durbans.com - online annual report

In 2003, the DRD attributed mineral resource has decreased by 7.0 million ounces (9.8%) to 63.9 million ounces (excluding the Argonaut Project, increased by 4.0 million ounces to 48.5 million ounces), compared to 2002 and the attributed mineral reserve, decreased by 0.5 million ounces to 15.8 million ounces.

DRD combined operations (includes 40% Crown and 19.81% Emperor)

Attributable mineral reserve and identified mineral resource statement as at 30 June 2003


Mineral reserve (delivered)					Mineral resource (inclusive of reserve and in-situ)
	Tonnes	Grade	Gold	Gold		Tonnes	Grade	Gold	Gold
Category	(Mt)	(g/t)	(tonnes)	(Moz)	Category	(Mt)	(g/t)	(tonnes)	(Moz)
Proved					Measured
Underground	41.284	7.18	296.486	9.532	Underground	49.996	8.77	438.393	14.095
Open-pit	0.001	21.21	0.019	0.001	Open-pit	0.001	25.92	0.020	0.001
Surface	52.762	0.62	32.849	1.056	Surface	91.405	0.51	46.648	1.500
	94.047	3.50	329.354	10.589		141.402	3.43	485.061	15.596
Probable					Indicated
Underground	22.502	6.67	150.154	4.828	Underground	48.755	6.98	340.074	10.934
Open-pit	0.003	28.72	0.077	0.002	Open-pit	0.022	5.61	0.126	0.004
Surface	14.890	0.77	11.505	0.37	Surface	152.130	0.31	46.572	1.497
	37.395	4.33	161.736	5.2		200.907	1.93	386.772	12.435
Total					Sub total
Underground	63.786	7	446.640	14.360	Underground	98.751	7.00	778.467	25.029
Open-pit	0.004	26.9	0.096	0.003	Open-pit	0.023	26.90	0.146	0.005
Surface	67.652	0.66	44.354	1.426	Surface	243.535	0.66	93.220	2.997
	131.442	3.74	491.090	15.789		342.309	3.74	871.833	28.031
					Inferred
					Underground	211.541	5.22	1 104.666	35.516
					Open-pit	0.001	40.78	0.026	0.001
					Surface	35.916	0.31	11.149	0.358
						247.458	4.51	1 115.841	35.875
					Total
					Underground	310.292	6.07	1 883.133	60.545
					Open-pit	0.024	7.20	0.172	0.006
					Surface	279.451	0.37	104.369	3.355
						589.767	3.37	1 987.674	63.906

Reporting code and definitions

The company reports its South African mineral resources and mineral reserves in compliance with the South African Code for Reporting Mineral Resources and Mineral Reserves (the “SAMREC Code”). The Code sets out the minimum standards, recommendations and guidelines for public reporting of exploration results, mineral resources and mineral reserves in South Africa. The Code has been adopted by the South African Institute of Mining and Metallurgy (“SAIMM”) and is incorporated in the Johannesburg Securities Exchange (“JSE”) rules in relation to listing requirements and reporting obligations.

The company’s Australasian operations, Tolukuma and Emperor, report their mineral resources and ore reserves in compliance with the Australasian standards laid down by the Australasian Joint Ore Reserve Committee (“JORC”) Code for reporting identified mineral resources and ore reserves.

The SAMREC Code is based on, and is compatible with, the JORC Code. In this context, ore reserve has the same meaning as mineral reserve.

The company’s mineral resources and mineral reserves, with the exception of Emperor, were independently reviewed and audited for SAMREC and JORC Code compliance by Resource Services Group (RSG). RSG is an exploration, mining and resource consulting firm, which has been providing services and advice to the international mineral industry and financial institutions since 1987. The audit report has been compiled by Mr Mike Sperinck (MAUSIMM and SACNASP), and Mr Jan de Visser (MAUSIMM and MGAA) and Mr Martin Millard (from Metallurgical Design Management and fellow of AUSIMM) who have the appropriate relevant qualifications, experience, competence and independence to be considered independent “competent persons” under the definitions provided in the codes. They each have more than 20 years’ experience in the mining industry and regularly conduct due diligence studies and technical audits around the world for mining companies and financial institutions.

The audit process undertaken by RSG has been carried out through the review of the data, techniques, procedures and parameters used in the resource and reserve preparation during two separate site visits to the South African operations, and an extended trip to the Tolukuma operation. DRD personnel, or suitably qualified contractors, undertook the work with input and discussion from RSG. The audit included sampling, assaying, resource estimation, classification, conversion to reserves through the mine planning process, costing and mining factors. All reserves that have been included in the reserve tabulation are included in the current life of mine plans.

The relevant definitions of the mineral resource and mineral reserve categories are included in the “glossary of terms”.

The Mineral and Petroleum Resources Development Act

The Mineral and Petroleum Resources Development Act (“The Act”) in its current form, while approved by Parliament, has not yet been enacted. The Act cannot be implemented without further legislation (the Royalty Bill, Beneficiation Bill, Regulations and Prescribed Social and Labour Plans) being enacted.

The main objective of the Act is that the State becomes the custodian of the nation’s mineral and petroleum resources. The prospecting and mining rights will be granted preferentially to historically disadvantaged persons. A mining right will be granted for a maximum of 30 years, which is renewable, in 30-year maximum terms.

DRD will have to convert its mining rights for current mining operations within five years and its prospecting rights for current prospecting operations within two years. Application for new mining rights and prospecting rights will only be granted when stipulated requirements are met.

Competent persons

The compilation of the mineral resource and mineral reserve statements is a team effort, with overall responsibility and accountability with the appointed mineral resource manager for the mineral resources on each operation. The appointed mineral resource competent persons for each operation that have overall responsibility for the information in this report are:

•	Crown Surface	William John Laing (PLATO);
•	ERPM	Johan Smit (PLATO);
•	Blyvoor	Jan Johannes Jacobus Petrus Pretorius (PLATO);
•	Buffels and Harties	Jan Johannes Jacobus Petrus Pretorius (PLATO);
•	Argonaut	Mathys Hendrik Greeff Heyns (SACNASP); and
•	Tolukuma	Michael John Bird (AusIMM).

The individuals who have provided input into this annual report, listed above, have extensive (more than five years’) relevant experience in the mining industry and type of deposits mined. They are all employees of the company and are the designated competent persons, in terms of the SAMREC and JORC Codes, with relevant geological and survey backgrounds relative to the style of mineralisation and are registered members of recognised statutory organisations.

The competent person, designated in terms of the SAMREC Code for the mineral reserves, and taking corporate responsibility for the compilation and reporting of the DRD mineral resources and mineral reserves, is Mathys Hendrik Greeff Heyns, who is an employee of the company. He has an M.Com. degree in Business Management and is a registered member of SACNASP and the SAIMM and has 20 years’ relevant experience.

Operations

During the current reporting period, the company has:

•	acquired 40% of ERPM, a gain of 0.794 million ounces of gold mineral reserve; and
•	obtained 19.81% of Emperor Mines Limited, a gain of 0.168 million ounces of gold mineral reserve.

4.1	Combined
	The DRD attributed mineral resource (including the Argonaut Project) has decreased in 2003 to 63.9 million ounces from 70.9 million ounces of gold in 2002 and the mineral reserves to 15.8 million ounces from 16.3 million ounces of gold, both decreases due largely to the decrease of the rand gold price used for the resource calculations, from R102 500 per kilogram in 2002 to R96 500 per kilogram in 2003.

4.2	Blyvooruitzicht (“Blyvoor”)
	The total mineral resource decreased 0.2% by 0.1 million ounces of gold only, due mainly to the positive impact of the inclusion of the No’s 4 and 5 tailings dams. The total mineral reserve decreased 20.1% by 1.5 million ounces of gold. This includes the negative impact of rock dump depletion and erratic Main Reef values, and the positive contribution of the inclusion of the No’s 4 and 5 tailings dams and Carbon Leader pillars (which were excluded due to lack of access previously), as well as good progress made with the expansion project. The mine is situated on the Far West Rand goldfield, on the north-western rim of the Witwatersrand Basin and comprises both underground and surface reclamation operations, a metallurgical plant, tailings deposition facilities and associated infrastructure. The mine exploits the Carbon Leader (“CLR”) and Middelvlei (“MR”) reef horizons of the Central Rand Group. The CLR is the principal economic horizon across the lease area and is a planar single sheet conglomerate. The CLR typically comprises basal carbon seam, overlain by a thin, small pebble conglomerate, enriched in carbon in the lower portion. The MR lies some 50 metres to 75 metres above the CLR and consists of a variable number of polymictic quartz conglomerate bands, interbedded with coarse grain quartzites. The grade of the MR is more variable, with distinctive payshoots forming as southward-orientated linear zones.

4.3	Buffelsfontein (“Buffels”)
	The operation’s total mineral resource increased 10.3% by 0.5 million ounces due to depletion not exceeding additional mineral resources identified. The total mineral reserve increased 7.2% by 0.1 million ounces of gold due to timeous conversion of resources to reserves with the opening up programme. The mine is situated on the Klerksdorp goldfield, on the north-western rim of the Witwatersrand Basin and comprises both underground and surface reclamation (waste rock dump) operations, a metallurgical plant, tailings deposition facilities and associated infrastructure facilities. The mine exploits the Vaal Reef (“VR”), occurring within the Central Rand Group of the Witwatersrand Supergroup, at the base of the Strathmore Formation. The VR is an oligomictic, quartz-pebble conglomerate no more than 50 centimetres thick. Gold is present throughout the reef horizon, but is concentrated on the bottom contact, where carbon commonly forms as a thin seam.

4.4	Hartebeestfontein (“Harties”)
	The total Harties mineral resource reduced 6.2% by 0.7 million ounces due to trimming of high values, higher cut-off grade (“COG”), completion of Townland’s area and depletion. The total mineral reserve decreased 0.4% by 0.3 million ounces of gold due to higher pay limit. The mine is situated on the Klerksdorp goldfield adjacent to Buffels, on the north-western rim of the Witwatersrand Basin and comprises both underground and surface reclamation (waste rock dump) operations, three metallurgical plants, tailings deposition facilities and associated infrastructural facilities. Similar to Buffels, the mine exploits the VR within the Central Rand Group of the Witwatersrand Supergroup.

4.5	Tolukuma
	The Tolukuma operation’s mineral resource has increased 17.24% by 0.05 million ounces of gold and the mineral reserve has increased 84.62% by 0.07 million ounces of gold. The increase in mineral resource is due to transfer to mineral reserves through development and to development beyond the southern open end of Gulbadi being completed. This area has increased the life of current producing areas. Similarities to the Tolukuma-Gulbadi area indicate a potential ore zone for the Milaihamba area. The nature of the mineralisation and problems with core recovery mean that mineral resources and mineral reserves can only be increased through development. The planned conversion of the stoping method from the mechanised methods (“Avoca method”) to hand-held down-dip stoping has significantly improved the mineral resource to mineral reserve conversion ratio. High gold losses inherent to the Avoca method create the possibility of reworking abandoned areas of the mine and increasing production in the future. The Tolukuma deposit is essentially a single narrow epithermal gold-silver vein that follows a series of linked structures trending generally southeasterly from Tolukuma Hill. All of the present resource is located within this vein in four sections that have different geological characteristics. From north to south these are Gifunis, Tolukuma, Tolimi and Gulbadi.

4.6	Crown surface
	The Crown operation’s mineral resources have reduced by 0.09 million ounces of gold, associated with depletion. The mineral reserve has reduced accordingly with 0.12 million ounces. The operation undertakes re-treatment of surface sources, deposited as tailings from non-operational sites and includes three metallurgical plants, tailings deposition facilities and associated infrastructure, which are managed as three separate business units. Material processed by Crown comes from numerous secondary surface resources, including sand dumps and tailings dams (sand and slimes) deposited as residue from mining operations on the Central Rand goldfield. The surface sources have generally undergone a complex depositional history, resulting in grade variations associated with improvements in plant recoveries, deposition of sands on slimes, presence of ash, cladding of dumps with waste rock and the dumping of waste rock in dams. There are variations in gold grade within the dams as well as between dams.

4.7	ERPM
	The acquisition of ERPM means that the DRD mineral resource and reserve base has increased with 3.43 million ounces and 0.79 million ounces, respectively. The additional mineral resource is made possible by the detailed geological modeling completed recently. The mine is situated on the Central Rand goldfield located within and near the northern margin of the Witwatersrand Basin in the town of Boksburg, 25 kilometres east of Johannesburg. Underground mining and recovery operations comprise relatively shallow remnant pillar mining in the central area and conventional longwall mining in the south-eastern area. Future surface reclamation (tailings dump) operations are to be conducted through the metallurgical plant, tailings depostion facilities and associated infrastructural facilities. The mine exploits the conglomeratic South Reef, Main Reef Leader and Main Reef in the control area and the Composite Reef in the south-eastern area.

4.8	Emperor
	The 19.81% attributed to DRD means that the mineral resource and mineral reserve base has increased with 0.87 million ounces and 0.168 million ounces, respectively. The mine is situated on the north coast of the island of Viti Levu, the main island of Fiji. Gold mineralisation is associated with a volcanic caldera, and occurs in both flat-lying and steeply-dipping structures, typically less than a metre in width, principally on the western fringe of the caldera. Mining is conducted underground.

Mineral reserve parameters

Mineral reserves for the South African operations are calculated using a total working cost pay-limit, the previous year’s mining efficiencies and the current life of mine plan. The working cost pay-limit is calculated per individual shaft or costing area using area costing figures, then combined to formulate the total pay-limit.

The summary tables below indicate the mineral reserve parameters utilised for the South African operations.


Underground		Blyvoor	ERPM	Buffels	Harties	Crown
Working cost	Rm	522.54	360.17	354.10	777.72
	R/t	560.66	486.06	575.48	422.81
Tonnes milled	t	932 000	741 000	615 312	1 839 403
Gold price	R/kg	96 500	96 500	96 500	96 500
Plant recovery	%	95	96	96	96
Mine call factor	%	82	85	80	85
Mining factors
Sundries	%	7.0	9.0	12.3	10.8
Off-reef	%	–	–	4	7
Reclamation	%	100	100	100	103
Development	%	1	–	0.24	1.12
Discrepancy	%	13.0	12.0	12.3	18.0
Required yield	g/t	5.81	5.04	5.96	4.38
Headgrade	g/t	6.12	5.25	6.19	4.55
Broken grade	g/t	7.46	6.17	7.73	5.35
Stoping width	cm	105	115	115	115
Surface
Working cost	Rm	59.17	26.13	63.75	40.59	366.95
	R/t	24.26	23.75	31.25	43.64	31.82
Tonnes milled	t	2 439 000	1 100 000	2 040 00	930 000	11 532 000
Gold price	R/kg	96 500	96 500	96 500	96 500	96 500
Plant recovery	%	60	62	75	80	61.22
Mine call factor	%	100	100	100	100	100
Mining factors
Reclamation	%	100	100	100	100	100
Required yield	g/t	0.25	0.25	0.32	0.45	0.33
Headgrade	g/t	0.42	0.40	0.43	0.57	0.54
Broken grade	g/t	0.42	0.40	0.43	0.57	0.54

Mineral resource and mineral reserve statements

Note: rounding off of figures in this report may result in minor computational discrepancies.

The mineral reserves quoted below refer only to fully diluted delivered tonnages and grades to the plants.

DRD combined operations

Mineral reserve statement as at June 30, 2003

			Mineral reserves (delivered)
	Proved		Probable		Total
							Gold	Gold
	(Mt)	(g/t)	(Mt)	(g/t)	(Mt)	(g/t)	(tonnes)	(Moz)
Combined 0perations
Blyvoor
Underground	15.596	7.67	6.318	6.74	21.913	7.40	162.245	5.216
Openpit	–	–	–	–	–	–	–	–
Surface	28.674	0.61	–	–	28.674	0.61	17.556	0.564
Subtotal	44.270	3.10	6.318	6.74	50.587	3.55	179.801	5.780
Buffels
Underground	1.467	7.45	3.600	7.07	5.066	7.18	36.368	1.169
Openpit	–	–	–	–	–	–	–	–
Surface	–	–	8.740	0.91	8.740	0.91	7.981	0.257
Subtotal	1.467	7.45	12.340	2.71	13.806	3.21	44.349	1.426
Harties
Underground	21.581	6.79	11.333	6.38	32.913	6.65	218.876	7.037
Openpit	–	–	–	–	–	–	–	–
Surface	–	–	0.930	0.70	0.930	0.70	0.651	0.021
Subtotal	21.581	6.79	12.263	5.95	33.843	6.49	219.527	7.058
Tolukuma
Underground	0.178	15.99	0.128	12.02	0.306	14.33	4.390	0.141
Openpit	0.001	21.21	0.003	28.72	0.004	26.90	0.096	0.003
Surface	–	–	–	–	–	–	–	–
Subtotal	0.179	16.02	0.131	12.36	0.310	14.47	4.486	0.144
Attributable
Crown
Underground	–	–	–	–	–	–	–	–
Openpit	–	–	–	–	–	–	–	–
Surface	15.929	0.64	5.220	0.55	21.148	0.62	13.009	0.418
Subtotal	15.929	0.64	5.220	0.55	21.148	0.62	13.009	0.418
ERPM
Underground	2.168	6.20	0.888	6.86	3.056	6.39	19.541	0.628
Openpit	–	–	–	–	–	–	–	–
Surface	8.160	0.63	–	–	8.160	0.63	5.157	0.166
Subtotal	10.328	1.80	0.888	6.86	11.216	2.20	24.698	0.794
Emperor
Underground	0.295	9.98	0.235	9.67	0.530	9.84	5.220	0.168
Openpit	–	–	–	–	–	–	–	–
Surface	–	–	–	–	–	–	–	–
Subtotal	0.295	9.98	0.235	9.67	0.530	9.84	5.220	0.168
Total combined
Underground	41.284	7.18	22.502	6.67	63.786	7.00	446.640	14.360
Openpit	0.001	21.21	0.003	28.72	0.004	26.90	0.096	0.003
Surface	52.763	0.62	14.890	0.77	67.652	0.66	44.354	1.426
Total	94.048	3.50	37.395	4.33	131.442	3.74	491.090	15.789

The mineral resources quoted below refer only to in situ tonnages and grades:

DRD combined operations
Mineral resource statement as at June 30, 2003

Mineral resources (inclusive of reserve and in-situ)

Measured

Indicated

Inferred

Total

Gold

(Mt)

(g/t)

(Mt)

(g/t)

(Mt)

(g/t)

(Mt)

(g/t)

(tonnes)

(Moz)

Combined operations

Blyvoor

Underground

21.160

8.58

28.667

5.62

139.716

3.41

189.543

4.32

819.437

26.345

Openpit

–

Surface

29.621

0.62

–

35.915

0.31

65.535

0.45

29.457

0.947

Subtotal

50.781

3.93

28.667

5.62

175.631

2.78

255.078

3.33

848.894

27.292

Buffels

Underground

1.418

11.86

4.425

10.29

8.932

9.26

14.775

9.82

145.103

4.665

Openpit

–

Surface

–

19.000

0.63

–

19.000

0.63

12.050

0.387

Subtotal

1.418

11.86

23.425

2.46

8.932

9.26

33.775

4.65

157.153

5.052

Harties

Underground

17.516

10.35

12.495

8.56

2.261

6.00

32.272

9.35

301.844

9.704

Openpit

–

0.020

2.00

–

0.020

2.00

0.040

0.001

Surface

3.270

0.53

8.410

0.38

–

11.680

0.42

4.949

0.159

Subtotal

20.786

8.80

20.925

5.27

2.261

6.00

43.972

6.98

306.833

9.864

Tolukuma

Underground

0.074

46.81

0.053

35.17

0.173

30.18

0.301

35.17

10.577

0.340

Openpit

0.001

25.92

0.002

35.10

0.001

40.78

0.004

34.17

0.132

0.004

Surface

–

Subtotal

0.075

46.59

0.055

35.16

0.174

30.22

0.305

35.16

10.709

0.344

Argonaut

Underground

–

53.077

9.00

53.077

9.00

477.691

15.358

Openpit

–

Surface

–

Subtotal

–

53.077

9.00

53.077

9.00

477.691

15.358

Attributable

Crown

Underground

–

Openpit

–

Surface

50.355

0.43

124.720

0.25

–

175.075

0.30

52.756

1.696

Subtotal

50.355

0.43

124.720

0.25

–

175.075

0.30

52.756

1.696

ERPM

Underground

9.264

5.17

2.180

7.23

6.112

6.18

17.556

5.78

101.393

3.260

Openpit

–

Surface

8.160

0.63

–

8.160

0.63

5.157

0.166

Subtotal

17.424

3.04

2.180

7.23

6.112

6.18

25.716

4.14

106.550

3.426

Emperor

Underground

0.563

13.20

0.934

9.38

1.270

8.58

2.767

9.79

27.090

0.871

Openpit

–

Surface

–

Subtotal

0.563

13.20

0.934

9.38

1.270

8.58

2.767

9.79

27.090

0.871

Total combined

Underground

49.996

8.77

48.755

6.98

211.541

5.22

310.292

6.07

1 883.133

60.545

Openpit

0.001

25.92

0.022

5.61

0.001

40.78

0.024

7.20

0.172

0.006

Surface

91.405

0.51

152.130

0.31

35.915

0.31

279.451

0.37

104.369

3.355

Total

141.402

3.43

200.907

1.93

247.457

4.51

589.767

3.37

1 987.674

63.906

Sensitivity of mineral reserves at various gold prices

The table below indicates the sensitivity of the mineral reserves to gold price at DRD’s Operations.

Gold price	US$290/oz US$1 =R8.58			US$320/oz US$1 =R8.58			US$350/oz US$1 =R8.58			US$380/oz US$1 =R8.58
Exchange rate	US$290/oz US$1 =R8.58			US$320/oz US$1 =R8.58			US$350/oz US$1 =R8.58			US$380/oz US$1 =R8.58
DRD	Tonnes	Grade	Gold	Tonnes	Grade	Gold	Tonnes	Grade	Gold	Tonnes	Grade	Gold
operations	Mt	g/t	koz	Mt	g/t	koz	Mt	g/t	koz	Mt	g/t	koz
Blyvoor
Proved	40.2	3.0	3 820	42.5	3.1	4 170	44.3	3.1	4 413	45.6	3.1	4 576
Probable	4.0	7.9	1 006	4.9	7.3	1 169	6.3	6.7	1 368	8.5	6.3	1 717
Subtotal	44.2	3.4	4 826	47.4	3.5	5 339	50.6	3.6	5 781	54.1	3.6	6 293
Buffels
Proved	0.7	8.5	205	1.1	7.9	291	1.5	7.5	351	1.7	7.2	389
Probable	9.9	1.8	563	11.0	2.3	806	12.3	2.7	1 074	14.1	3.1	1 394
Subtotal	10.6	2.2	768	12.1	2.8	1 097	13.8	3.2	1 425	15.8	3.5	1 783
Harties
Proved	17.2	7.5	4 160	19.5	7.1	4 472	21.6	6.8	4 714	23.0	6.6	4 858
Probable	10.5	6.2	2 114	11.9	6.1	2 333	12.3	5.9	2 344	13.5	5.7	2 477
Subtotal	27.7	7.0	6 274	31.4	6.7	6 805	33.9	6.5	7 058	36.5	6.3	7 335
Tolukuma
Proved	0.2	16.1	91	0.2	16.1	92	0.2	16.0	92	0.2	16.0	92
Probable	0.1	14.9	36	0.1	13.4	46	0.1	12.4	52	0.1	12.4	52
Subtotal	0.3	15.7	127	0.3	15.1	138	0.3	14.5	144	0.3	14.5	144
Attributable
Crown
Proved	3.3	0.7	72	12.6	0.5	205	15.9	0.6	326	15.9	0.6	326
Probable	5.8	0.7	123	8.0	0.8	211	5.2	0.6	92	6.9	0.6	122
Subtotal	9.1	0.7	195	20.6	0.6	416	21.1	0.6	418	22.8	0.6	448
ERPM
Proved	9.4	1.5	459	9.9	1.7	534	10.4	1.8	605	10.9	1.9	671
Probable	0.6	7.8	143	0.7	7.3	173	0.9	6.9	196	1.0	6.6	215
Subtotal	10.0	1.9	602	10.6	2.1	707	11.3	2.2	801	11.9	2.3	886
Combined operations
Proved	71.0	3.9	8 807	85.7	3.5	9 764	93.8	3.5	10 501	97.2	3.5	10 912
Probable	30.9	4.0	3 985	36.7	4.0	4 738	37.2	4.3	5 127	44.1	4.2	5 977
Total	101.9	3.9	12 792	122.4	3.7	14 502	131.0	3.7	15 628	141.3	3.7	16 889

The mineral reserves quoted are sensitive to operating costs and gold price. These sensitivities are presented to give an indication of changes relative to gold price. These are not supported by life of mine plans and should therefore only be considered as indicative and comparable on a relative basis. At different gold prices, alternative mining strategies may be pursued to exploit the orebody optimally. The mining process is dynamic and will thus have a “knock-on-effect” on the operating costs and cut-off grade associated with the change in scale of operations. The inclusion of large tonnages of surface material will also influence the mineral reserve sensitivity.

Argonaut Project

The Argonaut Project represents the southern down-dip extension of the Central Rand goldfield. It relates to the possible exploitation of part of the potential resource striking 30 kilometres east/west from East Rand Propriety Mines Limited to Durban Roodepoort Deep Mine and extending from 2 800 metres to 5 000 metres below surface. During the year, renewed focus was placed by the company on progressing the Argonaut Project towards a bankable feasibility study.

The Argonaut Project represents a promising, yet challenging deep-level mining development opportunity that has been the subject of various technical investigations over the past two decades. On surface, the project target area is located largely within the southern suburbs of the greater Johannesburg metropolitan region, which overlies the unmined, down-dip extensions of the rich, gold-bearing reefs that were previously the primary sources of gold production from the now-defunct mines of the former Central Rand goldfield.

Volatility in the gold price during the year, coupled with uncertainties relating to the pending introduction of the Minerals and Petroleum Resources Development Act, adversely affected gold exploration and new mine development activities in general within South Africa. The Argonaut Project also suffered as a result but, despite budgetary constraints and curtailment of the planned 3D seismic and drilling programmes for 2003, the company continued with the detailed geological modeling and mineral resource definition in the project target area.

Utilising a comprehensive database of historical underground sample and borehole core assay values of the Main Reef and Main Reef Leader, sedimentological and structural interpretations of these major gold-bearing orebodies are being undertaken with the objective of defining different facies and delineating geozones for statistical and geostatistical estimation purposes and predictive analysis. This work was still in progress by year-end, but the results of the geological modeling and mineral resource estimation will be reported during 2004, thus providing an update on previously reported mineral resource statements for the Argonaut Project.

Growth potential

DRD’s strategy remains that of growth and diversification through discovery and/or acquisition of new mineral resources and mineral reserves. The company has established specific objectives that will ensure sustainable, profitable growth for the company within acceptable risk parameters. Acquisitions will be considered at any stage on the development curve ranging from greenfields projects to mature operating mines. Of paramount importance in the growth strategy is the search for quality assets. The minimum requirement for acquisition is the enhancement of the company’s mineral resource and mineral reserve base through DRD management being able to effect an improvement of the assets’ performance through implementation of expansion and renewal programmes supported by capital expenditure.

A hybrid strategy towards growth will be adopted which considers corporate acquisitions, producing asset acquisitions, advanced exploration asset acquisitions, strategic exploration partnerships and in-house expansion – organic growth. This strategy towards growth is preferred as it spreads the risks involved and lowers costs.

Apart from the Argonaut Project, growth in South Africa is largely limited to operational organic growth or mature mines that are rationalised by other companies. The growth opportunities within South Africa have become very limited due to the completion of the restructuring process that has taken place within the South African gold mining industry. The growth potential for DRD lies largely offshore with the greatest opportunities currently presenting themselves in the Australasian region. This therefore is the region where DRD believes its efforts should be focused.

The company has become increasingly active in pursuing appropriate projects for gold exploration and acquisitions. Several acquisition projects have been considered and pursued, but most have proved to offer limited return. The resistance to acquisition of low return operations has contributed to our strong stock performance over the last year. DRD will continue to build on its position as a leading South African gold producer and strive to establish and entrench its position as one of the world’s premier international gold mining companies.

Assessment criteria used in the compilation of the mineral resource and mineral reserve – South African operations (SAMREC terminology)

Data density – underground
On-reef development is sampled on a two-metre grid. The mined orebody is sampled on a grid varying from 3m x 5m to 6m x 10m, depending on the orebody. This information is used to project reef characteristics for mineral resource into and beyond development. Argonaut data was digitised by Rand Mines in the 1980’s, regularised to a 100m x 100m grid and this regularised data used to project reef characteristics for mineral resource beyond stoping and development.

Data density – surface
All sand and slime sources are drilled and sampled to a grid pattern sufficient to clearly define the physical, metallurgical and grade structure of the deposit. Additional drilling and bulk sampling then tests the valuation model. Rock dumps are valued from bulk samples and historical records.

Data density – open-pit
Mineral resources are based on a combination of exploration drill holes and blast hole sampling. Selective mining of the orebody takes place based on the blast hole results and geological controls. The mineral reserve figures quoted are based on historical selective mining and grade-control efficiencies.

Geological interpretation
The orebody has been classified into geozones with similar grade characteristics by its macro features. These geozones can be recognised in exploration drilling and development, and grade characteristics.

Geological interpretation – surface dumps
The specific grade zones, metallurgical variances, sedimentological changes and contamination structures identified from drilling and test work, together with historical information, are used to create a model for reclamation planning.

Sampling technique
Underground sampling is by means of hammer and chisel sampling averaging 1.5 kilogram samples of mineralised material. This is followed up for ore accounting by broken ore sampling (“BOS”) and “go-belt” sampling. Surface deposits are mainly sampled by means of auger holes. Samples are taken at 1.5 metres increments, or at such specific intervals as deemed necessary to clearly define the deposit. Archive and silt deposits are sampled by trenching.

Quality of assay data
Independent and company assay laboratories are used. Underground chip samples are assayed by fire assay using 25 grammes charges, applying discounts for silver-by-silver discount chart. At the operations, 10% of all chip samples are re-assayed and parted to confirm the validity of the silver discount chart. All other samples are on 50 grammes charges completed by parting with nitric acid to account for the silver content. Monthly re-assays and checks on standards, mill products and mine samples are conducted with external laboratories. Throughput at the laboratories is generally in excess of 300 samples per day. Turnaround time is generally between 12 and 24 hours.

Estimation techniques – underground
Normal and lognormal kriging is used for current mining areas. Measured, indicated and inferred blocks are estimated using regularised data in different sized blocks. All kriging is done within clearly defined geozones. Pillars or ground left within old mining areas have been evaluated using simple weighted average regression techniques. Surface deposits are evaluated also using these techniques.

Estimation techniques – open-pit
Lognormal third parameter normal kriging is done using the blast hole sampling and limited exploration drilling. Measured and indicated blocks are estimated using 5m x 5m and 25m x 25m regularised data respectively. All kriging is done within clearly defined geozones. Inferred blocks re-allocated grades based on historical mined values within the same geozones.

Estimation techniques – surface
Mineral resource categories are based on drilling density and metallurgical test work.

Treatment of pillars
Pillars that have been assessed as mining opportunities are included in the mineral resource and mineral reserve. An entire mining evaluation team, who will take into account costs, access, rock mechanics and site investigation, do assessments.

Surface material – allocation of costs
The surface mineral resource is quoted at in-situ tonnes and grades. The surface mineral reserve is quoted at delivered-to-the-plant tonnes and grades. Dump material screening is regarded as a mining cost and the mineral reserve is quoted at post-screening tonnes and grades. Pre-concentration of sand dump material is regarded as a metallurgical cost. That material is quoted at delivered-to-the-plant tonnes and grades.

Development waste
Dilution includes waste from on-reef development.

Cut-off calculation
Cut-off is based on the stoping or mining, transport and milling cost and the production plan for the next 12 months. A different operational cut-off is applied to each surface deposit, depending on its composition, location and reclamation method.

Resource cut-off grades
The cut-off grade used for exclusion of blocks from the mineral resource was based on a gold price of R96 500 per kilogram (US$350 per ounce) at an exchange rate of R8.58: US$1.

Assessment criteria used in the compilation of the mineral resource and mineral reserve – Tolukuma operation (JORC terminology)

Data density – underground
All on-vein horizontal development faces are sampled, which provides data at 1.4 metres intervals along strike. The vertical interval between levels varies between 8 metres and 20 metres. Exploration diamond drill holes provide data beyond development on a grid ranging from 30 metres x 30 metres to 100 metres x 100 metres.

Data density – open pit
Pit floors are channel sampled across the entire pit floor at 5 metres intervals along strike. Every second flitch is sampled, which provides data on a 5 metres x 5 metres grid.

Geological interpretation
The orebody has been classified into geological zones based on mineralogy, vein strike and dip and the Ag:Au ratio. These are used to define estimation domains.

Sampling techniques
Underground faces are duplicate-sampled by two rows of random chip samples over geologically defined intervals across the face. The results are length-weighted averaged for calculation purposes. Pit floor samples are taken across geologically defined intervals from channels excavated by shallow ripping by bulldozer. Face and pit samples have an average mass of 1.5 kilograms. Drill core samples are from half-core from geologically defined intervals. Core recovery varies from 25% to 100%. Core samples have an average mass of 1.0 kilogram. Muck-pile and stockpile sampling is used for metal accounting and mill feed grade and metallurgical control. These samples have an average mass of 5 kilograms.

Quality of the assay data
All samples are dried and crushed, with 200 gram split out and pulverised. A second split is taken from every tenth sample for quality control of sample preparation procedures. Assaying is by ‘aqua regia digest’ with an ‘AAS finish’, using standard procedures. Every tenth pulp is duplicate-assayed for quality control of analytical procedures. All samples are routinely assayed for gold, silver, antimony and mercury. Site laboratory results are checked against fire assays of random mine sample pulps by outside laboratories. These show that the ‘aqua regia digest’ consistently under-estimates gold by 12% and silver by 7%.

Tonnage volume factor
The ore density is highly variable, ranging from 1.8 tonnes per cubic metre to 3.1 tonnes per cubic metre. It is not practical to determine the density of every sample so an average factor of 2.24 tonnes per cubic metre based on drill core samples is used.

Estimation techniques
All model blocks are 5 metres vertical x 5 metres north south. The block thickness (east-west dimension) is determined from DTM models of the hangingwall and footwall of the vein defined from sampling. Vein thickness variability is the largest single source of error in resource estimation. Grade estimations for gold, silver, antimony and mercury are by inverse distance squared within hard-boundary geological domains. The domains are based on geological fundamentals (such as vein orientation and mineralogy) but also data density (development versus drill hole data). All assay data are tagged by domain, as are all model cells, and only data specific to a domain is used to model the grade of that domain. Use of hard domain boundaries causes sharp model grade changes, but in reality most domain boundaries are only fuzzy over a distance of 2 metres to 10 metres, i.e. one or two model cells, so this does not introduce significant errors.

Resource classification
Measured resources are developed resources, plus a 10 metre down-dip projection. Indicated resources are based on a 10 metre down-dip projection beyond measured resources, or areas that have been drilled on a 30 metres x 30 metres grid. Inferred resources are based on widely spaced drilling and geological projection within the drilled area, but also include remnants within and adjacent to mined areas where mining problems may exist. Some areas of mineralisation that have sufficient data for classification as measured or indicated resource have been downgraded to inferred because of known mining problems.

Mineral reserve estimation
Mineral reserves are derived from the measured and indicated resource by applying call and dilution factors derived from mining history. Dilution is applied as a skin around the resource (with the thickness depending on intended mining method), with an additional factor applied for waste extracted with broken ore in backfill stopes. The call factor applied to contained gold varies by mining method and stope height for back-filled stopes. Mineral reserve contents are estimated by mining area based on the 5 metres x 5 metres model intersected with the planned mining perimeters. No publishable mineral reserves are based on the inferred resource.

Reserve classification
In general terms, proven reserves are derived from the measured resource and probable reserves are derived from the indicated resource. However, after application of dilution and recovery factors some of the resource is excluded from the reserve. Revision of the mine plan could cause some of this material to be reclassified as reserve.