Letter from the CEO

Niël Pretorius

Dear stakeholder

This is DRDGOLD’s third consecutive Sustainable Development Report in which we record the progress our group has made in the past year with respect to managing our performance in the economic, social and environmental spheres. We also document how we are advancing in terms of meeting the requirements of South African mining legislation – the Broad-based Socio-economic Empowerment Charter (the Mining Charter) in particular. This report is aligned with the requirements of the Global Reporting Initiative’s G3 guidelines and we have declared a C level of reporting for the 2010 financial year.

Addressing risks

Much attention was paid to the ‘de-risking’ of DRDGOLD during 2010; two risks that were addressed have special application to sustainability. The first concerned Blyvoor where a substantial drop in the gold price, seismic damage to higher-grade panels, a hike in the electricity tariff and a lengthy strike left this operation with hefty monthly losses. To save the mine from possible liquidation and to prevent it from putting the economic viability of DRDGOLD in jeopardy, we proactively requested South Africa’s High Court to grant provisional judicial management for Blyvoor. This was granted in November 2009 and lifted in April 2010 when the operation had returned to profitability. Had stability not been achieved at Blyvoor, the lives of thousands of employees, dependants and others living in the surrounding communities could have been adversely affected.

Acid mine drainage from the Western Basin of the Witwatersrand goldfields is a risk that faces a number of mining companies, DRDGOLD among them. Since 2005 we have been involved in industry-wide initiatives to find a solution to the problem as outlined in the Environmental section of this report. During the year under review we undertook a very careful legal assessment of the situation and gained a clear understanding of the full extent of our exposure. The position we have taken strikes a balance between our legal obligations and our responsibilities as a good corporate citizen.

Safety comes first

Our stance at DRDGOLD is that safety should never be compromised for production targets and better margins. Indeed we strive for zero harm at our operations and it is with deep regret that we report that two employees died in mining-related accidents in the past year. We extend our sympathies to the families and colleagues of the men who lost their lives: Mr Talent Ndlangamandla on 10 December 2009 at Crown and Mr Respeito Manhica on 3 February 2010 at Blyvoor.

These deaths marred what was in most other respects an encouraging safety performance with improvements recorded in the Fatal Injury Frequency Rate, which decreased by 58%; the Dressing Station Injury Frequency Rate, which declined by 27%; and the Reportable Injury Frequency Rate, which went down to 3.22 from 3.61. It was only the Lost Time Injury Frequency Rate that deteriorated (going up from 7.6 to 8.2).

Essentially we manage safety through training and by providing a safe working environment for employees. In particular, we are very disciplined with respect to our safety practices around support in the working areas. A good indicator of safety performance is the number of fatalities and injuries associated with a poor working area and we have not had any of these for several years. A pleasing achievement was Blyvoor’s completion in December 2009 of three million shifts without a fatality caused by a gravity-related fall of ground.

The group places great emphasis on safety awareness campaigns and these, together with training programmes and regular assessments and audits, underpin our management of safety across the operations.

Increasingly, DRDGOLD is becoming involved in industry-wide safety and health initiatives. Blyvoor belongs to two Community of Practice for Adoption (COPA) groups established by the Mining Industry Occupational Safety and Health Task Team. These are the Fall of Ground (FOG) and Prevention of Silicosis COPAs. This operation will be launching a COPA drive in the first half of the 2011 financial year to prevent FOG accidents by focusing on the entry examination of working places.

Transforming the workplace

DRDGOLD has worked towards meeting the requirements of the country’s first Mining Charter and has continued to make progress. A new Mining Charter was launched in September 2010, shortly before the publication of this report. We are pleased to have the greater clarity that comes with this revised document. Some goals may turn out to be fairly challenging but we are committed to meeting all the standards and requirements of the new Mining Charter by 2014.

Taking the group as a whole, the percentage of historically disadvantaged South Africans (HDSAs) in junior, middle and senior management positions is 32%. One more HDSA appointment to the company’s Executive Committee and HDSAs will comprise 40% of this body.

We have a very strong internal development process: all the operations identify HDSAs for skills development and advancement. Talent is fostered through learnerhips, internships, mentorships and tertiary education programmes. The group spent R9.1 million on training in the year under review and HDSAs were the main beneficiaries.

Although our internal advancement mechanisms are robust, we may have to start recruiting HDSA candidates from outside the company. One thing that we do not want to do is to appoint someone to a senior management position who leaves after six months for a relatively small hike in his/her salary. That sort of exercise is not sustainable. Should recruitment be necessary, it will be done in such a way that people will be engaged for real jobs and they will handle real portfolios.

Making a difference to communities

In 2010, we spent R5.3 million on local economic development and corporate social investment in the communities in which we operate. Our flagship project is the Ekurhuleni Business Development Academy (EBDA) which we established in mid-2008 to help address the critical shortage of skills in the country across all sectors of the economy and to create jobs. In the past two years, 1 145 people have graduated from this facility.

In addition to the many courses offered in a wide variety of disciplines, EBDA has a unique business development model that culminates in the development of sustainable small, medium and micro enterprises.We are confident that the academy will help to spawn many successful entrepreneurial ventures.

Tackling environmental issues

Dust is one of DRDGOLD’s biggest environmental challenges because the group’s surface reserves and resources are contained in tailings dams and many of these are situated in urban areas. The issue is managed through continual remediation measures and dust monitoring. A good example of the former is the R84-million project which is under way to suppress dust at the Brakpan Tailings Dam by cladding the slopes with dolorite. With respect to the latter, it is pleasing to note that in 2010 there was a 20% decrease in the number of instances where dust levels exceeded the South African National Standards. The company will be working towards a further reduction in 2011.

Clearly, however, acid mine drainage (AMD) is the most urgent and complex environmental issue of all and it is in the interests of all parties that it should be resolved as quickly as possible. We are hopeful that the revamped proposal for a sustainable solution to AMD which DRDGOLD, Harmony and Mintails have recently submitted to the Department of Water and Environmental Affairs will receive a positive response.

In conclusion

DRDGOLD is making steady progress in terms of meeting Global Reporting Initiative and the Mining Charter’s transformation targets and we are constantly seeking to improve our performance. We would welcome comments from our stakeholders and to facilitate this process we have provided a feedback form which can be found at the back of this report.

Niël Pretorius
Chief Executive Officer
16 September 2010