Niël Pretorius, Chief Executive Officer European Gold Forum 2013 … · 2012. 10. 26. ·...

www.drdgold.com

Niël Pretorius, Chief Executive OfficerEuropean Gold Forum 2013

Zurich16-18 April 2013

www.drdgold.com

www.drdgold.com

Disclaimer

Many factors could cause the actual results, performance or achievements to be materially different from any futureresults, performance or achievements that may be expressed or implied by such forward-looking statements, including,among others, adverse changes or uncertainties in general economic conditions in the markets we serve, a drop in thegold price, a sustained strengthening of the Rand against the Dollar, regulatory developments adverse to DRDGOLDor difficulties in maintaining necessary licenses or other governmental approvals, changes in DRDGOLD’s competitiveposition, changes in business strategy, any major disruption in production at key facilities or adverse changes inforeign exchange rates and various other factors. These risks include, without limitation, those described in the sectionentitled “Risk Factors” included in our annual report for the fiscal year ended 30 June 2012, which we filed with theUnited States Securities and Exchange Commission on 26 October 2012 on Form 20-F. You should not place unduereliance on these forward-looking statements, which speak only as of the date thereof. We do not undertake anyobligation to publicly update or revise these forward-looking statements to reflect events or circumstances after thedate of this report or to the occurrence of unanticipated events. Any forward-looking statements included in this reporthave not been reviewed and reported on by DRDGOLD’s auditors.

16-18 April 2013European Gold Forum 2013 2

www.drdgold.com

Introduction

� Among largest surface tailings retreatment companies in the world

� Retreating gold tailings from world’s single largest ‘stockpile’, established over 100+ years

� Recovery sites and plants, covering West, Central and East Witwatersrand

� Structure compliant with SA Mining Charter


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Introduction, cont’d

� Listed on JSE and NYSE Euronext� Market capitalisation: three-month range from $275 million to $300 million� 10 biggest shareholders hold 41.9%

� Liquidity as percentage of issued stock traded (March 2013 annualised)• JSE: 44%• NYSE: 75%

� Coverage: JP Morgan; Edison; Cadiz; Merrill Lynch initiating soon


Investec JSE 41 246 984 10.7%

Skagen AS NYSE 37 247 010 9.7%

Soges Fiducem SA (Brussels) JSE 17 821 240 4.6%

Citibank JSE 10 655 867 2.8%

State Street Bank JSE 10 247 831 2.7%

GEPF Equity JSE 10 190 134 2.6%

Standard Bank JSE 9 627 833 2.5%

Van Eck Associates Corp. NYSE 9 319 700 2.4%

Clearstream Banking SA Luxembourg JSE 8 976 508 2.3%

Ergo Mining Operations (Pty) Limited JSE 6 205 559 1.6%

www.drdgold.com

Structure

� Simple

� Compliant with South African legislation in terms of black economic empowerment (BEE)

• historically disadvantaged employees own 6% through trust

� Compliant with Zimbabwean indigenisation legislation


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How the business works

� Up to 2Mtpm of slimes material recovered from mine dumps and tailings dams with high-pressure water jets

� Slimes mixed with water, resulting slurry pumped to two CIL plants

� Dissolved in cyanide, carbon loaded, eluted and recovered in electro-winning circuit

� Residue disposal at large tailings deposition facility

� Head-grade average: 0.38g/t

� Recovery on average: 52% (0.197g/t)


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Operational differentiators

� Mechanised, 24/7/365 operation� Competitive advantage

• Ergo plant• tailings deposition facility• resource: on-surface stockpile, built up over 100+ years• land access infrastructure for pipelines and other installations

� Established, experienced management team


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Our operating footprint


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Factory-like challenges

� Sensitive to volume

� Sensitive to grade

� Extremely subtle metallurgical balance, with very long leads and lags


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Strategy

� Lower risk, lower cost, higher margin� Growth through:

• new technology• driven by ongoing research and development (R&D)

• R&D’s first delivery: new flotation/fine-grind circuit• cautious, low-capital diversification

• geographic • product


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Delivery on strategy: lower risk

� Operational risk:• more mechanised – less volatile• 24/7 process• on-surface• defined, visible resource

� Strategic risk:• long capital – significantly lower

stay-in-business capital• processing risk rather than

underground mining risk• greater degree of optionality –

greater ‘switch on/switch off’ flexibility

• fewer hands involved in moving run of mine material

• lower safety interruption risk


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Our performance, Q2 FY2013

� Cash costs: R284 425/kg� Operating margin: 41%� Free cash flow margin: 19%� NCE margin: 23%� Notional cash expenditure: R369 687/kg� Share price performance (over one year, as at 6 March 2013): +7.71%� Dividend yield (as at 6 March 2013): 4.6%


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Investment drivers FY 2012


Driver 2012 2011

Free cash flow margin 12% 0%

ROE 20% 9%

EBITDA R502.2 million R264.9 million

EBITDA margin 17% 10%

Production 232 353oz 265 179oz

Dividend yield 1.9% 2.3%

Share price R5.35 R3.27

PE ratio 6.2 11.7

Current ratio 1.8 1.2

Operating margin $583/oz $253/oz

Cash and cash equivalents R298.5 million R259.1 million

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Income statement (Q2 FY2013)


Q2 2013 Q2 2012 CommentsRm Rm

Continuing operationsRevenue 580.6 462.8 Up 25%, higher gold price and gold production

Net operating costs (341.9) (274.1) Up 25% due to 16% increase in volume, annual price increases

Operating profit 238.7 188.7 Up 26%

Depreciation (33.9) (30.6) Up 11%, new infrastructure being depreciated

Movement in provision for environmental rehab (16.2) (6.0)

Environmental rehab costs (12.5) (9.3)

Other income and costs (38.1) (39.2)

Net finance income 5.0 3.9

Profit before tax 143.0 107.5 Up 33%

Taxation (19.0) (34.4)

Profit after tax 124.0 73.1

Discontinued operation – 92.0

Net profit 124.0 165.1

HEPS from continuing operations (cents) 25 15 Up 67%

HEPS from total operations (cents) 25 33

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Balance sheet (Q2 FY2013)


Q2 2013 Q1 2013 CommentsRm Rm

Property, plant and equipment 1 767.9 1 692.8

Non-current investments and other assets 141.7 125.7 Increase in Village share price

Environmental rehabilitation trust funds and guarantees 182.0 174.1

Deferred tax asset 14.0 6.4

Cash and cash equivalents 398.4 409.9 Loan and dividend payments

Other current assets 266.4 302.9

Total assets 2 770.4 2 711.8

Equity 1 755.2 1 657.6

Long-term liabilities 152.4 172.1 DMTN programme (repaid R30 million)

Provision for environmental rehabilitation 527.1 513.8

Deferred tax liability 98.6 67.7

Current liabilities 237.1 300.6

Total equity and liabilities 2 770.4 2 711.8

Current ratio 2.8 2.4 Improved liquidity

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Delivery on strategy: technology growth

� New flotation/fine-grind circuit

• objective: optimise 11Moz resource

• 16-20% increase in extraction efficiency

• capex: R250 million (US$32 million)

• Total cost increase (real terms): R52/t (from R45/t) over LOM

• uranium upside potential (bolt-on, resin-in-pulp technology)

• feasibility study in progress


Total slimes feed to Ergo plant

4% mass pullto fine grind

Flotation

CIL

Milling

96% to conventional

CIL

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Flotation/fine-grind project – progress

� All four mills delivered, unpacked and mounted on bases� Mills installed – final pipe work and electrical installation to be completed in April 2013� Water commissioning began February 2013� Full production on track for Q1 FY2014� ±R55 million to be spent over next two quarters


Activity Feb2012

Mar2012

Apr2012

May2012

Jun2012

Jul2012

Aug2012

Sep2012

Oct2012

Nov2012

Dec2012

Jan2013

Feb2013

Mar2013

Apr2013

May2013

Jun2013

Jul2013

Aug2013

Project approval

Strip and clear redundant plant

Order/delivery of new plant

Refurbish existing plant

Shipping of mills from Canada

Install equipment

Plant commissioning

Tonnage build-up

Full tonnage

100%100%

95%95%

100%95%

20%

Completed

Shows % complete

0%0%

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Gold produced quarterly (kg)


0

200

400

600

800

1 000

1 200

1 400

Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun12 Sep-12 Dec-12

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Gold production: deviation from average by quarter (kg)

1916-18 April 2013European Gold Forum 2013

-150

-100

-50

0

50

100

150

MAR11 JUN11 SEP11 DEC11 MAR12 JUN12 SEP12 DEC12

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Cost breakdown

35%

30%

16%

4%

4%

11%

Labour and contractorsConsumablesElectricityWaterRehabilitationAdministration/other


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Recent production and financial performance trends


� 3% increase in gold production from continuing operations

� Operating profit from continuing operations of R162.2 million

� Net cash inflow from operations of R141.5 million

� Crown/Ergo pipeline completed

� Construction of Ergo’s flotation/fine-grind circuit under way

� Blyvoor disposal progresses

� Gold production from continuing operations down 8%

� Crown plant de-commissioning

� Pipeline design upgrades

� Operating profit from continuing operations of R114.8 million

� Net cashflow from operations of R116.2 million

� Restructuring of surface retreatment operations completed

� Ergo flotation/fine-grind circuit construction on track

� Blyvoor disposal completed

� 33% increase in dividend, to 10 SA cents

� 53% rise in operating profit from continuing operations

� 259% increase in HEPS

� Net cash flow from operations up 91%

� 11% rise in gold production to 35 815oz

� 34% increase in gold revenue to R526.8 million

� 51% rise in operating profit to R173.7 million

� Interim dividend declared of 14 cents

� 9% increase in gold production to 39 031oz

� 10% rise in gold revenue to R580.6 million

� 12% drop in cash operating cost to US$1 017/oz

� 37% increase in operating profit toR238.7 million

� 25% increase in HEPS to 25 cents

Q2 2013Q1 2013FY 2012Q4 2012Q3 2012

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Key targets

� Production – between 135 000 and 140 000 ounces per year

� Monthly throughput: ~2.0-2.1Mtpm

� Cash costs ($/oz): ~US$1 000-US$1 100

� Maintenance capex: ~R11 000/kg; US$42/oz


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Looking ahead

� Deliver into targets• maintain tonnage volumes to plant• complete flotation/fine-grind circuit

before financial year-end� Continue R&D

• improve recoveries� Progress strategic sustainable

development initiatives• intelligent water consumption• reduced carbon footprint• real human, social capital (EBDA)

� Explore expansion into other reclamation/recovery areas


www.drdgold.com

Investment case

� 5th consecutive annual dividend

� First interim dividend declared December 2012

� Long capital, steady yield

� Operating profit for year ending June 2012: R622 million (U$75m)* – at the time ~30% of market cap

� Top performer, benchmarked against other major SA producers: cash cost (R/kg), operating margin, free cash flow margin, NCE margin, share price performance, dividend yield

� Conservative approach to capital management – 9 852 800 shares bought back to offset stock-option dilution


*At an exchange rate of 0.121 US cents per rand

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Share price performance


750

725

700

675

650

625

600

575

550

525

500

475

450

425 01-03-12 01-05-12 01-07-12 01-09-12 01-11-12 01-01-13 01-03-13 10-04-13

Source: INet Bridge

www.drdgold.com

Registered office 1st Floor, Quadrum 1Quadrum Office Park50 Constantia BoulevardConstantia Kloof Ext 28RoodepoortSouth Africa

PO Box 390 Maraisburg 1700 South Africa

Contact details Tel: +27 (0) 11 470 2600 Fax: +27 (0) 11 470 2618 Email: Craig Barnes, CFO: [email protected]

James Duncan, Investor Relations: [email protected]

Website: www.drdgold.com

Shareholder data (Incorporated in the Republic of South Africa) Registration No.1895/000926/06 JSE share code: DRDISIN: ZAE 000058723 Issuer code: DUSM NYSE trading symbol: DRD


Niël Pretorius, Chief Executive Officer European Gold Forum 2013 … · 2012. 10. 26. ·...

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Transcript of Niël Pretorius, Chief Executive Officer European Gold Forum 2013 … · 2012. 10. 26. ·...