Niël Pretorius - CEO Riaan Davel - CFO Jaco Schoeman - Operations Director, Ergo Mining Operations Proprietary Limited

Leroy Mnguni - RMB Morgan Stanley Abhishek Tiwari - JPMorgan Cazenove Niël Pretorius: Thank you very much for joining us. Good morning. Thank you for joining us for the presentation results for the first nine months for the financial year and also the quarter-on-quarter results. It’s been a good quarter for us. I think we turn the corner on our technology implementation, the flotation and fine-grind and the metallurgical efficiencies that we have been dealing with and we think that you will see some of that in the numbers. Key feature for us obviously is our Black Economic Empowerment Transaction that was approved by the EMO. It basically means that our structure as it currently is constitutes full compliance with our existing mining licenses. So the 26% minority interest that you will see on the first page of our financial reports that’s not going to change. That’s all being fully consolidated and that is an exchange for roughly 10% of the shares in issue of DRDGOLD on the listed level. For the nine months, we saw a nice jump in gold production of 11%. You will recall that is exactly a year ago that we suspended the flotation and fine-grind after we tried to commission it a year ago. And obviously, for that period gold production was relatively low. It accelerated from April onwards though, but what you have seen here is really the effect of low production at the time and steady and accelerated gold production enough for the last few months. Our all-in sustaining costs are down by 9%, but it’s still not quite where we want it. We will spend a bit of time of talking about that as well. We said taking into consideration that the formula that was ultimately decided upon to calculate all-in sustaining cost does contain a measure of non-cash cost. There is a capital amortization element I think included in there, which might push that up a little bit higher than what the two actual net all-in costs are as gold fields are reporting all-in cash cost and maybe that’s a good measure to look at the actual cash profitability or cash margin of operations with all-in sustaining and strategic CapEx. On that score, I’m happy with where we are trending. Operating profit was also up nicely to R261 million, EBITDA up to just under R190 million and in the quarter-on-quarter numbers these are the ones that had us nervous at the beginning of the quarter because we were implementing both the second and third phase of the flotation and fine-grind at the time. It was going to be a time of inventory build-up, but at the gold lock-up. And also there is always a bit of lag for the metallurgical efficiency to simply just to settle into to find its rhythm and for us to start dancing to the rhythm of the plant. And middle of January through to the end of February, those were nervous weeks for us. We were holding our breath. You feel almost the temptation to interfere with how the plants going to perform, but you really just to want to sit back stick to the basics and wait for the plant to perform. And it came through spectacularly quite frankly towards the end of the quarter, and we were pleased about that. The operating profit is up nicely also quarter-on-quarter about 16%. And for us the two measure of how well the business is doing, what’s happening to our cash balance. And we are not a company that saves on necessary CapEx, if the CapEx needs to be spent, and we spend it. And we have been doing that. I think we have been based at the better part of our market cap and infrastructure and upgrade in the last five years. So if our cash balance is positive then it’s really an indication of increased robustness in the business. We don’t increase our cash position by deferring or avoiding necessary CapEx. We are looking at a properly capitalized business that is starting to hit steady state and that manage to generate about 5% of its market cap in a single quarter in net cash flow. We use that money to pay down R55 million of the outstanding R77 million that we had and ended up with just under R390 million to rather R290 million still in cash. That’s before the payment though just to point that out. But I think the nice thing is that we were able to cover the amount that we got to paid back on these loan notes in respect of those loan note holders who accepted the offer for early redemption. We managed to pay cover most of it with the net cash flows. Out of a single quarter we had two months out of the quarter, really months looking towards stabilizing the circuit and only the last month really was a stabilized circuit. So looking at the operating trend. The two things that really affect our business, the most are volume throughput metallurgical efficiency and we got to get 0.2 gram a ton out of the combined circuit that we have got and we need to put at least 60,000 tons of material through the plant per day. If we add up those numbers, you will see that we didn’t quite make the 60,000 and there were a number of reasons for that. Proportionately all of those also were around the beginning of the year with a bit of load shedding and also some asset availability and none of that as a consequence of what was happening towards the end of the quarter when volume throughput was really good and being matched by metallurgical efficiency. So that helped us to despite the fact that this was a month of commissioning and tweaking and fine tuning, or a quarter rather we still managed to improve on gold production and we had our second best quarter out of the last number of quarters and interesting trends coming out of the flotation and fine-grind. And importantly, finally achieving that 0.3 gram per ton reduction in the residue grades, which was really for us, I think the one thing that we wanted to achieve that was going to indicate a plant working in accordance with its design specifications and the assumptions upon which we base the initial decision to invest the CapEx. Our colleague Riaan is going to take you through the financial things and then I will wrap-up at the end.

Thank you very much Niël. Good morning ladies and gentlemen. It’s my privilege again to take you through the financial indicators, the trends income statement and balance sheet; we will state more financial position for 31 March. And I love talking about trends like these as long as it continues, as we look at the operating margin just a remainder that is a major of the operating effectiveness, so that’s operating profit as a percentage of revenue. And again, very, very positive trends if we look at the five quarters there. All-in sustaining cost margin, Niël mentioned that often, yes, it does contain non-cash expenditure as well which you can clear see in quarter four of 2014, which was a very specific non-cash environmental estimate adjustment in the fourth quarter, this was accretive so that made that margin quite high. Without that, if you strip that out, if you want to look at a pure trend, it would have been in the region of about 3%, so again, also very positive trending upwards to the 9% in quarter three. EBITDA, I remain again, earnings before interest, tax, depreciation and amortization, again a similar impact on the fourth quarter in 2014 of that roughly R90 million adjustments. Again, if you strip that out, would have probably driven that down to about 20%, R20 million and again, start as a very positive trend. Last quarter also had a specific sale of non-core land in that adjustment, which would have made the 69 slightly lower so extremely positive trending also in the earnings line. As Niël mentioned cash, as I said it last time and I will say it again, when you get back to the office or tonight to your family, friends, loved ones that’s the one you must talk about. So it is free cash flow. And please note, Niël also said the trend over the last three quarters, so extremely positive free cash flow generation. Remainder, its operating cash flow less investing cash flow, so all the CapEx that’s needed for your business as Niël as said. We have done all back on any of those, we still spend that on a regular basis to make sure the asset is maintained and operating in a magnificent condition. So again, very positive quarter two at that non-core land cash flow of about R14 million in the - so extremely proud of that 44 million, free cash flow in quarter three generated. Headline earnings, as of now, already mentioned that trends change in quarter four also impacted by that adjustment. And again, maybe based on the nature of where we do our major revisions, the market would know - that we don’t do a full environmental reestimate by some all the good environmental work we do through the year on a quarterly basis. So that is done on an annual basis and we are doing that calculation, the full reestimate now as we speak in preparation for the 30 June, 2015 position. And again, a very positive R0.02 per share in quarter three. Looking at the statement of profit and loss, you will see that revenue increase, and again, I’m going to focus quarter-on-quarter, you will have more detail in our full report that you have access to here and also available on our website. So the revenue number increased by 9% quarter-on-quarter to that R5 million to R9.5 million. As a result of a 2% increase in gold sold and roughly 6% increase in the average rand gold price received for the quarter. The net operating cost also increased by 7% quarter-on-quarter as a result of a 3% increase in volume throughput together with a significant increase in flotation throughput tonnages as the float front came up to full speed. And those two together resulted in a 15% increase in operating profit to 97.6% which Niël as already mentioned. Depreciation marginally higher for the quarter, and as I have mentioned, no major movements in the provision for environmental rehab maybe quarter-on-quarter, but to that full estimate as we do on an annual basis being performed as we speak. Other income and cost, majority of cost in headline is the head office cost, just to note again, as a line item as presented here, the 17.8% represented 29% decrease in a comparative quarter in 2014, which is a very positive trend. Net finance expense, majority of that is again a non-cash unwinding of the environmental provision on a quarterly basis of about R10 million. These are the profit before tax of R16 million and profit after tax of R11 million, headline earnings per share of R0.02 as already mentioned and earnings before interest in tax that’s basically the 16 plus that 7 and the majority of the adjustment sets in depreciation which is a non-cash adjustment a very much required in terms of IFRS presentation. Talking about financial position, yes, you can see obviously the asset is being used so that’s a good thing, so the major capital expenditure has stopped. And the asset is being depreciated so that balance will diminish over time. The R49 million included in that number which you may remember at last the presentation, we talked about the Village Main Reef asset, they have even sent capital of R12.25 and that’s a mark-to-market adjustment at the end of 31 March reflected in that investment. Again, I want to emphasize the cash position, still mentioned here by 18%, and then Niël also mentioned part of that was used on the 7, April to settle 53 million of the loan notes early. So we communicated to the market in February, if we want to seek early redemption - redemption of those notes and we successfully renegotiated R53 million of those. Current assets stable up 6%, liability is up - current liability is up 5%, but it keeps of a very stable current ratio of 1.6. And then just a quick word on equity, although you go and see it in a condensed format, but as Niël mentioned because of the Black Economic Empowerment Transaction flip up, the BEE partners now own approximately 10% in DRDGOLD directly, whereas previously that was shown as a non-controlling interest for the group, it’s now flipped up to equity of the onus of the parent but all equity of the group. So there is no fair value adjustment based on an historical cost basis, they just all shown as the equity of the parent from 1 April going forward. Long-term liabilities very low, it’s simplistically finance lease obligation for the June 6, that was capitalized in the second half of 2014 and the environmental liability unwinding and small adjustments on a quarterly basis. I’m going to hand back to Niël now. Thank you. Niël Pretorius: Thank you, Riaan. So we bought the flotation and fine-grind circuit because we wanted to achieve an improvement of R0.03 per gram per ton on recovery efficiency and just looking at the blackbox number, which is gold coming in and gold and residue leaving the plant that is exactly what we achieved towards the end of March or for most of March for that matter. As a consequence, Ergo produced - Ergo plant produced more gold in March than - in any other month since it was recommissioned approximately 8 years ago. There is still some work to be done representing the fact that these parameters are being achieved. Teams have picked up on one or two things that they want to tweak particularly in the high-grade circuit, the carbon-in-pulp section. Jaco is here and he will be, only too happy to share with you the technical details of that potentially what it involves is that the [indiscernible] not competing with the carbon again towards the end of that carbon-in-pulp section, sorry, I missed it, carbon-in-leach, carbon-in-pulp section and they want to arrest that by introducing carbon into the slurry or into the concentrated in early stage and they do that by converting the CIP to a CIL circuit. And maybe there is a little bit of more upside we don’t know with the sheer size and volume involved in the circuit, you don’t know until after you see the gold on the table. So you to trust your - you got to trust the - your technology and you are going to trust your experience and you are going to trust the knowledge of the people involved in the business. And everything they said that was going to happen, in support of this plant is now starting to happen, so if there is a minor tweak or two that could further enhance the efficiency of the circuit then it's certainly worth looking at. The Van Dyk project we spoke about at the previous results presentation and this is really to increase the volume capacity of the plant from 1.8 million tons a month to 2.1 million tons per month. It also introduces through the Van Dyk reclamation site. An additional, one additional reclamation site, which basically means that the extent to which we rely on those three lines from Elsberg and further west from Crown and City Deep that those are amplified by one additional line. And the vulnerability associated with just one main stream coming from essentially a concentrated area that reliance has diminished to an extent. Which basically means that you are creating about a headroom, these plants are designed and built in such a way that, you got to run them at 99%, 98% capacity most times and that there is very little room or scope to catch up by increasing the volume capacity of this plant. You are really creating a bit of pull capacity where the plant can receive almost more and what your various circuits can deliver and if there is a necessity to catch up a bit and you got the infrastructure and you got the optionality to do that. And from a risk management perspective that is a wonderful option to have, the ability to just catch up that little bit. And we have seen some of that down the last quarter as well with minor tweaking of engineering efficiency is insisting us to overcome some of the challenges being thrown at us and volume capacity being delivered into - on a regular basis and in fact it’s become almost power for the course as supposed to a few months ago. You can’t have a presentation at this stage with that also talking about the power situation and talking about Eskom ability to supply power consistent and reliably. December was not a good month from a load shedding perspective; we were finding our feet, Eskom was finding its feet to just get this large reduction arrangement in place. We had a few trip outs in January as well. We also - we were experimenting with subsequent to the conclusion of the large reduction agreement what is that we switch-off, what is that we keep on. Some of the measures that we put in place that we are going to take in order to drop our load by either 10% in the event of stage 1 and 2 load shutting or 20% in the event of stage 3 load shedding. We found that we actually dropping consumption more by more than what is actually required. So we are revisiting some of that. I think I will speak at the previous results presentation that we wanted to integrate just the measurement of consumption and the similar fashion that we are looking at every other component of our reclamation and production cycle through our control room in the Ergo plant and they have done that. Actually there is a little yellow line that you can look at with a 10% reduction consumption is going to be below the yellow line and with 20% below the line below that, the blue line I think it is Jaco, if I’m not mistaken. And on the one or two occasions where we have to stage 3 load shedding and we switched off some of the FFD circuit tree. We came in well below that 20% requirement. And as it turns out, we might actually be able to by simply managing the water balance slightly differently, the water circuit slightly differently absorb most of the load curtailment requirements of stage 1 and 2. And see almost no impact on volume throughput. In fact, the number of times that we had stage 1 and 2 in the last few weeks was very seldom that we actually came in below our daily call of 60,000 tons annually. Number of occasions we came through higher than the 60,000 tons, so it does seem as though the combination of our engineering lay-up, the systems that we have got in place, the arrangement that we have with Eskom that those are adequate for us to trace and absorb the risks associated with load shedding and the way that is being applied at this point in time. The impact of load shedding according to us, suppose I can conclude is to say that on volume throughput it is negligible, on metallurgical efficiency the actual impact on physical gold production we providing for about 10 kilogram reduction in gold production over a period of one month assuming that there is load shedding every day. We are not seeing load shedding every day. We are not seeing the impacts of load shedding on the circuit to be as severe as we thought it might be, so maybe that 10 kilos per month is on the right side of being conservative of being cautious. So obviously, it’s something that that we were extremely nervous about, we are holding our breath to see exactly what the effect is going to be, but it’s been perfectly manageable. As suppose there is one final point also on the electricity and electricity interruptions. I have shared with you on a number of occasions that one of the key vulnerabilities in our circuit is the thickeners. These are facilities to lift density before material coming from the float plant goes back into the CRL circuit, so that your column remains in suspension. And these things trip and it takes a week to wash them out and pull them back up again and in the months prior to January - December and January as part of our the engineering tweaks that we did at the time or tweaking, we have put in under float pumps and additional backup generator capacity et cetera, et cetera. And a few times where we have had full trips out without any prior warning just that trip out in the true sense of the word. The backup capacity that we had created at those thickness worked 100% and we haven’t had an instance where it was necessary for us to drain a thickener and wash it out and full it back up again and the same base that it usually takes to do that. We haven’t had one instance where that was necessary since the implementation of those measures. So it does look as though the reconfiguration of our operating footprint, installation circuit et cetera, et cetera has been successful and that it is capable of taking what the environment is currently throwing at it. And we are very pleased and very relived about that. Just on the sustainable development side, these are numbers that we just want to share with the market on an ongoing basis, so this is basically the rolling totals for the nine months through to March on local economic development, the spend was just over 3 million. Corporate social investment just over 1.2 million, all of these initiatives are in our integrated report and I invite you to read through it. It’s in fact an easy reading document. That’s a relevant document that really talks of the initiatives that we involve ourselves in. Human resource development just over 5 million and then EBITDA which is our [collage] [ph], which we established six odd years ago with the intension of becoming self-sustainable and profitable. It is managed to generate a net cash profit of 6.8 million in the nine months through to 31, March. We have to hand that over to the community and we are setting up a trust, beneficiaries of the trust or the seven schools that at this stage are taking advantage of the extra math and science classes that we are offering. They will be the beneficiaries of this. We are setting it up to partner with a commercial venture just to provide the necessary business acumen and management acumen. We will be withdrawing from it. But they are receiving a business or a college that is self-sustainable that can stand on its own feet and that offers a wonderful platform for further growth and expansion collaboration with a partner. And then on the environmental spend, the site rehabilitation and this is vegetation cross that we planting to make sure that we don’t cover [job work] [ph] in a cloud of dust and unlikely to drive past our tailings dam near the Soccer City stadium, so you will see the quality of what we are doing there. I think it’s world-class. It works really well. You can see on the 90 points where we measure dust - the occurrence of dust in the air that there are very few exceedances and this is directly attributable to the fact that we are spending this money on site rehabilitation that is working really well and the cost of that for the year, the last few months was R38 million. I think once again, I want to go back to the net cash situation at the end of the quarter. This is a business where the capital that as to get spend, get spend. The money that we got to spend on sustainable development gets spend. The money that we have to spend in order for this business to sustain business are not being interrupted because of environmental non-compliances money they get spent as well. So from a sustainability perspective, I think this is the sort of balance that you want to maintain. Of course, there is another element to it, and that is the shareholder element and it is always money in the bank. Obviously, the shareholders aren’t buying shares because they want to feel good about the corporate social spend. They are buying shares because they want to see a return on their investment. And hopefully, we will be able to maintain and sustain our reputation as a dividend paying company because we are building up surplus cash and you know, what we do with our surplus cash. So looking ahead, we want to continue to just look at the reliability of our assets and asset availability in particular. One of the key reasons why volume throughput in January was poor was because of asset availability. And that was essentially because of breakdowns of pumps that broke down. There are very few pipeline failures, but pumps in particular one of our main reclamation sites during the month of January. Our engineering staff under Kevin Kruger’s leadership have been doing a really good job to reverse that. And we have had some really good volume throughput and very few breakdowns in the latter part of the quarter. But we want to make sure that department also adequately resource and staffed that they have got the right systems, that they have got the right tools to continue to deliver the sort of performance that we are fast getting used to. We get used to good performance very quickly and we want to maintain that. So we want to make sure that he has got everything that he need and so we will be spending about money and time on just the asset maintenance systems protocols and equipment. The refurbishment of the remaining CIL tanks, I said earlier that is key for us that’s a key priority to raise our plant capacity by 300,000 tons per month and to start-up the Van Dyk because we do want that additional volume capacity. The construction of the Rondebult water plant that is at the sewage farm that’s going to give us 10 mega liters of water per day that would substitute water that we either throwing from the natural environment or from rent water, cheaper water as well. We are not competing with the rest of Joburg for portable water. So as I said many times in the past for us this is a wonderful synergy or overlay or overlap rather of environmental capital and financial capital. That the benefits, but we are also saving money, so bottom-lines are benefiting. Conversion of the high-grade CIPT shale, I spoke about that to trace some of these option issues that we still see. And once again, that is towards optimization, it’s not to trace underperformance but to enhance performance. And that’s what we will be keeping us ourselves busy with over the next few months. All right. Thank you very much, myself, Riaan and Jaco will take your questions. The rest of my colleagues are sitting at the back row there looking worried about what I might promise and what I might say. They would also be happy to take your questions. I will be here for a few minutes more. Thanks very much. Are there any questions from the podcast? All right, anybody? Q - Leroy Mnguni: Hi, good morning. Leroy from RMB Morgan Stanley. I have got two questions. The one is relating to the throughput. So if you are targeting 60,000 tons a day, what are you running at, at the moment and how do we expect that to build up to your targeted number? And once you got the additional capacity will that increase and what do you expected to be then? My second question is around the reliability of power, so my understanding was that Eskom had to agree that if you can curtail your demand during load shedding that wouldn’t cut your power, but it seems like they have cut your power on some occasions. So I mean, are you concerned about that how do you expect that to impact your business especially running into coal demands with this higher demand for electricity?

Look we are achieving the 60,000. In fact we built up capacity slightly higher than 60,000, which helps us to from time to time do scheduled maintenance without dropping to below the average goal of 60,000. So at this stage, or at this point in time, since about the middle of February, I think we have been comfortably maintaining the 60,000 tons a day. Your second question was the load shedding and the impact of that in the switching, is that right?

Yes.

So since January we haven’t had any of those. We haven’t had an instance where there was an unannounced complete interruption of power supply. We had one or two of those in January, but I think it was probably Eskom just settling into the load shedding schedule and inadvertently interrupting power without realizing that there was an arrangement in place. We haven’t had any of that since then. February, March we haven’t had any complete interruptions of power without notification. And in fact the load shedding arrangement or the load reduction arrangement that we had with Eskom has been honored. We haven’t been without power for the better part of seven weeks, I think now at any of our production sites.

If you do get interruptions, it’s not the production, it will be due to [indiscernible]?

Sorry, just the change in throughput once you have additional capacity. Niël Pretorius: I think we will stick to about 60,000. And we will use that additional capacity to - in the event that this maybe an interruption. Let’s say we have got the ability to do 68,000 with this additional site for argument sake per day. We won’t push for 68,000 unless we have fallen behind somewhere during the course of the month. And we need to push that in order to catch up. Because remember everything needs to leave the plant and ultimately end up on the tailings dam as well. And you don’t want to sweat tailings dam. You want it to be around as long as possible.

Hi, Niël. Abhishek from JPMorgan Cazenove. Two questions, firstly, extension from Leroy. Could you please guide us on your production going forward, what can be expected in terms of steady state gold production? Niël Pretorius: We want to do R0.2 a ton. And we want to do 2 million tons a month. So we want to do 400 kilos a month that’s what we want to achieve. The metallurgical performance of the business is set at this stage and the volume capacity of the business at this stage is such that those are achievable. So it’s either, if there is an interruption in volume throughput or a drop in volume throughput, or if there is a somewhat rather impact on metallurgical efficiency that will drop below that point. But, that is certainly what we are chasing is the two twos, 2 million tons at 0.20 recovery.

Okay. Thanks for that. And then, could you please remind us as to the amounts that you have received so far from the Balfour sale and how much is left - how much you can expect to receive once the offer from Heaven-Sent is completed, and then what do you plan to do with the money that you get? Niël Pretorius: Yes. In the last quarter I believe there were two milestones - important milestones and this is based on what I saw in the media and on sense. The competition commission approved the transaction and the shareholders also approved the transaction. I believe a key condition that is still outstanding is the consent from the regulator from government, the EMO for the transfer of the licenses and then it will go through. I think our - the two parts to this transaction, the shares that we hold are encumbered which once is sold I think is about 40 million, if I’m not mistaken here. And then they are escrow shares which are the shares that are in dispute we claiming those shares from EMO on the basis that it was non-compliances conditions of the agreement that got in the way of the delivery of those shares they are defending the claim. And then there is also an escrow dividend. I think those two had another 12, 15 odd million up to the total from - yes. Look nobody wants to litigate, I think hopefully in a pragmatism we will determine the outcome of that little dispute as well at some stage because it’s really become a dispute Balfour and liquidation, it’s really became a dispute about money and not much else. And those are resolvable. So we have to resolve that at some stage. But money that you can bank on is about - roughly 40 million, the unencumbered shares. And it will come into treasury and if we don’t have anything to spend it on or if we don’t have to hold on to in order to maintain our buffer, our working capital buffer then you will distribute it, we will either pay a dividend or we will buy back shares if the share price stays low.

There is nothing from the podcast. Niël Pretorius: Nothing else, okay, lovely. Thank you very much everybody. We will be around for a few minutes longer, if you want to ask questions, feel free to do that.