Review of operations

Blyvoor

Description

Blyvoor is situated on the north-western edge of the Witwatersrand Basin, to the south of the town of Carletonville and 70 kilometres south-west of Johannesburg, in North West Province. The mine has underground and surface operations and a gold plant. The first ore was raised in 1942.

Blyvoor has two main gold-bearing horizons: the Carbon Leader Reef (CLR), which is one of the principal orebodies of the Carletonville goldfield; and the Main Reef, which is some 75 metres above the CLR horizon. The reef formations have a thickness of between 5 and 20 centimetres. Recently there has been a shift in focus to mining the Main Reef.

Underground ore is mined by traditional drill, blast and scape narrow-reef mining methods. The operation is a combination of the workings of Blyvoor and Doornfontein mines and this allows several means of access, with four surface shafts still available and open.

Apart from the underground operations, production comes from waste rock stockpiles and the retreatment of surface tailings with the latter accounting for approximately 30% of current gold production.

Blyvoor’s carbon-in-leach (CIL) plant has a plant capacity of around 400 000 tonnes a month.

Life of mine is projected until 2030, but the resource at Blyvoor is so widespread that production could extend for many years beyond that, depending on the prevailing gold price and exchange rate.

Blyvoor

Safety review

Regrettably there were three fatalities during the year (2008: two), two caused by rockfalls following seismic events and one through an accident during loading in a chute. The last incident took place fatality-free shifts on 10 June 2009. The Lost Time Injury Frequency Rate (LTIFR) for the year was 11.84 per million man-hours worked compared with 8.67 in the previous year.

Operating review

Total gold production decreased by 8% to 129 473 ounces (2008: 141 172 ounces) reflecting an 8% drop in throughput to 4 036 000 tonnes (2008: 4 406 000 tonnes). Overall yield, however, held steady at 1.0 grams per tonne (g/t).

Gold production from underground was down by 14% to 88 898 ounces (2008: 103 813 ounces) in a challenging year for the operation. The mine lost 17 production days during the first half of the year because of Section 54 closures imposed by the Department of Minerals and Energy (now the Department of Mineral Resources) following the fatalities referred to above, and two days of mourning called by the National Union of Mineworkers. In the third quarter, six production shifts were lost at No 5 Shaft following the lightning strike at the shaft’s electrical sub-station.

During the fourth quarter there was a significant decline in grade because of the loss of some high-grade panels at No 5 Shaft through seismicity and an increase in the mining of lower-grade panels at No 4 Shaft. Underground throughput for the year decreased by 12% to 603 000 tonnes from 687 000 tonnes in 2008 while yield declined by 2% to 4.59g/t (2008: 4.70g/t).

In spite of an 8% decrease in throughput to 3 433 000 tonnes (2008: 3 719 000 tonnes), gold from surface sources rose by 9% to 40 575 ounces (2008: 37 359 ounces). This was mainly because of a 19% improvement in grade to 0.37g/t (2008: 0.31g/t).

Throughput went up in the fourth quarter following the successful commissioning of a new pipeline from the slimes operation transfer pump station to the plant.

Total operating costs went up by 32% to R209 170/kg from R158 798/kg in 2008. Lower production combined with the impact of power utility supplier Eskom’s 20% tariff increase during 2008 and higher tariffs during the winter months were the main reasons for this. While underground operating costs rose by 41% to R255 517/kg (2008: R181 518/kg), the increase for the surface operations was 8%, from R90 971/kg in 2008 to R98 124/kg in the year under review.

Operating profit was 17% higher at R176.2 million (2008: R150.9 million), resulting from the stronger average rand gold price received for the year.

Capital expenditure increased by 30% to R97.5 million (2008: R74.8 million) with opening up and development, the Way Ahead Project, the surface pipeline referred to above and the purchase of additional self-contained self-rescuers being the main components.

Growth

Mining from the Way Ahead Project, to access the orebody between 27 and 35 levels from No 5 Shaft, began in the first week of October 2008. Production build-up continued according to plan during the year with the goal of 1 200 square metres for the end of financial year being exceeded.

Supplier delays had a negative impact on the 15/29 Incline Project at No 6 Shaft. The upper portion of this project is in production but overall build-up has been slower than anticipated. Deepening of the incline to facilitate smoother loading of reef is in progress.

Crown

Description

Crown is the world’s largest gold surface retreatment facility, reprocessing the large and numerous sand and slimes dumps along the reefs that stretch from east to west just to the south of Johannesburg’s central business district (CBD). Most of these dumps hold waste from the stamp milling era of ore processing when plants treated the sand and slimes separately, unlike current milling methods which reduce all ore to slimes before the extraction of gold.

The dumps are reclaimed and mixed with water. The slurry is then pumped to one of Crown’s three processing plants: Crown Mines, 3 kilometres to the south, City Deep, 6 kilometres to the south-east, and Knights, 20 kilometres to the east of Johannesburg’s CBD. Using relatively modern milling methods and carbon-in-pulp (CIP) technology, these plants have the capacity to treat 11.76 million tonnes of sand and tailings a year, recovering much of the gold. The land that is uncovered through removing the tailings is reclaimed and developed mainly for light industrial activities.

Owing to the low head grades, this is a low-margin business that relies on high volumes to be treated. As old dams are depleted, others are brought on stream.

Crown’s current major project is Top Star, a tailings dam to the south of Johannesburg’s CBD. Production is continuing apace from this 126 000-ounce resource.

Crown and ErgoGold layout plan

Safety review

The LTIFR for this operation improved significantly, from 6.24 per million man-hours worked in 2008 to 2.91 in 2009. There were no fatalities.

Operating review

Gold production decreased by 8% to 80 377 ounces (2008: 87 354 ounces) because of a 20% decline in throughput to 6 577 000 tonnes (2008: 8 235 000 tonnes). This reduction in throughput was intentional: it forms part of the closure plan for the Crown Tailings Deposition Facility. The goal is to lower throughput to 400 000 tonnes per month (4 800 000 tonnes per year) and this may be decreased further if the condition of this facility deteriorates.

Yield for this operation increased by 15% to 0.38g/t (2008: 0.33g/t) because of higher grade material from the Mennells site and higher grade remnants from the CMR and Robertson Deep sites in the first quarter, as well as higher grade material from the Top Star site in the third quarter and fourth quarter.

Operating costs rose by 37% to R182 482/kg (2008: R133 322/kg) as a result of the decrease in production. Operating profit was 2% lower at R163.9 million (2008: R166.4 million), reflecting the higher average gold price received over the year as a whole.

Capital expenditure was almost unchanged at R43.1 million (2008: R42.1 million). The major elements were the completion of the construction of Top Star and tailings deposition site maintenance, which included the building of buttresses at the Crown Tailings Deposition Facility.

Growth

Crown has secured the contractual right from jointly owned Ergo Mining (Pty) Limited to deposit its entire tailings flow on to the Brakpan and Withok tailings facilities. This has the potential to extend its life of mine by several years.

Work is under way on an environmental impact assessment for a proposed R212-million pipeline to link the Crown plants to ErgoGold’s tailings deposition site at Brakpan.

ERPM

Description

ERPM is situated on the Witwatersrand Basin near the town of Boksburg, 25 kilometres to the east of Johannesburg. It was established as an underground mining operation more than 100 years ago. Underground mining was suspended in October 2008 following the cessation of the pumping of underground water for safety reasons.

ERPM continues as a surface retreatment operation. It holds 65% of ErgoGold through the contribution of its Elsburg Tailings Complex. ERPM’s wholly owned Cason surface retreatment operation is managed by Crown which processes 1.9 million tonnes of surface material through the Knights plant.

Safety review

Regrettably there were two fatalities at ERPM during the year (2008: two). The employees were asphyxiated in a shaft conveyance while on their way to conduct routine water level measurements. The LTIFR improved to 8.05 per million man-hours worked from 10.94 recorded in the previous year.

Operating review

As expected with the closure of the underground operations for eight months of the year, there was a substantial drop in gold production – from 79 479 ounces in 2008 to 34 174 ounces during the year under review. While throughput was 2 162 000 tonnes in the previous year, it was 1 614 000 in 2009 and yield declined from 1.14g/t to 0.66g/t.

Surface gold production decreased by 33% to 15 239 ounces (2008: 22 667 ounces), the result of lower throughput, which went down by 23% to 1 430 000 tonnes (2008: 1 859 000 tonnes), and a 13% reduction in grade to 0.33g/t (2008: 0.38g/t).

Underground gold production declined by 67% to 18 935 ounces (2008: 56 812 ounces). Production included yield from continuing clean-up activities. Throughput for the year was 184 000 tonnes (2008: 303 000 tonnes) while yield was 3.20g/t (2008: 5.83g/t).

As a result of lower production and care and maintenance costs, total operating costs were 65% higher at R285 589/kg (2008: R173 242/kg), the combination of a 89% rise in underground operating costs to R361 141/kg and a 61% increase in surface operating costs to R222 430/kg.

ERPM ran at an operating loss of R55.7 million compared with an operating profit of R38.8 million in 2008.

Capital expenditure was R31.7 million, almost all incurred during the first half of the year when land was acquired as part of an overall plan to realise value for the company’s property holdings.

Growth

All exploration activities have been suspended.

Ergo and ErgoGold

Description

The Ergo Joint Venture between DRDGOLD SA and Mintails South Africa was established in 2007 to exploit up to 1.7 billion tonnes of surface tailings for gold, uranium and sulphuric acid. The gold portion of the joint venture was initially known as the Elsburg Gold Mining Joint Venture and was renamed ErgoGold following DRDGOLD’s acquisition of Mintails’ share. ErgoGold is now wholly owned by the DRDGOLD group and it is managed by Crown.

The surface tailings are found near Benoni, Springs and Brakpan to the east of Johannesburg. There is one metallurgical plant – the Ergo plant near Brakpan – and three tailings deposition facilities.

Production from ErgoGold Phase 1 has begun and will rise to a planned 1.2 million tonnes per month at an average head grade of 0.32g/t and an unescalated cost of R30 per tonne for 12 years thereafter. ErgoGold has a resource of 1 670 000 ounces.

Safety review

ErgoGold is managed by Crown and the safety statistics for this operation form part of those reported by Crown.

Operating review

Gold production, which started at the end of the second quarter of 2009, amounted to 3 666 ounces for the year. Throughput was 2 296 000 tonnes at an average yield of 0.05g/t.

Work on the elution plant was completed in April 2009. While volume flows from the first circuit – from the L29 dump – were satisfactory, initial recoveries of 0.04g/t at the end of June were below project specifications. This required a number of engineering modifications to the plant.

The second circuit, linking the Elsburg Tailings Complex site with the Brakpan plant, came into production on 3 August 2009.With two lines now operational, steady state should be reached in September 2009.

Total operating costs for the year were R608 465/kg and, as anticipated since ErgoGold is in the start-up phase, the operation ran at a loss. The loss was R45.2 million.

Total capital expenditure was R157.1 million for ErgoGold and R17.0 million for the Ergo Joint Venture. The completion of the Elsburg reclamation site – where expenditure was accelerated to provide surge capacity on the Elsburg line and the ability to manipulate flow rates from both reclamation sites – and modifications to the elution plant were the main components.

Growth

Ergo Phase 2, which is at feasibility study stage, anticipates increased gold production and, possibly, the production of uranium and sulphuric acid. Potential synergies between Crown in the west and Ergo in the east are currently being investigated. This would create a seamless surface retreatment operation extending across the central Witwatersrand.