are prepared
 
using three-year average
 
rand gold prices.
 
We
 
prepare business plans
 
using the
 
forecast rand gold
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
 
Tons
 
 
Grade
 
 
Gold
Content
 
 
Tons
 
 
Grade
 
 
Gold
Content
 
 
Tons
 
 
Grade
 
 
Gold
Content
 
 
Tons
 
 
Grade
 
 
Gold
Content
 
 
(mill)
 
(oz/ton)
 
 
('m ozs)
 
(mill)
 
(oz/ton)
 
 
('000 ozs)
 
 
(mill)
 
(oz/ton)
 
 
('m ozs)
 
 
(mill)
 
 
(oz/ton)
 
 
('000 ozs)
 
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
 
 
Ergo's disclosed Costs used to determine pay-limit grade (R/t), for 30 June 2020, has been updated to reflect the correct amount.
 
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
 
Prior to the introduction
 
of the Minerals
 
and Petroleum Resources
 
Development Act,
 
or MPRDA in 2002,
 
ownership in mineral
 
rights
in South Africa
 
could be acquired
 
through the common
 
law or by statute.
 
With effect from May
 
1, 2004, all minerals
 
have been placed
 
under the
custodianship
 
of the
 
South African
 
government
 
under the
 
provisions
 
of the
 
MPRDA and
 
old order
 
proprietary
 
rights were
 
required
 
to be
 
converted
to new order rights
 
of use within certain
 
prescribed periods,
 
as dealt with in more
 
detail below. Mine dumps
 
created
 
before the MPRDA
 
became
law fall outside the
 
MPRDA and do
 
not require a
 
mining license to be
 
processed nor do
 
they require the extensive rehabilitation and closure
guarantees that are
 
a feature
 
of the
 
MPRDA. Many
 
of the
 
activities to re-process a
 
mine dump
 
do fall
 
under the
 
provisions of the
 
National
Environmental
 
Management
 
Act though,
 
which requires
 
at it most
 
basic the
 
compilation
 
and submission
 
of an Environmental
 
Impact Assessment.
Conversion
 
and renewal of
 
Rights under
 
the Mineral
 
and Petroleum
 
Resources Development
 
Act, 2002
 
Existing old
 
order rights
 
were required
 
to be converted
 
into new
 
order rights
 
in order
 
to ensure
 
exclusive
 
access to
 
the mineral
 
for which
rights existed
 
at the time
 
of the enactment
 
of the MPRDA.
 
In respect
 
of used old
 
order mining
 
rights, the
 
DMRE
 
is obliged
 
to convert
 
the rights
 
if
the applicant complies
 
with certain
 
statutory criteria. These include
 
the submission of
 
a mining
 
works program, demonstrable technical and
financial capability
 
to give effect to the
 
program, provision
 
for environmental
 
management and
 
rehabilitation,
 
and compliance
 
with certain black
economic
 
empowerment
 
criteria
 
and a social
 
and labor
 
plan. These
 
applications
 
had to be
 
submitted
 
within five
 
years after
 
the promulgation
 
of the
MPRDA
 
on May
 
1, 2004.
 
Similar
 
procedures
 
apply
 
where
 
we hold
 
prospecting
 
rights
 
and a
 
prospecting
 
permit
 
and conduct
 
prospecting
 
operations.
Under the
 
MPRDA mining
 
rights are
 
not perpetual,
 
but endure
 
for a fixed
 
period, namely
 
a maximum
 
period of
 
thirty years,
 
after which
 
they may
be renewed for
 
a further period of
 
thirty years. Prospecting rights are limited to
 
five years, with one
 
further period of renewal of
 
three years.
Applications for conversion of our
 
old order
 
rights were submitted to
 
the DMRE
 
within the requisite time
 
periods. As at
 
June 30,
 
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
 
In order to promote broad based participation in mining revenue, the MPRDA provides
 
for a Mining Charter to be developed by the
MRE Minister
 
within six
 
months
 
of commencement
 
of the
 
MPRDA beginning
 
May 1,
 
2004. 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.
 
 
The Mining Charter and the related
 
scorecard are not legally
 
binding and, instead,
 
simply state a public policy. However, the DMRE
places significant
 
emphasis on the
 
compliance
 
therewith. The
 
Mining Charter
 
and scorecard
 
have a decisive
 
effect on administrative
 
action taken
under the MPRDA.
 
 
In recognition of the Mining
 
Charter’s objectives of
 
transforming the mining
 
industry by increasing the
 
number of black people
 
in
the industry
 
to reflect
 
the country’s
 
population demographics,
 
to empower
 
and enable
 
them to
 
meaningfully participate
 
in and
 
sustain the
growth of the
 
economy, thereby advancing equal
 
opportunity and equitable
 
income distribution, we
 
have
 
achieved
 
our commitment
 
to ownership
compliance
 
with the MPRDA
 
through our historic
 
black economic
 
empowerment
 
structures
 
which have
 
subsequently
 
unwound.
 
The mining
 
industry in
 
South Africa
 
is extensively
 
regulated
 
through legislation
 
and regulations
 
issued by government’s
 
administrative
bodies. These involve
 
directives with respect
 
to health
 
and safety,
 
mining and
 
exploration of
 
minerals, and
 
managing the
 
impact of
 
mining
operations
 
on the environment.
 
A change
 
in regulatory
 
or government
 
policies could
 
adversely
 
affect our business.
 
On June
 
15, 2017, the
 
Reviewed Broad-Based Black Economic Empowerment Charter for the South
 
African Mining and Minerals
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)
 
 
For new
 
mining
 
rights
 
to be
 
issued,
 
the provision
 
for 1%
 
of Earnings
 
Before
 
Interest,
 
Taxes, Depreciation
 
and Amortisation
 
(“
EBITDA
”)
is paid to
 
communities
 
and employees
 
as a trickle
 
dividend from
 
the sixth year
 
of a mining
 
right until
 
dividends
 
are declared
 
or at any point
 
in a
12-month period
 
where dividends
 
are not declared
 
On February
 
2016, The President
 
of South Africa
 
announced that
 
a new mining charter
 
would be developed,
 
and will follow
 
a process
which includes
 
all stakeholders.
 
The Minerals
 
Council of
 
South Africa
 
subsequently
 
postponed
 
its application
 
in the
 
High Court
 
in respect
 
of the
2017 Mining
 
Charter.
 
 
On September
 
27, 2018
 
the Broad-Based
 
Socio-Economic
 
Empowerment
 
Charter
 
for the
 
Mining and
 
Minerals
 
Industry, 2018
 
(“
Mining
Charter 2018
”) was
 
published in
 
Government Gazette No.
 
41934 of
 
Government Notice No.
 
639 on
 
September 27,
 
2018 superseding and
replacing
 
all previous
 
charters,
 
including Mining
 
Charter III.
 
 
Mining Charter
 
2018 requires
 
an enduring
 
30% BEE interest
 
in respect
 
of new mining
 
rights. It
 
also has extensive
 
provisions in
 
respect
of HDP representation
 
at board and management,
 
as well provisions
 
relating to
 
local procurement
 
of goods and services.
 
The procurement
 
target
of the total
 
spend on services
 
from South African
 
companies has
 
been set at 80% (up
 
from 70% in Mining
 
Charter III)
 
and 60% of the aggregate
spend thereof
 
must be apportioned
 
to BEE entrepreneurs.
 
 
Key provisions
 
of Mining Charter
 
2018 are:
 
The conditional acceptance
 
of the continued consequences
 
of previous compliance
 
of the BEE ownership threshold
 
of 26% in respect
of existing
 
mining rights;
 
Of the 30%
 
HDP ownership
 
component, qualifying
 
employees
 
and communities
 
are each to
 
hold a 5% carried
 
interest (as
 
opposed to a
free carry interest
 
as per Mining Charter III)
 
the cost of which may be recovered
 
by the mining right holder from
 
the development of
the asset.
 
The community
 
interest
 
in turn may
 
be offset by
 
way of an
 
equity equivalent;
 
Removal of
 
the so-called
 
1% of EBITDA
 
trickle dividend
 
provided for
 
in the 2017
 
Mining Charter;
 
and
 
The removal
 
of provisions
 
requiring
 
community
 
and employee
 
representation
 
at board level.
 
that the continuing
 
consequences
 
of HDP ownership
 
are not recognized
 
for transfers
 
of mining rights;
 
and
 
 
that a top
 
up of HDP ownership
 
back to 30%
 
is required
 
for the renewal
 
of existing
 
rights.
 
 
Subsequently, several
 
notable developments
 
have occurred:
 
In March
 
2019, the
 
Mineral Council
 
of South Africa
 
brought an
 
application
 
in the High
 
Court, Pretoria
 
for a judicial
 
review and
 
setting
aside of certain
 
provisions in
 
Mining Charter
 
2018.
 
 
In June 2020, the
 
High Court ordered
 
the Minerals Council
 
of South Africa to join parties
 
representing
 
communities,
 
trade unions and
BEE entrepreneurs
 
as a prerequisite
 
to the continuation
 
of the lawsuit,
 
as they
 
have a
 
direct and
 
substantial
 
interest
 
in the outcome
 
of the litigation.
 
 
On September
 
21, 2021,
 
the High
 
Court of
 
South Africa
 
ruled that
 
the Mining
 
Charter
 
2018 is
 
not binding
 
subordinate
 
legislation
 
but an
instrument of policy. This ruling
 
affirmed that the MRE Minister
 
was not entitled to make
 
law through the Mining Charter
 
2018 to require 30%
HDP ownership
 
for the renewal
 
of existing
 
mining rights.
 
Mine Health
 
and Safety
 
Regulation
 
The South
 
African
 
Mine Health
 
and Safety
 
Act, 1996
 
(as amended),
 
or the
 
Mine Health
 
and Safety
 
Act, came
 
into effect
 
in January
 
1997.
The principal object
 
of the Mine Health and Safety
 
Act is to improve health
 
and safety at South African
 
mines and, to this end, imposes
 
various
duties on
 
us at our
 
mines and
 
grants the
 
authorities
 
broad powers
 
to, among
 
other things,
 
close unsafe
 
mines and
 
order corrective
 
action relating
 
to
health and safety matters.
 
In the event of any future accidents at any of our mines, regulatory authorities
 
could take steps which could increase
our costs and/or
 
reduce our production
 
capacity. The Act was
 
amended in 2009
 
and the
 
amendments to the
 
Act dealt with
inter alia
 
the stoppage
of production and
 
increase punitive measures
 
including increased financial
 
fines and legal
 
liability of mine
 
management. Some
 
of the more
important provisions in
 
the 2009 amendment bill
 
are the insertion of
 
section 50(7A) that obliges
 
an inspector to impose
 
a prohibition on
 
the
further functioning of a site where a person’s death, serious injury or
 
illness to a person or a health threatening
 
occurrence has occurred; a new
section 86A(1) creating a
 
new offence for any
 
person who contravenes or
 
fails to comply with
 
the provisions of the
 
Mine Health and Safety
Act thereby causing a
 
person’s death or
 
serious injury or illness to
 
a person. Subsection (3)
 
further provides that (a)
 
the “fact that the person
issued instructions prohibiting
 
the performance or
 
an omission is not
 
in itself sufficient
 
proof that all
 
reasonable steps were
 
taken to prevent
the performance or omission”; and that
 
(b) “the defense of ignorance or mistake by
 
any person accused cannot be permitted”; or that
 
(c) “the
defense that the death of a person, injury, illness or endangerment was caused by the performance or an omission of any individual within the
employ
 
of
 
the
 
employer
 
may
 
not
 
be
 
admitted”;
 
section
 
86A(2)
 
creating
 
an
 
offence
 
of
 
vicarious
 
liability
 
for
 
the
 
employer
 
where
 
a
 
Chief
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.
 
Under the South African Compensation
 
for Occupational Injuries
 
and Diseases Act, 1993 (as amended),
 
or COID Act, employers are
required to contribute
 
to a fund specifically
 
created for the
 
purpose of compensating
 
employees
 
or their dependents
 
for disability
 
or death arising
in the
 
course
 
of their
 
work.
 
Employees
 
who are
 
incapacitated
 
in the
 
course
 
of their
 
work have
 
no claim
 
for compensation
 
directly
 
from the
 
employer
and must
 
claim compensation
 
from the
 
COID Act
 
fund. Employees
 
are entitled
 
to compensation
 
without having
 
to prove
 
that the
 
injury or
 
disease
was caused by negligence
 
on the part of the employer, although
 
if negligence is involved,
 
increased compensation
 
may be payable by this fund.
The COID Act relieves employers of the prospect of costly damages, but does not relieve employers
 
from liability for negligent acts caused to
third parties outside
 
the scope of employment.
 
In fiscal year 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.
 
Under the Occupational
 
Diseases in Mines and
 
Works Act, 1973 (as amended), or the Occupational
 
Diseases Act, the multi-employer
fund pays compensation
 
to employees of mines
 
performing “risk
 
work,” usually in circumstances
 
where the employee
 
is exposed to dust, gases,
vapors, chemical
 
substances or other working
 
conditions which are
 
potentially harmful,
 
or if the employee contracts
 
a “compensatable
 
disease,”
which
 
includes
 
pneumoconiosis,
 
tuberculosis,
 
or a
 
permanent
 
obstruction
 
of the
 
airways.
 
No employee
 
is entitled
 
to benefits
 
under the
 
Occupational
Diseases
 
Act for
 
any disease
 
for which
 
compensation
 
has been
 
received or
 
is still
 
to be
 
received
 
under the
 
COID Act.
 
These payment
 
requirements
are based
 
on a combination
 
of the employee
 
costs and claims
 
made during the
 
fiscal year.
 
Uranium and radon are often
 
encountered during the
 
ordinary course of gold mining
 
operations in South Africa,
 
and present potential
risks for radiation exposure
 
of workers at those operations
 
and the public to radiation
 
in the nearby vicinity. We monitor our uranium and radon
emissions for compliance with
 
all local
 
laws and
 
regulations pertaining to
 
uranium and radon
 
management and under
 
the current
 
legislative
exposure limits prescribed for workers and
 
the public, under
 
the Nuclear Energy
 
Act, 1999
 
(as amended) and
 
Regulations from the National
Nuclear Regulator.
 
Environmental
 
Regulation
Managing the
 
impact of mining
 
on the environment
 
is extensively
 
regulated by
 
statute in
 
South Africa.
 
Recent statutory
 
enactments
 
set
compliance
 
standards both
 
generally, in the
 
case of the
 
National Environmental
 
Management
 
Act, and in
 
respect of
 
specific areas
 
of environment
impact, as
 
in the case
 
of the Air Quality
 
Act 2004, the
 
National Water Act
 
(managing effluent),
 
and the Nuclear
 
Regulator
 
Act 1999. Liability
 
for
environmental damage is also extended to
 
impose personal liability on
 
managers and directors of
 
mining corporations that are found
 
to have
violated applicable
 
laws.
The impact
 
on the environment
 
by mining operations
 
is extensively
 
regulated
 
by the MPRDA.
 
The MPRDA
 
has onerous
 
provisions
 
for
personal liability
 
of directors
 
of companies
 
whose mining
 
operations
 
have an unacceptable
 
impact on the
 
environment.
Mining
 
companies are
 
also
 
required to
 
demonstrate both
 
the
 
technical and
 
financial ability
 
to
 
sustain an
 
ongoing environmental
management program,
 
or EMP,
 
and achieve ultimate rehabilitation,
 
the particulars of which are to be incorporated in an EMP. This program is
required to
 
be submitted
 
and approved
 
by the DMRE
 
as a prerequisite
 
for the issue
 
of a new order
 
mining right.
 
Various funding mechanisms
 
are
in place,
 
including trust
 
funds, guarantees
 
and concurrent
 
rehabilitation
 
budgets, to
 
fund the rehabilitation
 
liability.
The MPRDA
 
imposes specific,
 
ongoing environmental
 
monitoring and
 
financial
 
reporting obligations
 
on the holders
 
of mining rights.
 
We
 
believe that
 
our
 
environmental risks
 
have
 
been
 
addressed in
 
EMPs
 
which
 
have
 
been
 
submitted to
 
the
 
DMRE
 
for
 
approval.
Additionally, key environmental issues
 
have been prioritized and are being addressed through active management
 
input and support as well as
progress measured
 
in terms of
 
activity schedules
 
and timescales
 
determined for
 
each activity.
 
 
Our existing
 
reporting and
 
controls
 
framework
 
is consistent
 
with the additional
 
reporting and
 
assessment
 
requirements
 
of the MPRDA.
 
 
Financial Provision
 
for Rehabilitation
 
We are required to make
 
financial provision
 
for the cost
 
of mine closure
 
and post-closure
 
rehabilitation,
 
including monitoring
 
once the
mining operations
 
cease. 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.
 
 
Whereas the old Minerals
 
Act allowed for the
 
establishment
 
of a fully funded rehabilitation
 
fund over the operational
 
life of mine, the
MPRDA assumes
 
a fully compliant fund
 
at any given time.
 
Insurance instruments
 
may also be utilized
 
to make up the shortfall
 
in available
 
cash
DRD20210630P36I1.GIF DRD20210630P36I0.GIF
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.
 
The provision
 
for environmental
 
rehabilitation
 
for the group was
 
R570.8 million
 
at June 30, 2021,
 
compared to
 
R568.9 million
 
at June
30, 2020.
 
New
 
Financial Provisioning
 
Regulations (“
FPR
”)
 
were
 
promulgated on
 
November 20,
 
2015
 
under
 
the
 
National
 
Environmental
Management Act, 107
 
of 1998
 
(“
NEMA
”) by
 
the Department of
 
Forestry, Fisheries and
 
the Environment (“
DFFE
”).
 
Under the
 
FPRs to
 
be
implemented
 
by the
 
DMRE, existing
 
environmental
 
rehabilitation
 
trust funds,
 
of which
 
DRDGOLD
 
has 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.
 
Several further proposed amendments to
 
the FPRs,
 
(“
Proposed Amendments
”) were
 
published subsequently.
 
The latest
 
Proposed
Amendments
 
were published
 
in August
 
2021 which,
inter alia
, extends
 
the compliance
 
with these
 
regulations
 
to three
 
months following
 
the fiscal
year end June
 
30, 2022.
 
 
The Proposed Amendments,
 
in their current form and which are still subject
 
to the approval of the DMRE and Treasury, allow under
certain circumstances for the withdrawal against financial
 
provision (which is currently not contemplated in the FPR). It is
 
therefore uncertain
whether these
 
provisions relating
 
to withdrawal
 
will remain
 
in their current
 
form, or at
 
all.
 
 
Regulation 5(4) of the Proposed Amendments
 
states that the determination of financial provision
 
must be undertaken by a specialist,
which according to the definitions
 
listed in the Proposed Amendments
 
is an “independent person”.
 
Regulation 10 of the Proposed Amendments
further requires
 
the annual review and re-assessment
 
of financial provision
 
by an independent specialist,
 
which in terms of Regulation
 
11 of the
Proposed Amendments
 
must also be
 
audited by an
 
independent
 
auditor. The Proposed
 
Amendments
 
do not require
 
that the annual
 
review and re-
assessment
 
of financial
 
provision be
 
audited by a
 
financial
 
auditor.
4C. ORGANIZATIONAL
 
STRUCTURE
The
 
following chart
 
shows our
 
principal subsidiaries as
 
of
 
June 30,
 
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
 
We
 
own 100%
 
of Ergo.
 
Ergo is
 
a surface tailings
 
retreatment operation operating
 
across central and east Johannesburg.
 
In order to
improve synergies,
 
effect cost savings and establish
 
a simpler group structure,
 
DRDGOLD restructured
 
the Group’s surface operations
 
(Crown,
ERPM’s
 
Cason
 
Dump
 
surface
 
operation
 
and
 
ErgoGold) into
 
Ergo
 
with effect
 
from
 
July 1,
 
2012. 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
 
The Ergo plant is
 
located approximately
 
43 miles (70
 
kilometers)
 
east of the Johannesburg’s
 
central business
 
district in the
 
province of
Gauteng on
 
land owned
 
by Ergo. Access
 
to the Ergo plant
 
is via the
 
Ergo Road on the
 
N17 Johannesburg-Springs
 
motorway.
 
 
Following the
 
restructuring
 
of the
 
Crown operations,
 
which consisted
 
of three
 
separate
 
locations,
 
City Deep,
 
Crown Mines
 
and Knights,
into a single
 
surface retreatment
 
operation in
 
Ergo,
 
these mining
 
rights were
 
transferred
 
to Ergo in March
 
2014.
 
Our ore
 
reserves
 
in the
 
western
 
Witwatersrand
 
had become
 
depleted.
 
We therefore
 
took a
 
decision
 
to close
 
the Crown
 
Mines plant
 
which
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.
 
The City Deep operation is located on the West Wits line within the Central Goldfields of the Witwatersrand
 
Basin, approximately
 
3
miles (5 kilometers)
 
south-east
 
of the Johannesburg
 
central business
 
district in
 
the province
 
of Gauteng.
 
Access is
 
via the Heidelberg
 
Road on the
M2 Johannesburg-Germiston
 
motorway. The City
 
Deep plant
 
continues to
 
operate as
 
a pump/milling
 
station feeding
 
the metallurgical
 
plants.
 
 
The Knights operation
 
is located at
 
Stanley and Knights
 
Road Germiston
 
off the R29 Main
 
Reef Road. The
 
Knights plant
 
continues to
operate as
 
a metallurgical
 
plant.
As of June
 
30, 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.
 
 
Our two gold producing metallurgical plants,