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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, 2022
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
 
Manager 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,
 
2022.
 
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
 
TABLE OF CONTENTS
Page
PART I
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
 
7
ITEM 2.
OFFER STATISTICS
 
AND EXPECTED TIMETABLE
 
7
ITEM 3.
KEY INFORMATION
 
7
3A.
[Reserved]
7
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
 
24
4C.
Organizational Structure
 
29
4D.
Property, Plant And Equipment
 
30
ITEM 4A.
UNRESOLVED STAFF
 
COMMENTS
 
43
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
 
44
5A.
Operating Results
 
44
5B.
Liquidity And Capital Resources
 
53
5C.
Research And Development, Patents And Licenses, Etc
 
54
5D.
Trend Information
 
54
5E.
Critical Accounting Estimates
58
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
 
58
6A.
Directors And Senior Management
 
58
6B.
Compensation
 
62
6C.
Board Practices
 
65
6D.
Employees
 
69
6E.
Share Ownership
 
70
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY
 
TRANSACTIONS
 
72
7A.
Major Shareholders
 
72
7B.
Related Party Transactions
 
73
7C.
Interests Of Experts And Counsel
 
73
ITEM 8.
FINANCIAL INFORMATION
 
73
8A.
Consolidated statements And Other Financial Information
 
73
8B.
Significant Changes
 
73
ITEM 9.
THE OFFER AND LISTING
 
74
9A.
Offer And Listing Details
 
74
9B.
Plan Of Distribution
 
74
9C.
Markets
 
74
9D.
Selling Shareholders
 
74
9E.
Dilution
 
74
9F.
Expenses Of The Issue
 
74
ITEM 10.
ADDITIONAL INFORMATION
 
74
10A.
Share Capital
 
74
10B.
Memorandum and articles of association
74
10C.
Material Contracts
 
77
10D.
Exchange Controls
 
78
10E.
Taxation
 
80
10F.
Dividends And Paying Agents
 
85
10G.
Statement By Experts
 
85
10H.
Documents On Display
 
85
10I.
Subsidiary Information
 
85
ITEM 11.
QUANTITATIVE
 
AND QUALITATIVE
 
DISCLOSURES ABOUT MARKET RISK
 
85
TABLE OF CONTENTS
Page
PART II
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
 
86
12A.
Debt Securities
 
86
12B.
Warrants and Rights
 
86
12C.
Other Securities
 
86
12D
American Depositary Shares
 
87
ITEM 13.
DEFAULTS,
 
DIVIDEND ARREARAGES AND DELINQUENCIES
 
88
ITEM 14.
MATERIAL
 
MODIFICATIONS TO
 
THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
 
88
ITEM 15.
CONTROLS AND PROCEDURES
 
88
ITEM 16.
[RESERVED]
89
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
 
89
ITEM 16B.
CODE OF ETHICS
 
89
ITEM 16C.
PRINCIPAL ACCOUNTANT
 
FEES AND SERVICES
 
89
ITEM 16D.
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
 
90
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
 
90
ITEM 16F
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
 
90
ITEM 16G.
CORPORATE
 
GOVERNANCE
 
90
ITEM 16H.
MINE SAFETY DISCLOSURES
 
91
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
 
91
PART III
ITEM 17.
FINANCIAL STATEMENTS
 
92
ITEM 18.
FINANCIAL STATEMENTS
 
92
ITEM 19.
EXHIBITS
 
95
SIGNATURES
98
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 in this Annual Report, 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 R16.27 per $1.00, the year end exchange rate on June 30, 2022.
 
In this Annual Report, we present certain non-IFRS financial measures such as “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, and 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,
cash generated from operating activities, 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 these
measures,
 
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.
 
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;
statements made in or with respect to the Technical Report Summaries (“
TRS
” or “
TRSs
”) including statements with respect to
Mineral Reserves and Resources and assumptions, gold prices, projected revenue and cash flows and capital expenditures and
other forward looking statements in the TRSs;
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 2023;
 
statements with respect to agreements with unions;
our prospects in litigation and disputes;
statements with respect to the legal review for increasing the deposition capacity of the Brakpan/Withok Tailings Storage Facility
(“
TSF
”) and the Regional Tailings Storage Facility (“
RTSF
”), 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:
 
2
the global
 
impact of
 
the COVID-19
 
pandemic and
 
potential new
 
variants,
 
including in
 
South Africa;
 
the global
 
impact of
 
Ukraine conflict
 
and global inflation;
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
 
and the reclamation
 
sites on the
 
east of Ergo’s plant;
challenges
 
in replenishing
 
mineral reserves;
changes in
 
our competitive
 
position;
changes in,
 
or that affect,
 
our business
 
strategy;
that assumptions
 
underlying our
 
Mineral Reserves
 
and Mineral
 
Resources as
 
set forth in
 
this report
 
and our TRSs
 
prove to be
incorrect;
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 our
 
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;
 
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
Any 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
 
and no websites
 
are incorporated
 
by reference
 
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,
exploration expenses and
 
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.
Brakpan/Withok final life design
 
The Brakpan/Withok Tailings
 
Storage Facility final life design is the engineering
 
design that ultimately brings
the
 
tailings
 
storage facility
 
to
 
its
 
finality
 
in
 
terms
 
of
 
extent, operation,
 
rehabilitation and
 
management. The
implemented final design
 
would result in
 
alignments with the
 
Global Industry Standard
 
on Tailings Management
(“
GISTM
”)
 
and
 
regulatory
 
bodies,
 
increase
 
deposition
 
capacity,
 
improve
 
operation/management
 
and
 
bring
about the sustainable closure of the facility.
 
$/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 grade
 
(i.e., the
 
concentration of
 
metal or
 
mineral in
 
rock) that
 
distinguishes material
 
deemed to
 
have no
economic value from material deemed to have economic value.
 
CIL Circuit
Carbon-in-leach circuit.
Definitive Feasibility Study
("
DFS
")
A definitive
 
engineering estimate
 
of all
 
costs, revenues,
 
equipment requirements
 
and production
 
at a
 
-5% to
+10% level of accuracy. The study
 
is used to define the
 
economic viability of a
 
project and to support
 
the search
for project financing.
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.
 
Dilution
Waste or material below the cut-off grade that contaminates the ore during the course of mining operations and
thereby reduces the average grade mined.
Doré
 
Unrefined gold and silver
 
bullion bars consisting of
 
approximately 90% precious metals
 
which will be further
refined to almost pure metal.
Footwall
The underlying side of a stope or ore body.
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.
5
Indicated Mineral Resources
That part of a Mineral Resource for which quantity and grade or
 
quality are estimated on the basis of adequate
geological
 
evidence
 
and
 
sampling.
 
The
 
level
 
of
 
geological
 
certainty
 
associated
 
with
 
an
 
indicated
 
Mineral
Resource is sufficient to allow a qualified person to apply modifying factors
 
in sufficient detail to support mine
planning and evaluation of the economic viability of the deposit. Because an indicated
 
Mineral Resource has a
lower level of
 
confidence than the
 
level of confidence
 
of a measured
 
Mineral Resource, an
 
indicated Mineral
Resource may only be converted to a probable Mineral Reserve.
Inferred Mineral Resources
That part of
 
a Mineral Resource
 
for which quantity
 
and grade or
 
quality are estimated
 
on the basis
 
of limited
geological
 
evidence
 
and
 
sampling.
 
The
 
level
 
of
 
geological
 
uncertainty
 
associated
 
with
 
an
 
inferred
 
Mineral
Resource
 
is
 
too
 
high
 
to
 
apply
 
relevant
 
technical
 
and
 
economic
 
factors
 
likely
 
to
 
influence
 
the
 
prospects
 
of
economic
 
extraction
 
in
 
a
 
manner
 
useful
 
for
 
evaluation
 
of
 
economic
 
viability.
 
Because
 
an
 
inferred
 
Mineral
Resource has the lowest level
 
of geological confidence of
 
all Mineral Resources, which prevents
 
the application
of the modifying factors in a manner useful for evaluation of economic viability,
 
an inferred Mineral Resource
may not be considered when assessing the economic viability of a
 
mining project and may not be converted to
a Mineral Reserve.
 
Measured Mineral Resources
That part of a Mineral
 
Resource for which quantity and
 
grade or quality are estimated
 
on the basis of conclusive
geological
 
evidence
 
and
 
sampling.
 
The
 
level
 
of
 
geological
 
certainty
 
associated
 
with
 
a
 
measured
 
Mineral
Resource is
 
sufficient
 
to allow
 
a
 
qualified person
 
to apply
 
modifying factors,
 
in sufficient
 
detail
 
to support
detailed mine planning
 
and final evaluation
 
of the
 
economic viability
 
of the
 
deposit. Because
 
a measured Mineral
Resource has a higher level of confidence than the level of confidence of
 
either an indicated Mineral Resource
or an inferred Mineral Resource, a measured Mineral Resource may be converted to a proven
 
Mineral Reserve
or to a probable Mineral Reserve.
Metallurgical plant
 
A processing plant (mill) erected to treat ore and extract the contained gold.
Mineral Reserves
 
An estimate of tonnage and
 
grade or quality of indicated
 
and measured Mineral Resources that, in
 
the opinion
of the qualified person, can be the basis of an economically viable project. More specifically, the economically
mineable part of a
 
measured or indicated Mineral
 
Resource, which includes diluting materials
 
and allowances
for losses that may occur when the material is mined or extracted.
Mineral Resources
A concentration or occurrence of material of economic interest in or on the Earth's crust in such form, grade or
quality,
 
and
 
quantity
 
that
 
there
 
are
 
reasonable
 
prospects
 
for
 
economic
 
extraction.
 
A
 
Mineral
 
Resource
 
is
 
a
reasonable estimate of mineralization, taking into
 
account relevant factors such as
 
cut-off grade, likely mining
dimensions, location or continuity, that, with the assumed and justifiable technical and economic conditions, is
likely to, in
 
whole or in
 
part, become economically
 
extractable. It is
 
not merely an
 
inventory of all
 
mineralization
drilled or sampled.
Mine call factor
 
The gold content recovered expressed as a percentage of the called gold content.
Modifying factors
The factors that a qualified person must
 
apply to indicated and measured Mineral Resources and
 
then evaluate
in order
 
to establish
 
the economic
 
viability of
 
Mineral Reserves.
 
A qualified person
 
must apply
 
and evaluate
modifying
 
factors
 
to
 
convert
 
measured
 
and
 
indicated
 
Mineral
 
Resources
 
to
 
proven
 
and
 
probable
 
Mineral
Reserves.
 
These
 
factors
 
include,
 
but
 
are
 
not
 
restricted
 
to:
 
Mining;
 
processing;
 
metallurgical;
 
infrastructure;
economic;
 
marketing;
 
legal;
 
environmental
 
compliance;
 
plans,
 
negotiations,
 
or
 
agreements
 
with
 
local
individuals or groups; and governmental
 
factors. The number, type and specific
 
characteristics of the modifying
factors applied will necessarily be a function of and depend upon the mineral, mine, property, or project
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.
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, ongoing
 
rehabilitation expenditure, care
 
and maintenance,
other operating income and retrenchment costs.
oz/t
 
Ounces per ton.
Prefeasibility study ("
PFS
")
A comprehensive study of a range of
 
options for the technical and economic
 
viability of a mineral project that
has
 
advanced
 
to
 
a
 
stage
 
where
 
a
 
preferred
 
mining
 
method,
 
in
 
the
 
case
 
of
 
underground
 
mining,
 
or
 
the
 
pit
configuration,
 
in
 
the
 
case
 
of
 
an
 
open
 
pit,
 
is
 
established
 
and
 
an
 
effective
 
method
 
of
 
mineral
 
processing
 
is
determined. It includes a
 
financial analysis based on
 
reasonable assumptions on the
 
modifying factors and the
evaluation
 
of
 
any
 
other
 
relevant
 
factors
 
which
 
are
 
sufficient
 
for
 
a
 
competent
 
person,
 
acting
 
reasonably,
 
to
determine if all or part of the Mineral Resource may
 
be converted to a Mineral Reserve at the time of
 
reporting.
A prefeasibility study is at a lower confidence level than a feasibility study.
Proven Mineral Reserves
 
The economically mineable part of a measured Mineral Resource and can only result from conversion of a
measured Mineral Resource and can only result from conversion of a measured Mineral Resource.
 
Probable Mineral Reserves
 
The economically mineable part of an indicated and in some cases, a measured Mineral Resource.
Qualified Person
An individual who is a
 
mineral industry professional with at least 5
 
years of relevant experience in the
 
type of
mineralization
 
and
 
type
 
of
 
deposit
 
under
 
consideration
 
and
 
in
 
the
 
specific
 
type
 
of
 
activity
 
that
 
person
 
is
undertaking on behalf of
 
the registrant, and an eligible
 
member or licensee in
 
a good standing of a
 
recognized
professional organization at the time the technical report is prepared.
Refining
 
The final purification process of a metal or mineral.
6
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.
7
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. [Reserved]
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 climate change;
Risks related to government regulation; and
Risks related to ownership in our ordinary shares or American Depositary Shares (ADSs).
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
 
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. Although
 
the impact
 
of the
 
COVID-19
 
pandemic
 
has diminished
 
and the
 
gold prices
 
have marginally
decreased,
 
the average
 
gold price
 
for fiscal
 
2022 remained
 
high due to
 
continued
 
economic
 
uncertainty
 
as the
 
global economies
 
attempt to
 
recover
from all
 
the after
 
effects of
 
COVID19
 
and deal
 
with,
 
the conflict
 
in Ukraine
 
and rapidly
 
rising
 
inflation.
 
In addition,
 
we are
 
impacted
 
by movements
in the exchange
 
rate of the
 
rand against
 
the dollar
 
as described
 
below.
 
 
Exchange rates are influenced by global economic trends. The closing exchange rate of
 
the rand against the dollar
 
at June 30,
 
2022
weakened
 
by 14% compared
 
to June 30,
 
2021.
 
The closing
 
price of the
 
rand against
 
the dollar
 
at June 30,
 
2021 strengthened
 
by 18% compared
 
to
June 30,
 
2020. At
 
September
 
30, 2022,
 
the rand
 
traded at
 
R18.15 =
 
$1.00 (based
 
on closing
 
rates),
 
a 12% weakening
 
of the rand
 
against the
 
Dollar
from June
 
30, 2022 as
 
the dollar
 
strengthened
 
as a result
 
of quantitative
 
tightening
 
and the raising
 
of interest
 
rates by the
 
US Federal
 
Reserve.
 
The
rand/dollar exchange
 
rate was volatile throughout
 
the fiscal year 2022
 
mainly as a result of global,
 
emerging market and
 
South Africa economic
uncertainty including
 
uncertainties
 
resulting from
 
the global economic
 
slowdown sentiment,
 
rapidly rising global
 
inflation,
 
geopolitical
 
tensions
in
 
Ukraine,
 
perceived political and
 
economic instability,
 
structurally weak economic
 
growth of
 
the South
 
African economy
 
exacerbated by
increasing
 
loadshedding
 
by power utility
 
Eskom Holdings
 
SOC Limited
 
(“
Eskom
”) as it battles
 
with supply.
 
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. Up to April 11, 2022 we sold 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
was usually sold at the
 
spot price in the
 
market on the date of
 
trade. Subsequent to April 11, 2022
 
gold is sold at
 
a dollar gold price and
 
spot
exchange rate
 
specified
 
in a contract
 
with the South
 
African bullion
 
banks to
 
deliver the
 
gold at a
 
specified
 
settlement
 
date.
 
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 Mineral
 
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 Mineral Reserves. A failure to
 
acquire new Mineral 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 Mineral 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.
 
Our 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
current life of mine and for the future. Key projects to increase
 
such a deposit capacity include the development
 
of the regional tailings storage
facility as part of Phase 2
 
FWGR project or identifying interim alternate deposition facilities as well as obtaining regulatory approvals for the
Brakpan/Withok
 
TSF final design
 
at Ergo.
 
However, their
 
products may
 
not be successful
 
or sufficient
 
to maintain
 
or increase
 
deposit capacity
.
 
 
Our large projects, most notably the development
 
of FWGR Phase 2, the Solar Plant Project and
 
Brakpan/Withok TSF final life
design implementation to enable mining on the
 
east of the
 
Ergo plant, 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
 
utilizing our
 
existing experience
 
and know-how.
 
Projects like
 
the
 
development of
 
Phase 2
 
of
 
the
 
FWGR assets
 
acquired from
 
Sibanye-Stillwater, the
 
Solar Plant
 
Project and
 
the
implementation
 
of the Brakpan/Withok TSF final life design are subject
 
to the risk of delays,
 
regulatory approvals
 
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;
 
failure or
 
delay of third-party
 
service providers;
 
and
 
changes to
 
regulations,
 
such as environmental
 
regulations.
 
We also face the
 
risk that expected
 
benefits of
 
our projects
 
are not achieved.
10
 
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
 
for the submitted
 
amended design.
 
It is therefore
 
anticipated
 
that the construction
 
of the Regional
 
Storage Facility,
 
related to Phase
 
2,
will commence
 
in fiscal
 
year 2031.
 
As the
 
Driefontein
 
4 TSF is
 
expected
 
to reach
 
full capacity
 
during fiscal
 
year 2025,
 
whereafter
 
the depositional
rate would
 
have to
 
decrease
 
materially. Plans
 
are in
 
place to
 
redirect
 
material
 
to Sibanye
 
Gold’s Leeudoorn
 
TSF until
 
the Regional
 
Storage
 
Tailings
Facility is
 
ready for commissioning
 
expected in
 
fiscal year
 
2031.
 
 
 
Ergo is currently
 
developing a
 
Solar Power
 
Plant to reduce
 
its reliance
 
on Eskom and
 
to reduce
 
its future
 
cost of electricity
 
(“
the Solar
Plant
”).
 
The Solar
 
Plant
 
definitive
 
feasibility
 
study was
 
completed
 
during
 
fiscal
 
year 2022
 
and is
 
currently
 
under
 
development.
 
A significant
 
capital
investment
 
is needed to
 
complete the
 
project. It
 
is estimated
 
that benefit
 
from the project
 
in reduced electricity
 
costs and reduced
 
carbon footprint
will start
 
to materialize
 
from April
 
2023 onwards.
 
 
 
Regulatory approvals
 
for the final life design of the Brakpan/Withok TSF are yet to be obtained. The
 
implementation
 
of the final life
design is expected
 
to be crucial
 
in the increase
 
of the life
 
of mine of
 
Ergo as it will
 
accommodate
 
material in
 
toward the
 
east of the
 
Ergo plant.
 
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,
 
the Solar
 
Power Project
 
and the
 
implementation of the
 
final life
 
design Brakpan/Withok TSF
 
are
particularly
 
material
 
to DRDGOLD,
 
significant
 
cost overruns
 
or adverse
 
changes
 
in assumptions
 
affecting
 
the viability
 
of these
 
projects
 
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,
 
rising cost
 
of debt,
 
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.
 
Management
 
is estimating
 
a significant
 
capital investment
 
in major projects
 
in the next
 
few years.
 
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 possible
 
on attractive
 
terms or
 
at all
 
due
to rising
 
interest
 
rates,
 
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
 
and load shedding
 
or power dips,
 
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.
 
 
Our FWGR operations are reliant
 
on the
 
use and access to
 
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.
 
Any of the risks
 
above or 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.
11
 
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 and
 
active TSFs
 
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.
 
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
:
 
 
rising global
 
and national
 
inflation;
 
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;
 
shortages
 
or availability
 
of materials
 
used in production;
 
environmental
 
factors; and
 
pollution.
 
Our production costs
 
consist mainly
 
of materials
 
including reagents
 
and steel, labor, electricity,
 
specialized
 
service providers,
 
machine
hire,
 
security,
 
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.
 
 
 
The transitional arrangement regarding wage increases with the workforce at
 
FWGR when these
 
employees were incorporated into
DRDGOLD have now come to an end. A three-year
 
wage agreement was reached
 
with organized labor at FWGR in November
 
2021 and wage
negotiations
 
are currently
 
under
 
way at
 
the ERGO
 
operations
 
after the
 
previous
 
extended
 
agreement
 
came to
 
an end
 
on June
 
30, 2022.
 
A new
 
wage
agreement
 
was concluded
 
after June
 
30, 2022.
 
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 reliance on Eskom’s grid through self-generation of power, for example through the
 
Solar Power project at
Ergo, 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
 
and
 
potential new
 
variants could
 
impact
 
current
 
and
 
future
operations
 
 
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. The
national
 
state
 
of disaster
 
imposed
 
by the
 
South African
 
Government
 
ended on
 
April 4,
 
2022,
 
which reduced
 
the overall
 
risk related
 
to the
 
pandemic.
 
We continue to monitor
 
the risk related
 
to the COVID-19
 
pandemic and
 
have measures
 
in place to
 
react in the
 
case that the
 
COVID-19 pandemic
worsens.
 
 
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.
 
Uncertainties
 
regarding supply
 
chain
 
The
 
global
 
economic
 
environment,
 
geopolitical
 
tensions
 
as
 
well
 
as
 
inflationary
 
pressures
 
worldwide
 
have
 
highlighted
 
the
interdependencies
 
of supply
 
chains.
 
The risk
 
of dependency
 
on key
 
suppliers
 
requires
 
ongoing focus
 
and proactive
 
management.
 
The unavailability
of critical
 
material
 
such as
 
reagents
 
and critical
 
equipment
 
may affect
 
production
 
and operating
 
costs
 
resulting
 
in loss
 
of revenue.
 
Delays
 
in supplies,
freight costs
 
and higher
 
than inflationary
 
increases
 
for capital
 
equipment are
 
crucial elements
 
for new projects.
 
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
 
R517.7 million which is
 
included in
 
our
statement
 
of financial
 
position
 
as at
 
June 30,
 
2022
 
(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 used to 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.
 
During fiscal
 
year 2022
 
we
 
changed the
 
method of
 
provision to
 
funds held
 
in
 
insurance products.
 
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. This is further impacted and expected to intensify with the
effects of climate change. 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 R14.7
billion, with a total loss limit
 
of R1 billion for Ergo and R650 million for FWGR
 
for the 2023 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
 
billion insurance cover is in
 
place for the
 
2023 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 2022 the
 
gold price reached
 
a high of U$2,070
 
per ounce
 
and a low of
 
U$1,684.
 
We benefited from
 
a sustained
 
high
gold price
 
due to slow
 
global economic
 
recovery,
 
economic uncertainty
 
and geopolitical
 
tensions.
 
 
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
sustained high gold price for fiscal 2022 after the highs experienced
 
in fiscal 2021.
 
The rand/dollar exchange
 
rate remained volatile throughout
fiscal 2022 mainly as a result
 
of economic uncertainty
 
and perceived political
 
instability,
 
increase of interest
 
rates by the US Federal Reserve
 
as
they attempt
 
to reduce
 
inflation,
 
global market
 
slowdown
 
sentiment,
 
Ukraine
 
conflict,
 
tensions
 
between the
 
USA and
 
China, low
 
economic
 
growth
and increased load shedding from Eskom as it struggles to keep up with demand., and a continually distressed Eskom. Further volatility
 
in the
Rand was fueled by Moody’s
 
upgrading of South Africa’s sovereign credit rating to stable after the rating was
 
downgraded to sub-investment
grade in fiscal
 
2021.
 
14
 
The factors
 
mentioned above
 
could put
 
negative pressure on
 
the price
 
of
 
gold or
 
the rand/dollar
 
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 Mineral Reserves
 
and Mineral Resources estimates.
 
Our Mineral Reserve and Mineral Resources 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 the SEC’s Regulation S-K (Subpart 1300). These
 
estimates may not
reflect actual Mineral Reserves and Mineral Resources 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
Mineral Reserves
 
and Mineral Resources,
 
particularly
 
those containing
 
relatively lower
 
grades of mineralization.
 
Under these circumstances,
 
we
would be required
 
to re-evaluate our Mineral
 
Reserves and Mineral
 
Resources.
 
Short-term operating
 
factors relating
 
to the ability to reclaim
 
our
Mineral Reserves,
 
at the required
 
rate, such
 
as an interruption
 
or reduction
 
in the supply
 
of electricity,
 
limited deposition
 
capacity or
 
a shortage
 
of
water may have
 
the effect that we
 
are unable to
 
achieve critical
 
mass, which may
 
render the recovery
 
of Mineral Reserve,
 
or parts of the
 
Mineral
Reserve
 
no longer
 
feasible,
 
which
 
could
 
negatively
 
affect
 
production
 
rate
 
and costs
 
and decrease
 
our profitability
 
during
 
any given
 
period.
 
Estimates
of Mineral Reserves
 
and Mineral Resources
 
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 in the past and
 
could
in the future result in reductions in our
 
Mineral Reserves
 
and Mineral
 
Resources 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;
15
injuries to
 
employees
 
or fatalities
 
due to falls
 
from heights
 
and accidents
 
relating to
 
mobile machinery
 
or electrocution
 
or other causes;
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 sustained
 
high unemployment
 
rate of
 
33.9% and 46.5%,
 
for 2022,
 
amongst the
 
youth has
 
increased
 
the risk
 
of social
 
unrest,
 
such as
protests and conflict, 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, specifically,
 
in combating unemployment particularly
 
in the youth of the country.
This frustration was a contributing
 
factor that led to social unrest, people committing
 
crimes, vandalising
 
property, and damaging infrastructure
during July 2021. A prolonged economic downturn
 
could result in an extended period of high unemployment,
 
further exacerbating
 
anti-mining
sentiments
 
in South Africa.
 
Furthermore,
 
the rise
 
of ESG factors,
 
such as electricity
 
usage, social
 
unrest, social
 
license to
 
operate, climate
 
change,
water usage
 
and environmental
 
stewardship,
 
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,
 
although many
 
countries
 
around the
world are
 
currently
 
facing inflation
 
challenges.
 
As of June
 
30, 2022, the
 
annual Consumer
 
Price Inflation
 
Index (“
CPI
”),
 
stood at 7.4%
 
compared
to 4.9%
 
in June 2021 and 2.2%
 
in June 2020. Annual CPI was
 
7.5%
 
as at September 30, 2022. Inflation
 
in South Africa generally
 
results
 
in an
increase in our rand operational
 
costs.
 
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 and
 
pipelines,
 
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 and
 
steel has resulted
 
in theft
of copper
 
cables
 
and pipelines.
 
Our operations
 
experience
 
high incidents
 
of copper
 
cable
 
theft and
 
pipelines
 
despite
 
the implementation
 
of enhanced
security measures
 
which have increased
 
our security
 
spend. At times,
 
the incidences
 
have resulted
 
in serious injuries
 
of our security
 
personnel.
 
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. Loadshedding
 
has intensified
 
over the past
 
year.
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.
 
Eskom has
 
approached
 
the National
 
Energy Regulator
 
of South Africa
 
(“
NERSA
”) for a
 
32% increase
 
in tariffs
 
for 2023,
 
a request
 
that
has been met
 
by strong push
 
from business
 
and society.
 
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.
 
 
In February 2019,
 
the President of
 
South Africa announced the
 
vertical unbundling of Eskom
 
to improve efficiencies and
 
have an
independent
 
grid operator
 
and open
 
competition
 
for energy
 
generation
 
at lower
 
cost to
 
the consumer.
 
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 expected to be completed
 
by 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, our business operating results and
financial
 
condition may
 
be adversely
 
impacted.
 
Ergo is currently
 
developing a
 
Solar Power
 
Plant to reduce
 
its reliance
 
on Eskom and
 
to reduce
 
its future
 
cost of electricity
 
but we face
risks in the
 
development
 
of this plant
 
as such plant
 
may not be completed
 
within expected
 
timeframe or
 
budget and may
 
not reduce
 
our
dependence
 
on Eskom as
 
expected.
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
 
As a result
 
of climate
 
change,
 
our operations
 
are exposed
 
to severe weather
 
events that
 
has in the past
 
and 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, we
 
have experienced
 
an 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.
 
17
 
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, 2022.
 
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
 
is a relatively
 
dry area and
 
predictions
 
are that
 
dry conditions
 
will escalate.
 
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. 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.
Risks related
 
to 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. Lack
 
of
 
communication between government and
 
regulators as
 
well as
 
ineffective
regulators remains
 
an issue that may increase
 
the cost of compliance
 
and obtaining permits.
 
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.
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
”).
18
 
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.
 
The MRE
 
Minister
 
confirmed
 
that they
will not appeal
 
the ruling.
 
 
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.
 
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 July 2022 which,
inter alia
, extends the compliance with these regulations
 
to three months following the fiscal
year end June
 
30, 2023.
 
 
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.
19
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
 
on the Group.
 
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 draft explanatory memorandum of the Taxation
 
Laws Amendment Bill proposes that amendment to section 5(2) of
 
the Carbon
Tax
 
Act to provide
 
for the carbon
 
tax rate adjustment
 
by US$1, US$2
 
and US$3/
 
t CO2e for
 
2023, 2024 and
 
2025 tax period
 
ending on
 
31
December using the
 
average exchange rate as
 
defined in the Income
 
Tax
 
Act. The rate will
 
thereafter increase gradually to
 
US$20t CO2e in
2026 and at
 
least to US$30/t
 
CO2e in 2030.
 
Currently under phase
 
1 an amount
 
of R120/t CO2e
 
is levied.
 
Although the decarbonization
 
of
electricity as an
 
energy supply must
 
nevertheless be prioritized
 
by both the
 
country and industries
 
at large to
 
de-carbonize the economy,
 
the
increased proposed rates denominated to US Dollar is expected to have an adverse impact on business.
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. The
proposed amendment
 
will come
 
into operation
 
on March 31,
 
2023 and apply
 
in respect
 
of years of
 
assessment
 
ending on or
 
after that
 
date.
 
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.
 
The South African
 
Revenue Service
 
(“
SARS
”) assesses 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.
20
 
Labor costs
 
are significant
 
for Ergo, constituting
 
18% of Ergo’s
 
production
 
costs for
 
fiscal year
 
2022 (2021:
 
19%). As
 
of June
 
30, 2022,
our Ergo operations
 
provided full-time
 
employment
 
for 763 employees
 
while our main
 
service providers
 
deployed an
 
additional
 
1,677 employees
to our operations,
 
of whom approximately
 
85% are members
 
of trade unions
 
or employee
 
associations.
 
 
Labor costs
 
are significant
 
for FWGR, constituting
 
21% of FWGR’s production
 
costs for fiscal
 
year 2022 (2021:
 
20%). As of June
 
30,
2022, our FWGR
 
operations provided full-time employment for 152 employees while our
 
main service providers deployed an additional 339
employees to our operations,
 
of whom approximately
 
82% 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 March
 
2022 to
 
June 2022
 
there was
 
strike action
 
by staff
 
at the
 
Sibanye-Stillwater
 
gold mines
 
adjacent
 
to FWGR.
 
FWGR’s gold
bars are smelted
 
at Sibanye’s Driefontein
 
plant. This resulted
 
in Ergo having to smelt
 
FWGR gold on their behalf.
 
Such events at our operations
or at our reclamation
 
sites has
 
in the past
 
and could in
 
future 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.
 
 
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.
 
21
 
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.
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.
22
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 share 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, 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
 
this reporting date
 
at which
 
date the
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 Ergo
 
Gold 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 final life design
 
 
The Brakpan/Withok TSF
 
final life design is the engineering
 
design that ultimately brings the
 
tailings storage facility to its finality
in terms of
 
extent, operation, rehabilitation
 
and management. The
 
implemented final design
 
would result in
 
alignments with the
 
Global Industry
23
Standard on Tailings Management (“
GISTM
”) and regulatory bodies, increase deposition
 
capacity, improve operation/management and bring
about the sustainable closure of the facility.
 
A legal review
 
of the existing
 
authorizations
 
was undertaken
 
for the final
 
life design
 
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.
 
Final designs for
 
the final stage
 
of the Brakpan/Withok TSF
 
are being reviewed,
 
in anticipation
of the DWAS approval.
 
The Ergo life
 
of mine has
 
been increased
 
to 19 years
 
and the Daggafontein
 
TSF classified
 
as a Mineral
 
Reserve.
 
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
 
involves 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
 
year 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
 
2025.
Although the Phase
 
1 upgrade of the Driefontein
 
2 Plant was essentially
 
complete by the end
 
of fiscal year 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 year
 
2021.
 
A new
 
thickener was
 
commissioned in November
 
2021.
 
The
conversion yielded
 
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
 
year 2021.
 
On average,
the plant resulted
 
in an additional
 
1.2kg 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
The Phase 2 project is a key project for us intended to extend potential resources in the West Rand.
 
Phase 2 initially included 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.
The capital spent on final design work on the CPP, with the design work is also applicable to the
 
potential expansion of DP2 from to 1.2 Mt as
an alternative to CPP is currently being considered.
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.
 
Delays in
 
obtaining
 
regulatory approval
 
have
 
affected
 
the
 
previously
 
reported
expected dates of the construction.
 
The Sibanye-Stillwater Leeudoorn tailings storage facility
 
was evaluated as a viable interim alternative
 
to
the RTSF whilst regulatory approvals are obtained.
The Definitive Feasibility Study (“
DFS
”) for Phase 2 was completed in the 3rd
 
quarter of fiscal year 2021 and that the
 
project was found to be
economically viable in a number of scenarios.
24
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.
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 2027. 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 final design work
 
on the CPP,
 
with the design work also
 
being applicable to the
 
potential expansion of DP2.
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.
 
 
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
 
and since
 
then substantially
 
rehabilitated.
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 has arranged
 
its operations into two wholly
 
owned entities covering
 
their East Rand (east of Johannesburg)
 
and far West
Rand (far west of
 
Johannesburg) businesses. The East Rand operations are run
 
by Ergo
 
and the West
 
Rand operations by FWGR. A
 
detailed
overview of
 
the operations
 
is provided under
 
Item 4D. Property,
 
Plant and Equipment
 
and in the Technical
 
Report Summary
 
attached as exhibits
in this annual
 
report.
25
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 anyone 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.
 
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
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.
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 year
 
2020 and
 
fiscal year 2021.
 
Although the impact
 
of the
 
COVID-19 pandemic has
 
reduced and
 
gold prices have
marginally decreased,
 
the average gold price for
 
fiscal year 2022 remained
 
high due to continued economic
 
uncertainty as the
 
global economies
attempt to recover
 
from all the after
 
effects of COVID-19,
 
and deal with the
 
conflict in Ukraine
 
and rapidly rising
 
inflation. In
 
addition, we
 
were
impacted by
 
movements
 
in the exchange
 
rate of the
 
rand against
 
the dollar during
 
described
 
below.
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.
The average
 
gold spot price
 
decreased
 
by 1% from
 
$1,850 per
 
ounce to
 
$1,834 per
 
ounce during
 
fiscal year
 
2022 after
 
having increased
by 18% from $1,562
 
per ounce to $1,850 per ounce during the fiscal year 2021 and having increased
 
by 24% from $1,263
 
per ounce to $1,562
per ounce during
 
the fiscal year
 
2020.
 
As a
 
result,
 
the average
 
gold price
 
received
 
by us
 
in Rands
 
for fiscal
 
year 2022
 
decreased
 
by 3%
 
to R894,409
per kg compared
 
to the previous
 
year at
 
R917,996 per
 
kg and for
 
fiscal year
 
2021 increased
 
by 19% to R917,996
 
per kg compared
 
to the previous
26
year at
 
R768,675 per
 
kg. The
 
decrease
 
in the gold
 
price received
 
contributed
 
to a 3%
 
decrease
 
in our total revenue for
 
fiscal year 2022 amounting
to R5,118.5 million (2021: R5,269.0 million and 2020: R4,185.0 million). All our revenue is generated from our operations in South Africa.
 
Looking ahead
 
we believe
 
that the global
 
economic environment,
 
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.
 
 
Until April
 
11, 2022, all gold
 
we produce
 
was 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 sales price
 
was fixed at the London
 
afternoon fixed
 
dollar
price on
 
the day
 
the gold
 
was 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 up to
 
April 11, 2022,
 
the dollars
 
are also
 
sold on the
 
day the gold
 
is delivered
 
to the buyer.
 
After
April 11,
 
2022, gold
 
is sold
 
directly to South
 
African Bullion banks after
 
being refined to
 
the required purity
 
by Rand
 
Refinery.
 
The Group
recognizes
 
revenue from the sale
 
of gold at a point in time
 
when the gold is delivered
 
to the South African
 
Bullion bank on
 
an agreed upon date,
gold price
 
and exchange
 
rate.
 
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.
 
In exchange
 
for this
 
service,
 
we pay
 
Rand Refinery
 
a variable
 
refining fee
 
and administration
 
fees
and up to April
 
11, 2022, a fixed
 
marketing
 
charge.
 
We own 11.3% (fiscal year
 
2021 and 2020: 11.3%) of
 
Rand Refinery.
 
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,
 
2022 and
September
 
30, 2022 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 and
 
was subsequently
 
amended in September
 
2010.
It is
 
used an
 
instrument to achieve mutually symbiotic sustainable growth and broad
 
based and meaningful transformation of the
 
mining and
mineral industry.
 
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
27
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
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