DRDGOLD Sustainable Development Report 2012 · 2020. 9. 24. · • DRDGOLD is a mid-tier, unhedged...

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environmental rehabilitation on Crown’s decommissioned Diepkloof tailings dam with the 3A2 sand reclamation site in the background

DRDGOLD Sustainable Development Report 2012 4

• DRDGOLDisamid-tier,unhedgedgoldproducer.

• Weareoneoftheworld’slargestgoldproducersfrom surface retreatment.

• DRDGOLDhasacurrentsurfacegoldresourceof 11 million ounces – sufficient to sustain operations for many years to come.


DRDGOLD is headquartered in Johannesburg and has its primary

listing on the JSE in South Africa. In FY2012, the company transferred

its secondary listing from NASDAQ to the New York Stock Exchange.

The company’s shares are also traded on the Marché Libre in Paris,

the Regulated Unofficial Market of the Frankfurt Stock Exchange,

the Berlin and Stuttgart over-the-counter markets, as well as

Euronext Brussels in the form of International Depository Receipts.

At the end of June 2012, the company had 385 383 767 shares in

issue and a market capitalisation of R2.1 billion (US$252.4 million).

The majority of DRDGOLD’s shareholders (54%) reside in the US,

South Africa (32%), UK and Europe (14%).

Our strategyDRDGOLD’s strategy is to enhance shareholder value by reducing

risk, controlling costs, managing margins and taking a disciplined

approach to growth in the highly competitive mining environment.

Key and specific among the company’s objectives are to:

• consolidate itspositionasaworld leader intheproductionof

gold from the retreatment of surface sand and slimes material

through its Ergo operation;

• realise value for shareholders from its remainingunderground

gold resources associated with the ERPM Extensions 1 and 2

exploration areas in South Africa; and

• establish, fromongoingjointventure(JV)explorationactivity,

the viability of alluvial and near-surface gold mining in

Zimbabwe.

An immediate priority is to extract as much gold as possible from

Ergo’s current 11Moz surface resource at the lowest possible

cost through:

• optimisationof existinghumancapital, plants, pump stations,

pipelines, deposition capacity and other infrastructure –

together, an unassailable advantage; and

• fast-track development, commissioning and build-up of

production from its new R250 million flotation/fine-grind circuit,

expected to increase gold recovery by between 16% to 20%.

Longer term, it is anticipated that the Ergo resource can also be

exploited for uranium, potentially through the addition of cost-

effective resin-in-pulp technology to the flotation/fine-grind circuit.

Our structureThe company holds a 74% interest in Ergo Mining Operations

Proprietary Limited (EMO). The balance is held by black economic

empowerment (BEE) partner Khumo Gold SPV Proprietary Limited

(Khumo Gold) (20%) and the DRDSA Empowerment Trust (6%),

ensuring that the company complies with the equity ownership

requirements of South African minerals legislation.

To improve synergies and save costs, the company created a

new strategic model and restructured its surface operations to

consolidate these operations into a single entity, Ergo Mining

Proprietary Limited (Ergo). Ergo and ERPM are wholly-owned by

EMO. The new structure came into full effect on 1 July 2012.

DRDGOLD is also a 50% partner in an early-stage gold exploration

project on Zimbabwe’s greenstone belt.

During FY2012, DRDGOLD disposed of its underground

operation, Blyvoor, to support its shift to becoming a surface

retreatment company.

Our value chainDRDGOLD is a very different kind of gold company. Sometimes

referred to as a gold “factory”, DRDGOLD is involved in the

retreatment of gold tailings or waste material above ground.

Our business

US 54%

South Africa 32%

Belgium 5%

Luxembourg 4%

United Kingdom 2%

Europe and other 3%

Geographical distribution of shareholders as at 30 June 2012

At the end of FY2012, the company employed 2 222 people (792 permanent employees and 1 430 contractors) and produced 232 353 ounces of gold generating R3 billion in revenue. Some R333.2 million was spent on capital projects.


Around Johannesburg, on the surface of the central, eastern and

western basins of the Witwatersrand, South Africa’s 140-year

mining history is still clearly evident. Mine dumps comprising the

waste material from earlier gold mining activities lie in an arc

around the city. These dumps – vast quantities of sand and slime

which also contain minute particles of gold – litter the landscape;

all created by mining companies that have, in most instances, long

since closed down.

These vast deposits not only occupy potentially valuable real estate

but they can also create nuisance dust for surrounding communities.

By processing these dumps and depositing the waste according to

an approved environmental management programme, DRDGOLD is

able to release the cleared land for use, and at the same time “clean

up” a potentially harmful environmental legacy.

DRDGOLD is in the unique position of owning the plant, pipeline

and deposition infrastructure, as well as the rights to mine many

of the dumps or reclamation sites surrounding Johannesburg. The

business achieves three important objectives for shareholders

and stakeholders:

• producingouncesandbringingpreviouslyunaccountedforgold

to account;

• removing old waste dumps and, in so doing, sources of dust

and, in some instances, contamination. The new waste material

created is deposited according to strict environmental, health

and safety guidelines; and

• returningprime land into theeconomyonce thedumpshave

been removed.

Results of the most recent research and development, conducted

in-house by DRDGOLD, promise to increase gold recovery yields

even further.

The retreated waste material yields gold bars of approximately

85% gold and 7% to 8% silver with the balance comprising

copper and other common elements. These bars are delivered to

Rand Refinery Proprietary Limited (Rand Refinery) where the silver

and other elements are removed and the gold is refined into troy

ounce bars (purified to 99.9%), meeting the standards of the

London Bullion Market Association (LBMA). On the same day as the

delivery takes place, Rand Refinery sells the gold. It does this on

behalf of DRDGOLD at the afternoon US$ price fixed by the London

Metal Exchange (LME). DRDGOLD has an interest in and plays an

active role in Rand Refinery, one of the world’s foremost refiners

and home of the Kruger Rand.

Engaging with our stakeholdersDRDGOLD understands that it has a responsibility to be a sustainable

business and must ensure that it reports relevant information

to stakeholders in a timely and transparent manner. As a group

DRDGOLD communicates extensively with all stakeholders –

internally and externally. These stakeholders include shareholders

and their investment advisers, employees, unions, communities,

government, regulators and non-governmental organisations.

Stakeholder engagement is addressed in more detail throughout

this report, particularly in the Engaging with our stakeholders

section on page 11 of this report.

Chizim Gold

EMO

DRDGOLD50% 74%

100% 100%

20%

6%

Ergo ERPM

Khumo Gold

DRDSA Empowerment Trust

Group structure


Our product

Remarkable and enduring goldGold is a remarkable precious metal with many uses. It is highly conductive, does not tarnish, is easy to work, can be drawn into wire and hammered into thin sheets, combined into alloys with many other metals, melted and cast into complicated shapes and has an alluring colour and lustre.

Throughout history, gold has been held in high esteem and seen as a symbol of enduring value. From the ancient pharaohs to Spanish explorers of the New World to modern European monarchies, gold has been used to symbolise power, beauty, purity and accomplishment. Today, we still turn to gold to make our wedding rings, Olympic medals, Oscars, money, religious icons and other

symbols of major importance.

South Africa and gold

South Africa has dominated the world’s gold mining industry for over a century. Since records of production were first collected in 1884, the South African gold mining sector has produced almost 52 000 tonnes of gold.

An estimated 40 000 tonnes of gold is still believed to be contained

below ground in the world renowned Witwatersrand basin – 8 000

to 10 000 tonnes of which are considered economically recoverable.

Two decades ago, South Africa was the leading global gold producer.

Today the country produces approximately a quarter of what it

did at its peak, having fallen behind China, Australia and the US.

South Africa and Russia are in close competition for fourth place.

Production has been cut back in recent years as mining depth has

increased and grades have declined, and as material input costs,

such as labour, steel and energy have increased significantly.

While South Africa’s gold production has steadily declined in recent

years, it remains one of the world’s most important producers and

repositories of gold.

Gold and its usesJewellery: The properties of gold make it perfect for manufacturing

jewellery; alloyed with other metals such as copper, silver and

platinum to increase durability. Some 70% of annual demand for

DRDGOLD is engaged in an expansive gold production process: exploration, surface retreatment, refining and rehabilitation. The company takes its responsibility towards its product very seriously in each area of the production process.

Gold recovered at ergo is purified at Rand Refinery. Photograph: Rand Refinery


gold is from the jewellery industry; making it far and away the

largest end-user of the precious metal.

investment and coins: Some 13% of the annual demand for gold

comprises investment in the form of bars and coins. Governments,

individuals and institutions hold gold investments in the convenient

form of bullion. Gold coins issued in specific weights are popular

among people who want to own small volumes of gold for investment.

The South African Mint Company Proprietary Limited also issues gold

coins as commemorative items and these coins have a collectable

and precious metal value.

electronics: The industrial sector accounts for some 11% of

annual demand for gold. The most important industrial use is the

manufacture of electronics. Electronic devices use very low voltages

and currents which are easily interrupted by corrosion or tarnish

at contact points. Gold is a highly efficient conductor that can

carry these tiny currents and remain corrosion free. A small amount

of gold is used in almost every sophisticated electronic device,

including cell phones, calculators and global positioning systems.

It is also used in television sets and computers.

Dentistry and medicine: Gold is used in dentistry because of its

superior performance and aesthetic appeal. It is also chemically

inert, non-allergenic and easy to work with.

Gold is used to treat a small number of medical conditions including

rheumatoid arthritis and certain cancers. Radioactive gold is used in

the diagnosis of cancer; injected in a colloidal solution that can be

tracked as a beta emitter as it passes through the body.

Aerospace: Gold is used extensively in every spacecraft launched

by the National Aeronautics and Space Administration in the US.

It is used in circuitry and parts of the spacecraft are fitted with gold-

coated polyester film which reflects infrared radiation and hence

stabilises the spacecraft’s temperature.

Responsible goldGold is a benign metal and there are few, if any, health and safety

impacts associated with the final product. Gold is seldom wasted

because it is precious and basically indestructible and lends

itself to recycling.

DRDGOLD does not produce the final product of a gold bar

of 99.9% purity. DRDGOLD produces doré bars which are

approximately 85% pure. These doré bars are then further refined at

Rand Refinery to achieve the 99.99% purity required by the LBMA.

Most of the fine gold produced by Rand Refinery goes into gold bars

– either 400 ounce good delivery bars, kilo bars or smaller. The gold

is then marketed and sold by Rand Refinery, on behalf of DRDGOLD,

to customers around the world.

DRDGOLD is therefore not involved with the end-users of its

product, and does not undertake any customer satisfaction surveys

or provide product information or labelling.


Dear stakeholder

In this, our fourth Sustainable Development Report, we present

a company that has changed tremendously during the past year.

Our strategy to transform DRDGOLD into a lower-risk, less labour-

intensive surface operation has largely been achieved with the sale

of Blyvoor during the year.

The sustainability of the business continues to be driven by factors

both beyond and within our control. From an external perspective,

we have little or no influence on the gold price, the exchange rate or

the value shareholders attach to our stock in these straitened times.

By ensuring that we steadily optimise our production, manage our

costs and limit our liabilities, we will continue to mitigate these

external risks.

The primary internal areas of concern for the business continue

to be:

• Ensuringthehealthandsafetyofouremployees.Ourexemplary

safety performance was marred by the death of Emanuel Zama

Rikhotoso on 12 April 2012. Our board and management extend

sincere sympathies to his family and colleagues. See page 24.

• Turning to account our significant, yet low grade resources

profitably and responsibly remains our key challenge. See our

Integrated Report, and page 36 and 37 for further details.

• Maintaining our licence to operate and, in particular,

meeting our obligations and commitments in respect of the

Mining Charter.

• Attractingandsecuringtheskillsweneed.Ourflagshipproject,

the Ergo Business Development Academy (EBDA) – which we

established in FY2009 to help address the critical shortage

of skills in the country across all sectors of the economy

and to create jobs – has continued to deliver an outstanding

performance.

• Acid mine drainage (AMD) from the western basin of the

Witwatersrand goldfields is a risk facing a number of mining

companies, including DRDGOLD. Since 2005, we have been

involved in industry-wide initiatives to find a solution to the

problem as outlined on page 41.

• Dust isoneofDRDGOLD’sgreatestenvironmentalchallenges

because many of our current and future resources are located

in urban areas and have an impact on our neighbours. The issue

is managed through continuous remediation measures and dust

monitoring. There are times – and will be in the future – when

our operations can and will affect our neighbours; the most

significant being the generation of nuisance dust from operating

and fallow dumps, particularly during windy periods. It is our

intention to:

• mitigate dust and other impacts on surrounding communities

through proper planning;

• prevent dust generation through the application of best

practice – through rehabilitation or other measures;

• remediate any impact that we have on our surrounding

communities;

• engagewiththesecommunities,listentoandaddresstheir

concerns, and communicate with them in a manner that is

open and transparent; and

• ensure that – through our employment practices and

training and development, and through our local economic

development programmes – we have a positive impact on

our employees and communities.

DRDGOLD is a high-volume, low-margin operation. Its success

depends on the responsible management of our resources so we

must extract the greatest value from each and every one of our

assets, in a way that ensures our licence to operate is maintained.

DRDGOLD has resources that will enable the business to operate

for many years to come. We want to ensure that – on balance – we

leave behind a positive legacy.

We trust that this report will provide some insight into the way

we conduct our business and our relationships with society. It has

been produced in line with the guidelines of the Global Reporting

Initiative to which we subscribe. Please also read our second

Integrated Report which is available at www.drdgold.com and

provides an holistic picture of our business.

niël Pretorius

Chief executive officer

17 September 2012

Niël Pretorius

Letter from our CEO


Engaging with our stakeholders

The company timeously reports information that is relevant

and meaningful. DRDGOLD has a sustained programme of

communication with stakeholders including shareholders and

their advisors, employees, unions, communities, government

and regulators.

Stakeholders are identified as individuals, groups and entities directly

affected, positively and negatively, by the activities of the company.

DRDGOLD believes that its ability to conduct its day-to-day business

is influenced by its capacity to develop and maintain long-standing

relationships with its stakeholders.

Stakeholder concerns are raised in various ways, including formal

concerns or queries lodged in writing with the company and concerns

raised during stakeholder forums or informal discussion. DRDGOLD

responds to these concerns appropriately and timeously.

DRDGOLD’s operations are located in close proximity to local

communities, and the economic, environmental and social impacts

of these operations can have a significant impact on the communities

concerned. The company therefore engages on an on-going basis

with these communities through local councillors and community

leadership structures. DRDGOLD engages on a formal and regular

basis with local authorities, including the Ekurhuleni Metropolitan

Municipality and the Johannesburg Metropolitan Municipality.

The company regularly consults with regulatory authorities, including the Department of Mineral Resources (DMR), the Department of Water Affairs (DWA), the Department of Environmental Affairs (DEA), the Department of Agriculture and Rural Development and the National Nuclear Regulator (NNR).

DRDGOLD participates in a number of public groups, including the Ekurhuleni Business Forum, Blesbok Spruit Forum, Klip River Forum, Rand Water Catchment Quality Forum, Heriotdale Business Forum and the Wonderfontein Spruit Forum.

A major priority for DRDGOLD is controlling dust emissions from tailings storage facilities. This is particularly problematic when wind speeds increase, especially during the dry, winter season. Quarterly dust meetings are held with the relevant authorities, including local municipalities, ward councillors, business forums and interested and affected parties (I&APs) to discuss dust fall out figures, new legislation and mitigation measures.

Before any project that might affect stakeholders commences, DRDGOLD engages in public participation processes with I&APs.

DRDGOLD identifies and engages with external and internal stakeholders at a number of different levels. Extensive and ongoing engagement, formal and informal, is undertaken by various disciplines

and in various ways.

The table below illustrates some of these interactions.

Discipline Comment Reference

Shareholders DRDGOLD knows that the key priority of any shareholder is to maximise investment returns in a sustainable manner. The company works diligently to provide information on operating, financial and other performance in a timely and equitable manner. This is done by making the relevant announcements on the JSE’s Stock Exchange News Service (SENS) and the NYSE, accompanied by almost simultaneous website postings, web alerts to a database of registered users and the distribution of an explanatory press release to a second database of analysts, investors and media.

See the financial capital section of this report on page 18.

DRDGOLD ensures that the principles of openness, integrity and accountability are adopted at every level of engagement with identified stakeholders.


Dust suppression sprays on the 3A2 reclamation site

Discipline Comment Reference

employees Relations with employees and organised labour at DRDGOLD are governed by recognition agreements and conditions of employment by legislation. The company supports the rights of all employees to freedom of association and acts in accordance with the South African Constitution, prescribed legislation, industry compacts and recognition agreements with unions. The company encourages open communication and consultation. Conflict is dealt with as necessary in workplace forums. DRDGOLD is aware that a successful business is a sustainable business, and works conscientiously to empower its employees, and to implement programmes and job opportunities that benefit the communities in which it operates. Employees and employee representatives are briefed through formal and informal structures as needed, including a quarterly printed newsletter. Entitled Asikhulume which means “let’s talk”, this publication is distributed to all operations staffed by DRDGOLD employees. Copies are available at designated pick-up points and each edition is preceded by “teaser” posters – along the lines of a newspaper placard. Selected articles in each issue are translated into isiXhosa, SeSotho and isiZulu, and the English articles are easy to understand. The disposal of Blyvoor during FY2012 has resulted in changes to the size and profile of the DRDGOLD workforce. The company will review the Asikhulume format in FY2013 in order to ensure that the publication remains relevant.

For more information on how the company manages and engages with employees, see the human capital and manufactured capital sections of this report on pages 22 and 43 respectively.

Communities DRDGOLD is committed to making a difference to the communities which surround its operations. Social and Labour Plans (SLPs) and Local Economic Development (LED) programmes are in place, and have been developed in compliance with the requirements of South African mining legislation. The company ensures that the projects and commitments it undertakes are in line with the local municipalities’ Integrated Development Plans. DRDGOLD engages on a formal and regular basis with local authorities, including the Ekurhuleni Metropolitan Municipality and the Johannesburg Metropolitan Municipality. Operational management has regular, formal and informal interaction with surrounding communities as well as formal consultations with I&APs.

See the social capital section on page 29 of this report.

In identifying its stakeholders, DRDGOLD developed a matrix

of groups/individuals who are directly and indirectly associated

with the company. Employees, shareholders, suppliers, unions and

neighbours are directly affected; indirectly affected stakeholders

include community members.

The main stakeholders identified by DRDGOLD, their key concerns

and the process DRDGOLD follows when engaging with them, are

listed on page 13.

Commitment to external initiativesDRDGOLD is a member of the Chamber of Mines of South Africa.

The Chamber is a voluntary membership, private sector employer

organisation and is the principal advocate of major policy positions

endorsed by mining employers. It represents members in various

organs of South African national and provincial government, and

other relevant policy-making and opinion-forming entities, within

the country and abroad. The Chamber also works closely with various

employee organisations in formulating positions where appropriate.

Engaging with our stakeholders (continued)


Stakeholder group Key concerns engagement process

Shareholders and investors

Operating and financial performance, share price performance and dividends, and issues relating to the overall sustainability of the company, particularly risk mitigation, nationalisation and safety

Annual general meetings, roadshows, one-on-one investor meetings, preliminary and annual results presentations, investor site visits, company announcements, company website, annual reports and sustainable development reports

employees Job security, training and development, remuneration, health and safety, personal growth

Company policies, collective bargaining practices, team briefings, two-way manager-employee communication, Asikhulume and campaigns

Suppliers and contractors

Sustainability of company, company’s financial performance, employment practices, local procurement practices, business training and support, quality control, preferential procurement practices

Company practices and policies, preferential procurement programmes, open days and dialogue

Government and regulating authorities

Licence to operate, employment, education and training, LED programmes, environmental impact and rehabilitation

Formal processes, participation in industry associations, SLPs, dialogue, company reports, open days and site visits

Communities and nGOs LED, employment and local job creation, corporate social investment (CSI) practices, health issues particularly HIV/AIDS, environmental impact and rehabilitation, skills development programmes

Community forums, stakeholder forums, industry partnerships, community engagement programmes, wellness campaigns (particularly HIV/AIDS awareness), youth development programmes, dialogue, company announcements and advertising in local newspapers

Media Financial results, corporate activity, environmental issues, marketing, community-related topics

Company announcements, company website, online presentations, media site visits, company reports, interviews and articles in local publications


Dust netting and bio wind breaks on the Diepkloof tailings dam have proved successful in mitigating dust

Our governance

DRDGOLD has set up systems and controls to promote discipline,

transparency, accountability, responsibility and fairness for the

protection of the interests of shareholders, employees and the

communities in which the company operates.

DRDGOLD’s shares are quoted on the JSE, which is its primary listing.

DRDGOLD is also registered with the SEC in the US and its ordinary

shares are quoted on the NYSE in the form of an American Depositary

Receipt Programme, administered by the Bank of New York Mellon

Corporation. Accordingly, DRDGOLD is subject to compliance with

the Sarbanes-Oxley Act of 2002 (SOX), which is documented in the

company’s Form 20-F, filed annually with the SEC.

Role of the boardThe board is responsible for setting the direction of DRDGOLD

through the establishment of strategic objectives and key policies.

It monitors the implementation of strategies through a structured

approach to reporting and clear mandates to management for the

detailed planning and implementation of such objectives.

The board currently comprises two executive directors and four

non-executive directors. The board charter sets out the directors’

responsibilities and serves as a standing guideline for the benefit

of directors. The majority of DRDGOLD’s directors are independent

in accordance with the JSE Listing Requirements. The roles of the

chairman and CEO are separate.

A number of committees have been established to enable the board

to discharge its duties and responsibilities properly, and to carry out

its decision-making functions effectively. Each committee acts within

written terms of reference approved by the board. Each committee

has defined purposes, membership requirements, duties and reporting

procedures. The committees are subject to regular board evaluation

with respect to performance and effectiveness.

Our board ensures that the principles of good corporate governance are upheld and implemented.

Sustainability governanceThe Social and Ethics Committee of the board was established to:

• promote transformation within the company and economic

empowerment of previously disadvantaged communities,

particularly within the areas where the company conducts

business;

• strive towards removing barriers and achieving equal

opportunities in a manner consistent with the values which

underpin the South African Constitution at all levels in the

company and its subsidiaries; and

• conductbusiness inamannerconducivetotheattainmentof

internationally acceptable environmental and sustainability

standards.


The Social and Ethics Committee is chaired by an independent,

non-executive director and has quarterly meetings during the year.

Sustainability issues also fall within the ambit of the Audit, Risk,

Remuneration and Nominations committees. The Audit Committee

comprises of non-executive directors – all independent.

Risk managementResponsibility for the quality, integrity and reliability of the company’s

risk management rests with the Risk Committee which facilitates

communication between the board, the Audit Committee, internal

auditors and other parties engaged in risk-management activities.

Requirements of King III and the Integrated Framework from the

Committee of Sponsoring Organisations of the Treadway Commission

have been incorporated into the company’s processes so that they

also comply with SOX Section 404 which deals with a company’s

internal control systems. The Risk Committee meets every quarter

and reports back to the board.

Quarterly risk assessments are carried out where all the key risks are

analysed and new risks identified. Each risk is ranked and allocated

to an individual who is then responsible for the implementation of

actions to mitigate the risk. All risks are included in a centralised

database from which data is taken to draw up risk maps for each

operation or division. These are then presented to management and

the Risk Committee.

Risk assessment for the operations is based on three levels:

preventative risks, strategic risks and external risks.

Conflicts of interestThe company expects employees to perform their duties in

accordance with the best interests of the company and not to use

their position or knowledge gained through their employment with

the company for their private or personal advantage. Directors are

required to declare any conflict of interest which may have an impact

on their ability to perform their duties in a manner that complies

with good corporate governance practices.

Significant legal issues or finesDRDGOLD did not incur any material fines during the year under

review in respect of non-compliance with laws and regulations.

It did however, receive a directive from the DWA to rehabilitate a

contaminated water resource, and undertake monitoring as a follow

up measure.

Code of EthicsDRDGOLD is committed to the highest ethical standards. The

company’s Code of Ethics governs the relationship between the

company and its stakeholders. The code applies to directors, officers,

employees, contractors, communities and suppliers. The Code of

Ethics can be found on the website. www.drdgold.com


DRDGOLD Sustainable Development Report 2012 · 2020. 9. 24. · • DRDGOLD is a mid-tier, unhedged...

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