##### Table of Contents



As filed with the Securities
and Exchange Commission on April 29, 2005   SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934ORx
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2004 Commission file number 0-28800 DRDGOLD LIMITED   REPUBLIC OF SOUTH AFRICA
(Jurisdiction of incorporation or organization)45 EMPIRE ROAD, PARKTOWN, JOHANNESBURG, SOUTH AFRICA, 2193
(Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the ActNone 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. As of June 30, 2004, the Registrant had outstanding 233,307,667 ordinary
shares, of no par value. 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 x No o Indicate by check mark which financial statement item the registrant has
elected to follow. Item 17 o Item 18 x Contact details:
Niel Pretorius  Group Legal Counsel
DRDGOLD Limited, 45 Empire Road, Parktown, Johannesburg, South Africa, 2193
Telephone: +2711 381 7800    Explanatory Note: This Amendment No. 3 on Form 20-F/A to the Annual Report on Form 20-F of DRDGOLD Limited for the
fiscal year ended June 30, 2004, amends portions of that Annual Report in response to comments
received from the Securities and Exchange Commission. These amendments principally comprise
substantial revision to the disclosure in Item 5A.: Operating Results  Restatement of US GAAP
Quarterly Results and the disclosure in Item 15.: Controls and Procedures, and the disclosure of
an additional risk factor in Item 3D.: Risk Factors  Risks related to our business and
operations, relating to the weaknesses we have identified in
our internal controls. In addition, the Consolidated Statement of
Operations on page F-3 has been revised to eliminate the
presentation of Gross Profit as a separate line item. The remainder
of the Form 20-F remains unchanged except for immaterial conforming and amending revisions. This
Amendment No. 3 does not reflect all events occurring after December 3, 2004, the filing date of
Amendment No. 1 to the Form 20-F. These subsequent events include those described in the Companys
press releases dated February 18, March 17 and
March 22, 2005 filed under cover of Form 6-K, which
are incorporated by reference in response to certain items in this Annual Report and filed as
exhibits hereto.




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##### Table of Contents



TABLE OF CONTENTS  
 PagePART IITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
    
    
    5ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
    
    
    5ITEM 3. KEY INFORMATION
    
    
    5ITEM 3A. Selected Financial Data
    
    
    5ITEM 3B. Capitalization and Indebtedness
    
    
        7ITEM 3C. Reasons For The Offer And The Use Of Proceeds
    
    
        7ITEM 3D. Risk Factors
    
    
        7ITEM 4. INFORMATION ON THE COMPANY
    
    
    22ITEM 4A. History And Development Of The Company
    
    
        22ITEM 4B. Business Overview
    
    
        27ITEM 4C. Organizational Structure
    
    
        44ITEM 4D. Property, Plant And Equipment
    
    
        45ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
    
    
        92ITEM 5A. Operating Results
    
    
        93ITEM 5B. Liquidity And Capital Resources
    
    
        121ITEM 5C. Research And Development, Patents And Licenses Etc.
    
    
        125ITEM 5D. Trend Information
    
    
        125ITEM 5E. Off-Balance Sheet Items
    
    
        126ITEM 5F. Tabular Disclosure Of Contractual Obligations
    
    
        127ITEM 5G.
Safe Harbor
    
    
        127ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
    
    
        128ITEM 6A. Directors And Senior Management
    
    
        128ITEM 6B. Compensation
    
    
        132ITEM 6C. Board Practices
    
    
        134ITEM 6D. Employees
    
    
        139ITEM 6E. Share Ownership
    
    
        141ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
    
    
    143ITEM 7A. Major Shareholders
    
    
        143ITEM 7B. Related Party Transactions
    
    
        145ITEM 7C. Interest Of Experts And Counsel
    
    
        148ITEM 8. FINANCIAL INFORMATION
    
    
        149ITEM 8A. Consolidated Financial Statements And Other Financial Information
    
    
        149ITEM 8B. Significant Changes
    
    
        149ITEM 9. THE OFFER AND LISTING
    
    
        149ITEM 9A. Offer And Listing Details
    
    
        149ITEM 9B. Plan Of Distribution
    
    
        150ITEM 9C. Markets
    
    
    150ITEM 9D. Selling Shareholders
    
    
        151ITEM 9E. Dilution
    
    
        151ITEM 9F. Expenses Of The Issue
    
    
    151ITEM 10. ADDITIONAL INFORMATION
    
    
        151ITEM 10A. Share Capital
    
    
        151ITEM 10B. Memorandum And Articles Of Association
    
    
        151ITEM 10C. Material Contracts
    
    
        154ITEM 10D. Exchange Controls
    
    
        160




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PageITEM 10E. Taxation
    
    
    163ITEM 10F. Dividends And Paying Agents
    
    
        168ITEM 10G. Statement By Experts
    
    
        168ITEM 10H. Documents On Display
    
    
        168ITEM 10I. Subsidiary Information
    
    
        168ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
        169ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
    
    
        173PART IIITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
    
    
        174ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
    
    
        174ITEM 15. CONTROLS AND PROCEDURES
    
    
        174ITEM 16. CORPORATE GOVERNANCE
    
    
        175ITEM 16A. Audit Committee Financial Expert
    
    
        175ITEM 16B. Code Of Ethics
    
    
        176ITEM 16C. Principal Accountant Fees And Services
    
    
        176ITEM 16D. Exemptions From The Listing Standards For Audit Committees
    
    
        176ITEM 16E. Purchase Of Equity Securities By The Issuer
    
    
        176PART IIIITEM 17. FINANCIAL STATEMENTS
    
    
    177ITEM 18. FINANCIAL STATEMENTS
    
    
    177ITEM 19. EXHIBITS
    
    
    179PORGERA JOINT VENTURE OPERATING AGREEMENTEMPLOYMENT AGREEMENTBANKING FACILITIES AGREEMENTEMPLOYMENT AGREEMENTSERVICE AGREEMENTEMPLOYMENT AGREEMENTSERVICE AGREEMENTSUBSCRIPTION AND OPTION AGREEMENTFORWARD BULLION TRANSACTION AGREEMENTSLOAN AGREEMENTTERMINATION AGREEMENTNOVATION AGREEMENTMEMORANDUM OF UNDERSTANDINGCCMA SETTLEMENT AGREEMENTLOAN AGREEMENTSUBSCRIPTION AGREEMENTCOMMON TERMS AGREEMENT OF LOANFACILITY A LOAN AGREEMENTLIST OF SUBSIDIARIESCERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATIONCONSENT OF KPMG INC.CONSENT OF DELOITTE & TOUCHECONSOLIDATED FINANCIAL STATEMENT




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Preparation of Financial Information We
are a South African company and during the three years ended
June 30, 2004, the majority of our
operations, as measured in production ounces, were located there. Accordingly,
our books of account are maintained in South African Rand. Our financial
statements attached hereto are presented in United States Dollars and in
accordance with generally accepted accounting principles in the United States,
or US GAAP. All references to Dollars or $ herein are to United States
Dollars, references to Rand or R are to South African Rands, references to
A$ are to Australian Dollars and references to Kina or K are to Papua New
Guinean Kinas. Certain information in this Annual Report presented in Rands, Australian
Dollars or Kinas has been translated into Dollars. Unless otherwise stated, the
conversion rates for currency translations for the 2004 fiscal year are R6.275
per $1.00, A$1.45 per $1.00 and K3.237 per $1.00, which reflect the noon buying
rate in New York City at June 30, 2004. For statement of operations amounts,
the average conversion rate for Rand during the 2004 fiscal year of R6.90013
per $1.00 is used. The rates used for currency translations for transactions
occurring during the 2003 and 2002 fiscal years are the respective year end
exchange rates for balance sheet amounts and the average exchange rate for that
year for statements of operations amounts. By including convenience currency
translations in this Annual Report, we are not representing that the Rand,
Australian Dollars or Kinas amounts actually represent amounts shown in Dollars
or that these amounts could be converted at the rates indicated into Dollars. DRDGOLD Limited In
December 2004, we changed our name from Durban Roodepoort Deep,
Limited to 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, associate and joint venture, as
appropriate in the context. Special Note Regarding Forward-Looking Statements Some of the information in this Annual Report may contain projections or
other forward looking statements regarding future events or other future
financial performance, including forward-looking statements (as that term is
defined in the Private Securities Litigation Reform Act of 1995) 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. When used in this report, the words estimate, project,
believe, anticipate, intend, expect and similar expressions are
intended to identify forward-looking statements. These statements include our
ability to grow our operations outside South Africa, our ability to
successfully restructure our South African operations, statements regarding
future production and throughput capacity, our ability to enter into borrowing
facilities under negotiation on acceptable terms or to fund our operations in
the next 12 months, and anticipated production costs, cash costs
per ounce1,
total costs per ounce2. 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, adverse changes or uncertainties in general economic conditions
in the markets we serve, a continuing strengthening of the Rand against the
Dollar, regulatory developments adverse to us or difficulties in maintaining
necessary licenses or other governmental approvals, changes in our competitive
position, changes in business strategy, any major disruption in production at
our key facilities or adverse changes in foreign exchange rates and various
other factors. For a discussion of such risks, see Item 3D.: Risk Factors.
Readers are cautioned not to place undue reliance on these forward-looking   1
 Cash costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to
production costs see Item 5A.: Operating Results.2 Total costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to production costs see Item 5A.: Operating
Results. 1




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statements, which speak only as of the date hereof. We do not undertake any
obligation to publicly update or release any revisions to these forward-looking statements to reflect events or

circumstances after the date of this report or to reflect the occurrence of
unanticipated events. Imperial units of measure and metric equivalents Units stated in this Annual Report are measured in Imperial and Metric. Metric
    
    Imperial
    
    Imperial
    
    Metric1 metric tonne
    
    1.10229 short tons
    
    1 short ton
    
    0.9072 metric tonnes1 kilogram
    
    2.20458 pounds
    
    1 pound
    
    0.4536 kilograms1 gram
    
    0.03215 troy ounces
    
    1 troy ounce
    
    31.10353 grams1 kilometer
    
    0.62150 miles
    
    1 mile
    
    1.609 kilometres1 meter
    
    3.28084 feet
    
    1 foot
    
    0.3048 metres1 liter
    
    0.26420 gallons
    
    1 gallon
    
    3.785 liters1 hectare
    
    2.47097 acres
    
    1 acre
    
    0.4047 hectares1 centimeter
    
    0.39370 inches
    
    1 inch
    
    2.54 centimetres1 gram/tonne
    
    0.0292 ounces/ton
    
    1 ounce/ton
    
    34.28 grams/tonnes0 degree Celsius
    
    32 degrees Fahrenheit
    
    0 degrees Fahrenheit
    
    - 18 degrees Celsius
 Glossary of Terms and Explanations Adularia
    
    A transparent or translucent variety of common feldspar.Archaean
    
    A period of the geological time scale between 2.5 and 4.6 billion years ago, the
earliest part of the Precambrian.Auriferous
    
    Containing gold.Bonanza
    
    Unexpected high-grade occurrences.Breccia
    
    Rock consisting of fragments, more or less angular, in a matrix of finer-grained
material or of cementing material.Care and maintenance
    
    Cease active mining activity at a shaft, but continue to incur costs to ensure that
the Ore Reserves are open, serviceable and legally compliant.Cash costs per ounce
    
    Production costs are costs incurred directly in the production of gold and include
labor costs, contractor and other related costs, inventory costs and electricity
costs. Cash costs per ounce are calculated by dividing cash costs by ounces of gold
produced. Production costs have been calculated on a consistent basis for all
periods presented. This is a non-US GAAP financial measure and should not be
considered a substitute measure of costs and expenses reported by us in accordance
with US GAAP.Caving
    
    A type of mining in which the ore is blasted and drawn in a manner causing the
overhead rock to cave in.Conglomerate
    
    A coarse-grained sedimentary rock consisting of rounded or sub-rounded pebbles.Cut-and-fill
    
    A mining method in which a slice of rock is removed after blasting and replaced
with a slice of fill material to provide workers with a platform to mine the next
slice of rock.Cut-off grade
    
    The minimum in situ grade of ore blocks for which the cash costs per ounce,
excluding overhead costs, are equal to a projected gold price per ounce.Depletion
    
    The decrease in the quantity of ore in a deposit or property resulting from
extraction or production.Dilution
    
    Broken rock entering the ore flow at zero or minimal grade and therefore diluting
the gold content.Diorite
    
    An igneous rock formed by the solidification of molten material.
 Grade
    
    The amount of gold contained within auriferous material generally expressed in
ounces per ton or grams per tonne of ore.g/t
    
    Grams per ton.Horizon
    
    A plane indicating a particular position in a stratigraphic sequence. This may be a
theoretical surface with no thickness or a distinctive bed.Hanging wall
    
    The mass of rock above a geological structure.Igneous rock
    
    Rock which is magmatic in origin.
 2




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In-situ deposit
    
    Reserves still in the ground calculated at a realistic stoping width, but not
discounted for mining efficiencies.Intrusive
    
    Rock which while molten, penetrated into or between other rocks, but solidified
before reaching the surface.Life of mine
    
    Projected life of a mining operation based on the Proven and Probable Ore Reserves.Metallurgical recovery factor
    
    Gold extracted from the ore, treated in a metallurgical process and expressed as a
percentage, once the tailings component has been discarded into residue.Metallurgical plant
    
    A processing plant (mill) erected to treat ore and extract the contained gold.Mineable
    
    That portion of a mineral deposit for which extraction is technically and
economically feasible.Mine call factor
    
    This is the gold content recovered expressed as a percentage of the gold content
called.Mill
    
    Material passed through the metallurgical plant for processing.Mt
    
    Million tons.Ore
    
    A mixture of valuable and worthless minerals from which the extraction of at least
one of the minerals is technically and economically viable.Ore Reserves
    
    Total Ore Reserves of wholly-owned subsidiaries and our 20% attributable share of
the Ore Reserves from the Porgera Joint Venture.Pay limit
    
    The minimum in-situ grade of ore blocks for which cash costs, including all
overhead costs, are equal to a projected gold price per ounce.Proven (Measured) Ore
Reserves
    
    Reserves for which (a) the quantity is computed from dimensions revealed in
outcrops, trenches, workings or drill holes; grade and/or quality are computed from
the results of detailed sampling and (b) the sites for inspection, sampling and
measurement are spaced so closely and the geologic character is so well defined
that size, shape, depth, and mineral content of Ore Reserves are well-established.Probable (Indicated) Ore
Reserves
    
    Reserves for which quantity and grade and/or quality are computed from information
similar to that used for proven Ore Reserves, but the sites for inspection,
sampling, and measurement are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven Ore Reserves,
is high enough to assume continuity between points of observation.oz/t
    
    Ounces per ton.Quartzite
    
    A metamorphic rock consisting primarily of quartz grains, formed by the
recrystallization of sandstone.Reef
    
    A gold-bearing sedimentary horizon, normally a conglomerate band that may contain
economic levels of gold.Refining
    
    The final purification process of a metal or mineral.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.Sand dump
    
    The 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.Sedimentary
    
    Formed by the deposition of solid fragmental material that originated from
weathering of rocks and was transported from a source to a site of deposition.
 3




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Shaft
    
    An opening cut downwards for transporting personnel, equipment, supplies, ore and
waste. A shaft is also used for ventilation and as an auxiliary exit. It is
equipped with a hoist system that lowers and raises a cage in the shaft,
transporting equipment, personnel, materials and ore. A shaft generally has more
than one compartment.Shrinkage stoping
    
    A mining method in which a small percentage of the broken ore is drawn as mining
progresses to make room for subsequent mining activities. Most of the blasted ore
is left to accumulate in the stope and is drawn after the stope is completely
mined.Slimes
    
    The fraction of tailings discharged from a processing plant after the valuable
minerals have been recovered.Sloughing
    
    The localized failure of part of the slimes dam wall caused by a build up of water
within the dam.Stope
    
    Underground production working area on the ore horizon.Sub-level stoping
    
    A method of mining in which the ore is blasted, on multiple levels in one stope,
and drawn off as it is blasted, leaving an open stope.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.Telluride
    
    A rare nonmetallic element, analogous to sulphur and selenium.Tonnage/Tons
    
    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.Total costs per ounce
    
    Total costs is a non-US GAAP financial measure that represents the full amount of
costs incurred and represents the difference between revenues from gold bullion
delivered to refineries and profits or losses before taxation. Total costs per
ounce are calculated by dividing total costs by ounces of gold produced. This is a
non-US GAAP financial measure and should not be considered a substitute measure of
costs and expenses reported by us in accordance with US GAAP.Tpm
    
    Tons per month.Up-dip mining
    
    A mining method in which the drilled and blasted ore gravitates into slushers or
gullies leaving an open space. This is normally used in narrow stopes.Waste rock
    
    Non-auriferous rock.Yield
    
    The amount of recovered gold from production generally expressed in ounces or grams
per ton of ore.
 4




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PART I 
 ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS Not applicable 
 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable 
 ITEM 3. KEY INFORMATION 
 3A. SELECTED FINANCIAL DATA The following selected consolidated financial data as of June 30, 2004 and
2003 and for the years ended June 30, 2004, 2003 and 2002 are derived from our
consolidated financial statements set forth elsewhere in this Annual Report,
which have been prepared in accordance with US GAAP. These consolidated
financial statements have been audited by KPMG Inc as of and for the years
ended June 30, 2004 and June 30, 2003 and Deloitte & Touche for the year ended
June 30, 2002, whose reports with respect to these financial statements appear
elsewhere in this Annual Report. The selected consolidated financial data as of
June 30, 2001 and 2000 and for the years ended June 30, 2001 and 2000 are
derived from audited consolidated financial statements not appearing in this
Annual Report which have been prepared in accordance with US GAAP. The selected
consolidated financial data set forth below should be read in conjunction with
Item 5.: Operating and Financial Review and Prospects and with the
consolidated financial statements and the notes thereto and the other financial
information appearing elsewhere in this Annual Report. As a result of anticipated changes in our audit team, on December 13,
2002, we requested that Deloitte & Touche resign as our independent
accountants. Deloitte & Touche indicated orally to us that effective December
31, 2002, they intended to resign and their letter dated December 31, 2002, was
subsequently received. In response to this, we engaged KPMG Inc as our new
independent accountants effective January 1, 2003. Our Audit Committee
recommended, and our board of directors authorized and approved, the decision
to accept the resignation of Deloitte & Touche and to replace them with KPMG
Inc. The report of Deloitte & Touche on our financial statements for the fiscal
year ended June 30, 2002 contained no adverse opinion or disclaimer of opinion
and was not qualified or modified as to uncertainty, audit scope or accounting
principle. In connection with our audit for the fiscal year ended June 30, 2002 there
have been no disagreements between us and Deloitte & Touche on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
Deloitte & Touche would have caused Deloitte & Touche to make reference thereto
in its reports on our financial statements for such years. During the fiscal
year ended June 30, 2002, we did not, nor did any other person on our behalf,
consult with KPMG Inc on any application of accounting principle or any other
matter set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K under the US
Securities Exchange Act of 1934, as amended, or the Exchange Act. 5




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Selected Consolidated Financial Data
(in thousands, except share, per share and ounce data) Year ended June 30,2004
    
    2003
    
    2002
    
    2001
    
    2000$ 000
    
    $ 000
    
    $ 000
    
    $ 000
    
    $ 000Consolidated Statement of Operations

DataRevenues
    
    
    313,290
    
    
    
    261,342
    
    
    
    303,858
    
    
    
    291,325
    
    
    
    327,568Production costs
    
    
    (277,491
    )
    
    
    (235,359
    )
    
    
    (218,056
    )
    
    
    (247,098
    )
    
    
    (303,484
    )Net operating (loss)/income
    
    
    (37,633
    )
    
    
    49,589
    
    
    
    (94,974
    )
    
    
    (12,920
    )
    
    
    (169,469
    )(Loss)/profit before tax and other
items
    
    
    (32,686
    )
    
    
    62,764
    
    
    
    (94,573
    )
    
    
    (91,744
    )
    
    
    (172,467
    )Income and mining tax (expense)/
benefit
    
    
    (14,230
    )
    
    
    (41,765
    )
    
    
    42,864
    
    
    
    7,005
    
    
    
    1,724Equity in loss from associates
    
    
    (8,827
    )
    
    
    (9,452
    )
    
    
    
    
    
    
    
    
    
    
    Minority interest
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    258
    
    
    
    (76
    )Net (loss)/profit applicable to common
stockholders
    
    
    (55,750
    )
    
    
    11,374
    
    
    
    (51,709
    )
    
    
    (84,481
    )
    
    
    (170,819
    )Basic (loss)/profit per share (cents)
    
    
    (26
    )
    
    
    6
    
    
    
    (32
    )
    
    
    (63
    )
    
    
    (164
    )Diluted (loss)/profit per share (cents)
    
    
    (26
    )
    
    
    4
    
    
    
    (32
    )
    
    
    (63
    )
    
    
    (164
    )Consolidated Balance Sheet DataCash and cash equivalents
    
    
    22,453
    
    
    
    44,423
    
    
    
    23,852
    
    
    
    13,889
    
    
    
    13,786Total assets
    
    
    284,975
    
    
    
    202,381
    
    
    
    197,306
    
    
    
    193,621
    
    
    
    232,597Total liabilities
    
    
    (200,194
    )
    
    
    (197,145
    )
    
    
    (212,777
    )
    
    
    (214,188
    )
    
    
    (203,134
    )Long-term loans
    
    
    (59,865
    )
    
    
    (63,149
    )
    
    
    (25,368
    )
    
    
    (7,273
    )
    
    
    (15,589
    )Stockholders (equity)/deficit
    
    
    (83,852
    )
    
    
    (5,236
    )
    
    
    15,471
    
    
    
    20,567
    
    
    
    (29,463
    )Total liabilities and stockholders
equity
    
    
    (284,975
    )
    
    
    (202,381
        )
    
    
    (197,306
        )
    
    
    (193,621
    )
    
    
    (232,597
    )Number of shares issued as at June 30
    
    
    233,307,667
    
    
    
    184,222,073
    
    
    
    177,173,485
    
    
    
    154,529,578
    
    
    
    120,990,746Non-US GAAP Financial DataWorking capital
    
    
    (24,993
    )
    
    
    2,419
    
    
    
    (34,311
    )
    
    
    (16,500
    )
    
    
    (35,059
    )Cash costs per ounce1
    
    
    343
    
    
    
    297
    
    
    
    212
    
    
    
    232
    
    
    
    267Total costs per ounce2
    
    
    428
    
    
    
    250
    
    
    
    388
    
    
    
    360
    
    
    
    441
   1
     Cash costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to
production costs see Item 5A.: Operating Results.2
 Total costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to production costs
see Item 5A.: Operating Results. 6




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3B. CAPITALIZATION AND INDEBTEDNESS Not applicable 
 3C. REASONS FOR THE OFFER AND THE USE OF PROCEEDS Not applicable 
 3D. RISK FACTORS In addition to other information contained in this Annual Report,
investors in our securities should consider carefully the risks described
below. Our business, financial condition or operating results could be
materially adversely affected by any of these risks. Some of the most relevant risks are summarized below and have been organized
into the following categories:  
    
    Risks related to our business and operations
    
    Risk related to the gold mining industry
    
    Risks related to doing business in South Africa and Papua New Guinea
    
    Risks related to ownership in our ordinary shares or ADSs Risks related to our business and operations A strong Rand and a weak gold price negatively affect our operations. As the majority of our production costs are in Rands, while gold is
generally sold in Dollars, our financial condition has been and could be
materially harmed in the future by an appreciation in the value of the Rand.
For our South African operations, the continuing appreciation of the Rand since
December 2001 has resulted in a sustained reduction in revenue received by us
in Rands. Consequently, in September 2003, the North West Operations underwent
a restructuring when underground operating costs were $104 per ounce above the
average Dollar gold price received, resulting in the retrenchment of 2,400
employees at a cost of $6.5 million. A further restructuring took place in
March 2004 with 600 employees retrenched at a cost of $0.6 million. In June
2004, the North West Operations and Blyvoor Section underwent further
restructuring when the cash costs were $26 and $72 per ounce above the average
Dollar gold price recovered in the fourth quarter, respectively. Due to the
marginal nature of our mines in South Africa, any sustained decline in the
market price of gold below the cost of production, which averaged a cash cost
and total cost1 of $393 per ounce and $458 per ounce respectively for the South
African operations, in fiscal 2004, could result in the closure of these mines
which would result in significant costs and expenditure for example, incurring
retrenchment costs earlier than expected, that would negatively and adversely
affect our financial situation. Changes in the market price for gold, which in the past has fluctuated
widely, and exchange rate fluctuations affect the profitability of our
operations and the cash flows generated by those operations. We generally 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 and Kina. We sell our gold and trade our foreign currency at the spot
price in the market on the date of trade. If the Dollar gold price should fall
and the regional functional currencies should strengthen against the Dollar,
resulting in revenue below our cost of production and remain at such levels for
any sustained period, we may experience losses and may be forced to curtail or
suspend some or all of our operations. In addition, we might not be able to
recover any losses we may incur during that period or maintain adequate gold
reserves for future exploitation.   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 7




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Exchange rates are influenced by global economic trends which are beyond
our control. In fiscal 2004, 2003 and 2002, the Rand appreciated against the
Dollar by 16%, 28% and 29%, respectively. As at June 30, 2004, the Rand had
appreciated by 54.7% since reaching R13.84 = $1.00 in December 2001. The
following table illustrates the movement in the closing and average Rand/Dollar
exchange rates over the last three years: Year ended June 30,2004
    
    % movement
    
    2003
    
    % movement
    
    2002
    
    % movement
    
    2001Average for the year
    
    
    6.90
    
    
    
    (23.8
    %)
    
    
    9.05
    
    
    
    (11.0
    %)
    
    
    10.12
    
    
    
    33.1
    %
    
    
    7.60Closing for the year
    
    
    6.28
    
    

    
    (16.0
    %)
    
    
    7.47
    
    
    
    (28.0
    %)
    
    
    10.37
    
    
    
    28.8
    %
    
    
    8.05
 As at October 31, 2004, the Rand/Dollar exchange rate was R6.14 = $1.00. The Kina has also experienced significant fluctuations against the Dollar
over this period. In fiscal 2003, the Kina strengthened against the Dollar by
29% and weakened in fiscal 2004 by 7%. A decrease in the gold price and a
strengthening of the foreign exchange rate of the Rand and Kina has resulted
and could continue to result in a decrease in profitability. In fiscal 2004 and
2003, 71% and 91% of production, respectively, was from South African mines
providing significant exposure to the strengthening of the Rand and a decrease
in profitability. If the Rand continues to appreciate in such a manner, our
South African operations could experience a reduction in cash flow and
profitability. We have a history of losses and may continue to incur losses in the
future. We incurred net losses of $55.8 million for fiscal 2004, $51.7 million for
fiscal 2002 and $84.5 million for fiscal 2001. We may continue to incur
substantial losses in the future. Our loss during fiscal 2004 would have been
higher had we not experienced an 18% increase in the average Dollar price of
gold from $334 in fiscal 2003 to $389 in fiscal 2004. The acquisition of a 20%
interest in the mineral assets mined under the unincorporated Porgera Joint
Venture and our resultant proportionate participation in its production and
costs from October 14, 2003, increased our gold production by 147,475 ounces at
a cash cost of $215 per ounce. This partially offset the losses incurred at our
South African operations with production of 574,955 ounces, or 71% of total
production, at a cash cost of $393 per ounce. Our profits and cash flows of the South African operations are directly
exposed to the strength of the Rand and higher input costs as we generally do
not hedge. These mines are also regarded as older, higher cost and lower-grade
gold producers. Our ability to identify Ore Reserves that can be mined
economically and to maintain sufficient controls on production and other costs
will have a material influence on the future viability of these mines. We may not be able to meet
our cash requirements because of a number of factors, many of which
are beyond our control. As
of November 30, 2004 we estimated that the cost of restructuring our South African operations
and other anticipated commitments for fiscal 2005, including capital
expenditure, working capital and interest payments on our convertible
notes, would be between $60.0 million to $65.0 million. This range
excluded our obligation to subscribe for rights under Emperors
2004 rights offering, which amounted to a maximum of A$9.2 million ($7.0
million). We funded our participation in this rights offering out
of the third debt facility of $15 million negotiated with Investec
(Mauritius). Our ability to meet our cash requirements is dependent
upon our future performance, our ability to successfully restructure
our South African Operations, which will be subject to financial,
business and other factors affecting our operations, many of which
are beyond our control. As at October 31, 2004 we had $2.9 million of
undrawn amounts under our existing facilities to use for general
purposes. If we are unable to meet our cash requirements out of cash
flows generated from our operations, we would need to fund these cash
requirements from alternative financing. We may not be able to obtain
alternative financing and we cannot guarantee that
any such financing would be on acceptable terms, or would be
permitted under the terms of our existing financing arrangements. In
the absence of such financing, our ability to respond to changing
business and economic conditions, make future acquisitions, react to
adverse operating results, meet our debt service obligations or fund
required capital expenditures or increased working capital requirements
may be adversely affected. 8




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##### Table of Contents



The failure to discover or acquire new Ore Reserves could negatively affect our
cash flow, results of operations and financial condition Our future cash flow, results of operations and financial condition are
directly related to the success of our exploration and acquisition efforts and
our ability to replace depleted South African reserves with reserves offshore.
In fiscal 2004, our Ore Reserves decreased by 24% from 14.4 million ounces at
June 30, 2003 to 11.0 million ounces at June 30, 2004, as a result of shaft
closures at certain of our South African operations and the strength of the
Rand causing a decline in the Rand gold price. Mining higher grade reserves in
our South African mines is likely to be more difficult in the future and could
result in increased production costs and reduced profitability. A failure to
discover or acquire new reserves in sufficient quantities to maintain or grow
the current level of our reserves will negatively affect our future cash flow,
results and financial condition. We can make no assurances that any of our new
or ongoing exploration programs will result in new mineral producing
operations. The ability to grow through acquisitions may be restricted by limited
acquisition opportunities at an appropriate price. From time to time we consider the acquisition of mining assets including
Ore Reserves, development properties, operating mines or mining companies. The
decision to acquire mining assets is based on our strategy to expand or replace
current production outside South Africa. The market for acquisitions is
competitive and we may not always be successful in purchasing assets. The
ability to conduct a comprehensive due diligence analysis could also be
restricted due to available information. This may result in the use of a
combination of historical and projected data in order to evaluate the financial
and operational feasibility of the target assets. These analyses are based on a
variety of factors including historical operating results, estimates of and
assumptions about future reserves, cash and other operating costs, metal prices
and projected economic returns and evaluations of existing or potential
liabilities associated with the property and its operations. Other than
historical operating results, all of these parameters could differ
significantly from the estimates and assumptions used in the evaluation
process, which could result in an incorrect evaluation of the quality of the
assets to be acquired. Our inability to make suitable acquisitions at an
appropriate price could adversely affect our ongoing business and financial
position, particularly if the Rand continues to strengthen against the Dollar.
Furthermore, we could experience financial loss through costs incurred in
evaluating and pursuing failed acquisitions or overpayment for an acquisition. We may not be able to continue our growth if our acquisition strategy is
not successful. Our objective is to grow our business by improving efficiency at our
existing operations as well as through acquisitions outside South Africa. Our
success at completing any acquisitions depends on a number of factors,
including:  
    
    identifying acquisitions which fit our strategy;
    
    negotiating acceptable terms with the seller of the business to be acquired;
    
    obtaining the financing necessary to complete future acquisitions; and
    
    obtaining approval for the funding and ownership structure from
regulatory and central banking authorities in South Africa and in the
jurisdiction of the business to be acquired. Whether an acquisition will have a positive effect on our results, depends
on a variety of factors including:  
    
    assimilating the operations of an acquired business in a timely and efficient manner;
    
    maintaining our financial and strategic focus while integrating the acquired business;
    
    implementing uniform standards, controls, procedures and policies at the acquired business; and
    
    to the extent that we make an acquisition outside of markets in which
we have previously operated, conducting and managing operations in a new
operating environment. 9




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##### Table of Contents



As a marginal gold producer, in the past we have acquired, and we plan to
continue to acquire, marginal mines with
relatively higher production costs and lower returns. We may not be able to
reduce the production costs or increase the returns on these mines in the short
to medium term, due to:  
    
    high employment costs;
    
    accessibility of reserves on an economically feasible basis;
    
    unexpected technical difficulties; and
    
    the inability to extend the life of mine. Acquiring additional businesses could place increased pressure on our cash
flow if such acquisitions are accomplished by utilizing cash. Acquisitions
financed through the issue of shares may result in a dilution in the value of
our shares if the value of the business acquired is not realized. The
integration of our existing operations with any acquired business will require
significant expenditure of time, management attention and funding. Achievement
of the benefits expected from the consolidation of newly acquired businesses
into the group will require us to incur significant costs in connection with,
among other things, implementing standardized financial internal controls over
financial reporting, disclosure controls and procedures, management and other
planning systems. We may not be able to integrate the operations of recently
acquired companies or restructure our previously existing operations without
encountering difficulties. Our inability to exercise effective control over
entities in which we have a significant minority interest and to gain control
of the business, as has been the case to date with Emperor, will restrict our
ability to implement operational and financial changes to the business in line
with our acquisition strategy. Over the short-term, difficulties associated
with integration and restructuring could result in decreased production,
increased costs and decreased profitability. The cost to fund the development of a new mining project is dependent on
third party financing which may not be obtainable. New mining projects take several years to bring into production and
require a significant amount of capital funding. The ability to raise funding
for a long-term project requires considerable support from shareholders,
financial institutions and investors. Due to the long duration to develop a
new mining project, the feasibility of the project could be impacted by
volatile input factors, including the price of gold. This may require
additional capital contributions during the course of the project and the
success of the project could ultimately be dependent on the ongoing financial
support of shareholders, financial institutions and investors. Because we rely on two mining operations for the majority of our cash
flow, our business and operating results will be harmed if one or both of those
operations are negatively impacted. In fiscal 2004, the Tolukuma Section and our interest in Porgera accounted
for 29% of total production and 117% of gross profit. In fiscal 2003, 8% of
total production and 14% of gross profit was from the Tolukuma Section. Any
negative developments affecting the Tolukuma Section or Porgera Joint Venture
(such as seismic events, underground fires and labor interruptions) could cause
our results of operations, cash flows and the price of our securities to
decline. In fiscal 2004, insurance coverage for our 20% share of loss of profit
at the Porgera Joint Venture was not available at an affordable premium. In
fiscal 2005, we obtained insurance coverage, against this risk, for the
Tolukuma Section. We do not control the operations at CGR, including the Crown and ERPM
Sections, Porgera Joint Venture or Emperor Section. We do not control Crown Gold Recoveries, or CGR, the Porgera Joint Venture
or Emperor Mines Limited, or Emperor, and cannot unilaterally cause these
entities to adopt a particular budget, pay dividends or repay indebtedness,
including debt held by us. Because we do not control these entities, current
management may not continue to manage these entities in a manner that is
favorable to us. With a minority interest stake in these entities, our ability
to raise funding is dependent on access to capital from their shareholders,
joint venture partners or third party financiers. Decisions which reduce gold
production, revenues or profitability, over which we have no control, may serve
to reduce our cash flows and decrease our profitability, especially with
regards to revenues, profitability and cash flows from the Porgera Joint
Venture, on which we depend. 10




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East Rand Proprietary Mines Ltd, or ERPM, may experience ongoing risks
during the controlled closure of the underground section. A multi-disciplinary consultative forum with broad based stakeholder
representation concluded on July 4, 2004, that continued underground mining at
ERPM had become unsustainable, even at a significantly higher Rand gold price.
As a result ERPMs underground operations have been placed on a controlled
closure program which was expected to be completed in March 2005, but has been
postponed. The decision was preceded by a 60-day operational review, conducted
in accordance with the provisions of the South African Labour Relations Act. The controlled closure of the underground section will require the
co-operation of all stakeholders including the Department of Minerals and
Energy, or DME, labor unions, shareholders, creditors and employees, in order
to meet the financial obligations of the mine. During the closure program
limited underground mining operation will continue in line with the reduction
in the labor force. Surface operations may continue uninterrupted both during
and after the closure of the underground section. ERPM believes anticipated
funds generated from the continued surface operations and the controlled
closure of the underground mining will fund retrenchment costs, environmental
management costs and rehabilitation. The continued operation of the underground section is dependent on the
safety of workers. Increased seismicity associated with the peculiar geological
composition of underground workings may cause the premature closure of the
underground section and limit the future cash generating ability of the mine.
ERPM may as a result, not be able to fund its financial obligations in respect
of, amongst other things, retrenchment, environmental management and
rehabilitation costs. The ability of our associates, CGR and ERPM, to continue as a going
concern conducting business depends on the support of their stockholders,
secured lenders and creditors, including us. At June 30, 2004, we recognized
losses against amounts owing to us by CGR and ERPM and these loans are
therefore carried at a nil value. If CGR and ERPM are forced into premature
closure they will experience a rehabilitation funding shortfall of $14.7
million. As managers of the Crown and ERPM Sections, we could be held
proportionately liable for claims resulting from non-compliance with certain
legislative standards of environmental practice, if the various statutory
criteria providing for liability beyond the corporate veil are applicable. Our production costs may fluctuate and have an adverse effect on our
results of operations. Our historical production costs have varied significantly and we cannot
predict what our production costs may be in the future. Production costs are
affected by, amongst other things:  
    
    labor stability, lack of productivity and increases in labor costs;
    
    unforeseen changes in ore grades and recoveries;
    
    unexpected changes in the quality or quantity of reserves;
    
    unstable or unexpected ground conditions and seismic activity;
    
    technical production issues;
    
    environmental and industrial accidents;
    
    gold theft;
    
    environmental factors; and
    
    pollution. 11




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Increased production costs would affect profitability. The majority of our production costs consist of labor, steel, electricity
and water. The production costs incurred at our South African operations have,
and could in the future, increase at rates in excess of our annual expected
inflationary increase and result in the restructuring of these operations at
substantial cost. The majority of our South African labor force is unionized
and their wage increase demands are usually above the then prevailing rates of
inflation. In 2003, we entered into a two year wage agreement with the local
South African labor unions that limited wage increases to the greater of
inflation as measured by the Consumer Price Inflation Index, or CPIX, plus 1%,
or 7%. This agreement took effect from July
1, 2004, with an actual increase of 7%. In addition, we have received
notification of price increases, far in excess of the current rate of
inflation, to be imposed by our South African steel suppliers and parastatal
entities which supply us with electricity and water. These, combined with the
increase in labor costs, could result in our costs of production increasing
above the gold price received. Discussions with suppliers to moderate price
increases have so far been unsuccessful. The costs of fuels, lubricants and
other oil and petroleum based products have increased in fiscal 2004 as a
result of the general increase in the cost of crude oil in global markets. Due to the location of the Tolukuma section in the highlands of Papua New
Guinea, all transportation to the mine site is by heavy lift helicopters.
Approximately $25 per ounce, or 10%, of production costs relate to
transportation, including the cost of JET A1 fuel for the helicopters. In the
event that the increase in crude oil prices continues, this will have a
significant impact on production costs at the Tolukuma section and will
increase the cost of mining at our other operations. Our initiatives to reduce costs may not be sufficient to offset the
increases imposed on our operations and could negatively affect our business
and operating results. Our operations are subject to extensive environmental regulations which
could impose significant costs and liabilities. 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 impact the environment, including land, habitat, streams and
environment near the mining sites. 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 to achieve compliance, therefore having
a material adverse effect on our profitability. We have made, and expect to make in the future, expenditures to comply
with these laws and regulations. We have estimated these liabilities and
included them in the $39.1 million provision for the Groups environmental
rehabilitation, reclamation and closure costs on our balance sheet as at June
30, 2004. However the ultimate amount of rehabilitation costs may in the future
exceed the current estimates due to influences beyond our control, such as
changing legislation or unidentified rehabilitation costs. 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 litigation and potentially significant liabilities. Our Papua New Guinea operations are subject to environmental risks
associated with tailings discharge. The Tolukuma and Porgera Sections in Papua New Guinea have site specific
environmental risks associated with their operations. Tailings are routinely
discharged into the surrounding river systems in accordance with approved
environmental water discharge permits issued by the Papua New Guinea Department
of the Environment and Conservation under the Papua New Guinea Environmental
Act 2000 and Regulations 2000. The Papua New Guinea Government has approved
disposal into certain natural rivers as the most appropriate method for treated
tailings and soft incompetent waste rock because the mines are located in
extremely rugged mountainous terrain, subject to seismic activity, high
rainfall and landslides, so construction of a tailings impoundment would be
very difficult and the risk of an engineering failure high. Due to the elevated concentrations of heavy metals naturally occurring in
the ore, in particular lead, mercury and arsenic, discharges are monitored in
accordance with the terms of our approved environmental management monitoring
program. Cyanide associated with the tailings deposited is detoxified and
cyanide levels are monitored daily. However, should we be unable to control the
levels of lead, mercury, arsenic or cyanide, it could pose potential adverse
health risks to 12




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##### Table of Contents



the surrounding communities and may result in us violating our
environmental water discharge permit and may expose us to civil and criminal
liability. While our Papua New Guinea operations currently comply with the
applicable license conditions accepted by the Papua New Guinea Government in
granting approval, the eventual, cumulative environmental impacts could be
greater than the estimates in, or contemplated by, the environmental plans and
environmental management monitoring programs approved by the Papua New Guinea
Government. In such event the Papua New Guinea Government could require
us to remedy such consequences and the costs of such remediation could be
material. We have also encountered opposition from local people and landowners
regarding our discharge of tailings. This opposition could cause delays or
stoppages which could reduce our production capacity and results of operations. Changes in Papua New Guinean Government legislation or policy on
regulatory discharges into the environment could result in operational
disruptions, especially if the government changes the method it requires for us
to test tailings discharges, and may have a material adverse affect on
profitability as additional costs may need to be incurred to facilitate other
waste discharge methods. Flooding at our operations may cause us to incur liabilities for
environmental damage. Flooding of underground mining areas is an inherent risk at our South
African operations. If the rate of rise of water is not controlled, water from
our workings could potentially rise to the surface or decant into surrounding
underground workings or natural underground water sources. Due to the
withdrawal of Government pumping subsidies at Durban Deep and West Wits,
we have ceased active pumping of underground water. We expect that the
progressive flooding where these operations are located could eventually cause
the discharge of polluted water to the surface and to local water sources. Estimates of the probable rate of rise of water in those mines are
contradictory and lack scientific support, however, should underground water
levels not reach a natural subterranean equilibrium, and in the event that
underground water rises to the surface, we may face claims relating to
environmental damage and pollution of ground water, streams and wetlands. Underground and opencast mines in Papua New Guinea may experience flooding due
to excessive annual rainfall. We have ageing assets in South Africa, which exposes us to greater risk of
our infrastructure failing and higher maintenance costs. Our South African assets are made up predominantly of mature assets, which
we acquired after they had reached the end of the planned production cycle
under their previous owners, and our strategy has been to revive these assets
through specialist planning and mining techniques. The ageing infrastructure
and installations typical of these operations require constant maintenance and
continuing capital expenditure. This materially increases our operational
costs. The mature state of these assets, coupled with the technology applied in
many of our installations was not regularly updated and accordingly has become
obsolete compared to the technology used in more modern mines. As a result the
risk of technology failure is high, and the maintenance of these installations,
costly. 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
Mr. M.M. Wellesley-Wood, our Chief
Executive Officer, and Mr. I.L. Murray, our Chief Financial Officer. Factors critical to retaining
our present staff and attracting additional highly qualified personnel include
our ability to provide these individuals with competitive compensation
arrangements, equity participation 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 prevent us from executing our business plans, which may
result in decreased production, increased costs and decreased profitability. 13




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##### Table of Contents



Events may occur for which we are not insured which could affect our cash
flows and profitability. We may become subject to liability for pollution or other hazards against
which we have not insured or are unable to insure, including those in respect
of past mining activities. Our existing property and liability insurance
contains certain exclusions and limitations on coverage. We have coverage in
the amount of $1,083 million (R6,798 million) for assets, $297 million (R1,861
million) for loss of profits due to business interruption and $90 million (R567
million) for general liability. This policy is limited by initial deductible
amounts covering the loss of surface and underground assets, and losses due to
seismic events, machinery breakdown, flooding, fire and accidents. Business
interruption is only covered from the
time the loss actually occurs. The deductible amounts vary between categories
with the maximum deductible of $4.8 million (R30 million) for any underground
loss. Claims for each and every event are limited by the insurers to $159.4
million (R1 billion). A specific limitation of $15.9 million (R100 million)
applies for loss suffered or claims as a result of any landslide at the
Tolukuma Section. In fiscal 2004, the asset program also had a number of
sub-limits for different categories of claims. Future insurance coverage may not cover the extent of claims 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, our costs may increase which could
decrease our profitability. We have discovered material weaknesses in our internal controls in relation to our US GAAP
financial reporting. If we fail to remedy these weaknesses and establish and maintain an effective
system of internal controls, our reported financial results under US GAAP may not be accurate. As a
result, current and potential shareholders could lose confidence in our financial reporting, which
could adversely affect the trading price of our shares. During fiscal 2004, we discovered material weaknesses in our internal controls. Effective
internal controls are necessary for us to provide reliable US GAAP financial reports. Failure to
remedy these weaknesses and provide reliable US GAAP financial reports could have an adverse effect
on our share price. Remedying these material weaknesses is challenging in light of the limited
availability within South Africa, where our headquarters are located, of internal accounting
employee candidates who have sufficient knowledge and experience regarding the application of US
GAAP and SEC requirements and of potential external advisers with US GAAP expertise to supplement
our internal resources. During our 2004 audit, our auditors identified accounting errors in our reported US GAAP
quarterly results, as disclosed in Item 5A under Restatement of US GAAP Quarterly Results, which
required us to restate certain amounts in those quarterly financial statements. In addition, it
also took us nearly twelve months to prepare and file separate US GAAP historical financial
statements and pro forma financial statements in connection with our acquisition, on October 14,
2003, of a 20% interest in the Porgera Joint Venture. In considering these accounting errors and the late filing of financial statements for our 20%
interest in the Porgera Joint Venture, our senior management, in conjunction with our auditors,
identified the following material weaknesses in our internal control over US GAAP financial
reporting at a Group level: (i) a lack of sufficient knowledge and experience among our internal
accounting personnel regarding the application of US GAAP and SEC requirements; (ii) insufficient
written policies and procedures for accounting and financial reporting with respect to the
requirements and application of US GAAP and SEC requirements; and (iii) insufficient emphasis by
management on evaluating our compliance with US GAAP and SEC requirements. These weaknesses were
most likely to manifest themselves in accounting errors in our US GAAP financial reporting for the
periods in which we did not utilize the assistance of external accounting advisers with US GAAP
expertise. We are continuing to work to improve our internal control over financial reporting, including
in the areas of compliance with US GAAP and SEC reporting requirements. We cannot be certain that
these measures will result in processes that provide reasonable assurance regarding the reliability
of our US GAAP financial reporting and the preparation of financial statements for external
purposes in accordance with US GAAP. Any failure to implement necessary new or improved controls,
including those needed to remediate any control weaknesses discovered in preparation for the
requirements of Section 404 of the U.S. Sarbanes-Oxley Act of 2002, or difficulties encountered in
their implementation, could cause us to fail to meet our US GAAP reporting obligations. If we are
unable to correct the material weaknesses in our internal control over US GAAP financial reporting
and we are required to continue to report that we have material weaknesses in those internal
controls, investors could lose confidence in our reported financial information, which could have a
negative effect on the trading price of our shares. Risks related to the gold mining industry Changes in the 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:  
    
    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 jewellery;
    
    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; and
    
    interest rates. The following table shows the average, high and low London Bullion market
price of gold in Dollars during the last three fiscal years: Year ended June 30,2004
    
    2003
    
    2002
    
    2001Average
    
    $
    389
    
    
    $
    334
    
    
    $
    296
    
    
    $
    269High
    
    $
    427
    
    
    $
    382
    
    
    $
    327
    
    
    $
    291Low
    
    $
    343
    
    
    $
    302
    
    
    $
    265
    
    
    $
    260
 On June 30, 2004, the afternoon fixing price of gold on the London Bullion
Market was $395.80 per ounce and on October 31, 2004, was $425.55 per ounce. 14




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The exploration of mineral properties is highly speculative in nature,
involves substantial expenditures, and is frequently unproductive. We must continually replace Ore Reserves that are depleted by production.
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. Gold mining companies may
undertake exploration activities to discover gold mineralization, which in turn
may give rise to new gold bearing ore bodies. Exploration is highly speculative
in nature and requires substantial expenditure for drilling, sampling and
analysis of ore bodies in order to quantify the extent of the gold reserve.
Many 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 or not the deposit
contains economically recoverable mineralization. Uncertainties as to the
metallurgical recovery of any gold discovered may not warrant mining on the
basis of available technology. As a result 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 properties. Our mineral exploration rights may also not contain
commercially exploitable reserves of gold. The cost incurred on unsuccessful
exploration activities are, as a result, not likely to be recovered and we
could incur a write-down on our investment in that interest or the
irrecoverable loss of funds spent. There is uncertainty with our Ore Reserve estimates. Our Ore Reserve 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 Industry Guide 7 of the Securities and Exchange
Commission, or SEC. These estimates may be imprecise and may not reflect actual
reserves 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 results of operations and financial
condition to decline. Moreover, if the price of gold declines, or stabilizes at
a price that is lower than recent levels, or if our production costs, and in
particular our labor costs, increase or recovery rates decrease, it may become
uneconomical to recover Ore Reserves containing relatively lower grades of
mineralization. Under these circumstances, we would be required to re-evaluate
our Ore Reserves. Short-term operating factors relating to the Ore Reserves,
such as the need for sequential development of ore bodies and the processing of
new or different grades, may increase our production costs and decrease our
profitability during any given period. These factors have and could result in
reductions in our Ore Reserve estimates, which could in turn adversely impact
upon the total value of our mining asset base and our business and operating
results. Gold mining is susceptible to numerous events that could have an adverse
impact on a gold mining business. The business of gold mining takes place in underground mines, open pit
mines and surface operations for the retreatment of rock dumps and tailings
dams. These operations are 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 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, but are not limited
to:  
    
    environmental hazards and pollution, including the discharge of
gases, toxic chemicals, pollutants, radioactive materials and other
hazardous material into the air and water;
    
    seismic activity which could lead to rock bursts, cave-ins, pit slope
failures or, in the event of a significant event, total closure of
sections or an entire underground mine; 15




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
    
    unexpected geological formations which reduce or prevent mining from
taking place;
    
    flooding, landslides, sinkhole formation, ground subsidence, ground
and surface water pollution, and waterway contamination;
    
    underground fires and explosions, including those caused by flammable
gas;
    
    accidents caused from and related to drilling, blasting, removing,
transporting and processing material, and the collapse of pit walls and
tailings dams; and
    
    decrease in labor productivity due to labor disruptions, work
stoppages, disease, slowdowns or labor strikes. In addition, deep level underground mines in South Africa, as compared to
other gold mining countries, involve significant risks and hazards not
associated with open pit or surface rock dump and tailings dam retreatment
operations. The level of seismic activity in a deep level gold mine varies
based on the rock formation and geological structures in the mine. The
occurrence of any of these hazards could delay production, increase production
costs and may result in legal claims. Underground and opencast mines in Papua New Guinea may experience pit wall
failures, landslides and flooding, due to excessive annual rainfall. The
transport of supplies and employees to and from the mine site may be inhibited
by incessant rain and damage to roads. In addition, excessive land movement
caused by excessive rain may destabilize existing building and plant
infrastructure and restrict access into the mines. Risks related to doing business in South Africa and Papua New Guinea Political or economic instability in the regions in which we operate may
reduce our production and profitability. We are incorporated and own significant operations in South Africa. As a
result, political and economic risks relating to South Africa could reduce 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 the majority of
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 have impeded fixed inward investment into South Africa
and have prompted emigration of skilled workers. As a result, we may have
difficulties attracting and retaining qualified employees. Recently, the South African economy has been growing at a relatively slow
rate, inflation and unemployment have been high by comparison with developed
countries, and foreign currency reserves have been low relative to other
emerging market countries. In the late 1980s and early 1990s, inflation in
South Africa reached record highs of 20.6%. This increase in inflation resulted
in considerable year on year increases in operational costs. In recent years,
the inflation rate has decreased and as of July 2004, the CPIX inflation rate
stood at 4.4%. A return to high levels inflation in South Africa, without a
concurrent devaluation of the Rand or increase in the price of gold, could
result in an increase in our costs which could reduce our profitability. In South Africa and Papua New Guinea there is a greater level of political
and economic risk as compared to other developed countries in the world. For
example, open pit operations at Porgera were suspended from August 27, 2002 to
October 12, 2002, due to interruptions in the electrical power supply as a
result of election-related vandalism in Papua New Guinea. There is also a risk
that social unrest and government intervention could be exacerbated during the
mine closure process. Mine infrastructure, including power, water and fuel, may
be at risk of sabotage. At present, Papua New Guinea is experiencing political instability
relating to upcoming governmental elections. As a result, the recurrence of
election related vandalism experienced in 2002 could be experienced yet again.
Landowners in the area, whose interests are consolidated with those of the
provincial government in a Papua New Guinea registered entity, Mineral
Resources Enga, or MRE, had an expectation of receiving from us a 5% stake in
the Porgera Joint Venture. This expectation arose from an undertaking we gave
at the time of acquiring our interest in Porgera, to sell a 5% stake to MRE on
commercial terms, which was subsequently cancelled as MRE failed to meet
certain conditions precedent after renegotiated, extended deadlines. This issue
may become the subject of some political campaigning and canvassing in the
upcoming elections. 16




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The Porgera mine has also on a number of occasions experienced delays
receiving operating permits and licenses, necessary for this mine to conduct
its lawful operations. If at any time in the future permits essential to lawful
operations are not obtained or exemptions not granted, there is a risk that the
Porgera mine may not be able to operate for a period of time. Future government
actions, or actions of other quasi-government or landowner groups, cannot be
predicted but may impact on the operations and regulation of mines including
the Porgera Joint Venture. Any suspension of operations at the Porgera Joint
Venture would decrease our attributable production and profitability. AIDS poses risks to us in terms of productivity and costs. Acquired Immune Deficiency Syndrome, or AIDS, and tuberculosis which is
closely associated with the onset of the disease and is exacerbated in the
presence of HIV/AIDS, represents a very serious health care challenge in the
mining industry. Human Immunodeficiency Virus, or HIV, is the virus that causes
AIDS and South Africa has one of the highest HIV infection rates in the world.
It is estimated that approximately 30%-40% of the mining industry workforce in
South Africa are HIV positive. The exact extent to which our mining workforce
both within and outside South Africa is infected with HIV/AIDS is unknown at
this stage. Papua New Guinea has recently been identified as a high risk
country for the HIV/AIDS pandemic and this could have a direct impact on our
workforce and productivity in that country. The exact impact of increased
mortality rates due to AIDS-related deaths on the cost of doing business is as
yet undefined. The only available treatments for HIV/AIDS are anti-retroviral
drugs, which slow down the advancement of the disease but do not present a
complete cure for the disease. The cost and availability of anti-retroviral
drugs could inhibit the introduction of treatment programs at our mines in
South Africa and Papua New Guinea to reduce the impact of HIV/AIDS on our
mining workforce and our businesses. The existence of the disease poses a risk
to us in terms of the potential reduction in productivity and increase in
medical costs. Government policies in South Africa may adversely impact our operations
and profits Government Regulation The mining industry in South Africa is extensively regulated through
legislation and regulations issued through 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 government enforces its regulations through the various
government departments. The Mineral and Petroleum Resources Development Act, 2002 On May 1, 2004, the new Minerals and Petroleum Resources Development Act,
or the MPRD Act, was enacted, which places all mineral and petroleum resources
under the custodianship of the state. Private title and ownership in minerals,
or the old order rights, are to be converted to new order rights,
essentially the right to mine. The MPRD Act allows the existing holders of
mineral rights a period of five years to apply for the conversion of used old
order rights, and one year for the conversion of unused old order rights. We
will need to submit a mining work program and thereby substantiate the area and
period of the new order rights and also comply with the requirements of the
Mining Charter as described below. Once these periods have lapsed, the holders
may have to compete to acquire the right to mine minerals previously held under
old order rights. To the extent that we are unable to convert some of our old
order rights, we may have a claim for compensation based on expropriation. It
is not possible to forecast with any degree of certainty whether a claim will
be enforceable against government, and the extent to which we may be
compensated. Factors that are taken into account are market value, as well as
the history of acquisition of these rights. Where new order rights are obtained under the MPRD Act, these rights will
not be equivalent to our existing property rights. The area covered by the new
order rights may be reduced by the State if it finds that the prospecting or
mining work program submitted by an applicant does not substantiate the need to
retain the area covered by the old order rights. The duration of the new order
rights will no longer be perpetual but rather, in the case of new order mining
rights, 17




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for a maximum of 30 years with renewals of up to 30 years each and, in
the case of prospecting rights, up to five years with one renewal of up to
three years. In addition, the new order rights will only be transferable
subject to the approval of the Minister. Mining or prospecting must commence
within one year or 120 days, respectively, of the mining right or
prospecting right becoming effective, and must be conducted continuously and
actively thereafter. The new rights can be suspended or cancelled by the
Minister on breach of or, in the case of mining rights, on non-optimal mining
in accordance with the mining work program. The implementation of the MPRD Act will result in significant adjustments
to our property ownership structure. To the extent that we are unable to
convert some of our old order rights to new order rights, and that the
exclusive rights to minerals we enjoyed under the previous statutory regime are
diminished, the operations of the MPRD Act may result in significant
adjustments to our property ownership structure, which in turn could have a
material adverse effect on the underlying value of our operations. Possible taxation reform and mining royalties The South African government has declared its intention to revisit the
taxation regime of South African gold mining companies. The South African gold
mining industry is taxed under the gold taxation formula which recognizes the
high level of capital expenditure required to sustain a mining operation over
the life of the mine. This results in an additional tax benefit not afforded to
other commercial companies. In addition, the South African Government has
indicated that it is looking at a revenue based royalty for mining companies,
as outlined in the draft Mineral and Petroleum Royalty Bill, 2003, or Royalty
Bill, which was released in March 2003 for comment. The Royalty Bill proposed a
three percent royalty on gross revenue for gold mining companies. In
conjunction with the South African Mining Development Association we have made
submissions to the government outlining our concerns about a revenue based
royalty and recommended a profit based royalty be introduced instead. In his
budget speech in February 2004, the South African Finance Minister acknowledged
that the draft Royalty Bill may need some refinement, but also stated that
governments preference is for a revenue based royalty, with introduction of
the royalty as of 2009. The introduction of the proposed royalty would have an
adverse effect on the profitability of our South African operations. We are
currently evaluating the impact of the proposed royalty. The Broad Based Socio-Economic Empowerment Charter The Broad Based Socio-Economic Empowerment Charter for the South African
Mining Industry, or Mining Charter, establishes certain numerical goals and
timeframes to transform equity participation in the mining industry in South
Africa and is effective from May 1, 2004. The goals set by the Mining Charter include that each mining company must
achieve 15 percent ownership by historically disadvantaged South Africans of
its South African mining assets within five years and 26 percent ownership
within ten years from May 1, 2004. This is to be achieved by, among other
methods, the sale of assets to historically disadvantaged persons on a willing
seller/willing buyer basis at fair market value. When considering applications
for the conversion of existing rights, the State will take a scorecard
approach, evaluating the commitments of each company to the different facets of
promoting the objectives of the Mining Charter. Failure on our part to comply
with the requirements of the Mining Charter and the scorecard could subject us
to negative consequences. We may incur expenses in giving additional effect to
the Mining Charter and the scorecard, including costs which we may incur in
facilitating the financing of initiatives towards ownership by historically
disadvantaged persons. There is also no guarantee that any steps we might take
to comply with the Mining Charter would ensure that we could successfully
acquire new order mining rights in place of its existing rights. In addition,
the terms of such new order rights may not be as favorable to us as the terms
applicable to its existing rights. Based on present indications, however, we
believe that we should be able to successfully acquire new order rights on
reasonable terms. 18




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Land Claims Our privately held land and mineral rights in South Africa could be
subject to land restitution claims under the Restitution of Land Rights Act,
1994 (as amended), or Land Rights Act. Under the Land Rights Act, any person
who was dispossessed of rights to land in South Africa as a result of past
racially discriminatory laws or practices is granted certain remedies,
including the restoration of the land. The initial deadline for such claims was
December 31, 1998. We have not been notified of any land claims, but it is
possible that administrative delays in the processing of claims could have
delayed such notification. Any claims of which we are notified in the future
could have a material adverse effect on our right to the properties to which
the claims relate and prevent us using that land and exploiting any mineral
reserves located there. 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. Labor costs constitute 50% of our production costs for fiscal 2004, and
42% and 41% for fiscal 2003 and 2002, respectively. As at June 30,
2004, we employed and contracted approximately 13,737 people. Of
these, 12,986 people were in South
Africa, of whom, approximately 70% were members of trade unions or employee
associations. This excludes all employees of our associates CGR and ERPM. We
have entered into various agreements regulating wages and working conditions at
our South African mines to June 30, 2005, at which time we will need to
re-negotiate these agreements. Unreasonable wage demands could increase
production costs to levels where our South African operations are no longer
profitable. This could lead to accelerated mine closures and labor
disruptions. We may also experience labor unrest at operations at which we have
an equity interest. In particular, during October and November 2002, ERPM
experienced some labor unrest during which several striking contract workers
were wounded and two workers were killed by employees of a private security
company. Our business could suffer if such activities are repeated. In recent years, labor laws in South Africa have significantly changed in
ways that 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. 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 the Common Monetary Area, including South
Africa. 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 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. These restrictions could hinder our corporate functioning and acquisition
strategy, including because investments of less than a 50% plus 1 share
interest can only be held subject to exchange approval. We hold 45.33% of Emperor and accordingly SARB may require us to divest our
interest in Emperor if we do not acquire 50% plus 1 share interest. While the South African Government has relaxed exchange controls in recent
years, it is difficult to predict whether or how it will further relax or
abolish exchange control measures in the future. For further information see
Item 10D.: Additional InformationExchange Controls. 19




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Risks related to ownership of our ordinary shares or ADSs Your ability to sell a substantial number of ordinary shares may be
restricted by the limited liquidity of ordinary shares traded on the
Johannesburg Securities Exchange, or JSE. The primary listings for our ordinary shares is the JSE and the Australian
Stock Exchange, or ASX. The principal trading market for our ADSs is the Nasdaq
SmallCap Market. On a historical basis, the trading volumes and liquidity of
shares listed on the JSE have been low in comparison with the Nasdaq SmallCap
Market. For the 12 months ended June 30, 2004, only 9% of the ordinary shares
publicly traded were traded on the JSE. The limited liquidity of the ordinary
shares traded on the JSE could limit your ability to sell a substantial number
of ordinary shares on the JSE in a timely manner, especially by means of a
large block trade. 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 ordinary shares or ADSs may decide to sell them at any time. Sales of
ordinary shares or ADSs, if substantial, or the perception that these sales may
occur and be substantial, could exert downward pressure on the prevailing
market prices for the ordinary shares or ADSs, causing their market prices to
decline. Trading activity of hedge funds and the ability to borrow script in
the market place will increase trading volumes and may place the share price
under pressure. 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 and articles of association 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. 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. In addition, our cash producing assets
are located outside the United States, and a major portion of 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 outside 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 our Company or
the members of its 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); 20




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
    
    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 actually 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 the purpose of use in South African
courts. It is not possible therefore for an investor to seek to impose criminal
liability on us in a South African court arising from a violation of United
States federal securities laws. 21




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ITEM 4. INFORMATION ON THE COMPANY 
 4A. HISTORY AND DEVELOPMENT OF THE COMPANY Introduction DRDGOLD Limited is a gold mining company engaged in
underground and surface gold mining including exploration, extraction,
processing and smelting. Our South African operations consist of the North West
Operations, comprising the Harties Section and the Buffels Section, the Blyvoor
Section and our 40% interest in CGR comprising the Crown Section and ERPM
Section. On March 22, 2005, however, we announced the provisional liquidation of Buffelsfontein Gold Mines
Limited, our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed
with the SEC on March 22, 2005, which is incorporated by reference in this Annual Report.
 Our Australasian operations consist of the Tolukuma Section and our
20% interest in the unincorporated Porgera Joint Venture, or Porgera, both of
which are in Papua New Guinea and a 45.33% interest in Emperor Mines Limited,
or Emperor, as of October 31, 2004 (19.78% as of June 30, 2004), which owns the
Vatukoula gold mine in Fiji. We also have exploration projects in South Africa,
Papua New Guinea and Australia, though our principal focus is on our operations
in South Africa and Papua New Guinea. We are a public company, incorporated on February 16, 1895, and our shares
were listed on the JSE in that same year. In 1898, our milling operations
commenced with 30 stamp mills and we treated 38,728 tons of ore and produced
22,958 ounces of gold. In South Africa we have focused our operations on the
West Witwatersrand basin which has been a gold production region for over 100
years. The Blyvoor Section (acquired on September 15, 1997, in exchange for
12,693,279 of our ordinary shares) and North West Operations, which comprise of
the Buffels Section (acquired on September 15, 1997, in exchange for 14,300,396
of our ordinary shares) and the Harties Section (acquired on August 16, 1999,
in exchange for $7.4 million), are predominantly underground operating mines
located within the Witwatersrand Basin, exploiting gently to moderately dipping
gold bearing quartz pebble conglomerates in addition to certain surface
sources. The Crown Section (CGR was acquired on September 14, 1998, in exchange
for 5,925,139 of our ordinary shares), also located within the Witwatersrand
Basin, exploits various surface sources, including sand and slime tailings
deposited as part of previous mining operations. Since 1999 our focus has been
to expand our operations outside South Africa and increase our production base
from the Pacific Rim region. The Tolukuma Section (acquired from September 1999
to June 2001, in exchange for 8,125,082 shares and $3.3 million in cash)
provided an initial base in that region, and the acquisition of a 20% interest
in the unincorporated Porgera Joint Venture (acquired in October 2003, in
exchange for 6,643,902 shares and $60.3 million in cash) increased total
production in the region to 233,190 ounces in fiscal 2004. To ensure access to global markets our shares and/or related instruments
trade on the JSE, Nasdaq SmallCap Market, London Stock Exchange, the Marche
Libre on the Paris Bourse, the Brussels Bourse in the form of International
Depository Receipts, the Australian Stock Exchange, or ASX, the Port Moresby
Stock Exchange in Papua New Guinea (as from August 18, 2004), the Over The
Counter, or OTC, market in Berlin and Stuttgart and the Regulated Unofficial
Market on the Frankfurt Stock Exchange. Effective August 18, 2003, we are
included as a member of the Philadelphia Gold and Silver Index. This is a
capitalization weighted index comprised of the leading publicly traded
companies involved in the mining of silver and gold, of which we currently
constitute approximately 0.64% of the index. Our registered office and business address is 45 Empire Road, Parktown,
Johannesburg, South Africa, 2193. The postal address is P.O. Box 390,
Maraisburg 1700, South Africa. Our telephone number is (+27 11) 381-7800 and
our facsimile number is (+27 11) 482-4641. We are registered under the South
African Companies Act, 1973 (as amended) under registration number
1895/000926/06. For our ADSs, The Bank of New York, at 101 Barclay Street., New
York, NY 10286 has been appointed as agent. 22




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Important Events in Our Development Generally and in the Current Year Review and restructuring of South African operations On July 21, 2003, we entered into a 60-day review period on our North West
Operations designed to restore the operations to profitability. The time period
of the review coincides with statutory limitations imposed by the Labour
Relations Act to implement strategic changes involving a substantial reduction
in labor force. This proposal was submitted to all stakeholders, including
organized labor, the Department of Labour and the Department of Minerals and
Energy for their input. An agreement was reached with all labor organizations
and the process was completed on September 21, 2003, with approximately 2,400
employees retrenched at a cost of $6.5 million and the placing of certain
infrastructure (Number 6 Shaft at the Harties Section) on a care and
maintenance program. This resulted in a 5% reduction of the planned production
profile. On March 16, 2004, we reopened the Number 6 Shaft in the Harties Section
of the North West Operations, to mine higher grade areas on a selective basis.
We recalled 400 staff previously retrenched from the North West Operations to
man this shaft. On February 18, 2004, we announced that the Number 11 Shaft at
the Buffels Section of the North West Operations was to be closed after the
revised work practices, implemented based on the operational review, proved to
be unsustainable. As a result, 600 employees were retrenched, at a cost of $0.6
million. On May 4, 2004, our associate, ERPM, entered into a 60-day review period
of its underground section designed to restore the operations to profitability.
A task team comprising management, union representatives and labor was
established to assess the proposals and make a final recommendation. On July 4,
2004, at the end of the process, ERPMs management and the consultative forum
concluded that continued mining of the underground section was not sustainable,
even at a higher Rand gold price of R2,650 per ounce. As a result, a controlled
closure program of the underground section was implemented and was expected to
be completed by March 2005. Following the retrenchment of 806 employees in
August 2004 at a cost of $0.6 million (R3.7 million), the mine has achieved a
reduction in costs coupled with improved productivity. As a result, the
original planned closure of the underground section has been postponed. It is
estimated that approximately 1,480 employees could be retrenched at a cost of
approximately $1.9 million (R12.3 million) if the closure program is completed.
The remainder of the employees will either be transferred within the CGR group,
leave the service of the company through natural attrition or remain to work on
the Cason Dump. ERPM believes that anticipated funds generated from the
continued surface operations and the controlled closure of the underground
mining will fund retrenchment costs, environmental management costs and
rehabilitation. On June 26, 2004, and June 28, 2004, respectively, we entered into a
further 60-day review period at the Buffels Section at our North West
Operations and at our Blyvoor Section designed to restore the operations to
profitability. Proposals were received into a consultative forum in which both
management and organized labor participated, and was distributed to the
Department of Labour and the Department of Minerals and Energy, for their
input. At the Buffels Section, agreement was reached with all the relevant
parties early in August 2004 to close the Number 9 Shaft, but to keep the
Number 10 and 12 Shafts in operation on condition that certain defined
sustainability thresholds are met. This agreement resulted in the
retrenchment of 120 employees at this mining operation during
fiscal 2005 at a cost of R3.7 million ($0.6 million). At the
Blyvoor Section, the 60-day review was extended by two weeks to conclude on
September 13, 2004. On October 5, 2004, it was announced that 1,619 employees
have been retrenched at a cost of approximately R32.0 million ($5.1 million),
with possible future restructuring initiatives depending on the economic
circumstances. In terms of the agreement organized labor recorded its
commitment to certain production targets, and undertook not to disrupt
production for at least six months for reason relating to restructuring of the
operations. On March 22, 2005, however, we announced the provisional liquidation of Buffelsfontein Gold Mines
Limited, our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed
with the SEC on March 22, 2005, which is incorporated by reference in this Annual Report. Emperor Mines Limited (Emperor Mine, Vatukoula, Fiji) Over the period December 2002 to July 2004, we acquired a 45.33% interest
in Emperor Mines Limited, or Emperor, an Australian listed gold mining company
with a single gold mine based in Vatukoula, Fiji. 23




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##### Table of Contents



Our interest in Emperor was acquired through a series of transactions. As
of December 31, 2002, we had acquired 14.15% of Emperor for approximately
A$11.9 million ($6.7 million). By April 2003, we had increased our percentage
holding in Emperor through additional purchases on the open market to 19.81% at
a total additional cost of A$4.3 million ($2.6 million). At June 30, 2004, our
effective holding had decreased to 19.78% as a result of additional shares
issued by Emperor during fiscal 2004. Given the size of our holding, Emperor
appointed two of our representatives to the board of Emperor in January 2003. On March 8, 2004, we announced a conditional takeover offer to acquire all
of the outstanding shares in Emperor that were not already owned by us for a
consideration of one of our shares for every five shares in Emperor held. At
that time, the offer valued Emperor at approximately A$105 million ($79.8
million). On June 10, 2004, we announced a revised final offer of five of our
shares for every twenty two shares in Emperor held. The revised offer
represented a 14% increase over the previous offer. On July 30, 2004, our offer
to Emperors shareholders closed with us having received acceptances from
Emperors shareholders representing approximately 25.55% of Emperors issued
capital, thereby increasing our shareholding in Emperor to 45.33%. Accordingly,
we issued 6,612,676 shares in exchange for the 29,097,269 Emperor shares to the
value of $16.6 million, based on the market value of our shares on the date
issued, with share issue and transaction costs associated with the take over
offer, amounting to $1.3 million. With effect from August 3, 2004, Emperors board of directors appointed
our then Executive Chairman, Mr. M.M. Wellesley-Wood as Managing Director of Emperor
and our Divisional Director: Australasian Operations, Mr. R. Johnson as a
Non-Executive Director of Emperor. On September 9, 2004, Emperor shareholders
approved a resolution to remove two independent directors from the board of
Emperor and to confirm Mr. R. Johnsons appointment as a Non-Executive Director
of Emperor. As a result, we have three of our representatives on the six member
Emperor board, with Emperors independent Chairman having a casting vote. At
the date of this annual report we did not have control over Emperor. On September 13, 2004, Emperor announced an A$20.4 million ($14.6 million)
non-renounceable rights issue to fund a portion of its Phase II capital
expansion project (which is designed to increase Emperors underground mining
capacity to match the current mill capacity), the acquisition of new heavy
vehicle equipment and Emperors short-term working capital requirements. Under
the rights issue, eligible Emperor shareholders were entitled to subscribe
for four fully paid ordinary shares in Emperor for every ten ordinary shares
held in Emperor at an issue price of A$0.45 per share. We agreed to apply
for our entitlement as well as to subscribe for any shortfall under the rights
issue, subject to certain conditions. The rights offer closed on
November 12, 2004 and DRD (Isle of Man) has
 subscribed for 20,522,122 Emperor shares (being its entitlement
under the Emperor rights issue), which at A$0.45 per share, amounted to
A$9.2 million ($7.0 million). We did not participate in any
shortfall to the rights offer. We entered into an additional facility of $15.0 million
with Investec Bank (Mauritius) Limited on October 14, 2004, to fund our
participation in this rights offering. The terms of repayment and restrictions
on funding of this facility are discussed under Item 5B.: Liquidity and Capital
Resources. During
the course of Emperors rights offering, an application was made
to contest the rights offering. On October 18, 2004, an initial Australian Takeovers Panel made a
declaration of unacceptable circumstances and orders in relation to the Emperor
rights offer. On October 31, 2004, following a review application by the
Company a review panel of the Australian Takeovers Panel declined to declare
that unacceptable circumstances exist in relation to the affairs of Emperor
with regards to the rights issue. The result of this decision was that Emperors
rights offer proceeded, although Emperor and DRD (Isle of Man) agreed to
amend the terms of that offering such that:  
    
    any application by DRD (Isle of Man) for its entitlement under the
rights offer would be scaled back to avoid accretion in its voting power
in Emperor above 45.33% due only to the exclusion of some of Emperors
foreign shareholders from the rights issue; and
    
    the shortfall facility, which offered all Emperor shareholders that
were eligible to participate in the rights offer with the ability to
participate in filling any shortfall to that offer on a pro rata basis,
would provide a priority shortfall allocation to all eligible Emperor
shareholders (other than ourselves). Previously, DRD (Isle of Man) was
able to participate in the shortfall facility on the same basis as any
other eligible Emperor shareholder. 24




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##### Table of Contents



In the fiscal 2004 financial report of Emperor their auditors issued a
modified audit report to the effect that until
such time as Emperor completes the rights offer, there remains a significant
uncertainty as to whether Emperor will continue as a going concern and,
therefore, whether it will realize its assets and extinguish its liabilities in
the normal course of business and at the amounts stated in the financial
report. Porgera Joint Venture (Papua New Guinea) Effective October 14, 2003, we acquired all the shares of Orogen Minerals
(Porgera) Limited, or OMP, and Mineral Resources Porgera Limited, or MRP, from
Oil Search Limited, or OSL. The transaction was effected through the
amalgamation of OML and MRP and our wholly-owned subsidiary, Dome Resources
(PNG) Limited which was subsequently renamed DRD (Porgera) Limited. All
conditions precedent to this transaction have been met and approval from the
Papua New Guinea Central Bank was obtained on November 19, 2003. South African
Reserve Bank approval was obtained on September 4, 2003. We received approval
for the transaction from the Investment Promotion Authority of Papua New Guinea
on December 16, 2003. This transaction resulted in us acquiring an effective 20% interest in an
unincorporated gold mining joint venture, the Porgera Joint Venture, which has
fifteen mineral tenements which form part of the Porgera mine located in Papua
New Guinea. The final purchase price of $77.1 million comprised $60.3 million
in cash and 6,643,902 ($16.7 million) of our ordinary shares based on the
prevailing market value on November 22, 2003, being the final settlement date.
Included in the purchase price is an amount of $4.1 million in respect of
costs. As part of the acquisition we offered, on commercial terms, 5% of our
interest in the Porgera Joint Venture to Mineral Resources Enga, or MRE, on
behalf of the Enga Provincial Government and landowners in Papua New Guinea.
On April 26, 2004, we announced that the offer to sell the 5% interest in the
Porgera Joint Venture to MRE would not proceed, as the conditions precedent

were not met. As at June 30, 2004, the Porgera Joint Venture is owned by Placer
Dome Limited (75%), DRD (Porgera) Limited (20%) and the MRE, on behalf of the
Enga Provincial Governments and landowners in Papua New Guinea (5%). An
affiliate of Placer Dome Inc., Placer (PNG) Limited is the operator of the
Porgera Joint Venture and is subject to the control of a management committee
made up of representatives of the joint venture partners, including one of our
representatives. The management committee is governed by an operating agreement
which prevents the partners from acting unilaterally. Crown Gold Recoveries (Pty) Limited Effective July 1, 2002, we engaged in a transaction consistent with our
black economic empowerment strategy to fulfill the requirements of the Mining
Charter, by entering into a share purchase agreement with Crown Gold Recoveries
(Pty) Limited, or CGR, the Industrial Development Corporation of South Africa,
or IDC, and Khumo Bathong Holdings (Pty) Limited, or KBH. Under the share
purchase agreement, we sold 57% of our interest in CGR to the IDC and 3% of our
interest in CGR to KBH for a total amount of R105.0 million ($10.1 million),
and realized a profit of R48.0 million ($5.3 million). KBH was granted an
option to purchase the IDCs shares in CGR. The IDC and KBH also each purchased
their respective share of three shareholder loans, aggregating R190.1 million
($18.3 million) owed by CGR to us. On October 10, 2002, CGR entered into an agreement with third parties to
purchase the entire issued share capital and all shareholder claims of East
Rand Proprietary Mines Limited, or ERPM. CGR paid a purchase price of R100.0
million ($11.0 million) for this acquisition. In connection with this
transaction, we provided ERPM with a loan of R10.0 million ($1.3 million). In
addition, an amount of R60.0 million ($8.0 million) was lent by us to CGR which
CGR paid to the then shareholders of ERPM as an interest free loan. CGR has
received from the shareholders, as security for the loan, a pledge of the
entire issued share capital of ERPM and a cession of the shareholders claim to
CGR. The South African competition authorities have approved the transaction
and the R60.0 million ($8.0 million) loan is deemed to be part payment of the
purchase price of R100.0 million ($11.0 million) by CGR for the acquisition of
the shares and the claims of ERPM. CGR acquired ERPM without indemnification
for any disclosed or undisclosed liabilities, as Enderbrooke Investments (Pty)
Limited, the Seller, was unwilling to provide such indemnification. In the
course of negotiations, a due diligence investigation was conducted. As a
result of this investigation, the initial purchase price was reduced by
approximately R40.0 million ($4.4 million) to reflect potential liability at
the time the acquisition was entered into. 25




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##### Table of Contents



We have a 40% equity interest in CGR and its subsidiaries. We have
recognized losses generated by CGR and its subsidiaries against any advances we
have made to them and these are carried at a nil value at June 30, 2004. Sale of West Wits assets (South Africa) In June 2002, we entered into an agreement with Bophelo Trading (Pty)
Limited, subsequently renamed Mogale Gold (Pty) Limited, or Mogale, for the
sale of the West Wits gold plant and certain related assets for R25.0 million
($2.4 million) to process certain sand dumps, surface materials, freehold areas
and surface right permits located at the West Wits Section. We retain the right
to mine underground by virtue of certain mining titles and mining
authorizations on the property. As part of the agreement, we agreed to
indemnify Mogale against any loss, damage or expense which Mogale might incur
as a result of any liability in connection with the transferred assets, the
cause of which arose prior to this sale. The effective date of this sale was
July 21, 2003, when all of the conditions president were fulfilled and Mogale
was granted a mining license. Other On April 28, 2004, we concluded the acquisition of a 50.25% interest in
Net-Gold Services Limited, a company that brokers the payment of purchases made
by subscribers, through settlement in gold, for a consideration of $2.0
million. On May 21, 2004, Fortis Limited, an insurance company registered in Papua
New Guinea, was established by us to facilitate the reinsurance of the workers
compensation insurance costs for our Tolukuma Section, in order to reduce the
cost of this insurance cover. To date, workers compensation insurance costs
have been reduced by 90% for this mining operation. It is a legal requirement
in Papua New Guinea to have workers compensation insurance cover in place to
assist an employee with medical costs should he be injured at work. Should an
employee be killed while performing his duties compensation is provided to
relatives of the employee, by way of a lump sum payment and in the case of
minors, regular income up to when the minor reaches the age of 21 to provide
for education. The reinsurance cover is provided by Swiss-Re Australia Limited
and other insurers in Australia. On June 30, 2004, we established an insurance cell captive in White Rock
Insurance Company PPC Limited, mainly to facilitate access to additional
insurance markets and to assist us in reducing costs through establishing a
self insured group policy across the different regions in which we operate. On July 27, 2004, we established the DRD (Isle of Man) Limited (Singapore
Branch), a branch of DRD (Isle of Man) Limited, registered in Singapore. It is
intended that the establishment of the branch will facilitate our further
expansion in the Australasian region in line with our growth strategy. At our Annual General Meeting held on November 26, 2004, our shareholders approved the changing of the Companys name from Durban
Roodepoort Deep, Limited to DRDGOLD Limited. 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. 26




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##### Table of Contents



4B. BUSINESS OVERVIEW Description of Our Mining Business Exploration Exploration activities are focused on the extension of existing ore bodies
and identification of new ore bodies both at existing sites and at undeveloped
sites. Once a potential orebody has been discovered, exploration is extended
and intensified in order to enable clearer definition of the orebody and the
portions with the potential to be mined. Geological techniques are constantly
refined to improve the economic viability of exploration and exploitation. Mining The South African Operations comprise relatively old assets and the
principal mining method is the extraction of
previously abandoned Ore Reserves, which require a high degree of opening up of
these previously abandoned Ore Reserves. The Australasian Operations comprise open-pit mines and decline shafts,
with appropriate mining methods. Our Metallurgical Plants and Processes A detailed review of the metallurgical plants and processes for each of
the mining operations is provided under Item 4D.: Property, Plant and
Equipment. Market The gold market is relatively liquid compared to other commodity markets,
with the price of gold generally 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 jewellery, 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 (the tendency of gold to retain its
value in relative terms against basic goods and in times of inflation and
monetary crises) 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, gold is
often seen as a safe haven, leading to increased purchases of gold and support
for the price of gold. We believe that the primary mover in gold continues to be strong
speculator and investor interest in the metal, driven by a number of
fundamental economic circumstances. Among these circumstances is an anticipated
further decline in the value of the Dollar. These same influences have pushed
up prices of base metals and other commodities, although the extent of investor
interest in precious metals is relatively high compared with the rest of the
metals sector. Physical demand for gold increased despite the rising Dollar
gold price, during fiscal 2004. Whilst the purchase of gold by the jewellery,
industrial and dental industries for fiscal 2004 was marginally higher by 1%
year-on-year. The bar and coin retail investment market increased 14% during
fiscal 2004 in comparison to fiscal 2003. On the supply side, mine production
in fiscal 2004 was 12% higher than in fiscal 2003. However, scrap sales and
official sector (Central Bank) sales decreased by 8% respectively, representing
approximately 1,358 tonnes for fiscal 2004, and constituting 37% of the supply
of gold to the current market. 27




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##### Table of Contents



Our total revenue by geographic market is as follows: Year ended June 30,2004
    
    2003
    
    2002$ 000
    
    $ 000
    
    $ 000South Africa
    
    
    220,102
    
    
    
    238,472
    
    
    
    281,808Australasia
    
    
    93,188
    
    
    
    22,870
    
    
    
    22,050313,290
    
    
    
    261,342
    
    
    
    303,858
 All gold produced by our South African operations is sold on our behalf by
the Rand Refinery Ltd, or RRL, in accordance with a refining agreement signed
by us in October 2001. At our various operations the gold bars which are
produced consist of approximately 85% gold, 7-8% silver and the balance
comprises copper and other common elements. The gold bars are sent to the RRL
for assaying and final refining where the gold is purified to 99.9% and cast
into troy ounce bars of varying weights. RRL then sells the gold on the same
day as delivery, for the London afternoon fixed Dollar price on the day the
gold is sold, with the proceeds remitted to us in Rand within two days. In
exchange for this service, we pay RRL
a variable refining fee plus fixed marketing, loan and administration fees. We
currently own 10.6% of RRL (which is jointly owned by South African mining
companies). The gold produced in Papua New Guinea by the Tolukuma section is sold
directly to N.M. Rothschild under an agreement signed by us in December 2001.
Proceeds for gold sold are received within two days of sale. The selling price
is determined by the previous days London afternoon close Dollar price and we
are paid in Dollars. We do not have an interest in N.M. Rothschild. The gold produced by Porgera in Papua New Guinea is sold directly to the
Bank of Western Australia Limited, or BankWest. Proceeds for gold sold are
received within two days of sale. The selling price is determined by the spot
price at the time of sale and we are paid in Dollars. We do not have an
interest in BankWest. Ore Reserves The tables below set out the Proven and Probable Ore Reserves that are the
Groups Ore Reserves as of June 30, 2004 and 2003, in both imperial and metric
units. Our Ore Reserves are comprised of the total Ore Reserves of our
wholly-owned subsidiaries, as well as our 20% attributable share of the Ore
Reserves of the Porgera Joint Venture. In addition, our attributable 20% share
of the Ore Reserves of the Porgera Joint Venture is based on the information
disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera Joint
Venture) in its Annual Report for the fiscal year ended December 31, 2003, as
filed with the SEC on Form 40-F on March 5, 2004. The Porgera Ore Reserves are
estimated as at December 31, 2003, using appropriate cut-off grades associated
with an average long-term gold price of $325 per ounce, and on the Australian
Dollar Kina average long-term exchange rates to the Dollar of A$1.67 = $1.00
and K4.00 = $1.00. Ore Reserve estimates in this report are reported in accordance with the
requirements of the SECs Industry Guide 7. Accordingly, as of the date of
reporting, all reserves are planned to be mined out under the life of mine
plans within the period of our existing rights to mine, or within the time
period of assured renewal periods of our rights to mine. In addition, as of the
date of reporting, all reserves are covered by required permits and
governmental approvals. See Item 4D.: Property, Plant and Equipment for a
description of the rights in relation to each mine. In Australia and South Africa, we are legally required to publicly report
Ore Reserves and mineral resources in compliance with the South African Code
for the Reporting of Mineral Resources and Ore Reserves, or SAMREC Code,
together with the Australasian Code for Reporting of Mineral Resources and Ore
Reserves, or JORC Code, and the National Instrument 43-101 Standards of
Disclosure for Mineral Projects dated February 2001. The SAMREC Code is based
on, and is comparable with the JORC Code. The SECs Industry Guide 7 does not
recognize mineral resources. Accordingly, we do not include estimates of
mineral resources in this report. 28




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##### Table of Contents



Ore Reserve calculations, are subject to a review conducted in accordance
with SEC Industry Guide 7. Components of the calculations included in the
geological models and input parameters of the reserve estimation procedures,
were checked. In addition, visual inspection of the planning to deliver an
individual block to the metallurgical plant, and the recovery, and deposition
of the tails, took place. A check is also made of the financial input into the
costs and revenue to affirm that they are within reasonable limits. The Ore Reserves are inclusive of diluting materials and allow for losses
that may occur when the material is mined. Ore Reserve tons, grade and content
are quoted as delivered to the gold plant. There are two types of methods
available to select ore for mining. The first is pay-limit, which includes cash
costs, including overhead costs, to calculate the pay-limit grade. The second
is the cut-off grade which includes cash costs, excluding fixed overhead costs,
to calculate the cut-off grade, resulting in a lower figure than the full
pay-limit grade. The cut-off grade is based upon direct costs from the mining
plan, taking into consideration production levels, production efficiencies and
the expected costs. We use the pay-limit to determine which areas to mine, as
an overhead inclusive amount that is indicative of the break-even position,
especially for marginal mining operations. The pay-limit approach is based on the minimum in-situ grade of ore
blocks, for which the production costs, which includes all overhead costs,
including head office charges, are equal to a three year historical average
gold price per ounce for that year. This calculation also considers the
previous three years mining and milling efficiencies, which includes
metallurgical and other mining factors and the production plan for the next
twelve months. Only blocks above the pay-limit grade are considered for mining.
The pay-limit grade is higher than the cut-off grade, because this includes
overhead costs, which indicates the break-even position of the operation,
specifically significant for marginal mines. When delineating the economic limits to the ore bodies we adhere to the
following guidelines:  
    
    The potential ore to be mined is well defined by an externally
verified and approved geological model created using our mining
software;
    
    The potential ore, which is legally allowed to be mined, is also confined by the mines lease boundaries; and
    
    A full life of mine plan (physical 5 year plan) is constructed to mine the ore from existing infrastructure. Our Ore Reserves figures are estimates, which may not reflect actual
reserves or future production. We have prepared these figures in accordance
with industry practice, converting mineral deposits to an Ore Reserve through
the preparation of a mining plan. The Ore Reserve estimates contained herein
inherently includes a degree of uncertainty and depends to some extent on
statistical inferences which may ultimately prove to have been unreliable. Reserve estimates require revisions based on actual production experience
or new information. 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 adversely affect our operations. Moreover, if the
price of gold declines, or stabilizes at a price that is lower than recent
levels, or if our production costs increase or recovery rates decrease, it may
become uneconomical to recover Ore Reserves containing relatively lower grades
of mineralization. The following reserve estimates do not give effect to our announcement, on March 22, 2005, of the
provisional liquidation of Buffelsfontein Gold Mines Limited, our subsidiary that owns our North
West Operations. For fiscal 2004, in respect of our South African assets, Ore Reserves were
determined assuming a gold price of approximately R90,023 per kilogram as
determined from the three year historical average. In accordance with SEC
Industry Guide 7. Based on the average exchange rate for fiscal 2004 the
assumed Dollar gold price would be approximately $400 per ounce. At June 30,
2004, the Rand gold price was R79,851 per kilogram. In respect of our
Australasian assets:  
    
    Ore Reserves for the Tolukuma Section were determined assuming a gold
price of K1,288 per ounce ($400 per ounce at an exchange rate of K3.22 = $1.00) as at June 30, 2004; and 29




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##### Table of Contents




    
    Ore Reserves in respect of our 20% attributable interest in the
Porgera Joint Venture, are as determined by Placer Dome Inc. and as set
forth in its Annual Report for the fiscal year ended December 31, 2003,
and filed with the SEC on Form 40-F on March 5, 2004, assuming an
average long-term gold price of $325 per ounce and exchange rates of
A$1.67 = $1.00 and K4.00 = $1.00. For fiscal 2003, in respect of our South African assets, Ore Reserves were
determined assuming a gold price of approximately R96,549 per kilogram as
determined from the three year historical averages in accordance with SEC
Industry Guide 7. Based on the average exchange rate for fiscal 2003 the
assumed Dollar gold price would be approximately $330 per ounce. In respect of
our Australasian assets, Ore Reserves for the Tolukuma Section were determined
assuming a gold price of $350 per ounce at an exchange rate of K3.46 = $1.00
based on the Kina gold price and exchange rate as at June 30, 2003. The principal reasons for the decrease in our Ore Reserves as at June 30,
2004 (of 11.0 million) compared with June 30, 2003 (of 14.4 million), other
than depletion which constituted 6% of the decrease, are as follows:  
    
    a decrease of 1.5 million ounces or 25% of the Ore Reserves at the
Blyvoor Section due to the change in the pay-limit factors, mining mix
and the decline in the Rand gold price;
    
    a decrease of 3.4 million ounces or 41% of the Ore Reserves at the
North West Operation due to the closure of
the Buffels Section, the loss of 10% of the Ore Reserves at the Harties
Section as these reserves cannot be mined economically past a 15 year life
of mine, resulting from the scattered nature of the remaining Ore
Reserves, escalation in costs, decline in the Rand gold price and higher
pay limits;
    
    an increase of 0.1 million ounces or 40% of the Ore Reserves at the
Tolukuma Section due to updates to the geological model based on
improved drilling and development information; and
    
    an increase of 1.4 million ounces or 100% of the Ore Reserves due to
the purchase of a 20% interest in the Porgera Joint Venture, as at
December 31, 2003, noting that more current information is not
available. Based on the revised Ore Reserves set forth below, the revised life of
mine for our operations are as follows: Underground
    
    SurfaceMine
    
    2004
    
    20031
    
    2004
    
    20031South AfricaNorth West Operations- Harties Section
    
    15 years
    
    19 years
    
    0 years
    
    1 year- Buffels Section
    
    2 months
    
    8 years
    
    0 years
    
    9 yearsBlyvoor Section
    
    15 years
    
    21 years
    
    8 years
    
    9 yearsCrown Section2
    
    n/a
    
    n/a
    
    7 years
    
    7 yearsERPM Section2
    
    9 months
    
    11 years
    
    6 years
    
    9 yearsAustralasiaTolukuma Section
    
    3 years
    
    2 years
    
    2 years
    
    1 yearPorgera Joint Venture3
    
    4 years
    
    
    
    11 years
    
    
 Our Ore Reserves as of June 30, 2004 and 2003 are set forth in the table
below.   1 Historical information based on the assumptions used as at June 30, 2003.2 The results of the Crown Section and its subsidiary ERPM are
accounted for using the equity method.3 Our 20% interest in the Porgera Joint Venture was only acquired with effect
from October 14, 2003. 30




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Ore Reserves: Imperial At June 30, 2004Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTons
    
    Grade
    
    Content
    
    Tons
    
    Grade
    
    Content(mill)
    
    (oz/ton)
    
    (000 ozs)
    
    (mill)
    
    (oz/ton)
    
    (000 ozs)South African OperationsBlyvoor SectionUnderground
    
    
    13.56
    
    
    
    0.23
    
    
    
    3,081
    
    
    
    3.78
    
    
    
    0.20
    
    
    
    743Surface
    
    
    29.37
    
    
    
    0.02
    
    
    
    505
    
    
    
    
    
    
    
    
    
    
    
    Total Blyvoor Section
    
    
    42.93
    
    
    
    0.08
    
    
    
    3,586
    
    
    
    3.78
    
    
    
    0.20
    
    
    
    743Buffels SectionUnderground
    
    
    0.06
    
    
    
    0.20
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Buffels Section
    
    
    0.06
    
    
    
    0.20
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Harties SectionUnderground
    
    
    15.35
    
    
    
    0.22
    
    
    
    3,346
    
    
    
    8.58
    
    
    
    0.20
    
    
    
    1,689Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Harties Section
    
    
    15.35
    
    
    
    0.22
    
    
    
    3,346
    
    
    
    8.58
    
    
    
    0.20
    
    
    
    1,689Papua New Guinea OperationsPorgera SectionUnderground
    
    
    0.20
    
    
    
    0.24
    
    
    
    48
    
    
    
    0.54
    
    
    
    0.26
    
    
    
    139Open pit
    
    
    6.98
    
    
    
    0.11
    
    
    
    738
    
    
    
    1.72
    
    
    
    0.09
    
    
    
    153Surface
    
    
    4.93
    
    
    
    0.07
    
    
    
    359
    
    
    
    
    
    
    
    
    
    
    
    Total Porgera Section1
    
    
    12.11
    
    
    
    0.09
    
    
    
    1,145
    
    
    
    2.25
    
    
    
    0.13
    
    
    
    292Tolukuma SectionUnderground
    
    
    0.27
    
    
    
    0.57
    
    
    
    153
    
    
    
    0.09
    
    
    
    0.43
    
    
    
    38Open pit
    
    
    0.01
    
    
    
    0.50
    
    
    
    6
    
    
    
    0.01
    
    
    
    0.44
    
    
    
    6Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Tolukuma Section
    
    
    0.28
    
    
    
    0.57
    
    
    
    159
    
    
    
    0.10
    
    
    
    0.43
    
    
    
    44TotalUnderground
    
    
    29.44
    
    
    
    0.23
    
    
    
    6,640
    
    
    
    12.99
    
    
    
    0.20
    
    
    
    2,609Open pit
    
    
    6.99
    
    
    
    0.11
    
    
    
    744
    
    
    
    1.73
    
    
    
    0.09
    
    
    
    159Surface
    
    
    34.3
    
    
    
    0.03
    
    
    
    864
    
    
    
    0
    
    
    
    0.00
    
    
    
    0Total2
    
    
    70.73
    
    
    
    0.12
    
    
    
    8,248
    
    
    
    14.72
    
    
    
    0.19
    
    
    
    2,768
   [Continued from above table, first column(s) repeated] At June 30, 2003Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTons
    
    Grade
    
    Content
    
    Tons
    
    Grade
    
    Content(mill)
    
    (oz/ton)
    
    (000 ozs.)
    
    (mill)
    
    (oz/ton)
    
    (000 ozs)South African OperationsBlyvoor SectionUnderground
    
    
    17.191
    
    
    
    0.22
    
    
    
    3,848
    
    
    
    6.964
    
    
    
    0.20
    
    
    
    1,368Surface
    
    
    31.607
    
    
    
    0.02
    
    
    
    564
    
    
    
    
    
    
    
    
    
    
    
    Total Blyvoor Section
    
    
    48.798
    
    
    
    0.09
    
    
    
    4,412
    
    
    
    6.964
    
    
    
    0.20
    
    
    
    1,368Buffels SectionUnderground
    
    
    1.617
    
    
    
    0.22
    
    
    
    351
    
    
    
    3.968
    
    
    
    0.21
    
    
    
    818Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.634
    
    
    
    0.03
    
    
    
    256Total Buffels Section
    
    
    1.617
    
    
    
    0.22
    
    
    
    351
    
    
    
    13.602
    
    
    
    0.08
    
    
    
    1,074Harties SectionUnderground
    
    
    23.788
    
    
    
    0.20
    
    
    
    4,714
    
    
    
    12.492
    
    
    
    0.19
    
    
    
    2,323Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.025
    
    
    
    0.02
    
    
    
    21Total Harties Section
    
    
    23.788
    
    
    
    0.20
    
    
    
    4,714
    
    
    
    13.517
    
    
    
    0.17
    
    
    
    2,344Papua New Guinea OperationsPorgera SectionUnderground
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Open pit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Porgera Section1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tolukuma SectionUnderground
    
    
    0.196
    
    
    
    0.47
    
    
    
    92
    
    
    
    0.141
    
    
    
    0.35
    
    
    
    50Open pit
    
    
    0.001
    
    
    
    0.62
    
    
    
    1
    
    
    
    0.003
    
    
    
    0.84
    
    
    
    2Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Tolukuma Section
    
    
    0.197
    
    
    
    0.47
    
    
    
    93
    
    
    
    0.144
    
    
    
    0.36
    
    
    
    52TotalUnderground
    
    
    42.792
    
    
    
    0.21
    
    
    
    9,005
    
    
    
    23.565
    
    
    
    0.19
    
    
    
    4,559Open pit
    
    
    0.001
    
    
    
    1.00
    
    
    
    1
    
    
    
    0.003
    
    
    
    0.67
    
    
    
    2Surface
    
    
    31.607
    
    
    
    0.02
    
    
    
    564
    
    
    
    10.659
    
    
    
    0.03
    
    
    
    277Total2
    
    
    74.4
    
    
    
    0.13
    
    
    
    9,570
    
    
    
    34.227
    
    
    
    0.14
    
    
    
    4,838
   1 Total Proven and Probable Ore Reserves for 2004 reflects our attributable 20%
interest in the Porgera Joint Venture. This is based on the information
disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera Joint
Venture) in its Annual Report for the fiscal year ended December 31, 2003, as
filed with the SEC on Form 40-F on March 5, 2004.2 The Ore Reserves listed in the above table are estimates of what can be
legally and economically recovered from operations and, as stated, are
estimates of mill delivered tons. 31




---



##### Table of Contents



Ore Reserves: Metric At June 30, 2004Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTonnes
    
    Grade
    
    Content
    
    Tonnes
    
    Grade
    
    Content(mill)
    
    (g/tonne)
    
    (tonnes)
    
    (mill)
    
    (g/tonne)
    
    (tonnes)South African OperationsBlyvoor SectionUnderground
    
    
    12.301
    
    
    
    7.79
    
    
    
    95.823
    
    
    
    3.432
    
    
    
    6.73
    
    
    
    23.110Surface
    
    
    26.645
    
    
    
    0.59
    
    
    
    15.721
    
    
    
    
    
    
    
    
    
    
    
    Total Blyvoor Section
    
    
    38.946
    
    
    
    2.86
    
    
    
    111.544
    
    
    
    3.432
    
    
    
    6.73
    
    
    
    23.110Buffels SectionUnderground
    
    
    0.057
    
    
    
    6.82
    
    
    
    0.389
    
    
    
    
    
    
    
    
    
    
    
    Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Buffels Section
    
    
    0.057
    
    
    
    6.82
    
    
    
    0.389
    
    
    
    
    
    
    
    
    
    
    
    Harties SectionUnderground
    
    
    13.922
    
    
    
    7.47
    
    
    
    104.059
    
    
    
    7.784
    
    
    
    6.75
    
    
    
    52.548Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Harties Section
    
    
    13.922
    
    
    
    7.47
    
    
    
    104.059
    
    
    
    7.784
    
    
    
    6.75
    
    
    
    52.548Papua New Guinea OperationsPorgera SectionUnderground
    
    
    0.180
    
    
    
    8.33
    
    
    
    1.497
    
    
    
    0.489
    
    
    
    8.83
    
    
    
    4.314Open pit
    
    
    6.330
    
    
    
    3.63
    
    
    
    22.960
    
    
    
    1.556
    
    
    
    3.06
    
    
    
    4.768Surface
    
    
    4.472
    
    
    
    2.50
    
    
    
    11.172
    
    
    
    
    
    
    
    
    
    
    
    Total Porgera Section1
    
    
    10.982
    
    
    
    3.24
    
    
    
    35.629
    
    
    
    2.045
    
    
    
    4.44
    
    
    
    9.082Tolukuma SectionUnderground
    
    
    0.244
    
    
    
    19.49
    
    
    
    4.760
    
    
    
    0.081
    
    
    
    14.73
    
    
    
    1.193Open pit
    
    
    0.012
    
    
    
    16.98
    
    
    
    0.196
    
    
    
    0.012
    
    
    
    15.20
    
    
    
    0.189Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Tolukuma Section
    
    
    0.256
    
    
    
    19.37
    
    
    
    4.956
    
    
    
    0.093
    
    
    
    14.79
    
    
    
    1.382
   [Continued from above table, first column(s) repeated] At June 30, 2003Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTonnes
    
    Grade
    
    Content
    
    Tonnes
    
    Grade
    
    Content(mill)
    
    (g/tonne)
    
    (tonnes)
    
    (mill)
    
    (g/tonne)
    
    (tonnes)South African OperationsBlyvoor SectionUnderground
    
    
    15.596
    
    
    
    7.67
    
    
    
    119.624
    
    
    
    6.318
    
    
    
    6.73
    
    
    
    42.551Surface
    
    
    28.674
    
    
    
    0.61
    
    
    
    17.556
    
    
    
    
    
    
    
    
    
    
    
    Total Blyvoor Section
    
    
    44.270
    
    
    
    3.10
    
    
    
    137.250
    
    
    
    6.318
    
    
    
    6.73
    
    
    
    42.551Buffels SectionUnderground
    
    
    1.467
    
    
    
    7.45
    
    
    
    10.930
    
    
    
    3.599
    
    
    
    7.06
    
    
    
    25.439Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.740
    
    
    
    0.91
    
    
    
    7.981Total Buffels Section
    
    
    1.467
    
    
    
    7.45
    
    
    
    10.930
    
    
    
    12.339
    
    
    
    2.71
    
    
    
    33.420Harties SectionUnderground
    
    
    21.581
    
    
    
    6.79
    
    
    
    146.620
    
    
    
    11.333
    
    
    
    6.37
    
    
    
    72.255Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.930
    
    
    
    0.70
    
    
    
    0.651Total Harties Section
    
    
    21.581
    
    
    
    6.79
    
    
    
    146.620
    
    
    
    12.263
    
    
    
    5.95
    
    
    
    72.906Papua New Guinea OperationsPorgera SectionUnderground
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Open pit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Porgera Section1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tolukuma SectionUnderground
    
    
    0.178
    
    
    
    15.99
    
    
    
    2.850
    
    
    
    0.128
    
    
    
    12.02
    
    
    
    1.541Open pit
    
    
    0.001
    
    
    
    21.21
    
    
    
    0.018
    
    
    
    0.003
    
    
    
    28.72
    
    
    
    0.077Surface
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Tolukuma Section
    
    
    0.179
    
    
    
    16.02
    
    
    
    2.868
    
    
    
    0.131
    
    
    
    12.36
    
    
    
    1.618
   1 Total Proven and Probable Ore Reserves for 2004 reflects our attributable 20% interest in the Porgera Joint
Venture. This is based on the information disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera
Joint Venture) in its Annual Report for the fiscal year ended December 31, 2003, as filed with the SEC on Form
40-F on March 5, 2004.2 The Ore Reserves listed in the above table are estimates of what can be legally and economically recovered from
operations and, as stated, are estimates of mill delivered tons. 32




---



##### Table of Contents



At June 30, 2004Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTonnes
    
    Grade
    
    Content
    
    Tonnes
    
    Grade
    
    Content(mill)
    
    (g/tonne)
    
    (tonnes)
    
    (mill)
    
    (g/tonne)
    
    (tonnes)Underground
    
    
    26.704
    
    
    
    7.73
    
    
    
    207
    
    
    
    11.786
    
    
    
    6.89
    
    
    
    81Open pit
    
    
    6.342
    
    
    
    3.65
    
    
    
    23.156
    
    
    
    1.568
    
    
    
    3.16
    
    
    
    5Surface
    
    
    31.117
    
    
    
    0.86
    
    
    
    26.893
    
    
    
    0
    
    
    
    0.00
    
    
    
    0Total
    
    
    64.163
    
    
    
    4.00
    
    
    
    256.577
    
    
    
    13.354
    
    
    
    6.45
    
    
    
    86
   [Continued from above table, first column(s) repeated] At June 30, 2003Proven Ore Reserves
    
    Probable Ore ReservesGold
    
    
    
    
    
    
    
    
    
    GoldTonnes
    
    Grade
    
    Content
    
    Tonnes
    
    Grade
    
    Content(mill)
    
    (g/tonne)
    
    (tonnes)
    
    (mill)
    
    (g/tonne)
    
    (tonnes)Underground
    
    
    38.822
    
    
    
    7.21
    
    
    
    280
    
    
    
    21.378
    
    
    
    6.63
    
    
    
    141.786Open pit
    
    
    0.001
    
    
    
    18.00
    
    
    
    0
    
    
    
    0.003
    
    
    
    25.67
    
    
    
    0.077Surface
    
    
    28.674
    
    
    
    0.61
    
    
    
    18
    
    
    
    9.67
    
    
    
    0.89
    
    
    
    8.632Total
    
    
    67.497
    
    
    
    4.41
    
    
    
    298
    
    
    
    31.051
    
    
    
    4.85
    
    
    
    150.495
 33




---



##### Table of Contents



The approximate mining recovery factors for the 2004 Ore Reserves shown in
the above table are as follows: Underground
    
    SurfaceDilution (Sundries,Shortfall and
    
    
    
    
    
    Metallurgical and
    
    
    
    
    
    Metallurgical andDevelopment)
    
    Mine Call Factor
    
    recovery factor
    
    Mine Call Factor
    
    recovery factorMine
    
    (%)
    
    (%)
    
    (%)
    
    (%)
    
    (%)Harties Section
    
    
    23.1
    
    
    
    81.5
    
    
    
    95.0
    
    
    Not applicable
    
    Not applicableBuffels Section1
    
    
    28.7
    
    
    
    81.3
    
    
    
    95.0
    
    
    Not applicable
    
    Not applicableBlyvoor Section
    
    
    29.8
    
    
    
    83.5
    
    
    
    94.5
    
    
    
    100.0
    
    
    
    55.0Tolukuma
    
    
    19.3
    
    
    
    87.0
    
    
    
    91.0
    
    
    
    95.0
    
    
    
    91.0Porgera2
    
    Not available
    
    
    100.0
    
    
    
    86.7
    
    
    
    100.0
    
    
    
    84.0Crown Section3
    
    Not applicable
    
    Not applicable
    
    Not applicable
    
    
    100.0
    
    
    
    66.2ERPM Section3
    
    
    19.9
    
    
    
    85.0
    
    
    
    94.0
    
    
    
    100.0
    
    
    
    64.0
 The approximate mining recovery factors for the 2003 Ore Reserves shown in
the above table are as follows: Underground
    
    SurfaceDilution (Sundries,
    
    
    
    
    
    Metallurgical and
    
    
    
    
    
    Metallurgical andShortfall and
    
    Mine Call Factor
    
    recovery factor
    
    Mine Call Factor
    
    recovery factorMine
    
    Development) (%)
    
    (%)
    
    (%)
    
    (%)
    
    (%)Harties Section
    
    
    32.6
    
    
    
    85.0
    
    
    
    96.0
    
    
    
    100.0
    
    
    
    80.0Buffels Section
    
    
    26.6
    
    
    
    80.0
    
    
    
    96.0
    
    
    
    100.0
    
    
    
    75.0Blyvoor Section
    
    
    20.0
    
    
    
    82.0
    
    
    
    95.0
    
    
    
    100.0
    
    
    
    60.0Tolukuma
    
    
    15.0
    
    
    
    85.0
    
    
    
    90.0
    
    
    
    95.0
    
    
    
    90.0Crown Section3
    
    Not applicable
    
    Not applicable
    
    Not applicable
    
    
    100.0
    
    
    
    61.2ERPM Section3
    
    
    19.9
    
    
    
    85.0
    
    
    
    96.0
    
    
    
    100.0
    
    
    
    62.0
 The following table shows the average drill/sample spacing (rounded to the
nearest foot), as at June 30, 2004, for each category of Ore Reserves at our
mines: Proven
    
    ProbableMine
    
    Reserves
    
    ReservesSouth AfricaHarties Section
    
    20 ft. by 27 ft.
    
    246 ft. by 787 ft.Buffels Section
    
    20 ft. by 39 ft.
    
    nilBlyvoor Section
    
    16 ft. by 24 ft.
    
    98 ft. by 492 ft.Crown Section3
    
    328 ft. by 328 ft.
    
    328 ft. by 328 ft.ERPM Section3
    
    15 ft. by 17 ft.
    
    nilAustralasiaTolukuma Section
    
    3 ft. by 39 ft.
    
    39 ft. by 98 ft.Porgera2
    
    49 ft. by 49 ft.
    
    98 ft. by 98 ft.
 In fiscal 2004, the pay-limit approach was applied to the mineralized
material database of our various shafts or business units in order to determine
the tonnage and grade available for mining. In fiscal 2003, we also used the
pay-limit approach to select ore for mining.   1 The life of mine at the Buffels Section ends in August 2004, and the Ore
Reserves are nil. Mining of redundant reserves and blocks originally bypassed
may continue for a limited period thereafter.2 This is based on the information disclosed by Placer Dome Inc. (which has a
75% interest in the Porgera Joint Venture) in its Annual Report for the fiscal
year ended December 31, 2003, as filed with the SEC on Form 40-F on March 5,
2004.3 The results of the Crown Section and its subsidiary ERPM are
accounted for using the equity method. 34




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##### Table of Contents



The underground reserves quoted as of June 30, 2004, are sensitive to
operating costs and gold price assumptions as
shown in the table below. These sensitivities are presented to give an
indication of changes in reserves relative to the gold price assumptions used.
All sensitivities have been calculated at an exchange rate of R7.00 = $1.00 for
the South African operations and K3.22 = $1.00 for Papua New Guinea operations.
No sensitivities are presented for Porgera as our disclosures are based on the
publicly available information as at December 31, 2003, which did not include
these sensitivities. At different gold prices, alternative mining strategies
may be pursued to optimally exploit the orebody. Due to the re-processing
nature of our surface operations, those reserves are not sensitive to the price
of gold and are included in our reserve statement provided that the gold price
per ounce exceeds the per ounce cost of processing the materials. Sensitivities,
conducted using the $400 per ounce average gold price in
local currencies, where applicable, indicate that there is material difference
to the Ore Reserves as stated below. 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
pay limit grade associated with the change in scale of operations. The
inclusion of large tonnages of surface material will also influence the Ore
Reserve sensitivity. 35




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##### Table of Contents



$320/oz
    
    $360/oz
    
    $400/ozOperation
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    GoldMt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    TonnesBuffels Section1Proven
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Probable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Harties SectionProven
    
    
    9.6
    
    
    
    8.5
    
    
    
    2,604.6
    
    
    
    81.011
    
    
    
    13.0
    
    
    
    8.2
    
    
    
    3,420.7
    
    
    
    106.395
    
    
    
    14.0
    
    
    
    7.5
    
    
    
    3,357.2
    
    
    
    104.421Probable
    
    
    3.9
    
    
    
    7.7
    
    
    
    953.7
    
    
    
    29.665
    
    
    
    5.0
    
    
    
    7.0
    
    
    
    1,115.6
    
    
    
    34.700
    
    
    
    7.8
    
    
    
    6.8
    
    
    
    1689.2
    
    
    
    52.539Total
    
    
    13.5
    
    
    
    8.2
    
    
    
    3,558.3
    
    
    
    110.675
    
    
    
    18.0
    
    
    
    7.8
    
    
    
    4,536.3
    
    
    
    141.095
    
    
    
    21.8
    
    
    
    7.2
    
    
    
    5,046.4
    
    
    
    156.960Blyvoor SectionProven
    
    
    33.6
    
    
    
    2.4
    
    
    
    2,591.3
    
    
    
    80.599
    
    
    
    36.2
    
    
    
    2.7
    
    
    
    3,122.0
    
    
    
    97.106
    
    
    
    38.9
    
    
    
    2.9
    
    
    
    3,581.1
    
    
    
    111.385Probable
    
    
    2.1
    
    
    
    7.5
    
    
    
    504.9
    
    
    
    15.704
    
    
    
    3.0
    
    
    
    7.0
    
    
    
    675.4
    
    
    
    21.007
    
    
    
    3.4
    
    
    
    6.7
    
    
    
    742.6
    
    
    
    23.098Total
    
    
    35.7
    
    
    
    2.7
    
    
    
    3,096.2
    
    
    
    96.303
    
    
    
    39.2
    
    
    
    3.0
    
    
    
    3,797.4
    
    
    
    118.113
    
    
    
    42.3
    
    
    
    3.2
    
    
    
    4,323.7
    
    
    
    134.483Proven
    
    
    43.2
    
    
    
    3.7
    
    
    
    5,195.90
    
    
    
    161.61
    
    
    
    49.2
    
    
    
    4.1
    
    
    
    6,542.70
    
    
    
    203.501
    
    
    
    52.9
    
    
    
    4.1
    
    
    
    6,938.30
    
    
    
    215.806Probable
    
    
    6
    
    
    
    7.6
    
    
    
    1,458.60
    
    
    
    45.369
    
    
    
    8
    
    
    
    7.0
    
    
    
    1,791.00
    
    
    
    55.707
    
    
    
    11.2
    
    
    
    6.8
    
    
    
    2,431.80
    
    
    
    75.637Total
    
    
    49.2
    
    
    
    4.2
    
    
    
    6,654.50
    
    
    
    206.979
    
    
    
    57.2
    
    
    
    4.5
    
    
    
    8,333.70
    
    
    
    259.208
    
    
    
    64.1
    
    
    
    4.5
    
    
    
    9,370.10
    
    
    
    291.443
 [Continued from above table, first column(s) repeated]
 $440/oz
    
    $480/ozOperation
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    GoldMt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    TonnesBuffels Section1Proven
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Probable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Harties SectionProven
    
    
    18.9
    
    
    
    7.2
    
    
    
    4,381.5
    
    
    
    136.281
    
    
    
    20.6
    
    
    
    7.1
    
    
    
    4,723.2
    
    
    
    146.909Probable
    
    
    8.1
    
    
    
    6.2
    
    
    
    1,602.4
    
    
    
    49.840
    
    
    
    10.7
    
    
    
    5.4
    
    

    
    1,869.1
    
    
    
    58.136Total
    
    
    27.0
    
    
    
    6.9
    
    
    
    5,983.9
    
    
    
    186.121
    
    
    
    31.3
    
    
    
    6.5
    
    
    
    6,592.3
    
    
    
    205.045Blyvoor SectionProven
    
    
    40.6
    
    
    
    2.9
    
    
    
    3,827.2
    
    
    
    119.041
    
    
    
    42.6
    
    
    
    3.0
    
    
    
    4,077.7
    
    
    
    126.832Probable
    
    
    3.9
    
    
    
    6.4
    
    
    
    814.3
    
    
    
    25.328
    
    
    
    6.1
    
    
    
    5.8
    
    
    
    1,136.6
    
    
    
    35.352Total
    
    
    44.5
    
    
    
    3.2
    
    
    
    4,641.5
    
    
    
    144.369
    
    
    
    48.7
    
    
    
    3.3
    
    
    
    5,214.3
    
    
    
    162.184Proven
    
    
    59.5
    
    
    
    4.3
    
    
    
    8,208.70
    
    
    
    255.322
    
    
    
    63.2
    
    
    
    4.3
    
    
    
    8,800.90
    
    
    
    273.741Probable
    
    
    12
    
    
    
    6.3
    
    
    
    2,416.70
    
    
    
    75.168
    
    
    
    16.8
    
    
    
    5.6
    
    
    
    3,005.70
    
    
    
    93.488Total
    
    
    71.5
    
    
    
    4.6
    
    
    
    10,625.4
    
    
    
    330.49
    
    
    
    80
    
    
    
    4.6
    
    
    
    11,806.6
    
    
    
    367.229
 $320/oz
    
    $360/oz
    
    $400/ozOperation
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    GoldMt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    TonnesTolukuma SectionProven
    
    
    0.2
    
    
    
    19.9
    
    
    
    158.9
    
    
    
    4.943
    
    
    
    0.3
    
    
    
    19.5
    
    
    
    158.6
    
    
    
    4.933
    
    
    
    0.3
    
    
    
    19.4
    
    
    
    159.3
    
    
    
    4.956Probable
    
    
    0.1
    
    
    
    15.4
    
    
    
    43.4
    
    
    
    1.351
    
    
    
    0.1
    
    
    
    15.1
    
    
    
    43.9
    
    
    
    1.367
    
    
    
    0.1
    
    
    
    14.8
    
    
    
    44.5
    
    
    
    1.383Total
    
    
    0.3
    
    
    
    18.7
    
    
    
    202.3
    
    
    
    6.294
    
    
    
    0.4
    
    
    
    18.4
    
    
    
    202.5
    
    
    
    6.300
    
    
    
    0.4
    
    
    
    18.1
    
    
    
    203.8
    
    
    
    6.339
 [Continued from above table, first column(s) repeated]
 $440/oz
    
    $480/ozOperation
    
    Tonnes
    
    Grade
    
    Gold
    
    Gold
    
    Tonnes
    
    Grade
    
    Gold
    
    GoldMt
    
    g/t
    
    000 ozs
    
    Tonnes
    
    Mt
    
    g/t
    
    000 ozs
    
    TonnesTolukuma SectionProven
    
    
    0.3
    
    
    
    18.9
    
    
    
    161.3
    
    
    
    5.016
    
    
    
    0.3
    
    
    
    18.6
    
    
    
    161.9
    
    
    
    5.035Probable
    
    
    0.1
    
    
    
    13.4
    
    
    
    47.6
    
    
    
    1.481
    
    
    
    0.1
    
    
    
    12.7
    
    
    
    48.7
    
    
    
    1.514Total
    
    
    0.4
    
    
    
    17.3
    
    
    
    208.9
    
    
    
    6.497
    
    
    
    0.4
    
    
    
    16.8
    
    
    
    210.6
    
    
    
    6.549
   1 The life of mine at the Buffels Section ends in August 2004, and the Ore
Reserves are nil. Mining of redundant reserves and blocks originally bypassed
may continue for a limited period. 36




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##### Table of Contents



Governmental regulations and its effect on our business South Africa Common Law Mineral Rights and Statutory Mining Rights Prior to the introduction of the MPRD Act in 2002, private ownership in
mineral rights and statutory mining rights in South Africa could be acquired
through the common law or by statute. Under the old regime, the term freehold
title refers to a right of ownership of land and the surface thereof and the
term mining title refers to a right of ownership of the minerals below the
surface or the right to mine such minerals. With effect from May 1, 2004, all
minerals have been placed under the custodianship of the South African
government under the provisions of the MPRD Act, and old order proprietary
rights, need to be converted to new order rights of use within certain
prescribed periods, as dealt with more fully below. Old Order Rights - Mining Authorizations Because mining authorizations issued under the previous regime remain
valid, they are dealt with briefly. No person or mining entity may prospect or
mine for minerals without being granted a prospecting or mining authorization.
Prior to granting a prospecting or mining authorization, two requirements had
to be fulfilled. First, the mining entity must either be the registered holder
of the mineral rights or have obtained the written consent of the registered
holder of the mineral rights to mine the minerals concerned for its own
account. Second, the Department of Minerals and Energy, or the DME, must be
satisfied with the scale, manner and duration of the intended prospecting or
mining operations and must approve an Environmental Management Program, or EMP.
A prospecting permit was issued for a limited period but could be renewed on
application. A mining license was generally issued until such time that the
minerals could no longer be mined in an economically viable manner. The rights
enjoyed under these authorities will endure until they are converted within the
period of time prescribed in the MPRD Act. Thereafter, such rights will lapse. Conversion of Rights under the Mineral and Petroleum Resources Development Act,
2002 Existing common law prospecting, mining and mineral rights, or old order
rights, need 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 MPRD Act. In respect of used mineral rights, the DME is obliged to convert the
rights if the applicant complies with certain statutory criteria. These include
the submission of a mining plan, demonstrable technical and financial
capability to give effect to the plan, provision for environmental management
and rehabilitation, and compliance with certain black empowerment and
social-economic guidelines. These applications need to be submitted within five
years after the enactment of the MPRD Act on May 1, 2004. Similar procedures
apply where we hold prospecting rights and a prospecting permit and conduct
prospecting operations. Where we hold unused rights however, the application
for conversion to mining or prospecting rights has to be submitted within one
year. The requirements for unused rights are more stringent than for used
rights, particularly insofar as participation in benefits from historically
disadvantaged groups are concerned. The DME has, in these instances also a
wider discretion to refuse an application for conversion. Under the new MRPD
Act, mining rights are not perpetual, but endure for a maximum of thirty years,
after which they may be renewed for a further thirty years. Prospecting rights
are limited to five years, with one renewal of three years. If any of our applications for conversion are refused, rights for damages,
based on expropriation will vest in the Company. The DME may attach specific
conditions and limitations to the exercise of new order rights. It may, for
example, reduce the area over which the new order right applies, if it is of
the view that the prospecting or mining work programs submitted by an applicant
do not justify the extent of the area covered by the old order right. They may
also be suspended or cancelled by the Minister in the event of a breach or, in
the case of mining rights, of non-optimal mining in accordance with the mining
works program. 37




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##### Table of Contents



The South African government has declared its intention to revisit the
taxation regime of South African gold mining companies. The South African gold
mining industry is taxed under the gold tax formula which recognizes the high
level of capital expenditure required to sustain a mining operation over the life of
mine. This results in an additional tax benefit, not afforded to other
commercial companies. In addition, the South African government has declared
its intention to revisit the taxation regime of South African gold mining
companies. The South African gold mining industry is taxed under the gold
taxation formula which recognizes the high level of capital expenditure
required to sustain a mining operation over the life of mine. This results in
an additional tax benefit not afforded to other commercial companies. In
addition, the South African Government has indicated that it is looking at a
revenue based royalty for mining companies, as outlined in the draft Mineral
and Petroleum Royalty Bill, 2003, or Royalty Bill, which was released in March
2003 for comment. The Royalty Bill proposed a three percent royalty on gross
revenue for gold mining companies. In conjunction with the South African Mining
Development Association we have made submissions to the government outlining
our concerns about a revenue based royalty and recommended a profit based
royalty be introduced instead. In his budget speech in February 2004, the South
African Finance Minister acknowledged that the draft Royalty Bill may need some
refinement, but also stated that governments preference is for a revenue based
royalty, with introduction of the royalty as of 2009. The introduction of the
proposed royalty would have an adverse effect on the profitability of our South
African operations. We are currently evaluating the impact of the proposed
royalty. In order to promote broader based participation in mining revenue, the
MPRD Act provides for a Broad Based Socio-Economic Empowerment Charter, or
Mining Charter, to be developed by the Minister within five years of
commencement of the Act, beginning May 1, 2004. The mining industry has
submitted its proposals on the content of the charter. In its current format
its objectives include:  
    
    Increased direct and indirect ownership of mining entities;
    
    expansion of opportunities for persons disadvantaged by unfair
discrimination under the previous political dispensation;
    
    expansion of the skills base of such persons, the promotion of
employment and advancement of the social and economic welfare of mining
communities; and
    
    promotion of beneficiation. Its sets certain numerical and timeframe goals on equity participation by
historically disadvantaged South Africans of its 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 within ten years from May 1, 2004.
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. Compliance with these
objectives is measured on the weighted average scorecard approach in
accordance with a draft scorecard which was published by the government in
February 2003. We are supportive of addressing the legacies of the past through
developing opportunities in accordance with the objects and parameters of the
MPRD Act. We have demonstrated our commitment through our 40% associate
company, CGR, through which we facilitated the acquisition of 60% of our
interest in CGR by KBH. However, at this point we are unable to set out a
definitive timeline of when we will comply with our objectives before the
expiration of the 10 year time limit as the legislation was only recently
passed. We are also unable to identify any permits, rights or investments which
we may lose as a result of any non-compliance. The provisions of the Mining
Charter apply to each mining company individually. Accordingly, it is not
possible for us to meet our obligations by disposing of our less profitable
operations which would undermine the objectives of the Mining Charter. As
transactions, to comply with the Mining Charter, are to be at fair market
value, we do not anticipate incurring any loss in fulfilling our obligations
provided that we are able to identify suitable partners that are able to obtain
adequate funding. The continued ownership of the mineral rights associated with
the Argonaut Project is dependent on the conversion of the existing prospecting
permit under the new MPRD Act. The application for conversion was submitted on
September 30, 2004, and if granted will be valid for an initial period of two
years. The permit will be extended further subject to the fulfillment of
conditions associated with the initial two year period. 38




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##### Table of Contents



Mine and Safety Regulation The South African Mine Health and Safety Act, 1996 (as amended), or the
Mine Health and Safety Act, came into effect in January 1997. The principal
object of the Mine Health and Safety Act is to improve health and safety at
South African mines and to this end, imposes various duties on us at our mines,
and grants the authorities broad powers to, among other things, close unsafe
mines and order corrective action relating to health and safety matters. In the
event of any future accidents at any of our mines, regulatory authorities could
take steps which could increase our costs or reduce our production capacity. Under the South African Compensation for Occupational Injuries and
Diseases Act, 1993 (as amended), or COID Act, employers are required to
contribute to a fund specifically created for the purpose of compensating
employees or their dependants for disability or death arising in the course of
their work. Employees who are incapacitated in the course of their work have no
claim for compensation directly from the employer and must claim compensation
from the COID Act fund. Employees are entitled to compensation without having
to prove that the injury or disease was caused by negligence on the part of the
employer, although if negligence is involved, increased compensation may be
payable by this fund. The COID Act relieves employers from the prospect of
costly damages, but does not relieve employers from liability for negligent
acts caused to third parties outside the scope of employment. We have
contributed approximately $2.6 million over the past three fiscal years under
the COID Act, to a multi-employer industry fund administered by Rand Mutual
Assurance Limited. Under the Occupational Diseases in Mines and Works Act, 1973 (as amended),
or the Occupational Diseases Act, the multi-employer fund created pays
compensation to employees of mines performing risk work, which is work
declared to be risk work by the Minister for Health, usually in circumstances
where the employee is exposed to dust, gases, vapors, chemical substances or
other working conditions which are potentially harmful, if the employee
contracts a compensatable disease, which includes pneumoconiosis,
tuberculosis, a permanent obstruction of the airways, and any other disease
declared to be so by the Minister for Health. No employee is entitled to
benefits under the Occupational Diseases Act for any disease for which
compensation has been received or is still to be received under the COID Act. In the future, compliance with the Mine Health and Safety Act and the COID
Act may require significant expenditures which could increase our costs or
reduce the profitability of our South African operations. Currently the Group
is compliant with these payment requirements, which are based on a combination
of the employee costs and claims made during the year. Uranium and radon are often encountered during the ordinary course of gold
mining operations in South Africa, and present potential risks for exposure of
workers at those operations and the public to radiation in the nearby vicinity.
We monitor our uranium and radon emissions, and believe that we are currently
in compliance with all local laws and regulations pertaining to uranium and
radon management and that we are within the current legislative exposure limits
prescribed for workers and the public, under the Nuclear Energy Act, 1999 (as
amended) and Regulations from the National Nuclear Regulator. Environmental Regulation in South Africa Managing the impact of mining on the environment is extensively regulated
by statute in South Africa. Recent statutory enactments set compliance
standards both generally, in the case of the National Environmental Management
Act, and in respect of specific areas of environment impact, as in the case of
the Atmospheric Pollution Act (dust pollution), the National Water Act
(managing effluent), the Environmental Conservation Act (waste disposal) and
the Nuclear Energy Act (latent radon contamination). Liability for
environmental damage is also extended beyond the corporate veil to impose
personal liability on managers, and directors of mining corporations that are
found to have violated applicable laws. Managing the impact on the environment by mining operations is extensively
provided for in the MRPD Act. The MRPD Act has onerous provisions for personal
liability of directors of companies whose mining operations have an
unacceptable impact on the environment. 39




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##### Table of Contents



Under the MPRD Act, new order mining licenses are not issued unless a
complete environmental impact assessment is conducted and all potentially
affected parties have been given an opportunity to comment on the proposed
mining. Mining companies are also required to demonstrate both the technical
and financial ability to sustain an ongoing environmental
management program, and achieve ultimate rehabilitation, the particulars
of which are to be incorporated in an environmental management program, or EMP.
This program is required to be submitted and approved by the Department of
Minerals and Energy, or DME, as a prerequisite for the issue of a new order
mining license. Financial provision is made by depositing funds into a
rehabilitation trust fund. We have a registered fund for each of North West
Operations, Blyvoor Section, Durban Deep Section and the West Wits Section and
our associate, CGR, has registered funds for the Crown and ERPM Sections. These
funds are discussed below. The MPRD Act imposes specific, ongoing environmental monitoring and
financial reporting obligations on the holders of mining licenses. Because of the diverse nature of our operations, ranging from underground
mining to surface reclamation activities, environmental risks vary from site to
site. These risks have been addressed in EMPs which have been submitted to the
Department of Water Affairs, or DWAF, and are reviewed and updated on an annual
basis. As of June 30, 2004, EMPs have been submitted for all operations in
South Africa and all have been approved by the DWAF. Additionally, the key
environmental issues have been prioritized and are being addressed through
active management input and support and progress measured in terms of activity
schedules and timescales determined for each activity. Two environmental
compliance assessments have been conducted at the Blyvoor Section and the Crown
Section, which both show that these mines are in substantial compliance with
the conditions of their EMPs. The environmental compliance assessments for ERPM
and the North West Operations are due in February 2005 and June 2005
respectively. Our existing reporting and controls framework is consistent with the
additional reporting and assessment requirements of the MPRD Act. Papua New Guinea Mineral exploration and mining operations in Papua New Guinea are
principally regulated by the following legislation:  
    
    Papua New Guinea Mining Act 1992 and Mining Regulations 1992, or the Mining Act and Regulations;
    
    Mining Safety Act and Regulations; and
    
    Papua New Guinea Environmental Act 2000 and Regulations 2000, or the Environmental Act and Regulations. Current mining activities at the Tolukuma Section are covered by a mining
lease (ML 104), granted under the Mining Act. The initial term of this lease
was for a period of 8 years, which was renewed for a further 10 years, expiring
2012. The mining lease may be renewed for further periods not exceeding 10
years in accordance with applicable laws. Current exploration activities are
covered by a number of exploration licenses. These licenses have been granted
for a term not to exceed two years but can be renewed for further two year
periods. In total, there are 11 exploration licenses or applications covering
the Tolukuma Section. The Porgera Joint Venture has approval to work the Porgera deposit within
the agreed development plan under the terms of the Porgera Mining Development
Contract, or the Porgera Contract, between the Government of Papua New Guinea
and the members of the Porgera Joint Venture. The Porgera Contract specifies,
among other matters, the annual rents that must be paid for the Special Mining
Lease and the various classes of compensation that are payable to the
landowners for the various land uses. The Special Mining Lease, which expires
in 2019, encompasses approximately 5,535 acres (2,240 hectares) including the
mine area and the areas in which the project infrastructure is located. There
is no expiration date for the Porgera Contract, but it is tied to the
continuation of the Special Mining Lease. Leases for mining purposes have also
been awarded by the Government of Papua New Guinea for land use associated with
the mining operation such as waste dumps, campsite, and an airstrip. Permits
are held for water use, including run-off from unconsolidated surfaces, such as
the open pit, the underground mine and the waste dumps. These permits are
renewable on a regular basis and are subject to public hearing before approval. 40




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The Tolukuma and Porgera Sections are operated subject to the requirements
of the Mining Act and Regulations and the Mining Safety Act and Regulations as
applied by the Papua New Guinea Government. We believe all requisite licenses
and permits are in good standing. The Mining Safety Act and Regulations The Mining Safety Act and Regulations sets out in detail the standards
pertaining to safe and responsible mining. It lays down the conditions a mining
operation has to comply with to ensure that the health and safety of all
workers is protected. It includes requirements pertaining to worker training,
risk assessment and safe working procedures with regard to all activities
associated with mining. Environmental Regulations in Papua New Guinea The Tolukuma and Porgera Sections are subject to the Environmental Act and
Regulations which came into effect on January 1, 2004. The Environmental Act
and Regulations provide for objective criteria for regulating the impact of
activities on the environment, as well as the regulation of air and water
pollution. Both the Tolukuma and Porgera Sections have a number of licenses and
permits with which those respective operations are required to comply. The activities at the Tolukuma and Porgera Sections are categorized under
the Environmental Act and Regulations as Level 3 activities because of the size
and complexity of their processes. Level 3 activities are subject to more
rigorous regulation as they are regarded as being more likely to create an
adverse impact on the environment. Under the grandfathering provisions under
the Environmental Act and Regulations, both the Tolukuma and Porgera Sections
are able to continue to operate under each of their existing environmental
plans and permits. An environmental plan for the mining related activity at the Tolukuma
Section, was submitted to the Directorate Environment and Conservation, or DEC,
in Papua New Guinea, in November 1993 and was approved, subject to certain
conditions, on May 24, 1994. The three principal conditions were:  
    
    submission of an environmental management and monitoring program;
    
    rehabilitation on a progressive basis throughout the life of mine and progress reports every six months; and
    
    develop a final site rehabilitation plan and submit the plan four
years from the date of final plant commissioning. Tolukuma submitted their environmental management and monitoring program
in July 1994 and have adhered to its requirements. Similarly an environmental plan for mining related activity at Porgera, was
submitted and was approved by the DEC. A detailed review of the environmental issues and concerns for the
Tolukuma and Porgera Sections are provided under Item 4D.: Property, plants
and equipment  Description of Significant Subsidiaries, Properties and Mining
Operations under Environmental and Closure Aspects. 41




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Environmental Regulation in Fiji Managing the impact of mining on the environment is regulated by various
statutes in Fiji, dealing with various mining and mining-related activities and
the effect that they may have upon the environment. The Fijian Mining Act regulates mining activities generally within Fiji.
In particular:  
    
    the Director of Mines grants mining permits and leases under the
Fijian Mining Act and has the power to attach conditions to those
permits or leases. Under certain provisions of the Fijian Mining Act,
the Director of Mines has power to cancel a lease or permit where the
holder of that lease or permit has failed to comply with certain
requirements of the Mining Act;  
    
    the Fijian Mining Act places an obligation on the owners of mining
leases in Fiji to take all necessary actions to restore land once
mining operations cease. There is also a requirement under the Act to
pay compensation to land owners for any damage to the surface of land
caused by the mining operations; and  
    
    pollution of a watercourse is an offence under the Fijian Mining Act,
although permits can be obtained to authorize the deposit of sludge
and tailings. The Mining Act requires all areas of subsidence to be
clearly marked and fenced off with warning signs posted. Failure to
comply with these provision is again an offence. The Fijian Mining Act
also contains provisions regulating the storage and protection of
chemicals and poisons and accompanying washes and antidotes, dust
abatement requirements and the construction of dams. The general penalty under the Fijian Mining Act, where the section does
not impose a specific penalty, is a fine of 200 Fijian Dollars or six months
imprisonment or both. In addition to the Fijian Mining Act, the Rivers and Streams Act create
temporary and special water rights. The Water Supply Act imposes a penalty for
polluting a water supply of F$100. Health and safety legislation also imposes upon employers a duty to take
all practicable measures to minimize the risk of explosions and to render safe
hazardous conditions and materials. As mining and environmental protection legislation in Fiji is still in the
early stages of development, penalties for breaching the existing mining and
environmental protection legislation are relatively small compared to
international standards.However, the Fijian Parliament is currently
considering an Environment Management Bill which, if passed, will introduce a
number of environment protection measures, many of which will impact the mining
industry. The Bill contains provisions imposing liability upon directors for
offences committed by a company. Financial Provision for Rehabilitation We are required to make financial provision for the cost of mine closure
and post-closure rehabilitation, including monitoring once the mining
operations cease. In South Africa we have funded these environmental
rehabilitation costs by making contributions over the life of the mine to
environmental trust funds established for each operation. Funds are
irrevocably contributed to trusts that function under the authority of trustees
that have been appointed by, and who owe a statutory duty of trust, to the
Master of the High Court of South Africa. The funds held in these trusts are
invested primarily in interest bearing debt securities. As of June 30, 2004, we
held a total of $22.8 million in trust, the balance held in each fund being
$1.8 million (2003: $1.4 million) for West Wits Section, $16.4 million (2003:
$13.2 million) for Buffels Section, $2.5 million (2003: $2.0 million) for
Blyvoor Section and $2.1 million (2003: $1.3 million) for the Durban Deep
Section. Trustee meetings are held as required, and quarterly reports on the
financial status of the funds, are submitted to our board of directors. The fund for the Buffels Section includes provision for the Harties
Section. The financial provision for the West Wits Section and Durban Deep
Section have been consolidated into a single fund. 42




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We address shortfalls in the funds by accruing trust investment income for
the benefit of the funds and by replenishing it with the proceeds from the sale
of redundant mining equipment at the end of the life of the mine. If any of the
operations are prematurely closed, the rehabilitation funds may be insufficient
to meet all the rehabilitation obligations of those operations. Whereas the old Minerals Act allowed for the establishment of a fully
funded rehabilitation fund over the life of mine, the MPRD Act assumes a fully
compliant fund at any given time in the production life of a mine. The DME
appears to have taken a practical approach in dealing with this change, and has
indicated that the traditional ring fencing of funds may, for investment
purposes be relaxed, and that insurance instruments may also be received
subject to the DMEs consent, to make up the shortfall in available cash funds. The aggregate group rehabilitation, reclamation and closure cost provision
was calculated at June 30, 2004 at $39.1 million, up from $24.6 million on June
30, 2003. The increase is attributable to the inclusion of the provision for
the environmental closure of Porgera when it reaches the end of its life of
mine, and the strengthening of the Rand against the Dollar. 43




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4C. ORGANIZATIONAL STRUCTURE The following chart shows our principal subsidiaries, associate, joint
venture and investments as of June 30, 2004. All of our subsidiaries are
incorporated in South Africa unless otherwise indicated. The Company,
DRDGOLD Limited, holds the majority of the investments directly or
indirectly as indicated below. Refer to Exhibit 8.1 for a list of the Companys
directly held subsidiaries. (ORGANIZATIONAL STRUCTURE FLOW CHART) 44




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4D.: PROPERTY, PLANT AND EQUIPMENT The following maps set out the location of our mines and projects in South
Africa, Papua New Guinea and Fiji. (MAP) (MAP) 45




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(MAP) 46




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(MAP) Description of Significant Subsidiaries, Properties and Mining Operations South Africa West Witwatersrand Basin Geology The North West Operations, which is comprised of the Buffels Section and
Harties Section, and the Blyvoor Section are predominantly underground
operating mines located within a geographical region known as the Witwatersrand
Basin, exploiting gold bearing reefs in addition to certain surface sources.
The Crown Section and the ERPM Section are also located within the
Witwatersrand Basin and exploit various surface sources, including sand and
slime tailings deposited as part of historical mining operations. The ERPM
Section is predominantly an underground mining operation with a surface
operation for the processing of sand from the Cason Dump. Our underground
operations are typical of the many gold mining operations in the area which
together have produced approximately 1.5 billion ounces of gold over a period
of more than 100 years. The Witwatersrand Basin comprises a 4 mile (6 kilometres) vertical
thickness of sedimentary rocks situated within the Kaapvaal Craton, extending
laterally for approximately 186 miles (299 kilometres) east-northeast and 62
miles (100 kilometres) south-southeast. The sedimentary rocks generally dip at
shallow angles towards the center of the basin though locally this may vary.
The Witwatersrand Basin is Archaean in age and the sedimentary rocks are
considered to be approximately 2.7 to 2.8 billion years old. Gold mineralization in the Witwatersrand Basin occurs within horizons
termed reefs. These occur within seven separate goldfields located along the
eastern, northern and western margins of the basin. These goldfields are known
as the Evander Goldfield, the East Rand Goldfield, the West Rand Goldfield, the
Far West Rand Goldfield, the Central Rand Goldfield, the Klerksdorp Goldfield
and the Free State Goldfield. As a result of faulting and other primary
controls of mineralization, the goldfields are not continuous and are
characterized by the presence or dominance of different reef units. The reefs
are generally less than 6 feet (2 metres) thick but in certain instances, these
deposits form stacked elastic wedges which are hundreds of feet thick. 47




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The gold generally occurs in native form within the various reefs, often
associated with pyrite and carbon. North West Operations Overview We own 100% of the North West Operations through our wholly owned
subsidiary the Buffelsfontein Gold Mines Limited, which in turn owns 100% of
the Hartebeestfontein Gold Mining Company Limited and Duff Scott Hospital (Pty)
Limited. The consolidated mining operations of the North West Operations
consist of the Buffels Section and the Harties Section, which lie adjacent to
each other within the Klerksdorp Goldfield on the northwestern rim of the
Witwatersrand Basin. At June 30, 2004, the net book value of the mining assets
at the Buffels Section was $1.4 million and at the Harties Section was $26.3
million, with a workforce at the North West Operations of approximately 7,600
workers, including contractors. Since its inception in 1949, the Buffelsfontein Gold Mine Limited has
produced over 32 million ounces of gold, with 20,100 tons of uranium as a
by-product. In fiscal 2004, the operations produced 341,861 ounces of gold. Mining activity at the Harties Section, including exploration, development
and production dates back to 1949 with gold production from the area totaling
over 38 million ounces, with uranium oxide, sulfuric acid, pyrite and silver
being recovered as by-products. The Proven and Probable Ore Reserves of the Buffels Section at June 30,
2004, were estimated at less than 0.1 million ounces. The mine has reached the
end of its economic life. Number 11 Shaft closed in April 2004 and Number 9
Shaft closed in September 2004. There are 5.0 million ounces of Ore Reserves
for the Harties Section. Accordingly, the Buffels Ore Reserves have been
decreased to nil, while only selective mining is taking place at the Number 6
Shaft at the Harties Section. On July 21, 2003, we entered into a 60-day review period on our North West
Operations designed to restore the operations to profitability. An agreement
was reached with all labor organizations and the process was completed on
September 21, 2003, with approximately 3,000 employees retrenched and the
placing of Number 6 Shaft of the Harties Section on a care and maintenance
program, effectively suspending the use of the asset. On March 16, 2004, we
reopened the Number 6 Shaft at the Harties Section to mine high grade areas on
a selective basis. We recalled approximately 800 employees previously
retrenched from the North West Operations to man this shaft. On February 18,
2004, we announced the closure of the Number 11 Shaft in the Buffels Section
after the revised work practices implemented based on the operational review
proved to be unsustainable. As a result, approximately 1,000 employees were
retrenched. The total cost of the July 21, 2003 and March 16, 2004
retrenchments was $7.1 million. With the continuing strength of the Rand and the decline in the Rand gold
price, we entered into a 60-day review period at the Buffels Section at our
North West Operations on June 26, 2004, in order to restore profitability. An
agreement was reached with all the relevant parties early in August 2004 to
close the Number 9 Shaft, but to keep the Number 10 and 12 Shafts in operation,
on the condition that certain defined sustainability thresholds are met. This
agreement resulted in the retrenchment of 120 employees at this mining
operation during fiscal 2005, at a cost of R 3.7 million ($0.6 million). As at
October 31, 2004 a total of 603 employees are employed at Number 10 and 12
Shafts. On March 22, 2005, we announced the provisional liquidation of Buffelsfontein Gold Mines Limited,
our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed with the SEC
on March 22, 2005, which is incorporated by reference in this Annual Report. Property The North West Operations are located in the Klerksdorp Goldfield of the
Witwatersrand Basin approximately 100.0 miles (160.9 kilometres) southwest of
Johannesburg near the towns of Stilfontein and Klerksdorp, North West Province,
and are reached via the R12 Johannesburg-Potchefstroom-Kimberley highway. The climate of the Highveld area (at an elevation of 5,249 feet (1,600
metres) above mean sea level), where the mine is situated, is humid continental
with warm summers and cold winters. Temperatures range from a minimum of 23 degrees Fahrenheit (-5 degrees Celsius) in June and July to a maximum of 93
degrees Fahrenheit (34 degrees Celsius) in December and January. 48




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The mines infrastructure includes the shaft complexes, metallurgical
plants, engineering workshops and its associated tailings dams. Buffels has
mining title to 17,575 acres (7,113 hectares) and freehold title to 4,893 acres
(1,980 hectares). The Harties Section has mining title to 15,560 acres (6,297
hectares) and freehold title to 375 acres (152 hectares), all held in the name
of Buffels. The Buffels Section consists of one mining license, ML4/2001 in
respect of statutory mining rights, and one prospecting permit, RP54/2002 in
respect of statutory mining rights and mineral rights held by the Buffels
Section. We are in the process of converting these old order property rights to
new order rights under the MPRD Act. Accommodation for staff is situated on the property as well as in the
neighboring towns of Stilfontein and Klerksdorp. In addition to mining its
lease area, the Buffels Section operates and mines the adjoining
Harties Section mineral rights areas and another area pursuant to royalty-based
tribute agreements with Lucas Block Minerals Limited, a South African company,
and the Harties Section. The average mining depth at the Harties Section is 5,322 feet (1,622.1
metres), 961 feet (292.9 metres) below mean sea level and at the Buffels
Section is 6,099 feet (1,859 metres), 1,790 feet (545.6 metres) below mean sea
level. History  1949
    
    Hartebeestfontein Gold Mining Company Limited, or Hartebeestfontein,
was incorporated as a public company in South Africa on June 20,
1949. The company is dormant and no longer trades.1995
    
    Buffelsfontein Gold Mines Limited, or Buffels, was incorporated and
registered as a public company in South Africa on September 20, 1995,

under the name Camelian Investments (Pty) Ltd. Camelian Investments
changed its name to Buffelsfontein Gold Mines Ltd on December 29,
1995. As of December 31, 1995, Buffels acquired the assets and
liabilities of the Buffelsfontein mine division of Buffelsfontein
Gold Mines Company Limited previously managed by Gencor Limited, a
South African mining company.1997
    
    We acquired Buffels on September 15, 1997.1999
    
    On August 16, 1999, Buffels acquired both the Harties business assets
and Hartebeestfontein from Avgold Limited.2003
    
    On July 21, 2003, we entered into a 60-day review period of our North
West Operations. The process was completed on September 21, 2003,
with approximately 3,000 employees retrenched at a cost of $6.5
million and the placing of certain infrastructure (Number 6 Shaft at
the Harties Section) on a care and maintenance program.2004
    
    In March 2004, the Number 6 Shaft at the Harties Section was reopened
to mine high grade areas on a selective basis. We recruited 800
staff previously retrenched to man this shaft.
In April 2004, the Number 11 Shaft at the Buffels Section was closed
as the shaft reached the end of its economic life. Approximately
1,000 employees were retrenched at a cost of $0.6 million.
In September 2004, the Number 9 Shaft at the Buffels Section was
closed as the shaft reached the end of its economic life. Geology and Mineralization The Buffels Section and Harties Section, are predominantly underground
operating mines located within a geographical region known as the Witwatersrand
Basin, that exploit gold bearing reefs consisting of Vaal Reef ore and surface
sources from previously discarded low-grade rock dumps. The Vaal Reef is an
oligomictic, quartz-pebble conglomerate no more than 20 inches (50 centimeters)
thick. Gold is present throughout the reef horizon, but is concentrated on the
bottom contact, where carbon commonly forms as a thin seam. The Buffels Section has exploited the Vaal Reef, occurring within the
Central Rand Group of the Witwatersrand Supergroup, at the base of the
Strathmore formation. The bulk of the Buffels Section Ore Reserves have been
mined-out but the infrastructure is being used to access remnant reserves and
blocks originally bypassed because of structural complexity. Access from the
surface to the underground workings of the mine is through vertical and
underground incline shafts. Mining of the reef takes place in stope panels.
Holes are drilled into the solid rock and are charged with explosives and
blasted. The loosened rock is removed from the stope panels and is conveyed to
the shaft, tipped into the ore-pass systems, hoisted to the surface and
conveyed to the metallurgical plant for gold extraction. 49




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Similar to the Buffels Section, the Harties Section exploits the Vaal Reef
within the Central Rand Group of the Witwatersrand Supergroup. Gold production
at the Harties Section started in 1955 on the Vaal Reef. By the late 1990s the
mine had reached a position where its life was dependent on the mining of shaft
pillars and scattered remnants. The Harties Section has been converted from a
high-grade mine with a short life to a medium-grade mine with a longer life.
This has been achieved in three stages, firstly, by the conversion of the
previous owners mine plan and operating method, secondly, by dropping the pay
limits and putting in place a medium-term operational plan including the
opening up of old mining areas
for remnant mining, and thirdly, developing a sustainable life of mine
plan that will be supported by areas not included in the previous owners
mining plan due to high pay limits. Under our management, the mine has produced
more than 1.6 million ounces of gold. The Proven and Probable Ore Reserves have
been reduced to 5 million ounces. Opening up of abandoned pillar areas across
the lease area is underway to ensure Ore Reserves over the life of mine. The
Number 6 Shaft area at the Harties Section was reopened in fiscal 2002 to mine
medium and low grade areas. The shaft was subsequently placed on a care and
maintenance program in September 2003 due to the sustained decline in the
Rand-gold price. The shaft was reopened in February 2004 to mine high grade
areas on a selective basis. Mining and processing Metallurgical processing facilities at the North West Operations include
two operating plants. All the underground ore is processed by the Buffels or
South Plant. All the surface material is processed in the North Plant
previously known as the Low Grade Gold Plant, or LGGP, with limited underground
material. These plants have a combined operating capacity of 260,000 tons per
month, or tpm. South Plant: Commissioned in 1957, this plant, is also known as the
Buffels Plant. The original plant was comprised of a conventional circuit
including multi-stage crushing and grinding followed by standard dissolution
and recovery circuits. The plant was modified from 1994 to 1997 through the
closure and demolition of the original comminution sections. It is now
comprised of a circuit including run of mine milling, thickening, leaching,
filtration, zinc precipitation and smelting to doré. The operating capacity of
the plant is 90,000 tpm. During fiscal 2004, we considered expanding
the existing plant to 125,000 tpm, at an expected cost of $14.7 million. The
proposed expansion was suspended due to the sustained decline in the Rand gold
price and initial expenditure of $1.4 million was expensed. North Plant: Commissioned in 1987, this plant, also known as the Low
Grade Gold Plant, is comprised of a circuit including crushing, closed circuit
milling, thickening, cyanidation and gold recovery in a Carbon-In-Pulp, or CIP,
plant, elution, electrowinning and smelting to doré. The operating
capacity of the plant is 170,000 tpm of low grade ore (1 gram per ton). This
plant is being used to process mostly surface material and some
underground material. Electricity for South Africa is provided by Eskom, which is government
owned. Eskom is the largest producer of electricity in Africa. In South Africa,
Eskom operates a national power supply grid consisting of 24 power stations
across the country. Electricity to the North West Operations is provided from
the Kardell and Hermies substation located between Stilfontein and Orkney in
the Buffels area. Electricity is supplied directly from the national power grid
to these substations at 88,000 volts. Further substations, located on mine
site, transform the power to 6,600 volts for direct supply to the shaft winder
and air compressors. The power supply is further reduced to 525 volts for
smaller devices and equipment used on the mine. The average annual power
consumption is about 852 gigawatt hours, or GWHr and the maximum demand is
about 92 megawatts, MW. Several capital expansion projects were conducted over the period fiscal
2002 to fiscal 2004, including the upgrading of Ore Reserves of $3.2 million. 50




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Environmental and closure aspects Activities in the Buffels and Harties Sections include underground mining.
The North West Operations are situated in the Vaal River catchment area. The
enforcement of compliance standards for the use and discharge of water is
conducted by the DWAF, acting under the National Water Act. At the North West
Operations, we pump water from underground to surface to prevent flooding and
to keep underground workings accessible. Our environmental managers manage the
use and discharge of water in accordance with a water management plan, compiled
in accordance with the National Water Act, and approved by DWAF. In addition we
maintain a rate of pumping that adequately deals with the ingress of water into
underground workings, thus preventing the flooding of production areas. Our water management plan also addresses the management of seepage and
effluent on surface from our installations and facilities, for example our
reduction works and slimes dams. By having increased the water retention
capacity of the paddocks at the Buffelsfontein tailings complex, including the
return water dams, and by having installed a
draw off system, return water is re-circulated to the plant, thus minimizing
potential water pollution and utilizing polluted water more fully. Dust pollution is addressed through an active vegetation program and
selective ridge plowing in areas marked for rehabilitation. The vegetation
program for the tailings dams is preceded by a detailed scientific and
site-specific evaluation of the tailings complex. Based on the results of
geo-chemical analyses performed, the tailings medium is prepared for vegetation
by the addition of lime to neutralize the natural acidic conditions and
fertilizer. Vegetation is then established and care is taken to select species
endemic to the area. A variety of species selected are then planted to ensure
species diversity using either the leaching (irrigation) or dry land method.
Regular monitoring is conducted. To address dust pollution in unvegetated
areas, in the short-term, the open surface areas on top of the tailings dam are
ridge ploughed mechanically. This method significantly reduces dust
re-suspension. As an additional measure in inaccessible areas, environmentally
friendly chemical and organic dust suppressants are employed, where necessary. While the total rehabilitation costs to be incurred in the future is
uncertain, we have estimated that the total cost for the North West Operations,
in current monetary terms as at June 30, 2004, is $18.5 million. This amount
has been included in our provision for environmental rehabilitation,
restoration and closure costs on our balance sheet. A total of $16.4 million
has been contributed to the Rehabilitation Trust Fund. This is an irrevocable
trust, managed by specific responsible people who are nominated by us and
appointed as trustees by the Master of the High Court of South Africa. Life of Mine Based
upon a gold price of approximately R90,023 per kilogram (approximately $400 per ounce based on the average exchange rate for fiscal
2004) at June 30, 2004, the Proven and Probable Ore
Reserves at the Harties Section were 5.0 million ounces. In fiscal 2003, based
upon a gold price of approximately R96,549 per kilogram at
June 30, 2003, the Proven and Probable Ore Reserves at the Harties Section were
7.1 million ounces. These reserves decreased by 2.1 million ounces due to
depletion and as these Ore Reserves can not be mined economically past the
projected life of mine, resulting from the scattered nature of the remaining
Ore Reserves, escalation in costs, decline in the Rand-gold price and higher
pay limits. The Proven and Probable Ore Reserves at the Buffels Section was
less than 0.1 million ounces, as at June 30, 2004. In fiscal 2002, previously unprofitable areas of the Buffels and Harties
Sections below a cut-off grade of 7.96 g/t at Buffels Section and 6.45 g/t at
Harties Section were identified as potentially profitable areas to an
increasing Rand gold price above R100,000 per kilogram. These areas consisted
of medium and lower grade deposits and would increase the Ore Reserves and
contribute towards the overhead costs to run the North West Operations. The
lower grades require strict geological and mining controls in order to ensure
they are mined profitably and are therefore riskier to mine. As a result of the
decrease in fiscal 2003 and the 60-day review process at our North West
Operations, the decision was made in September 2003 to stop mining the medium
grades until the Rand gold price improves. Accordingly, the Buffels Ore
Reserves have been decreased to nil, while only selective mining took
place at the Number 6 Shaft at the Harties Section during fiscal 2004. 51




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Current year production The
North West Operations were our largest producer of gold and produced a
total of 341,861 ounces of gold in fiscal 2004, with 298,681 ounces of gold
from underground areas and 43,180 ounces from surface areas. In fiscal 2003, a
total of 462,743 ounces were produced, with 384,296 ounces of gold from
underground areas and 78,447 ounces from surface areas. This represents a
decrease of 120,882 ounces or 26% of gold production from fiscal
2003. On March 22, 2005, however, we announced the provisional liquidation of Buffelsfontein Gold Mines
Limited, our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed
with the SEC on March 22, 2005, which is incorporated by reference in this Annual Report. During
fiscal 2004 gold production was at a cash1 and total
cost1 of $393
and $442 per ounce, respectively. Gold production was 26% lower than in fiscal
2003 due to the restructuring of the mines at North West Operations in
September 2003 following the 60-day review. Cash costs increased by 26% to $393
per ounce in fiscal 2004 from $312 per ounce of gold in fiscal 2003 and $219
per ounce of gold in fiscal 2002. The increase was primarily due to
restructuring costs of $7.1 million, the appreciation of the Rand against the
Dollar in fiscal 2003, as well as increased labor costs of $8.4 million. Total
cost per ounce of gold of $442 per ounce constituted an increase of $121, or
38%, in comparison to the $321 per ounce recorded in fiscal 2003. In fiscal
2003 total cost per ounce of $321 per ounce decreased from $426 per ounce in
fiscal 2002. The decrease in fiscal 2003 and related increase in fiscal 2004 is
primarily attributable to the profit on financial instruments in fiscal 2003,
as compared to fiscal 2002 and fiscal 2004. In monetary terms, this amounted to
a loss of $1 per ounce in fiscal 2004, a profit of $55 per ounce in fiscal
2003, and a loss of $143 per ounce in fiscal 2002.   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs to total costs see Item 5A.: Operating Results. 52




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##### Table of Contents



The following table details the operating and production results from the North
West Operations for the past three fiscal years. Year ended June 30,2004
    
    2003
    
    2002ProductionBuffels- Surface OperationsOre mined (000 tons)
    
    
    1,542
    
    
    
    3,947
    
    
    
    3,520Recovered grade (oz/ton)
    
    
    0.019
    
    
    
    0.012
    
    
    
    0.012Gold produced (ounces)
    
    
    28,776
    
    
    
    49,061
    
    
    
    43,339- Underground OperationsOre mined (000 tons)
    
    
    548
    
    
    

    972
    
    
    
    633Recovered grade (oz/ton)
    
    
    0.171
    
    
    
    0.155
    
    
    
    0.198Gold produced (ounces)
    
    
    93,751
    
    
    
    150,690
    
    
    
    125,549Harties- Surface OperationsOre mined (000 tons)
    
    
    105
    
    
    
    1,572
    
    
    
    2,774Recovered grade (oz/ton)
    
    
    0.137
    
    
    
    0.019
    
    
    
    0.022Gold produced (ounces)
    
    
    14,404
    
    
    
    29,386
    
    
    
    60,347- Underground OperationsOre mined (000 tons)
    
    
    1,286
    
    
    
    1,802
    
    
    
    1,873Recovered grade (oz/ton)
    
    
    0.159
    
    
    
    0.130
    
    
    
    0.166Gold produced (ounces)
    
    
    204,930
    
    
    
    233,606
    
    
    
    311,315Total ounces produced
    
    
    341,861
    
    
    
    462,743
    
    
    
    540,550Results of Operations ($)Revenues (000)
    
    
    130,036
    
    
    
    151,923
    
    
    
    160,596Production cost (000)
    
    
    134,465
    
    
    
    144,568
    
    
    
    118,265Non-US GAAP Financial DataCash cost
per ounce of gold ($)1
    
    
    393
    
    
    
    312
    
    
    
    219Total cost
per ounce of gold ($)1
    
    
    442
    
    
    
    321
    
    
    
    426
   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 53




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##### Table of Contents



Blyvooruitzicht Mine Overview We own 100% of the Blyvooruitzicht Gold Mining Company Limited, which in
turn owns 100% of the Doornfontein Gold Mining Company Limited. The
consolidated mining operation, referred to as the Blyvoor Section, consists of
the adjacent mines of Blyvooruitzicht and Doornfontein which are located within
the Carletonville Goldfields on the northwestern edge of the Witwatersrand
Basin. Blyvoor was the first mine in the West Wits line. Together, these two
operations have produced over 35 million ounces of gold since inception. The
net book value of the mining assets at the Blyvoor Section is $48.5 million at
June 30, 2004, with 4.3 million ounces of Ore Reserves. On June 28, 2004, we entered into a 60-day review period on the Blyvoor
Section designed to restore the operations to profitability. The 60-day review
was extended to September 13, 2004. On October 5, 2004, it was announced that
1,619 employees have been retrenched at a cost of approximately R32.0 million
($5.1 million), with possible future restructuring initiatives depending on the
economic circumstances. In terms of the agreement, organized labor recorded its
commitment to certain production targets, and undertook not to disrupt
production for at least six months for reasons related to restructuring of the
operations. As of June 30, 2004, the mine has approximately 5,300 employees, including
approximately 850 contractors. Property The Blyvoor Section is located on the West Wits line within the Far West
Rand Goldfields on the northwestern rim of the Witwatersrand Basin, near the
town of Carletonville, Gauteng Province, about 50.0 miles (80.5 kilometres)
south-west of Johannesburg and is reached via the R528 road to Carletonville on
the N12 Johannesburg-Potchefstroom-Kimberly highway. The climate of the Highveld area (at an elevation of 5,249.3 feet (1,600
metres) above mean sea level), where the mine is situated, is humid continental
with warm summers and cold winters. Temperatures range from a minimum of 23
degrees Fahrenheit (-5 degrees Celsius) in June and July to a maximum of 93
degrees Fahrenheit (34 degrees Celsius) in December and January. The operating facilities are all situated on property belonging to the
Blyvoor Section, and include the shaft complexes, administrative offices for
the managerial, administrative, financial and technical disciplines, extensive
workshops and consumable stores, the metallurgical plants, tailings dams and
waste rock dumps. Blyvoor also houses the majority of its employees in
Blyvoor-owned houses on the property and in the town of Carletonville. The
normal support structures, including training, security, sport and recreational
facilities, schools and churches are situated on the property. Blyvoor has
mining title to 16,242 acres (6,573 hectares) and owns 5,138 acres (2,079
hectares) of freehold property. The Blyvoor Section consists of one mining license, ML46/99, in respect of
statutory mining rights and mineral rights held by Blyvoor. We are in the
process of converting these old order property rights to new order rights under
the MPRD Act. 54




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##### Table of Contents



History  1937
    
    Blyvooruitzicht Gold Mining Company Limited, or Blyvoor, was incorporated and
registered as a public company in South Africa on June 10, 1937.1942
    
    Gold production commenced.1995
    
    Blyvoor acquired the Doornfontein Gold Mining Company Limited in November 1995.1996
    
    Blyvoor acquired the mineral rights representing the Western Deep Levels tribute area.1997
    
    We acquired the entire share capital of Blyvoor on September 15, 1997.2001
    
    Implementation of the Blyvoor expansion project.2003
    
    Commissioning of 4 and 5 Slimes Dam retreatment facility at a cost of $6.5 million.2004
    
    On June 28, 2004, we entered into a 60-day review period on the Blyvoor Section. The
60-day review was extended to September 13, 2004. On October 5, 2004, it was
announced that 1,619 employees have been retrenched at a cost of approximately R32.0
million ($5.1 million), with possible future restructuring initiatives depending on
the economic circumstances. Geology and Mineralization The Blyvoor Section exploits the two gold-bearing pebble horizons in the
Central Rand Goldfields, the Carbon Leader, which is one of the principal ore
bodies in the goldfield, and the Middelvlei Reef horizons which occur in
discrete channels over parts of the lease area approximately 246 feet (75.0
metres) vertically above the Carbon Leader Reef horizon. The Carbon Leader Reef
is the principal economic horizon across the lease area and is a planar single
sheet conglomerate. The Carbon Leader Reef typically comprises basal carbon
seam, overlain by a thin, small pebble conglomerate, enriched in carbon in the
lower portion. The grade of the Carbon Leader Reef is more variable than the
Middelvlei Reef. The Middelvlei Reef consists of a variable number of
polymictic quartz conglomerate bands, interbedded with coarse grain quartzites.
The grade of the Middelvlei Reef is more erratic, with distinctive payshoots
forming as southward-orientated linear zones. The Blyvoor Section was established in 1937 to exploit the rich Carbon
Leader Reef but by the late 1980s had reached a position where continued
existence of mining operations was dependent upon the mining of scattered
Carbon Leader Reef remnants and limited sections of the lower grade Middelvlei
Reef. Mining and processing Access from the surface to the current underground workings of the mines
is through a system of vertical and incline shafts situated at the Blyvoor and
Doornfontein mines. Doornfontein was previously a separate mine adjacent to the
Blyvoor mine but has since been merged to form the Blyvoor Section. The shaft
system consists of four vertical shafts from the surface, thirteen sub-incline
shafts and two sub-vertical shafts underground. Of these thirteen incline
shafts, only nine are in operation and are used for the conveyance of
personnel, pumping and hoisting of mined ore and waste. Two levels have been holed between the previous Doornfontein mine and
workings within the Blyvoor lease extension (purchased in 1996 from Western
Deep Levels Limited) to allow ore from the bottom of the Blyvoor workings to be
trammed across and hoisted up via the Blyvoor Number 5 Shaft, from where, it is
trucked to the gold plant. The average mining depth at the Blyvoor Section is
10,541 feet (3,213 meters), 5,292 feet (1,613 metres) below mean sea level. Mining of the reef takes place in stope panels. Holes are drilled into the
solid rock and are charged with explosives and blasted. The loosened rock is
removed from the stope panels and is conveyed to the shaft, tipped into the
ore-pass systems, hoisted to the surface and transported to the metallurgical
plant for gold extraction. 55




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Metallurgical processing facilities at the Blyvoor Section are comprised
of a single metallurgical plant. The process route is based on a conventional
flowsheet comprising multi-stage crushing, open circuit primary and closed
circuit secondary milling with hydrocyclones, thickening and cyanide leaching
in a Carbon-in-Pulp, or CIP, carousel arrangement. The gold is recovered
through electrowinning followed by smelting to doré. The circuit was recently
modified by the closure of the filtration system and the commissioning of a
modern carbon Kemix pumpcell plant. In April 2001, we launched the Blyvoor expansion project. The project,
valued at R65.0 million ($10.4 million), was funded from the Industrial
Development Corporation, or IDC, loan granted to Blyvoor, for this purpose.
This project was to facilitate the commissioning of additional infrastructure
and the opening up of additional mining areas to further enable the effective
mining of reserves at the Blyvoor Section. In fiscal 2003, the Blyvoor Section processed an average of approximately
70,000 tpm of ore from the underground section and 135,000 tpm from surface
rock dumps. With the depletion of the surface rock dumps, only remnant amounts
are available for processing. Processing of material from the 4 and 5 slimes
dam project, which was commissioned in December 2003, is building up to the
planned processing capacity of 240,000 tpm and will replace the processing of
the surface rock dump material which has been depleted. Initial processing of
material took place from the 4 Slimes Dam and the recovery grades were below
expectation. From August 2004, the processing of material from the 5 Slimes Dam
commenced and the recovery grade has improved. With the conclusion of the
60-day review entered into on June 28, 2004, certain shafts were placed on a
care and maintenance program, resulting in a decrease to a total of seven
vertical and decline shafts. Electricity for South Africa is provided by Eskom, which is government
owned. Eskom is the largest producer of electricity in Africa. In South Africa,
Eskom operates a national power supply grid consisting of 24 power stations
across the country. Electricity to the Blyvoor Section is provided from the Wes
Wits substation outside Carletonville. Electricity is supplied directly from the
national power grid to the Wes Wits substation at 44,000 volts. Further substations, located on mine site, transform the power to 6,600 volts or 22,000
volts for direct supply to the shaft winder and air compressors. The power
supply is further reduced to 525 volts for smaller devices and equipment used
on the mine. The average annual power consumption is about 432 GWHr and the
maximum demand is about 66 MW. Several major capital expansion projects were conducted over the period
fiscal 2002 to fiscal 2004, including processing and extension of Slimes Dams
4, 5 and 6 ($7.6 million), underground expansion projects ($1.5 million) and a
water project ($0.4 million). Exploration and Development At the beginning of fiscal 2003, the Blyvoor Section began a feasibility
study looking at the opportunity to re-mine and treat the slimes dam material
from the 4 and 5 Slimes Dam. The project was commissioned during November 2003
and completed at a cost of $6.9 million including the conversion of leaching
tanks, linear screens, pipes and site construction. The Number 6 Slimes Dam has
been extended to provide additional capacity for the tailings from this project
at a cost of $0.7 million. The project involves the reclamation of
approximately 24 million tonnes of slime material at a rate of 240,000 tpm by
high water monitoring and processed through a CIP circuit. The project has an
estimated life of 8 years and an average recovery grade of 0.02 ounces per ton
at a cash cost of $200 per ounce1 of gold produced. The project costs were
funded from the R65.0 million ($10.4 million) loan facility from the IDC. As at
June 30, 2004, the project has not reached full production capacity and was
producing at a cash cost of $272 per ounce1.   1 Cash costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to
production costs see Item 5A.: Operating Results. 56




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##### Table of Contents



Environmental and closure aspects The predominantly dolomitic geology of the area in and around the Blyvoor
Section, and the resultant occasional occurrence of sinkholes and subsidences,
exposes the Blyvoor Section to relatively unique environmental risks and costs
associated with the remediation and filling of these sinkholes. Blyvoor has to maintain a rate of pumping of fissure water sufficient to
keep the rate of rise of underground water below the level of underground
workings. The required rate is in the order of 4 million gallons (14 million
litres) per day. Water not used in the operations is discharged into the
Wonderfonteinspruit and the Doorndraai Dam. In order to address the risk of
contamination of ground water, streams and wetlands, water is sampled and the
level of contaminants monitored in accordance with Blyvoors water management
plan. Fissure water at Blyvoor is generally of a good quality, therefore we
believe that the contribution of this water to pollution of water in the area
is minimal. We have not conducted an assessment of the full scope of pollution to
surface water as a result of the discharge from the Blyvoor Section. This is
because the impact of our discharge cannot be addressed without addressing the
impact from the discharge of other neighboring mining operations. The Far West
Rand Dolomitic Water Association, of which all mining operations in the area
are members, has undertaken two studies. Apportioned responsibility has been
recognized by the DWAF and they have initiated an impact assessment on the
Wonderfonteinspruit in order to assess the cumulative impact from the different
mining operations. The first study, commissioned and completed in January 2003,
addressed the methodologies proposed for filling in sinkholes and subsidences.
The second study will address the impact of the flooding on the dolomitic
aquifers when mining in the area ceases. This study has been commissioned and
is scheduled to be completed by the end of 2005. Sinkholes are caused by ground water seeping into the underground
dolomitic structures, which dissolve and weaken causing a collapse in the rock
structure. Dolomitic rock could be dissolved, resulting in an increased risk of
sinkholes and possible pollution of fresh water resources stored in the
dolomitic formations. The seepage may also cause pollution of fresh water
resources stored in dolomitic formations, which if pumped to surface will
result in pollution on the surface. The occurrence of sinkholes is limited to a
particular area of the Blyvoor Section, which requires an active program in the
water management plan to continuously divert ground water away from the
affected area and reduce the risk of seepage into the dolomitic structure.
Should the pumping apparatus fail and there is an excessive build up of surface
water, this could over a period of time result in a weakening of the underlying
dolomitic structure and the occurrence of a sinkhole in that area. In addition
to purifying the water for our own use, we repair all sinkholes that form on
our property, in accordance with industry and government standards. Sinkholes
which form outside of our property are repaired by the Far West Rand Dolomitic
Water Association. Pollution from slime dams is controlled by dust suppression and water
management programs. Short-term dust control is accomplished through ridge
ploughing the top surface of dormant tailings dams. Environmentally friendly
dust suppressants, such as molasses, are also applied when deemed necessary. In
the long-term, dust suppression and water pollution is managed through a
program of progressive vegetation of the tailings complexes followed by the
application of lime, to neutralize the natural acidic conditions, and
fertilizer as the organic growth medium. Blyvoor has implemented a tailings reclamation project during fiscal 2004
and the environmental considerations have been a key feature of this project.
As a result of this new project being implemented amendments to Blyvoors EMP
have had to be made by the relevant regulator. The environmental management
program identify the impacts associated with the reclamation of the dams and
the extension of the Number 6 return water dam and identified remedial measures
to minimize the risk. The DWAF visited the site in August 2004 and was
satisfied with our environmental performance. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, we have estimated that the total cost for the Blyvoor
Section, in current monetary terms as at June 30, 2004, is $6.6 million. This
has been included in the provision for environmental rehabilitation,
restoration and closure costs on our balance sheet. A total of $2.5 million has
been contributed to a Rehabilitation Trust Fund. This is an irrevocable trust,
managed by specific responsible people who we nominated and who are appointed
as trustees by the Master of the High Court of South Africa. 57




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##### Table of Contents



Life of Mine Based
upon a gold price of approximately R90,023 per kilogram
(approximately $400 per ounce based on the average exchange rate for fiscal
2004) at June 30, 2004, the Proven and Probable Ore Reserves of the Blyvoor
Section were 4.3 million ounces. In fiscal 2003, based upon a gold price of
approximately R96,549 per kilogram at June 30, 2003, the
Proven and Probable Ore Reserves of the Blyvoor Section were 5.8 million
ounces. The decrease of 1.5 million ounces is due to the change in the
pay-limit factors, mining mix and decline in the Rand gold price. In the light of adverse costs, the Rand/Dollar exchange rate, the Rand
gold price and current retrenchments, we are reassessing the life of mine to 15
years, as at June 30, 2004. Current year production The Blyvoor Section produced a total of 233,094 ounces of gold in fiscal
2004, with 198,211 ounces from underground areas and 34,993 ounces from surface
areas. This represents 29% of our total production of 808,145 ounces based on
our subsidiaries and our attributable 20% interest in Porgera. In fiscal 2003,
a total of 247,626 ounces of gold were produced compared to 253,025 ounces in
fiscal 2002. Underground gold production has decreased from 203,000 ounces in fiscal
2003 to 198,211 ounces in fiscal 2004 due to operational difficulties. Steps to
improve the shaft call factor and the enforcement of appropriate gold mining
practices, will improve production efficiency and the production profile. The
Blyvoor Section has also embarked on an extensive old gold project at all its
shafts which includes vamping of crosscuts and haulages, and mud reclamation.
A mid-shaft loading arrangement has also been installed at 1A Sub Shaft to
relieve ore pass constraints underground. Surface gold production decreased
from 44,626 ounces in fiscal 2003 to 34,883 ounces in fiscal 2004 due to the
depletion of the surface rock dump material. This was offset in part by the
slower than expected start up on the 4 and 5 Slimes Dam retreatment operation
which produced 5,188 ounces in fiscal 2004. The planned increase in production and reduction of operating costs did
not materialize in fiscal 2004 due to operational difficulties and the lower
grade recovery during the initial processing stages of the 4 and 5 Slimes Dam
retreatment operations. These factors and the strengthening of the Rand from
R7.47 = $1.00 at June 30, 2003 to R6.28 = $1.00 at June 30, 2004, resulted in
cash costs of $388 per ounce in fiscal 2004 compared to $263 per ounce in
fiscal 2003 and total costs of $427 per ounce in fiscal 2004 compared to $110
per ounce in fiscal 2003. The increase in cash cost per ounce is mostly
attributable to operational difficulties and a decrease in the recovered grade
and the increase in total cost per ounce for the year is mostly attributable to
the decrease in the profit on derivative instruments during fiscal 2004. As a
result of operational difficulties, changes in senior management, Mr. M.
Marriott was appointed as Divisional Director: South African Operations and
acting General Manager for the Blyvoor Section with effect August 10, 2004. In
response to the operational difficulties, we announced a 60-day review of the
operations on July 28, 2004 in order to restore profitability. Cash costs from underground production were $263 per ounce for fiscal 2003
as a result of the commissioning of additional infrastructure, the opening up
of additional areas to enable the effective mining of payable Ore Reserves as
well as a stronger Rand against the Dollar. Total costs per ounce of gold
produced decreased to $110 per ounce in fiscal 2003 from $327 per ounce in
fiscal 2002. This decrease is primarily attributable to increased profits on
financial instruments during fiscal 2003. 58




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##### Table of Contents



The following table details the operating and production results from the
Blyvoor Section for the past three fiscal years. Year ended June 30,2004
    
    2003
    
    2002Production- Surface OperationsOre mined (000 tons)
    
    
    2,522
    
    
    
    1,838
    
    
    
    1,960Recovered grade (oz/ton)
    
    
    0.014
    
    
    
    0.024
    
    
    
    0.027Gold produced (ounces)
    
    
    34,883
    
    
    
    44,626
    
    
    
    52,854- Underground OperationsOre mined (000 tons)
    
    
    916
    
    
    
    970
    
    
    
    838Recovered grade (oz/ton)
    
    
    0.216
    
    
    
    0.210
    
    
    
    0.239Gold produced (ounces)
    
    
    198,211
    
    
    
    203,000
    
    
    
    200,171Total ounces produced
    
    
    233,094
    
    
    
    247,626
    
    
    
    253,025Results of Operations ($)Revenues (000)
    
    
    90,066
    
    
    
    81,753
    
    
    
    73,705Production cost (000)
    
    
    90,366
    
    
    
    65,240
    
    
    
    46,579Non-US GAAP Financial DataCash cost per ounce of gold ($)1
    
    
    388
    
    
    
    263
    
    
    
    184Total cost per ounce of gold ($)1
    
    
    427
    
    
    
    110
    
    
    
    327
   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 59




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##### Table of Contents



Crown Gold Recoveries (Pty) Limited (CGR) Overview We own 100% of Crown Consolidated Gold Recoveries Ltd, or CCGR, which in
turn owns 40% of Crown Gold Recoveries (Pty) Limited, or CGR. CCGR was
incorporated in South Africa on May 23, 1997. Pursuant to a scheme of
arrangement, we acquired 100% of CCGR on September 14, 1998. On June 12, 2002, we entered into an agreement with the Industrial
Development Corporation of South Africa, or IDC, Khumo Bathong Holdings (Pty)
Limited, or KBH, and CCGR whereby, with effect from July 1, 2002, we sold 3% of
the entire issued share capital of and shareholders loans held in CGR to KBH
and 57% of the entire issued share capital of and shareholders loans held in
CGR to the IDC, for a total amount of $10.1 million. As part of this
transaction, we loaned KBH R5.3 million ($0.7 million) to fund its initial
purchase of 3% interest in CGR. According to the terms of the shareholders
agreement entered into between these parties, the parties agreed that IDC would
not remain a shareholder in CGR, but would transfer its shares and claims held
in CGR to KBH. Accordingly, IDC granted an option to KBH to purchase its shares
and claims held by it in CGR subject to certain terms and conditions. The
option was exercised by KBH in July 2002 and KBH is currently the owner of 60%
of the entire issued share capital of and shareholders loans held in CGR. CCGR
holds 40% of the issued share capital of CGR, which has four wholly-owned
subsidiaries, Crown Mines Limited, City Deep Limited and Consolidated Main Reef
Mines and Estate Limited and East Rand Proprietary Mines Limited, or ERPM. On October 10, 2002, CGR entered into an agreement with third parties to
purchase the entire issued share capital and all shareholders claims of ERPM
for a purchase price of $11.0 million. CGRs acquisition of ERPM has been
approved by the South African competition authorities. ERPM is predominantly an
underground mining operation located near the town of Boksburg on the East
Rand, which is east of Johannesburg and approximately 60 miles (97 kilometres)
from the Blyvoor Section. We loaned CGR the sum of R60.0 million ($8.0 million)
to facilitate its acquisition of ERPM. We have subsequently loaned CGR an
additional R9.9 million ($1.3 million), which CGR in turn loaned to ERPM as
working capital. The loan bears interest at the prime rate of The Standard Bank
of South Africa on overdraft. As of June 30, 2003, the loan had been repaid in
full. Surface mining of the Cason Dump will continue, with treatment through
the Knights plant for a further 5 years, based on the current rate of
production of approximately 150,000 tons per month. CGR has a surface retreatment operation consisting of the Crown Central,
City Deep and Knights business units, collectively referred to as the Crown
Section. East Rand Proprietary Mines Limited, or the ERPM Section, is a wholly
owned subsidiary of CGR and consists of an underground section and the Cason
Dump surface retreatment operation. The underground mining operation at ERPM
implemented a controlled closure programme which was scheduled to close in
March 2005. Following the retrenchment of 806 employees in August 2004 at a
cost of $0.6 million (R3.7 million), the mine has achieved a reduction in costs
coupled with improved productivity. As a result the original planned closure of
the underground section has been postponed. The Cason Dump surface re-treatment
operation will continue to operate until 2010 under the management of the Crown
Section based on the current rate of production of approximately 150,000 tons
per month. The Crown Section undertakes the retreatment of surface sources
deposited as tailing from non-operation mining sites across central
Johannesburg. We have accounted for our 40% interest in CGR under the equity method
commencing July 1, 2002. We have recognized losses generated by CGR and its
subsidiaries against any advances we have made to them. At June 30, 2004, the CGR had approximately 846 employees, including
approximately 440 contractors and ERPM had approximately 2,940 employees. The ability of CGR and ERPM to continue as a going concern conducting
business depends on the support of their stockholders, secured lenders and
creditors. Separate
consolidated financial statements and notes thereto for CGR and its
subsidiaries for its fiscal years ended June 30, 2004 and 2003,
are being filed pursuant to Rule 3-09 of Regulation S-X.
Reference is made to Exhibit 15.1 to our Annual Report on Form 20-F. 60




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##### Table of Contents



Current year production The
following table details the operating and production results from the Crown and ERPM Sections for the past three fiscal
years: Year ended June 30,2004
    
    2003
    
    2002ProductionSurface and underground operations (only surface operations in 2002)Ore mined (000 tons)
    
    
    4,772
    
    
    
    4,884
    
    
    
    12,297Recovered grade (oz/ton)
    
    
    0.020
    
    
    
    0.016
    
    
    
    0.011Gold produced (ounces)
    
    
    96,878
    
    
    
    77,239
    
    
    
    138,665Results
of Operations ($)1Revenues (000)
    
    
    
    
    
    
    
    
    
    
    40,606Production cost (000)
    
    
    
    
    
    
    
    
    
    
    28,254Non-US GAAP Financial DataCash cost
per ounce of gold ($)2
    
    
    
    
    
    
    
    
    
    
    204Total cost
per ounce of gold ($)2
    
    
    
    
    
    
    
    
    
    
    278
 Our 40% share of gold production for CGR, including the Crown Section and
ERPM Section, was 96,878 ounces in fiscal 2004 compared to 77,239 ounces in
fiscal 2003, and 138,665 ounces for fiscal 2002. The increase in fiscal 2004 is
due to increased output from the ERPM Section, included for only a portion of
fiscal 2003, as this Section was acquired on November 1, 2002. The decrease in
output from fiscal 2002 to fiscal 2003 was as a result of the sale of 60% of
CGR to KBH, effective July 1, 2002. Our 40% share of gold production from the Crown Section was 51,982 ounces
in fiscal 2004, which was lower than our 40% share of gold production of 56,495
ounces in fiscal 2003. The decrease is due to a decline in ore processed from
11,810 Mt in fiscal 2003 to 11,052 Mt in fiscal 2004. The yield remained
unchanged at 0.012 ounces per ton. Our 40% share of gold production from the ERPM Section was 44,895 ounces
in fiscal 2004, which was higher than our 40% share of gold production of
20,743 ounces in fiscal 2003. The increase in fiscal 2004 is due to the
increase in production capacity from the underground section and the
commencement of the Cason Dump surface retreatment operation. Total ore milled
during fiscal 2004 doubled from 401 Mt in fiscal 2003 to 875 Mt in fiscal 2004. A discussion follows of the Crown and ERPM Sections: Crown Section Property The Crown Section is situated on the outskirts of Johannesburg, South
Africa and consists of three separate locations. It has mining rights to 5,787
acres (2,342 hectares) and has the right to occupy 1,490 acres (603 hectares)
of freehold property. CGR is in the process of converting these old order
property rights to new order rights under the MPRD Act.   1 As a result of the sale of 60% of CGR to KHB with effect from July 1, 2002
the results of the Crown Section are no longer consolidated as a subsidiary
into our results. Our remaining 40% is now accounted for using the equity
method.2 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 61




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The Crown Central operation is located on the West Wits line within the
Central Goldfields of the Witwatersrand Basin, approximately 6 miles (10
kilometres) west of the Johannesburg central business district in the province
of Gauteng. Access is via Xavier Road on the M1
Johannesburg-Kimberley-Bloemfontein highway. The City Deep operation is located
on the West Wits line within the Central Goldfields of the Witwatersrand Basin,
approximately 3 miles (5 kilometres) south-east of the Johannesburg central
business district in the province of Gauteng. Access is via the Heidelberg Road
on the M2 Johannesburg-Germiston motorway. The Knights operation is located at
Stanley and Knights Road Germiston off the R29 Main Reef Road. History  1979
    
    Rand Mines Limited directors approved the formation of the company Rand Mines Milling
& Mining Limited (RM3) to treat the surface gold tailings created from the underground
section of the original Crown Mines, which had been in operation since the start of
gold mining on the Witwatersrand in the late 1800s.
1982 First plant commissioned at Crown Mines to process surface material.1982
    
    First plant commissioned at Crown Mines to process surface material.1986
    
    Second plant commissioned at City Deep to process surface material.1997
    
    Randgold Exploration Limited and Continental Goldfields of Australia entered into a
joint venture with the intention to establish a company that would acquire dump
retreatment operations on the Witwatersrand. This resulted in the formation of CCGR,
which was incorporated as a public company in South Africa in May 1997. CGR, is a
wholly owned subsidiary of CCGR and consists of the surface retreatment operations of
Crown Central, City Deep and Knights.1998
    
    We purchased 100% of CCGR.2002
    
    KBH purchased 60% of CGR. We were appointed as joint manager of the operation with KBH. Mining and processing The Crown Section undertakes the re-treatment of surface sources deposited
as tailings from non-operational mining sites across central Johannesburg. Material processed by the Crown Section is sourced from numerous secondary
surface sources namely, sand and slime. The surface sources have generally
undergone a complex depositional history resulting in grade variations
associated with improvements in plant recovery over the period of time the
material was deposited. Archive material is a secondary source of gold bearing
material. This material is generally made up of old gold metallurgical plant
sites as well as river bed material. The three metallurgical plants, known as the Crown Mines, City Deep and
Knights, have an installed capacity to treat approximately 11.0 million tons of
material per annum. Up to fiscal 2003, the Crown Section also operated the West
Wits gold plant for the processing of sand and slime. The Crown Section also
includes the ERPM plant discussed below. All of the plants have undergone
various modifications during recent years resulting in significant changes to
the processing circuits. Electricity for South Africa is provided by Eskom, which is government
owned. Eskom is the largest producer of electricity in Africa. In South Africa,
Eskom operates a national power supply grid consisting of 24 power stations
across the country. Electricity to the Crown Section is supplied to the Crown
Central and City Deep business units from separate substations referred to as
Jupiter and Number 15 Shaft Crown Mines, and for the Knights by the Ekhurhuleni
Town Council. Electricity is supplied directly from the national power grid to
the substation and town council at 44,000 volts. Substations, located on mine
sites, transform the power to 6,600 volts for direct supply to the plants. The
power supply is further reduced to 525 volts for smaller devices and equipment. For Crown Central and City Deep, the average annual power consumption is
about 72 GWHr and the maximum demand is about 3.7 MW. For Knights the average
annual power consumption is about 36 GWHr and the maximum demand is about 1.8
MW. 62




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Specific capital expansion projects include: Knights Residue Pipeline Pipeline and installation to transport the waste material (residue) from
the plant to the slimes dam of approximately 13.8 miles (22 kilometers) in
length with a total of $2.0 million spent, $1.8 million during fiscal 2003 and
$0.2 million during fiscal 2004, respectively. City Deep - Mennels Dump Infrastructure to commence with the reclamation of sand from the dump,
including power and water reticulation, construction of a tank farm, pumping
equipment and the reticulation pipeline. This amounted to a total of $0.6
million spent during fiscal 2003. Knights - 4/A/19 Dump Infrastructure to commence with the reclamation of sand from this dump,
including power and water reticulation, construction of a tank farm, pumping
equipment and the reticulation pipeline to the plant. This amounted to a total
of $0.7 million spent during fiscal 2004. Knights - 4/A/18 Dump Infrastructure to commence with the reclamation of sand from this dump,
including power and water reticulation, construction of a tank farm, pumping
equipment and the reticulation pipeline to the plant. This amounted to a total
of $0.5 million during fiscal 2004, $0.4 million during fiscal 2003 and $0.4
million during fiscal 2002. CGR operates three plants with slight variations in design in each plant,
with a processing capacity of approximately 1 million tpm, yielding
approximately 0.01 oz/t (0.4 g/t). The feed stock is made up of sand and slime
which are reclaimed separately. Sand is reclaimed using mechanical front-end
loaders, re-pulped with water and pumped to the plant. Slime is reclaimed using
high pressure water monitoring guns. The re-pulped slime is pumped to the
plant and the reclaimed material is treated using screens, cyclones, ball mills
and CIL technology to extract the gold. As at June 30, 2004, the overall plant
utilization is 95%. City Deep Plant:Commissioned in 1987, this surface/underground plant is
comprised of a circuit including screening, primary, secondary and tertiary
cycloning in closed circuit milling, thickening, oxygen preconditioning, CIL,
elution and zinc precipitation followed by calcining and smelting to doré. In
1998, the plant was converted to a slimes only operation. However, due to
operational difficulties caused by the particulate nature of the slimes, the
milling circuit has subsequently been recommissioned to facilitate the
treatment of sand. As at June 30, 2004 the current operating capacity of the
plant is 220,000 tpm. Crown Mines Plant:Commissioned in 1982, this surface/underground plant
has already been modified and is comprised of a circuit including screening,
primary cycloning, open circuit milling, thickening, oxygen preconditioning,
CIP and CIL, elution, zinc precipitation followed by calcining and smelting to
doré. As at June 30, 2004, the current operating milling capacity of the plant
is 341,000tpm (leach circuit 496,000tpm). Knights Plant:Commissioned in 1988, this surface/underground plant is
comprised of a circuit including screening, primary cycloning, spiral
pre-concentration, milling in closed circuit with hydrocyclones, thickening,
oxygen preconditioning, CIL, elution, electrowinning and smelting to doré. As
at June 30, 2004, the operating capacity of the plant was 352,000tpm. A portion
of the surface material processed in the Knights plant owned by the
Witwatersrand Gold Mining Realisation Trust, is subject to a 6% royalty of gold
revenue received. As at June 30, 2004 this plant also processes 150,000tpm of
surface material from the ERPM Section surface operation, the Cason Dump. 63




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Exploration and development Exploration and development activity at the Crown Section involves the
drilling of existing surface dumps and evaluating the potential gold bearing
surface material owned by third parties that could be processed on a full
treatment basis or purchased outright by the Crown Section. Environmental and closure aspects The Crown Section operates at sites located in close proximity to
significant municipal infrastructure, commercial and residential development.
The major environmental risks remain associated with dust from various recovery
sites, and effective management of relocated process material on certain
tailings dams. The impact of windblown dust on the surrounding environment and
community is addressed through a scientific monitoring and evaluation process,
with active input from the University of Witwatersrand and appropriate
community involvement. Environmental management programs, addressing a wide
range of environmental issues, have been prepared by specialist environmental
consultants and applied specifically to each dust sample recovery monitoring
site and integrated into CGRs internal environmental assessment process.
Although CGR completed a project for thickening re-processed tailings, there
also remains a risk of localized sloughing which can result in that section of
the tailings dam being closed temporarily, with repair work being done to the
dam wall. Water pollution is controlled by means of a comprehensive system of
return water dams which allow for used water to be recycled for use in CGRs
metallurgical plant. Overflows of return water dams may, depending on their
location, pollute surrounding streams and wetlands. CGR has an ongoing
monitoring program to ensure that its water balances (in its reticulation
system, on its tailings and its return water dams) are maintained at levels
that are sensitive to that capacity of return water dams. Dust pollution is controlled through an active environmental management
program for the residue disposal sites and chemical and organic dust
suppression on recovery sites. Short-term dust control is accomplished through
ridge ploughing the top surface of dormant tailings dams. Additionally,
environmentally friendly dust suppressants, such as molasses, are applied. Dust
fall-out is also monitored. In the long-term, dust suppression and water
pollution is managed through a program of progressive vegetation of the
tailings complexes followed by the application of lime, to reduce the natural
acidic conditions, and fertilizer to assist in the growth of vegetation planted
on the tailings dam. A program of environmental restoration that provides for the
rehabilitation of areas affected by mining operations during the life of the
mine is in place. CGR believes the surface reclamation process at the Crown
Section has several environmental merits as it has removed a potential
pollution source and opens up land for development. The Crown Section has
conducted its environmental management program performance assessment, the
results of which will be finalized shortly and submitted to the DME, during
2005. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, CGR has estimated that the total cost for the Crown
Section, in current monetary terms as at June 30, 2004, is $8.4 million. A
total of $0.9 million has been contributed to the Crown Rehabilitation Trust
Fund. This is an irrevocable trust, managed by specific responsible people who
we nominated and who are appointed as trustees by the Master of the High Court
of South Africa. Life of Mine Based upon a gold price of
approximately R90,023 per kilogram (approximately $400 per ounce
based on the average exchange rate for fiscal 2004) at June 30, 2004, our 40% share of the Proven and Probable Ore Reserves
of the Crown Section was 0.3 million ounces. CGR estimates that the life of the
Crown Central and City Deep operations extends up to 2008 and the Knights
operation extends up to 2011. In fiscal 2003, based upon a gold price
of approximately R96,549 per kilogram, our 40% share of Proven and
Probable Ore Reserves of the Crown Section were 0.4 million ounces. The year on
year decrease is mostly attributable to depletion. 64




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ERPM Section Property The ERPM Section is situated on the Central Rand Goldfield located within
and near the northern margin of the Witwatersrand Basin in the town of
Boksburg, 20 miles (32 kilometres) east of Johannesburg. Access is via Jet
Park Road on the N12 Boksburg-Benoni highway. Underground mining and recovery
operations comprise relatively shallow remnant pillar mining in the central
area and conventional longwall mining in the south-eastern area. Surface
reclamation operations including the treatment of sand from the Cason Dump, is
conducted through the metallurgical plant, tailings deposition facilities and
associated facilities. The mine exploits the conglomeratic South Reef, Main Reef Leader and Main
Reef in the central area and the Composite Reef in the south-eastern area. The planned controlled closure of the underground operations at ERPM,
which has been postponed due to the current reduction in costs and improved
productivity at the mine, encompasses the following process:  
    
    Limited pumping is to be done at South West Vertical shaft, or SWV
Shaft, from June 1, 2004;
    
    Underground mining operations at Far East Vertical Shaft, or FEV
Shaft, will cease at the end of September 2004;
    
    The reclamation of underground equipment at FEV Shaft will commence
in October 2004 and extend to March 2005; and
    
    Mining operations at Central Shaft will cease at the end of March
2005 or a later date, depending on prevailing circumstances. History  1895
    
    Formation of East Rand Proprietary Mines Limited.1991
    
    The FEV shaft was commissioned.1999
    
    The company was liquidated in August 1999. The mine was run by a
small number of employees during liquidation. Underground flooding
continued during liquidation.2000
    
    KBH took over control of the mine in January 2000. Operating as
Enderbrooke Investments (Pty) Limited, or Enderbrooke, and employing
an outside contractor, the mine re-commenced mining operations in
February 2000.2002
    
    CGR purchased 100% of ERPM, from Enderbrooke.2003
    
    Underground fire at FEV Shaft, in February 2003. There was also a
loss of Hercules Shaft in June 2003 and the loss of secondary outlet
at the FEV shaft in November 2003.2004
    
    In July 2004 it was determined that the underground section would
undergo a controlled closure program ending March 2005. The closure
program has been postponed due to the current reduction in costs and
improved productivity at the mine. Mining and processing Underground mining operations at the ERPM Section are comprised of two
vertical shafts known as FEV Shaft, and the Central Shaft. There are also three
additional shafts namely the South East Vertical Shaft, or SEV Shaft, used for
the transport of employees and materials and the hoisting of rock, the SWV
Shaft and Hercules that are used for water pumping only. The Cason Dump Project
is the retreatment of surface material mined from the defunct Cason shaft. At the FEV shaft, the Composite Reef is mined. This reef accounts for all
the gold in the eastern portion of the mine. A high-grade concentration of
gold, or payshoot, of the Composite Reef occurs in an arc which decreases in
gold value from the northwest to the southeast. This high-grade payshoot is the
result of sedimentological erosion and the reworking of the older gold-bearing
pebble horizons with the gold being concentrated within the younger Composite
Reef. 65




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In addition, in the mining area accessed from the FEV shaft, there is a
significant fault development that trends
roughly north-south and is exposed in the western faces. Faults in this area
generally have small throws and are easily negotiated. Routine cover drilling
is in place and several holes that are 650 feet (198.1 metres) in length have
been drilled towards the east to locate a fault that appears to be seismically
active. These holes indicate that future production will not be impacted by
this fault. In the immediate short-term; however, as the mining activity
approaches this geological feature, the risk of seismicity increases. In November 2003, the Hercules tertiary shaft was closed due to a
collapse. At present, the FEV shaft and the Central shaft are used for mining
and the SWV shaft and Hercules shaft are used for water pumping only. The SEV
shaft is used for hoisting rock and lowering material. A minimum of R17 million
($2.7 million) is required to be spent immediately in order to upgrade the
shaft infrastructure to ensure legal compliance. At June 30, 2004 the processing of ore from the underground section takes
place in the ERPM plant with 65,000 tpm milling capacity and a 100,000 tpm of
treatment capacity. An operational reassessment of the underground operations was undertaken
in April 2004. Formal notice under the South African Labor Relations Act was
issued on May 4, 2004, which required a review period of no less than 60 days
to assess the operational performance of the ERPM underground operations to
consider options to restore the operations to profitability. A task team
comprising management, union representatives and labor was established to
assess the proposals and make a final recommendation. On July 4, 2004, ERPM management announced that the underground mining
operation was not sustainable, even at a higher Rand-gold price of R2,650 per
ounce. As a result, a controlled closure program of the underground section was
implemented and was expected to be completed by March 2005. Following the
retrenchment of 806 employees in August 2004 at a cost of $0.6 million (R3.7
million), the mine has achieved a reduction in costs coupled with improved
productivity. As a result, the original planned closure of the underground
section has been postponed. It is estimated that approximately 1,480 employees
could be retrenched at a cost of approximately $1.9 million (R12.3 million) if
the closure program is completed. The remainder of the employees will either be
transferred within that group, leave the service of the company through natural
attrition or remain to work on the Cason Dump. Surface mining of the Cason Dump will continue, with treatment through the
Knights plant for a further 6 years, based on the current rate of production of
approximately 150,000 tpm. The design capacity from surface operations is
200,000 tpm. The success of the controlled closure process and the continuation
of the Cason Project are dependent on the ongoing support of all stakeholders
including labor, the unions, creditors and funders. Should any one of the
stakeholders not co-operate during this process, the mine could be forced into
liquidation resulting in further losses to employees, creditors and
stockholders. Electricity for South Africa is provided by Eskom, which is government
owned. Eskom is the largest producer of electricity in Africa. In South Africa,
Eskom operates a national power supply grid consisting of 24 power stations
across the country. Electricity to the ERPM Section is provided to the Cason
Dump, SEV and FEV Shafts from the Bremmer substation, located in close
proximity to the mine in Boksburg. Transmission is at the rate of 88,000 volts.
The Simmer Pan substation, located approximately 10 miles (16 kilometers) away
from the mine site in Germiston, supplies the SWV and Hercules Shafts.
Transmission is at the rate of 44,000 volts. The two substations, located on
mine site, transform the power to 6,600 volts for direct supply to the shaft
winder and air compressors. The power supply is further reduced to 525 volts
for smaller devices and equipment used on the mine. The average annual power
consumption is about 240 GWHr and the maximum demand is about 52 MW. The on-mine substations are older in nature and undergo annual infrared
testing to identify hot connections which are potential fire hazards and are
subject to regular maintenance which includes the inspection of the settings,
blades and changing the transformer oil in the circuit breakers. 66




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Several major capital expansion projects were conducted over the period
fiscal 2002 to fiscal 2004, including infrastructure to reclaim the Cason Dump,
of $6.8 million. Exploration and development Exploration and development activity has been curtailed at the ERPM
Section with the decision to close the underground section by March 2005 or a
later date, depending on prevailing circumstances. In fiscal 2004, further
drilling of the Cason Dump was undertaken to complete the feasibility study for
the retreatment of the surface source. The dump was created from 1922 to 1959,
when mining from the Cason shaft took place. The grade profile ranges from 0.01
oz/t to 0.10 oz/t (0.2 g/ton to 3.3 g/ton). Environmental and closure aspects There is a regular ingress of water into the underground workings of the
ERPM Section, which was contained by continuous pumping from the underground
section. On May 31, 2004, ERPM
stopped continuous pumping of water from the underground section for financial
reasons due to the withdrawal of the subsidy and the low Rand gold price making
the cost of full time pumping unaffordable, with occasional pumping to surface
conducted on weekends. Studies on the estimates of the probable rate of rise of
water have been inconsistent, with certain theories suggesting that the
underground water might reach a natural subterranean equilibrium, whilst other
theories maintain that the water could decant or surface. A program is in place
to routinely monitor the rise in water level in the various underground
compartments and there has been a substantial increase in the subsurface water
levels. There is a need for further studies to be undertaken so as to qualify
and quantify this risk more analytically. After the final phase of the planned closure of the underground operations
at ERPM which was expected to be completed in March 2005, but has been
postponed, only reclamation of underground equipment will take place. During
this time the underground workings at the FEV Shaft will become flooded. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, ERPM have estimated that the total cost for the ERPM
Section, in current monetary terms as at June 30, 2004, is $5.4 million. A
total of $21,146 has been contributed to the ERPM Rehabilitation Trust Fund.
This is an irrevocable trust, managed by specific responsible people who we
nominated and who are appointed as trustees by the Master of the High Court of
South Africa. Life of mine Based
upon a gold price of approximately R90,023 per kilogram
(approximately $400 per ounce based on the average exchange rate for
fiscal 2004) at June 30, 2004, our 40% share of Proven and Probable Ore Reserves of
the ERPM Section was 0.2 million ounces, of which 11,000 ounces relate to the
underground section which is scheduled for closure by March 2005 or a later
date, depending on prevailing circumstances. The remaining 165,000 ounces
relate to the Cason Dump surface material which, based on the estimated rate of
production, will be processed over a remaining 6 year period ending in fiscal
2010. Based upon a gold price of approximately R96,549 per kilogram at June 30, 2003, our 40% share of Proven and Probable Ore Reserves of
the ERPM Section were 0.8 million ounces. The year on year decrease is mostly
attributable to depletion and changes in the economic factors. 67




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Papua New Guinea Porgera Mine Overview Through our wholly-owned subsidiary, DRD (Porgera) Limited, we own a 20%
interest in an unincorporated joint venture, the Porgera Joint Venture, which
holds certain mining leases, easements and exploration licenses which form part
of the Porgera gold mine, or Porgera, in the highlands of Papua New Guinea, or
PNG. We purchased this interest in October 2003 for a purchase consideration of
$77.1 million. Placer Dome Inc. is the owner of a 75% interest. The remaining
interest of 5% is held by Mineral Resources Enga Limited, or MRE (on behalf of
Enga Provincial Government and landowners in PNG). All of the various mineral
tenements making up Porgera are exploited collectively by the joint venture
partners. An affiliate of Placer Dome Inc., Placer (PNG) Limited, is the operator of
Porgera and is subject to the control of a management committee made up of
representatives of the joint venture partners. Decisions regarding the assets
which comprise Porgera, including any sale thereof, are made collectively by
the parties through the management committee. The parties also have a right of
first refusal with regard to certain assignments of assets which make up
Porgera. Each party has the right to own and to take in kind and dispose of its
share of all ores, concentrates and refined products produced by Porgera. Each
party also pays for its proportionate share of the costs associated with the
mining activities. The net book value of our share of property, plant and equipment, deferred
stripping and purchased undeveloped mineral interests is $61.7 million at June
30, 2004. As at June 30, 2004, the workforce at Porgera comprised about 2,210
employees of whom 1,960 are PNG nationals. In addition, there are approximately
510 contractors of whom 480 are PNG nationals. Of the total workforce of 2,720,
approximately 70% are local residents, while the remainder work a
fly-in-fly-out basis. We understand that Placer Dome Inc., in conjunction
with other primary industry producers, is continuing to work with the PNG
Government to address causes of civil unrest which affected production in 2002. Our 20% attributable share of production for fiscal 2004 was 147,475
ounces at a cash and total cost of $215 and $291 per ounce, respectively. Production from Porgera is subject to a 2% net smelter royalty payable to
the National Government Department of Mining which then distributes it to the
Enga Provincial Government, the Porgera District Authority, and local
landowners. The Proven and Probable Ore Reserves of the Porgera Joint Venture at
December 31, 2003, are estimated at 7.2 million ounces of gold with a projected
life of 11 years. Our 20% attributable share of estimated Proven and Probable
Ore Reserves as at December 31, 2003, before Ore Reserve depletion, is 1.4
million ounces. Our attributable 20% share of the Proven and Probable Ore
Reserves in the Porgera Joint Venture is based on the information disclosed by
Placer Dome Inc. (which has a 75% interest in the Porgera Joint Venture) in its
Annual Report for the fiscal year ended December 31, 2003, as filed with the
SEC on Form 40-F on March 5, 2004. The Porgera Ore Reserves are estimated as
at December 31, 2003. Information for the 6 months ended June 30, 2004 is not
available for inclusion. Property The Porgera deposit and the mine is located in the Enga Province in the
highlands of PNG, approximately 7,260 feet (2,213 metres) to 8,910 feet (2,716
metres) above mean sea level, about 82 miles (132 kilometres) west of the
established town of Mount Hagen, 275 miles (443 kilometres) northwest of Port
Moresby, and about 425 miles (684.0 kilometres) by road from the coastal port
of Lae from which all materials are freighted. The road is partly paved and passes through unstable mountainous terrain with many major river crossings.
Personnel are transported by bus, fixed wing aircraft and helicopter to mine
site. 68




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Temperatures range from 50 to 77 degrees Fahrenheit (10 to 25 degrees
Celsius) and rainfall averages 3,650mm per year. The vegetation is largely
rainforest below an elevation of 7,920 feet (2,414 metres). The Porgera Joint Venture has approval to work the Porgera deposit within
the agreed development plan under the terms of the Porgera Mining Development
Contract, or the Porgera Contract, between the Government of PNG and the joint
venturers. The Porgera Contract specifies, amongst other matters, the annual
rents that must be paid for the Special Mining Lease, and the various classes
of compensation that are payable to the landowners for the various land uses.
The Special Mining Lease, which expires in 2019, encompasses approximately
2,240 hectares including the mine area and the areas in which the project
infrastructure is located. There is no expiration date for the Porgera
Contract, but it is tied to the continuation of the Special Mining Lease.
Leases for Mining Purposes have also been awarded by the Government for land
use associated with the mining operation such as waste dumps, campsites, water
supply, power generation and an airstrip. The Porgera Joint Venture holds a
mining lease for the operation of a limestone quarry for the supply of lime to
the process plant. Permits are held for water use, including run-off from
unconsolidated surfaces, such as the open pit, the underground mine and the
waste dumps. These water use permits are renewable on a regular basis and are
subject to public hearing before approval. The Porgera Joint Venture runs an
environmental monitoring program to ensure compliance with the requirements of
these permits. The Porgera Joint Venture also maintains two Exploration Licenses, or ELs,
which comprise the Special Mining Lease and some key Leases for Mining
Purposes. The Exploration Licenses are the subject of ongoing exploration
expenditure. We have a legal dispute with Placer Dome Inc., regarding two
Exploration Licenses namely EL454 and EL858 in which we believe we have a 20%
interest. On August 9, 2004 we placed a caveaton the title register in order
to prevent changes taking place without notification to us. The Porgera Joint
Venture holds mining easements for utilities such as power transmission lines
and water supply pipelines. Porgera has on a number of occasions experienced delays in the granting of
operating permits and licenses necessary for these businesses to conduct their
lawful operations. Although there has never been an interruption to operations
due to an issue of this nature, if at any time in the future permits essential
to lawful operations are not obtained or exemptions not granted, there is a
risk that Porgera may not be able to operate for a period. Future government
actions cannot be predicted, but may impact the operation and regulation of
mines including Porgera. Porgera is operated subject to the requirements of the PNG Mining Safety
Act and Regulations as applied by the Mines Inspectorate. 69




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History  1938
    
    Alluvial gold was first reported at Porgera.1975
    
    Placer (PNG) Limited, or Placer (PNG), a wholly owned subsidiary of
Placer Dome Inc., became the operator and owner of a two-third interest in
an exploration venture with Mount Isa Mines Limited (now MIM Holdings
Ltd.), or MIM.1979
    
    A Joint Venture Agreement was signed whereby Placer (PNG), MIM and New
Guinea Goldfields Ltd. (a subsidiary of Goldfields Limited) each held a
one third interest and the Independent State of Papua New Guinea, or the
State, had the right to acquire at cost up to a 10% interest in the
project if developed.1989
    
    The joint venturers application for a Special Mining Lease was approved
in May and construction began immediately. The State accepted its full 10%
entitlement (inclusive of 5% on behalf of the Enga Provincial Government),
thus diluting each of the other joint ventures down to 30% each. The State
took its interest in the name of a corporate nominee, Mineral Resources
Porgera Limited.1990
    
    Commercial production commenced in August. MIM sold its 30% interest to
Highlands Gold Ltd., or Highlands Gold.1993
    
    Placer (PNG), Goldfields and Highland Gold each sold a further 5% to the
State (15%). The additional 15% was taken by the State in the name of a
corporate nominee, Orogen Minerals (Porgera) Limited.1997
    
    Placer Domes joint venture interest was increased from 25% to 50% as of
January 1, 1997 following the completion of the acquisition of Highlands
Gold.1999
    
    The State reorganized the holding of Mineral Resources Porgera Limited by
transferring a 5% direct interest in the Joint Venture to Mineral
Resources Enga Limited owned by the Enga Provincial Government and project
area landowners.2002
    
    Placer Domes joint venture interest in Porgera was increased from 50% to
75% through the acquisition of AurionGold. The State reorganized its
holdings in the Joint Venture such that Oil Search Limited then held a 20%
direct interest in the Joint Venture through two subsidiaries.2003
    
    We acquired the shares of Oil Search Limited in Orogen Minerals (Porgera)
Limited and Mineral Resources Porgera Limited through the amalgamation of
Mineral Resources Porgera Limited with Orogen Minerals (Porgera) Limited
and Dome Resources (PNG) Limited, our wholly-owned subsidiary. Geology and Mineralization Mineralization is structurally controlled and occurs within the Porgera
diorite intrusive complex, around the margins of, and within, the intrusive
bodies. The Porgera orebody is an epithermal style orebody hosted within thermally
metamorphosed sediments. The known orebody extends for up to 3,050 feet (930
metres) along strike. The maximum width across strike is 330 feet (100.6
metres), but the width is commonly no more than 65 to 98 feet (20 to 30
metres). The intrusive diorite complex has many individual stocks and dykes.
The rocks are competent however they tend to be brittle, and in the vicinity of
the orebody, are extensively veined and brecciated. The intrusive bodies tend
to be concentrated towards the footwall of the deposit. The gold and electrum metal association is the source of the high gold
grades found in the deposit. The majority of gold occurs as submicroscopic gold
intimately associated with and disseminated throughout pyrite. Mining and Processing The Porgera deposit is currently being extracted using open pit and
underground mining methods. Mill feed, on a tonnage basis, was sourced 90% from
open pit and run of mine stockpiled ore, and 10% from underground. Underground
ore accounted for 15% of the contained gold in mill feed. Open pit mining is a typical hard rock operation utilizing 33 feet (10
meter) benches. The current mining fleet of DML blast hole drills, O&K RH200
hydraulic face shovels and Caterpillar 789 haul trucks, gives a nominal
capacity in the order of 80 million tonnes per annum. Waste stripping
requirements will reduce as the open pit mining operation approaches closure in
2006, allowing a progressive retirement of the mining fleet. 70




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Open pit mining is currently in stages 4 and 5 of a 5 stage open pit
mining plan. Stage 4 will provide the principal source of ore in calendar 2004
and into calendar 2005. Stage 5 will replace stage 4 as the principal ore
source during calendar 2005 through to stage completion late in 2006.
Underground mining was suspended in 1997, and subsequently recommenced in 2002.
Underground production is now expected to continue through to late 2008. On
completion of the open pit operation, the mill will continue to process
accumulated lower grade ore stockpiles through to 2015, supplemented by the
underground ore until 2008. Gold production from the open pit and underground
from 2008 onward will fall, as lower grade stockpile ore replaces the open pit
ore feed. The Porgera plant was completed in 1996. The mill has undergone four
stages of improvement and expansion, since it was first commissioned in
September 1990. The last expansion was completed in 1996 with the installation
of additional milling, floatation and leaching capacity increasing the nominal
throughput from 10,000 tonnes per day to 17,700 tonnes per day. Further
improvements were made in 1999 with addition of further flotation capacity and
the installation of gravity concentrators to remove free gold and to improve
overall recoveries. The main water supply for the mine is the Waile Creek Dam, located
approximately 7 kilometres (4 miles) from the mine. Water for the grinding
circuit is also extracted from Kogai Creek, which is located adjacent to the
grinding circuit. The mine operates four water treatment plants for potable
water and five sewage treatment plants. The principal source of power for Porgera is supplied by a 73-kilometre
(45 mile) transmission line from the gas fired Hides Power Station. The station
has a total output of 62 MW. A back up diesel power station is located at the
mine and has an output of 13MW. The average power requirement of the mine is
about 60 MW. Average annual power consumption is 518 GWHr. The most significant capital expenditure during fiscal 2004, related to
deferred stripping, and our 20% share amounted to $4.1 million. Exploration and Development The Eastern Deeps and Roamane Fault Zones were upgraded to indicate
mineralized material during the year ended December 31, 2003. An underground
drilling program is currently underway on the Eastern Zone to delineate
additional mineralized material that may be mined from underground. Exploration plans for calendar 2004 call for the evaluation of prospective
near-mine surface targets as identified by previous surface work and the recent
structural and fluid flow studies. The objective is to discover a near-mine
mineralized material amenable to open pit or underground mining. The existing
geological database creates an opportunity for focused re-evaluation of
previous data using revised geological and structural models and current
economic hurdles. These targets may be evaluated by a combination of surface
and underground drilling. Approval was granted for calendar 2004 to extend the regional exploration
program within remaining exploration leases held by the Porgera Joint Venture.
Collation of previous research and limited additional research was completed in
2003 and is the basis of regional exploration targeting. Life of Mine As at December 31, 2003, our attributable portion of Proven and Probable
Ore Reserves was 1.4 million ounces, with an expected remaining life of 11
years. In respect of the our attributable 20% interest in the Porgera Joint
Venture, Ore Reserves were determined as at December 31, 2003 assuming an
average long-term gold price of $325 per ounce and average long-term exchange
rate of A$1.67 = $1.00 and K4.00 = $1.00. This is based on the information
disclosed by Placer Dome Inc. (which has a 75% interest in the Porgera Joint
Venture) in its Annual Report for the fiscal year ended December 31, 2003, as
filed with the SEC on Form 40-F on March 5, 2004. There is no comparative
amount for fiscal 2003 as we only acquired our interest in fiscal 2004. 71




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Environmental and Closure Aspects Porgera is located in extremely rugged mountainous terrain, subject to
seismic activity, high rainfall and landslides. In such conditions construction
of a tailings impoundment would be very difficult and the risk of an
engineering failure high. Therefore the Papua New Guinea Government approved
riverine disposal as the most appropriate method for treated tailing and soft
incompetent waste rock. Competent rock is stored in stable waste dumps. The
mine follows a government approved Environmental Management and Monitoring
Program. In 1996, an independent study was undertaken by the Commonwealth
Scientific & Industrial Research Organization, or CSIRO, an Australian based
independent research organization, to assess the mines impact on the
downstream river system and local people. In its report CSIRO made certain
recommendations to the Porgera Joint Venture that we believe have either been
implemented or are in the advanced stages of implementation. A few have been
rejected due to their impracticality. An advisory group, called the Porgera
Environmental Advisory Komiti, or PEAK, was formed as a result of the CSIRO
recommendations. PEAK comprises representatives from the Papua New Guinea
Government, Papua New Guinea and international non-governmental organization
groups, Placer (PNG) Limited and independent technical experts.
The primary function of PEAK is to enhance understanding and provide
transparency of Porgeras environmental (physical and social) issues with
external stakeholders and to assist in reviewing its environmental performance
and public accountability. In 2002, PEAK had its terms of reference expanded to
include mine closure. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, we have estimated that our attributable 20% portion of
total costs for Porgera, based on information provided by the operator, Placer
(PNG) Limited, in current monetary terms as at December 31, 2003, is $6.4
million. This has been included in the provision for environmental
rehabilitation, reclamation and closure costs on the balance sheet. 72




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Current Production Our 20% interest in the Porgera Joint Venture was acquired with effect
from October 14, 2003. Attributable (20%) production since the date of
acquisition amounted to 147,475 ounces at a cash cost and total cost per ounce
of $215 and $291, respectively. The following table details our attributable (20%) operating and
production results from the Porgera Joint Venture for fiscal 2004. Year ended June 302004ProductionSurface OperationsOre mined
(000 tons)
    
    
    1,038Recovered grade (oz/ton)
    
    
    0.142Gold produced (ounces)
    
    
    147,475Results of Operations ($)Revenues
(000)
    
    
    60,445Production
cost (000)
    
    
    31,650Non-US GAAP Financial DataCash cost
per ounce of gold ($)1
    
    
    215Total cost
per ounce of gold ($)1
    
    
    291
   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 73




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Tolukuma Gold Mine Overview Dome Resources (Pty) Limited, or Dome, was incorporated on May 17, 1984
under the name Dome Resources NL. Dome owned and operated the Tolukuma gold and
silver mine in PNG. During September 1999, we purchased 28,693,002 (19.93%) of
Domes ordinary shares for A$0.30 ($0.19) per share. In June 2001 we acquired
all the shares in Dome which we did not already own. As at June 30, 2004 the mine is a low capacity (18,000 tpm capacity),
high-grade (0.39 ounces per ton) operation and employs approximately 750
people, including approximately 70 contractors. Property The Tolukuma Section consists of one mining lease, ML 104, covering 1,898
acres (768 hectares) and five current exploration licenses covering an area of
approximately 513,962 acres (208,000 hectares), two licenses under renewal
covering 125,525 acres (50,800 hectares) and four licenses under application
totaling 1,073,884 acres (434,600 hectares). The total exploration area
amounts to approximately 2,456,144 acres (994,000 hectares). The following
table details the status of our mining lease and exploration licenses. License
    
    Expiration DateML104
    
    August 29, 2012EL580
    
    April 4, 2005EL683
    
    April 3, 2005EL894
    
    Under renewal1EL1264
    
    April 29 2005EL1271
    
    Under application2EL1284
    
    April 18, 2006EL1297
    
    Under renewal3EL1327
    
    June 23, 2005EL1352
    
    Under application2EL1366
    
    Under application2EL1379
    
    Under application2
 All current mining activities are carried out under the terms of Mining
Lease 104 (ML 104), granted under Section 38 of the Papua New Guinea Mining Act
of 1992 and Mining Regulations 1992. The lease is granted for a term of 20
years expiring on August 29, 2012, and is renewable for further periods not
exceeding 10 years each. The mine is located about 62 miles (100 kilometres) north of Port Moresby
in the Central Province of Papua New Guinea at an elevation of 5,115 feet
(1,560 metres) above mean sea level. The mine is situated in very steep
mountainous terrain that is not accessible by road. All transport of employees,
materials and equipment to and from the mine is by helicopter. As a result,
approximately 24% of the production costs of the mine is spent on
transportation and logistics, including the cost of jet fuel. The Tolukuma
Section is worked on a fly-in-fly-out basis, with all staff being
accommodated in quarters when at the mine.   1 EL894 initially expired on April 3, 2003.2 EL1271, EL1352, EL1366 and EL1379 are new exploration licenses.3 EL1297 initially expired on August 30, 2004. 74




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The climate of the Central Province area is temperate with year round rainfall.
Temperatures range from 50 to 77 degrees Fahrenheit (10 to 25 degrees Celsius)
and rainfall averages 144 inches (3,650mm) per year. The vegetation is largely
rainforest and thick vegetation associated with high rainfall and mountainous
regions. At the Tolukuma Section, the traditional landowners are the Yulai people who
belong to the Auga tribes  Auga being their main river. There are three clans
and at the head of each clan is a chief. The population around the mine is
approximately 2,700, with 700 being landowners and the rest made up of
outsiders coming into the area to seek employment. There is a Memorandum of
Agreement, or MOA, between National Government, Provincial Government, the
landowners and Tolukuma Gold Mines Limited, or Tolukuma. The MOA is a working
document which indicates the responsibilities of each party and their role in
the sustainable development of the community. The MoA is reviewed every two
years, with an MoA to be mutually agreed by the parties if revised.
Negotiations for a revised MoA are underway. Production from the Tolukuma Section is subject to a 2% net smelter royalty.
This royalty is distributed to the Yulai future generation fund, a landowners
association, the landowners and to a Central Provincial Government fund for
projects outside the mine area. History  1984
    
    Dome Resource (Pty) Limited was incorporated on May 17, 1984, under the
name Dome Resources NL, or Dome.1987
    
    Tolukuma mine was discovered by Newmont Proprietary Limited.1993
    
    Tolukuma Gold Mines Limited, or Tolukuma, was acquired by Dome from
Newmont Second Capital Corporation.1999
    
    In September, we purchased an initial stake of 19.93% of Dome.2001
    
    In June, we acquired all outstanding shares of Dome we did not already
own, bringing our shareholding to 100%. Exploration and development Exploration within the mining lease, ML 104, has recently been expanded
with the purchase of two underground diamond drill rigs, including one with
long hole capability, and an additional rig for surface drilling. This brings
the number of rigs on site to five in fiscal 2004, compared to only one in
fiscal 2003. An air-driven Kempe rig, commissioned in December 2003, is used
for short holes underground, currently targeting the down dip extension of the
Tinabar ore body and an LMA90 drill rig, commissioned in January 2004, is used
for longer exploration holes, initially in the Gulbadi south area and the
Milaihamba structural target. Another manportable DT600P was purchased to
support the existing manportable DT250P on surface drilling of ML104 and later
the Saki, Sere Sere, Taula and Taula North prospects in Exploration License 580
followed by other regional targets. The LY44 is also currently drilling ML 104
targets. Drilling for the year concentrated mainly within ML 104, testing the
extensions of known mineralized structures such as the Zine, 120, Gulbadi,
Tolukuma, and Tinabar veins, with the aim of delineating and defining
additional mineralized materials for mill feed. New structures that have also
been defined for drill testing include the Lock, Tofun, and Banana vein
structures. In fiscal 2004, exploration expenditure of $1.65 million was incurred. Geology and Mineralization The Tolukuma deposit is a narrow epithermal low sulphidation
gold/silver/quartz/adularia vein system noted for its high-grade bonanza
style mineralization. The primary structures extend 4.4 miles (7 kilometres) on
strike with economic mineralization usually occurring in well-defined zones on
dip and along strike. 75




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The Tolukuma deposit is comprised of two sub-parallel structures that are
connected by a series of linked structures trending generally from north west
to south east. Individual quartz veins average 0.6 feet to 6.6 feet (0.2 metres
to 2.0 metres) in width over a strike length of more than 0.9 mile (1.4
kilometres). Likewise, the Zine and 120 veins located approximately 250 metres
to the east, have similar geological features. These are connected by a series
of linked structures tending generally in a south east to north west direction. All the current Ore Reserves are located within these veins in five
sections that have different geological characteristics. These zones and our
percentage Ore Reserve are, from north to south, Tolukuma (3.9%), Tolimi
(4.8%), Tinabar (33.5%) and Gulbadi (51.7%). The Gulbadi zone includes the
Gulbadi and Gulbadi X-veins. The Zine and 120 veins comprises 6.1% of the Ore
Reserves. Clay zones of variable width are located in the intersections on two
or more structures. Minor loops off the main veins, minor splay veins and minor
cross veins are excluded from the potential reserves, although they are mined
at times. Infill diamond drilling of the Zine and 120 veins is continuing and
an underground diamond drilling program has commenced. Mining and processing In 1995, the Tolukuma plant was built and at June 30, 2004, the current
production is approximately 90% from underground mining and 10% from open pit
mining. All open pit and underground mining is conducted using mining plant and
equipment owned by the Tolukuma Section. The average mining depth at the
Tolukuma Section is 490 feet (150 metres) below surface or approximately 4,760
feet (1,450 metres) above mean sea level. Access to underground workings is via
decline shafts. Mining methods vary according to local ground conditions and
are generally mechanized cut and fill shrinkage methods. The metallurgical plant is compact and is located on a steep ridge in very
mountainous terrain. Ore is trucked to the plant, then milled and treated
through a conventional gravity and CIL circuit. The plant consists of a closed
circuit semi-autogenous mill that at June 30, 2004 is capable of processing
18,000 tpm. Cyanide in the residue is neutralized in a detoxification plant
prior to revirine discharge. Tolukuma is situated in a remote area, and as a result is forced to be
self sufficient with regard to the generation of power. Power is generated
through a combination of diesel driven generator sets and hydro-turbine driven
generator sets. Three hydro units are installed, capable of generating 1.8 MW
of power. These units are dependant on the supply of adequate water. These
generators supply 32,000 volts via overhead lines to the mine, where it is
transformed down to either 6,600 volts, 1,000 volts or 525 volts, depending on
the requirement. On average the mine consumes 30 MW of power. Any shortfall
from the hydro units is made up by the diesel units (a total of
3.2 MW of
diesel generating power is installed). Several capital projects were conducted over the period fiscal 2002 to
fiscal 2004, including expansion of the mobile plant and additions to equipment
in the plant ($2.3 million) and acquisition of plant and equipment ($1.2
million). Environmental and closure aspects The Tolukuma Section has been developed in accordance with an
environmental plan approved by the Papua New Guinea authorities in July 1994.
To ensure continuing compliance with the Papua New Guinea Governments
regulatory requirements, Tolukuma has implemented a broad-based environmental
management monitoring program. The measures we have taken to implement this
program include:  
    
    regular monitoring of water quality to ensure discharge is within the
legislative limits set by the Papua New Guinea Government;
    
    establishment of an experimental plant nursery for the development of rapid-growth species;
    
    site rehabilitation;
    
    appointment of an experienced site rehabilitation consultant;
    
    an aquatic survey completed in June 2003; 76




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
    
    appointment of a liaison officer to liaise with down stream
communities and the Department of Environment and Conservation, or DEC;
    
    a stream sediments and water sampling study conducted in March 2004;
    
    support for an independent water and health study of the Auga and
Angabanga Rivers undertaken by the DEC in association with the Central
Province Department of Health, or DOH; and
    
    commissioning an independent health study undertaken by a team from
James Cook University and Angau Memorial Hospital in Lae completed in
March 2003. The Tolukuma Section is compliant with government regulatory requirements.
As part of its ongoing program of discharge management Tolukuma has increased
the percentage of solids removed during the treatment process, increased
dilution of the remaining waste and established an on-site containment area,
which now takes all overburden and retrieved solid waste. Tailings are routinely discharged into the surrounding river systems in
accordance with approved environmental water discharge permits issued by the
DEC under the Papua New Guinea Environmental Act 2000 and Regulations 2000. In
April 2004, the Papua New Guinea Government renewed Tolukumas water discharge
permit for a further 40 years. The Papua New Guinea Government has approved
disposal into certain natural rivers as the most appropriate method for treated
tailings and soft incompetent waste rock because the mines are located in
extremely rugged mountainous terrain, subject to seismic activity, high
rainfall and landslides. Construction of a tailings impoundment would be very
difficult and the risk of an engineering failure high. In order to ensure that mercury discharges from the mine remain within
allowable limits, we conduct monthly monitoring of mercury and other heavy
metals at government mandated water quality inspection points 7 kilometers
downstream of the discharge point and biennial monitoring of stream sediments.
In addition, for internal purposes, we conduct daily monitoring of mercury
levels at the tailings discharge point and approximately 1500 feet downstream
(grab sampling). Our monitoring and data capturing comply with standards set
in our environment management monitoring program and environment plan, both of
which have been approved by the authorities. Prior to discharge, the cyanide
associated with the mining process is degraded in a detoxification process and
levels are monitored daily. This process is unique to our operations in Papua
New Guinea. Oxfam Community Aid Abroad, a non-government organization, in its reports
in 2001 and 2004, expressed concerns that our tailings pose both an
unacceptable environmental threat, as well as a health threat to riverine
communities. In response to these statements and at Tolukumas request,
independent health investigations were conducted by the Department of
Environment & Conservation, Department of Mining, Central Provincial Health and
an independent consultant, reports of which did not find any connection between
the reported allegations of disease outbreak in the Fane area of Central
Province and Tolukuma. In addition to the regular testing of water quality required by the Papua
New Guinea Government, the Tolukuma Section has also commissioned other
independent studies designed to monitor the impact of its activities on fluvial
process and the marine environment. The most recent independent studies were an
aquatic fauna survey conducted in June 2003 and a stream sediments and water
sampling study conducted in March 2004. Our own recordings and the findings of
these studies are inconsistent with the concerns raised by Oxfam Community Aid
Abroad in its reports in 2001 and 2004. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, we have estimated that the total cost for the Tolukuma
Section, in current monetary terms as at June 30, 2004, is $1.1 million. This
has been included in the provision for environmental rehabilitation,
reclamation and closure costs on the balance sheet. Life of Mine Ore Reserves for the Tolukuma Section, as at June 30, 2004, were 0.2
million ounces, determined assuming a gold price of $400 per ounce at an
exchange rate of K3.22 = $1.00 (K1,288 per ounce) using the Kina gold price and
exchange rates as at June 30, 2004. Based on a gold price of $350 per ounce and an exchange rate of K3.26 =
$1.00, at June 30, 2003, the Proven and Probable Ore Reserves of the Tolukuma
Section were 0.1 million ounces. The year on year increase is due to updates to
the geological model based on improved drilling and development information
resulting in a transfer of Ore Reserves. 77




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Current Production Total gold production for fiscal 2004 was 85,715 ounces compared to 68,096
ounces for fiscal 2003 and 71,955 ounces for fiscal 2002. The Tolukuma Section
also produced 180,252 ounces of silver in fiscal 2004 compared to 157,844
ounces of silver in fiscal 2003 and 261,550 ounces of silver in fiscal 2002.
Cash costs1 decreased to $231 per ounce of gold in fiscal 2004 from $281 per
ounce of gold in fiscal 2003, primarily due to the strength of the Kina and the
increase in ounces produced. Total cost per ounce1 of gold decreased to $355
per ounce in fiscal 2004 from $441 per ounce in fiscal 2003 and increased to
$441 per ounce in fiscal 2003 from $370 per ounce in fiscal 2002, mostly due to
the decrease in the production ounces. The following table details the operating and production results from the
Tolukuma Section for the past three fiscal years. Year ended June 30,2004
    
    2003
    
    2002ProductionUnderground Operations
Ore mined (000 tons)
    
    
    218
    
    
    
    177
    
    
    
    184Recovered grade (oz/ton)
    
    
    0.39
    
    
    
    0.38
    
    
    
    0.39Gold produced (ounces)
    
    
    85,715
    
    
    
    68,096
    
    
    
    71,955Results of Operations ($)Revenues (000)
    
    
    32,743
    
    
    
    22,870
    
    
    
    22,050Production cost (000)
    
    
    19,821
    
    
    
    19,105
    
    
    
    17,272Non US GAAP Financial DataCash cost per ounce of gold ($)1
    
    
    231
    
    
    
    281
    
    
    
    248Total cost
per ounce of gold ($)1
    
    
    355
    
    
    
    441
    
    
    
    370
   1Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 78




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Fiji Emperor Mines Limited Overview At October 31, 2004, we own through DRD (Isle of Man) 45.33% of Emperor
Mines Limited, the owner of the Vatukoula mine. The mine located at Vatukoula on the South Pacific island nation of Fiji,
has been in operation since 1933, with 6.7 million ounces of gold produced
since operations commenced. The Emperor mine is a multi-shaft underground mine
and produced approximately 126,000 ounces of gold for the year ended June 30,
2004. The Vatukoula mine is Fijis second largest private employer with over
2,100 employees at June 30, 2004, and accounts for approximately 7.5% of Fijis
national foreign income on that date. On September 13, 2004, Emperor announced an A$20.4 million ($14.6 million)
non-renounceable rights issue, which is discussed in detail under Item 4A.:
History and Development of the Company. Emperors
rights offering closed on November 12, 2004 and we subscribed
for our entitlement under the rights offering. We did not participate
in any shortfall to the rights offer. Property The mine is situated on the north coast of the island of Viti Levu, the
main island of Fiji. Gold mineralization is associated with a volcanic caldera,
and occurs in both flat-lying and steeply-dipping structures, typically less
than a meter in width, principally on the western fringe of the caldera. Mining
is conducted underground from four main shafts exploiting the ore bodies in the
southwest portion of the volcanic margin to the Tavua Caldera, a large shield
volcano about 9 miles (15 kilometres) in diameter and the recently accessed R1
ore bodies situated within the caldera. The main mining licenses include
Special Mining Lease 54, 55 and 56. History 1930
    
    Discovery of alluvial gold in the Nasivi river in Vatukoula.1933
    
    Commencement of mining activities at the Vatukoula mine.1950s
    
    Emperor secures ownership of the Vatukoula mining field.1992
    
    Western Mining Corporation relinquishes its joint venture with respect to the Emperor Gold2003
    
    We acquired a 19.81% interest in Emperor.2004
    
    In July 2004, we increased our shareholding in Emperor to 45.33% through
a conditional takeover offer announced in March 2004. Emperor
appointed Mark Wellesley-Wood as Managing Director and our
Divisional Director: Australasia, Richard Johnson as Non-Executive
Director, both with effect from August 3, 2004.
 Exploration and development Emperor holds three mining tenements Special Mining Lease 54, 55 and 56,
and 100% of the Special Prospecting Licenses for tenements 1201, 1283, 1296,
1344, 1360 and 1411. In addition, Emperor has submitted applications for
Special Prospecting License CX626 situated south of and adjacent to SPL 1411 on
the island of Vanua Levu. Geology and Mineralization Vatukoula is a low-sulphidation epithermal gold deposit associated with
alkaline type igneous rocks in a volcanic setting. This volcanic setting and
rock type is typical of several major gold mines in the southwest Pacific
region, such as Porgera. The ore deposits lie along the margin of the Tavua
volcanic caldera and consist of various types of
quartz-adularia-telluride-auriferous-pyrite fillings deposited in fractured,
faulted and shattered volcanic rocks. 79




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The majority of the Vatukoula mines ore bodies are situated in the
southwest portion of the volcanic margin of the Tavua volcanic caldera, a large
shield volcano about 9.3 miles (15.0 kilometers) in diameter. The more recently
accessed at R1 ore bodies are, however, situated within the caldera. Volcanism commenced about 5 million years ago and ceased about 3.5 million
years ago. The ore bodies were the last major geological event and mineralized
fractures persist throughout the very late stage sediments that filled in the
central part of the caldera. The gold is found as native gold, auriferous
pyrite, and as gold tellurides. Mining and Processing Most of the known ore bodies at Vatukoula are relatively narrow, flat
dipping structures previously mined by room and pillar methods. They are now
mined predominantly by longwall stoping, although throughout the mine a number
of other mining methods, such as sub-level stoping and caving, cut-and-fill,
shrinkage stoping and up-dip mining, are also practiced. The remnants of 50
years of room and pillar mining are also currently being successfully
exploited. Current production at the Vatukoula mine comes from four mining sections
that are named according to the shaft or drive access: Smith Shaft, Philip
Shaft, R1-Cayzer Shaft and the Emperor Decline Shaft. The Emperor plant built in 1997, consists of two parallel grinding mills,
namely a Smidth grinding mill and a larger Morgardshammer mill. At June 30,
2004 the combined capacity of the mills is approximately 66,000 tpm. There are
also two flotation circuits, one for slimes washed from the ore, and a
conventional sulphide circuit for the grinding circuit product. Both
concentrates are combined in a thickener and roasted before passing through a
CIP circuit. Loaded carbon is stripped and the gold-rich solution combined with
the calcine rich solution for zinc precipitation and smelting into bars. As at
June 30, 2004, the plant utilizes approximately 75% of its capacity. Current production No production or related revenue and costs have been accounted for in
fiscal 2004 or 2003, as we only owned 19.78% as at June 30, 2004, and 19.81% as
at June 30, 2003 and, therefore, treated our interest in Emperor as a listed
equity investment. Refer to note 11 of the audited financial statements for
further details. Exploration Projects Our exploration and project development activities during fiscal 2004
continued to enhance our growth strategy by growing the Tolukuma Section
(through both brownfields and greenfields exploration) and the refinement of
the Argonaut Project geological modeling and resource estimation. Total
exploration and project expenditure for fiscal 2004 was $1.65 million for the
Tolukuma Section and $0.17 million for the Argonaut Project. Due to the lower
Rand gold price at June 30, 2004, we have not yet commenced with the detailed
drilling program in the Argonaut Project and are in the process of applying for
the conversion of our old prospecting permit to new order rights under the new
MPRD Act. 80




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South Africa Argonaut Project The Argonaut Project represents the southern down-dip extension of the
Central Rand Goldfield. The strike length of the area covered by the mineral
rights covers approximately 19 miles (30 kilometers) from Durban Deep in the
west to ERPM in the east with the possible exploitation of part of the
potential mineralized material striking 3 miles (5 kilometers) east/west from
City Deep Mine to Robinson Deep Mine and extending from 9,900 feet to 13,200
feet (3,018 meters to 4,023 meters) below surface. Most of the main exploration
target area incorporated by our 42 square kilometers of mineral rights above
the 5,000 meter depth contour of the Main Reef Leader is covered by urban
residential development. The mining activity may, as a result, give rise to an
increase in seismicity and associated environmental pollution in the immediate
proximity of the mine. If operated, this would be the first mine in the world
to operate at such depths and the seismicity associated with the mining
activity and the impact on the health and safety of the mine employees working
in the underground section is unknown at this stage. The environmental risks
could result in public opposition to the project and delay our application for
the necessary permits or prevent the implementation of the project. During fiscal 2004, progress on advancing the Argonaut Project towards a
bankable feasibility study was hampered by the low Rand gold price and the
enactment of the MPRD Act which delayed the issuing of a prospecting permit by
the DME. Under the MPRD Act, the prospecting permit is classified as a pending
application and, as a result, only geological modeling and resource estimation
took place. In utilizing a comprehensive computerized 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 ore bodies across the former Central Rand have been undertaken
with the objective of defining sedimentological facies trends and delineating
geozones for statistical and geostatistical estimation purposes and predictive
analysis. A log-linear extrapolation technique was applied to the trend
directions exhibited within the data for each geodomain, enabling the
calculation of the likely distances over which the gold accumulation decreases
within the respective geodomains down the palaeoslope. The end product is a
grade block model for the Main Reef Leader showing the rapid downdip decrease
in the gold accumulation in all of the defined geodomains. Renewed focus had been placed on progressing the Argonaut Project by
reviewing the geological modeling in the project target area and valuation
model. The results were a substantial downgrading of the estimated mineralized
material from that previously reported. Due to unreliable data, no estimate of
mineralized material was deduced for the Main Reef. Future work will include
the drilling of three additional boreholes to test the model and extrapolations
and estimates, and upgrade and increase the mineralized material estimate
within our mineral rights area. At June 30, 2004, no Ore Reserves have been included in the Proven and
Probable Ore Reserve statement. In addition the lead time to mining these
reserves is expected to be in excess of 10 years. The Argonaut Project still represents a promising, yet challenging
deep-level mining development opportunity which is dependent on significant
increases in the Rand gold price before becoming viable. Papua New Guinea Tolukuma Section The Tolukuma Section, located within Mining Lease 104 (ML 104) covers an
area of 7.68 square kilometres and has extensive exploration tenements in the
vicinity of the mine covering approximately 9,937 square kilometres and within
40 minutes flying radius of the mine site. The Tolukuma Section is being
explored using geophysical surveys, interpretation of satellite images, mapping
and sampling of streams. This is followed up by detailed mapping, trenching and
drilling of prospective target areas. 81




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Exploration within the mining lease has recently been expanded with the
purchase of two underground diamond drill rigs, including one with long hole
capability, and an additional rig for surface drilling. This brings the number
of rigs on site to five in fiscal 2004, compared to only one in fiscal 2003.
The short-term focus will continue to be on increasing the resource base at and
around the Tolukuma Section. Near mine work has also been carried out during 2003 and early 2004 on two
areas adjacent to the mining lease, the Saki and Sere Sere projects situated
3km (2 miles) east and south of the mine respectively. In fiscal 2004, exploration follow up work was done covering some near
mine (ML 104) and regional targets. Regional areas covered include, amongst
others, the Taula North (Exploration License 580), Belavista (Exploration
License 1284), Etasi Creek (Exploration License 894), Samanalan (Exploration
License 683) and Gira (Exploration License 1297). The follow up work included,
creek traversing with pan concentrate and stream sediment sampling, trench
mapping and sampling, and ridge and spur soil sampling. A total of 990 feet
(302 metres) of hand dug trenches were excavated and 1,749 feet (533 metres) of
soil line cut, from which a total of 860 rock chip, 13 stream sediment, 14 pan
concentrate, and 41 soil samples were collected. In fiscal 2004, exploration expenditure of $1.65 million was incurred and
the exploration tenements remain in good standing. Below is a summary of
exploration licenses. EL No
    
    No of Sub blocks
    
    Area under EL (sq km)
    
    Status
    
    Expiry date683
    
    
    30
    
    
    
    102
    
    
    current
    
    April 3, 2005580
    
    
    68
    
    
    
    230
    
    
    current
    
    April 4, 20051264
    
    
    132
    
    
    
    564
    
    
    current
    
    April 29, 20051327
    
    
    292
    
    
    
    989
    
    
    current
    
    June 23, 20051284
    
    
    58
    
    
    
    196
    
    
    current
    
    April 18, 2006894
    
    
    75
    
    
    
    254
    
    
    under renewal
    
    April 3, 20031297
    
    
    75
    
    
    
    254
    
    
    under renewal
    
    August 30, 20041271
    
    
    564
    
    
    
    1,915
    
    
    under application
    
    Not applicable1352
    
    
    550
    
    
    
    1,875
    
    
    under application
    
    Not applicable1366
    
    
    403
    
    
    
    1,364
    
    
    under application
    
    Not applicable1379
    
    
    648
    
    
    
    2,194
    
    
    under application
    
    Not applicableTotal
    
    
    2,895
    
    
    
    9,937
 Australia Daylesford We hold one exploration license, EL3431, and another license under
application around the Daylesford Goldfield, which is a prospecting area in
Victoria, Australia. Our license in Daylesford, was renewed until July 2005.
Progress to date includes data acquisition and re-interpretation of the
geological findings. Previous drilling by Range River Gold NL, does not appear to effectively test a structurally favorable zone below the Ajax workings,
which is a mining area, since the area has not been tested by drilling beyond
relatively shallow depths. Testing of drill samples indicates 85% of gold is
located at a depth of less than 345 feet (105 metres). The quartz reef
mineralization appears to have strike lengths of less than 492 feet (150
metres) with widths of approximately 3 to 16 feet (1 metre to 5 metres) and
multiple reefs were exploited representing structural repetition at depth. 82




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Closed Operations Durban Deep Section Overview The Durban Roodepoort Deep Gold Mine, or Durban Deep Section, was the
original gold mine of the Group. The section is situated on the northern edge
of the Witwatersrand Basin immediately to the west of Johannesburg. Mining had
been taking place within the lease area since the discovery of the
Witwatersrand Goldfield in 1886 at nearby Langlaagte. As of August 2000, we ceased all underground and open pit mining
operations at the Durban Deep Section. Following the withdrawal of our
underground pumping subsidy, the deeper sections of the mine have been flooded.
On a combined basis, the Durban Deep Section produced more than 37 million
ounces of gold prior to the cessation of operations. Property The Durban Deep Section is located within the Central Witwatersrand Basin
which stretches from the Durban Deep Section in the west to the ERPM Section in
the east. The Durban Deep Section is situated 9.3 miles (15 kilometres) west of
Johannesburg and contains mining title to 14,262 acres (5,772 hectares) and
owns 3,667 acres (1,484 hectares) of freehold property. These include
administrative buildings, hospital, recreation complexes, housing in both
hostel and free-standing houses and a security complex. We have title to
substantial land tracts on the outskirts of the City of Roodepoort, which is
located in this section. We do not intend to convert our rights under the MPRD
Act. Mining and processing Five different ore bodies have been mined at the Durban Deep Section. Ore
was mined from outcrops at the surface down to a maximum depth of 9,200 feet
(2,804 metres) and the reefs are known to persist to 13,000 feet (3,962.4
metres) below the surface within the lease area. Environmental and closure aspects Underground mining at the Durban Deep Section ceased in August 2000. A
detailed closure program was prepared and submitted to the DME in December
2000. The drafting of the program was preceded by a comprehensive risk
assessment process, during which both residual and latent environmental risks
and impacts were identified and prioritized. The risks identified are currently
being addressed in accordance with the closure program. In order to mitigate the impact of windblown dust from dormant tailings
dams in proximity to surrounding communities, short-term dust suppression
methods are currently being employed. In addition to dust suppression,
amelioration and vegetation of the tailings dams, the closure program is also
focused on the sealing of shafts and openings to the surface, the demolition
and rehabilitation of shaft infrastructure and the rehabilitation of open
surface areas. The Durban Deep Section is located in the geographical area known as the
Western Basin. There is no hydraulic continuity between the Western Basin and
the Central Basin. Water has already begun to flood to the surface in this area
from other neighboring mining operations. This water is of poor quality,
containing heavy metals, sulphates and other pollutants. However, there has
been no flooding of water to the surface on any of our properties located in
the Western Basin. We have developed a program to progressively seal all potential ingress
points at the Durban Deep Section. We anticipate that this program will be
completed by May 2005. The sealing of all potential ingress points at these
operations will be a permanent measure. All plugs used have been approved by
the DME which also performs periodic inspections during the sealing phase to
monitor progress. However, despite these sealing programs, naturally occurring
water conduits and other geological features which are not mine-related and may
not be located on mine property will allow surface water,
especially storm runoff, to reach underground aquifers. This will eventually
cause water levels to rise. The costs associated with sealing off all potential
water ingress points at the Durban Deep Section have been included in our
provision for environmental rehabilitation, restoration and closure costs. 83




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Substantial effort and resources have gone into the rehabilitation
process. Total rehabilitation, involving plugging, capping and vegetation, of
the Coetzee Shaft, Number 7 Shaft, Great Britain Shaft and the Number 5 Shaft,
has been undertaken as well as the backfilling, compacting and vegetation of
several voids and pits, the demolition of redundant structures and buildings
and the rehabilitation of the carbon in leach plant area. Further progress in
accordance with the closure plan is continuing. In 2004, we had applied to the
DME for the closure of ten shafts. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, we have estimated that the remaining cost for the Durban
Deep Section, in current monetary terms as at June 30, 2004, is $4.9 million.
This has been included in the provision for environmental rehabilitation,
restoration and closure costs on the balance sheet. A total of $2.1 million has
been contributed to the Environmental Trust Fund. This is an irrevocable trust,
managed by specific responsible people who we nominated and who are appointed
as trustees by the Master of the High Court of South Africa. West Witwatersrand Gold Mines Ltd Overview We own 100% of West Witwatersrand Gold Mines Ltd, or West Wits, which held
West Wits Section. We acquired the entire share capital of West Witwatersrand
Gold Holdings Limited, which was the parent company of West Wits, as well as
Consolidated Mining Corporation Ltds loan to West Witwatersrand Gold Holdings
Limited, on April 1, 1996. We also acquired the entire issued capital and the
shareholders claim and loan account of East Champ dOr Gold Mine Ltd, a gold
mining company with mining title in the West Rand. The mining assets were sold
to Bophelo Trading (Pty) Limited, subsequently renamed, Mogale Gold (Pty)
Limited, or Mogale, during fiscal 2004, effectively leading to the closure of
the mining operation. The West Wits Section is situated on the northern edge of the
Witwatersrand Basin near the town of Krugersdorp to the west of Johannesburg. Property The West Wits Section was formed out of the northern section of
Randfontein Estates located in the West Rand Goldfields, about 22.0 miles (35.4
kilometres) west of Johannesburg, Gauteng Province. The mine is reached via the
R28 Johannesburg-Krugersdorp highway. West Wits also had rights to mine on three adjacent mining leases, namely,
East Champ dOr, West Rand Consolidated and Luipaardsvlei. West Wits had mining
title to 8,364 acres (3,790 hectares) and owns 72 acres (29 hectares) of
freehold property on which all of its mining operations are situated. These
rights were sold to Mogale during fiscal 2004. 84




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The climate of the Highveld area (at an elevation of 5,249 feet (1,600
metres) above mean sea level), where the mine is situated, is humid continental
with warm summers and cold winters. Temperatures range from a minimum of 23
degrees Fahrenheit (-5 degrees Celsius) in June and July to a maximum of 93
degrees Fahrenheit (34 degrees Celsius) in December and January. History 1967
    
    West Witwatersrand Gold Mines Ltd, or West Wits, was incorporated and
registered as a public company in South Africa on December 21, 1967.1996
    
    We acquired the entire share capital of West Wits on April 1, 1996.2000
    
    All mining ceased at the West Wits Section in August 2000.2002
    
    We entered into an agreement with Bophelo Trading (Pty) Limited,
subsequently renamed Mogale Gold (Pty) Limited, or Mogale, for the
sale of the West Wits gold plant, freehold areas, surface rights
permits and certain related assets.2003
    
    The agreement with Mogale was subsequently amended by a Memorandum of
Agreement on June 6, 2003. The effective date of this sale was July
21, 2003.2004
    
    Mogale was placed under judicial management on April 13, 2004. As a
result, the remaining balance on the purchase price was impaired for
$1.1 million.
 Mining and processing In August 2000, we decided to cease all operations at both the underground
and open pit operations at the West Wits Section. This decision was taken after
the South African government withdrew the water pumping subsidy. Without the
subsidy, mining at the West Wits Section became prohibitively expensive. The
mining operation is an agglomeration of old mines on the Randfontein Basin
separated from the main part of the Witwatersrand Basin by a geological
structure known as the Witpoortjie Horst. Over fifteen different gold-bearing
pebble horizons have been mined. Ore has been mined from outcrops at the
surface down to a maximum depth of 5,900 feet (1,798.3 metres). West Wits mined the Livingston Reef package, locally known as the East
Reef. It comprises a 100-foot thick package of conglomerates and quartzites
dipping at an average of 18 degrees. The combined West Wits Section produced
more than 1.0 million ounces of gold since inception, before the cessation of
underground and open-pit operations at the end of August 2000. Subsequent to
the cessation of mining operations, the metallurgical plant at the West Wits
Section was taken over by Crown for the processing of sand dumps only. Environmental and closure aspects Underground mining at the West Wits Section ceased as of August 2000. We
are required to affect environmental closure at the West Wits Section although
certain aspects of this have been assumed by Mogale. Commensurate with the
decision to close these operations, a detailed closure program was prepared and
submitted to the DME in December 2000. The drafting of the program was preceded
by a comprehensive risk assessment process, during which both residual and
latent environmental risks and impacts were identified and prioritized. The
risks identified are currently being addressed by the West Wits Section, in
accordance with the closure program submitted to the DME. In order to mitigate
the impact of windblown dust from dormant tailings dams in proximity to
surrounding communities, short-term dust suppression methods are currently
being employed. Although this is to continue until 2006, the program is being
run along with a vegetation program, currently focusing on the main tailings
impoundments in question, namely the main mine complex. Discussions have been
entered into with the relevant stakeholders and it had been jointly decided
that dry land vegetation on the top surface of the dam will be initiated during
fiscal 2005. During fiscal 2004, and as part of the rehabilitation program, a
total of 17,000 trees were planted on the complex and key surface areas were
rehabilitated and grassed. Preliminary indications are that the tree species
have established well. Shaft rehabilitation has been scheduled to run concurrently with the
rehabilitation of the slimes dam project. This will in effect reduce the
ingress of surface water to the groundwater system. 85




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Similar to the Durban Deep Section, the Company has developed a program to
progressively seal all potential ingress points at the West Wits Section. In
addition DWAF has authorized the Council of Geoscience to rehabilitate the
sources outside of the mining area. Further to this, rehabilitation of the main
tailings dam was started during fiscal 2004, with ridge-ploughing and the
establishment of dry land vegetation on the top surface of the dam. We estimate
that this will be completed over a period of 4 years. While the ultimate amount of rehabilitation costs to be incurred in the
future is uncertain, we have estimated that the remaining cost for the West
Wits Section, in current monetary terms as at June 30, 2004, is $1.5 million.
This has been included in the provision for environmental rehabilitation,
restoration and closure costs on the balance sheet. A total of $1.8 million has
been contributed to the Environmental Trust Fund. This is an irrevocable trust,
managed by specific responsible people who we nominated and who are appointed
as trustees by the Master of the High Court of South Africa. Current year production In fiscal 2004 these mining assets were sold to Mogale and accordingly,
there was no production or related costs for the year under review. The following table details the operating and production results from the
West Wits Section for the past three fiscal years: Year ended June 30,2004
    
    2003
    
    2002ProductionSurface Operations
Ore mined (000 tons)
    
    
    
    
    
    
    1,606
    
    
    
    3,262Recovered grade (oz/ton)
    
    
    
    
    
    
    0.009
    
    
    
    0.007Gold produced (ounces)
    
    
    
    
    
    
    14,531
    
    
    
    23,245Results of Operations ($)Revenues (000)
    
    
    
    
    
    
    4,796
    
    
    
    6,897Production cost (000)
    
    
    
    
    
    
    4,859
    
    
    
    6,137Non US GAAP Financial DataCash cost per ounce of gold ($)1
    
    
    
    
    
    
    334
    
    
    
    264Total cost per ounce of gold ($)1
    
    
    
    
    
    
    319
    
    
    
    355
 Legal Proceedings Special Committee In May 2000, we became aware of possible serious irregularities arising
largely out of our investments in Australasia and our businesses in that
region. By the end of the fiscal 2000 audit, our internal investigations had
identified a number of unauthorized and irregular monetary transfers made
during the 1999 and 2000 years which had caused us significant losses.
Following this initial investigation, our then Chief Financial Officer, Mr. C.
Mostert, resigned effective July 31, 2000.   1 Cash cost per ounce and total cost per ounce are non-US GAAP financial
measures of performance that we use to determine cash generating capacities of
the mines and to monitor performance of our mining operations. For
a reconciliation to production costs see Item 5A.: Operating Results. 86




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On August 14, 2000, we received notice from our auditors, Deloitte &
Touche, outlining the material irregularities and requiring us to take the
necessary action to remedy them. We then established a Special Committee to
investigate the unauthorized payments and the corporate governance
irregularities associated with them. The Special Committee consisted of Mr. M.
Wellesley-Wood, then serving as our non-executive chairman, Mr. Ian Murray,
then serving as one of our
alternate directors, Mr. C. Valkin, a partner with the firm Bowman Gilfillan
Attorneys, our independent legal advisers, and Mr. M. Pinnington, a director of
Deloitte & Touche Forensic Services, and they were assisted in the
investigation by Control Risks Inc.. The Special Committee was mandated by our
Audit Committee to investigate these matters and institute, where necessary,
legal proceedings in respect of potential recoveries. By the end of June 2002, the Special Committee had uncovered a number of
irregular or questionable transactions which had occurred during fiscal 2000
and 2001. These transactions included:  
    
    The invalid issuance of 8,282,056 ordinary shares during the months
of July and October 1999, in connection with the Rawas acquisition, as
described below.
    
    The unauthorized payment on December 22, 1999, by our wholly-owned
subsidiary, DRD Australasia Aps, or DRD Australasia, of a A$5.9 million
($3.6 million) facilitation fee to Noble Investments (Pty) Limited, or
Noble, in connection with the purchase of 11,150,000 shares,
representing approximately 11% of the issued share capital of
Continental Goldfields Limited, or Continental, a publicly traded
company in Australia. The sellers of the shares were Noble (7,350,000
shares for a total consideration of A$0.7 million ($0.5 million)),
Leadenhall Australia Limited (1,200,000 shares for a total consideration
of A$0.1 million ($0.07 million)) and Advent Investors (Pty) Limited
(2,600,000 shares for a total consideration of A$0.3 million ($0.2
million)). At the time, all three sellers were owned by Mr. T. Lebbon,
an Australian citizen and businessman.
    
    The payment of the facilitation fee resulted in DRD Australasia
paying A$0.70 per share for the Continental shares at a time when
Continental shares traded at a market price of A$0.10 per share. The
investigation carried out under the supervision of the Special Committee
had subsequently revealed that we were substituted as the purchaser of
the Continental shares. The original purchaser was JCI Limited, or JCI,
a South African listed company. Facts discovered during the course of
the investigation indicate that the effect of the transaction was to
relieve JCI and its related companies from their contractual obligations
to Noble and its group companies. Mr. R.A.R. Kebble was at the time of
the transaction our executive chairman. He was also a director and
shareholder of JCI and JCI Gold Ltd. At June 30, 2000, Continental owned
shares in JCI which constituted approximately 75% of its total assets.
Although we have entered into an agreement to acquire the Continental
shares and are fully entitled to take ownership of these shares at any
time, we have elected not to do so at this point to avoid being deemed
to have validated the transaction and thus jeopardize the outcome of the
pending legal proceedings. The effect of this transaction was fully
provided for in fiscal 2001.
    
    The advancement by our subsidiaries between September 1999 and May
2000 of $3.9 million to Notable Holdings (Pty) Ltd (Aussie), or Notable,
an Australian company, for operational assistance purposes. No formal
agreement was entered into by us and Notable at the time the advances
were made. The ultimate parent company of Notable was Continental
Goldfields. At that time, our then Chief Financial Officer, Mr. C.
Mostert was a director of Notable. Our Board of Directors did not
approve this transaction. We have recovered all but $0.9 million of this
loan from Notable. We wrote off $1.9 million as a bad debt in fiscal
2000 and the remainder was written off as a bad debt in fiscal 2002. 87




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
    
    The unauthorized advancements in fiscal 2000 totaling $1.85 million
by DRD Australasia acting on the direction of Mr. C. Mostert, in
connection with the purported acquisition of a bauxite mine in
Venezuela. DRD Australasia purportedly entered into a letter agreement
with Bauxite Investments, or Bauxite, a company registered in Mauritius,
to purchase the outstanding shares of Delta Minerals Corporation, or
Delta, a company registered in Bermuda and the owner of the bauxite mine
in Venezuela. The purchase consideration for the mine was $25 million.
DRD Australasia had an obligation to pay Bauxite a non-refundable
deposit of $1.65 million. This amount was paid by DRD Australasia into a
bank account nominated by Mr. T. Main, the representative of Bauxite.
The Special Committee discovered that Mr. C. Mostert instructed Mr. T.
Main on the same day to pay the $1.65 million received earlier by Mr. T.
Main, into the bank accounts of certain of our officers, namely Messrs.
R.A.R. Kebble ($298,617), M.Prinsloo ($197,264), V. Hoops ($117,583),
C. Mostert ($542,464) and I. Murray ($65,667). The rest was paid into
the bank accounts of certain individuals who were not our employees,
namely Mr. J. Stratton ($270,653) and Mr. T. Main ($157,752). The
amounts paid to the officers were paid to cover the shortfall in the
payments due to
each of these officers under their respective restraint of trade
agreements. The affected officers, other than Mr. C. Mostert, advised the
Special Committee that they were not aware that the source of their
payments was an amount which DRD Australasia paid as a non-refundable
deposit for the acquisition of the bauxite mine. The Special Committee
accepted their explanation. However, the Board of Directors decided that,
based on the poor performance of the investments for which the officers
were being compensated, these officers, excluding Mr. C. Mostert, should
repay 50% of the success fees which they had received in connection with
our acquisition of Dome. All the individuals concerned have accepted this
mandate and have made the relevant payments. In addition, we have also
recovered a portion of payments made to Mr. C. Mostert and Mr. T. Main.
Recovery actions have also been issued against Mr. J. Stratton to recover,
amongst other claims, his portion of the payments and an additional
unauthorized payment of $0.2 million which was subsequently made on his
behalf by DRD Australasia, through Mr. C. Mostert, for the Bauxite
transaction. The recoveries from our officers and Messrs. C. Mostert and
T. Main total $1.268 million. All of these amounts were recorded as
receivables in fiscal 2000 and also provided for as doubtful debts as the
recovery process had not yet commenced. No remaining dispute exists
between us and Bauxite or Delta.
    
    In addition, action was instituted on April 27, 2004 against SG
Securities (London) Limited and Mr. A. Mahalski for:  
    
    A$5,907,500 ($4,077,947) from SG Securities (London)
Limited being payments made by them out of monies raised from the
issue of 2,450,000 of our ordinary shares in December 1999 and
January 2000, which payments we claim were made on an unauthorised
basis; and
    
    A$16,000 ($11,045) from Mr. A. Mahalski, an employee of SG
Securities (London) Limited at the time, being a payment to him
which we claim were made without due cause and on an unauthorised
basis.  In addition, these claims will seek interest on such amounts from the date
of payment to the date of settlement of the claims in the event of such
claims succeeding.The defendants lodged defences to the above claims during July 2004. The total amount of all of these irregular or questionable transactions
(excluding the Rawas transaction) was $9.4 million. Settlement agreements have
been reached with several of these parties and we have succeeded in recovering
$4.2 million. Proceedings for the recovery of a further A$2.8 million ($1.5
million) were instituted against Mr. J. Stratton on June 12, 2002 in the
Supreme Court of Western Australia. The remainder has been written off as bad
debts or been provided for as doubtful debts in our financial statements during
fiscal 2001 and 2002. The recovered funds will be reflected in our financial
accounts on an as and when received basis and no recovery has been taken into
account in fiscal 2004. The attributed $12.4 million value of the shares issued in connection with
the Rawas transaction was written off in the statement of operations as aborted
acquisition costs in fiscal 2000 as the recovery of this amount was uncertain.
Loans made by us to members of the Rawas group, amounting to $2.9 million, were
written off in fiscal 2000. No amounts have been recovered on these
transactions. The Special Committee has confirmed that the adjustments made to our
financial statements to make provision for unauthorized and irrevocable
transfers made during fiscal 2000 were appropriate. No further financial
adjustments have been required as a result of the Special Committees work. As
result of these transactions, and upon consultation with our auditors, we
established an Audit Committee and Remuneration Committee consisting solely of
independent directors; restructured our Board of Directors so that all but
three Directors are independent; and established a committee to conduct proper
due diligence investigations on all potential acquisition targets prior to any
offer being made. These improved controls and procedures have been examined and
approved by our insurers. At an Audit Committee meeting held on July 22, 2002,
a decision was made to dissolve the Special Committee as it had fulfilled its
mandate and achieved its objectives. 88




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Invalid Issuance of Ordinary Shares in Connection with Rawas Acquisition During the months of July and October of 1999, we issued and allotted a
total of 8,282,056 ordinary shares to Rothschild Nominees Pty Ltd, Maxidrill
Pty Ltd, PT Petrosea TBK, Repadre International Corporation, Minproc
Engineering Pty Ltd, Rio Tinto Rawas Holdings Ltd, Continental Goldfields Ltd,
Consolidated African Mines Ltd, JCI (Isle of Man) Ltd, Weston Inv. Ltd and
Consolidated African Mines Australia Pty Ltd, all of which were creditors of
Laverton or its subsidiaries, below the average stated capital price. At the
time, our then executive chairman, Mr. R.A.R. Kebble, was a director of
Laverton and JCI Gold Limited. These ordinary shares were ostensibly issued
pursuant to the planned acquisition of Rawas, a gold mine located in Indonesia,
in consideration for, or in anticipation of receiving, shares in and claims
against various companies with ownership interests in Rawas and its mining
right. Evidence came to light revealing that the ordinary shares were issued
without our legal authority and suggesting that this occurred as a result of a
transaction entered into for the benefit of certain third parties. However,
because of subsequent trades, splits and consolidations, it was no longer
possible to distinguish the affected shares from all of the other ordinary
shares resulting in their identity being lost. This meant that it was no longer
possible to identify the invalidly issued shares or their holders. Accordingly,
it was not possible to remove these invalidly issued shares from our members
register. Under the South African Companies Act, 1973 (as amended), the High
Court of South Africa is permitted to validate an invalid share issuance.
During a shareholders meeting in 2002, our shareholders, by special
resolution, resolved to ratify the share issuance. We subsequently made an
application to the High Court of South Africa to validate the invalid issuance.
This application was successful and the High Court validated the issuance in
July 2002. Internal investigations, which began in 2000 after we became aware of
certain irregularities in the transaction, continued and considered the
potential for recovery through the pursuit of legal claims. We have not instituted any actions against the recipients of our shares in
this transaction as each of these entities had ceded to us their claims against
the companies in the Rawas group in exchange for those shares. However, legal
action has begun both in South Africa and Australia. In an action instituted in
the High Court of South Africa, against Messrs. R.A.R. Kebble, M. Prinsloo, J.
Stratton and H. C. Buitendag and JCI Limited the following claims are being
pursued:  
    
    R69.6 million ($11.2 million) for the 7,644,944 ordinary shares
issued on July 9, 1999 at a price per share of R9.10; and
    
    R7.6 million ($1.2 million) for the 637,062 ordinary shares issued on
October 8, 1999 at a price per share of R11.90. We have also made a claim for A$6.1 million ($4.1 million) for loans and
advances made to and on behalf of PT Barisan Tropical Mining, the entity which
operated the Rawas mine, and R0.7 million ($4.4 million) for costs associated
with issuance of the above shares. We instituted a separate action in Australia on the December 12, 2003
against Mr. C. Mostert, Mr. J. Stratton, Continental Gold Fields Limited, CAM
Australia, (Pty) Ltd, Weston Investments (Pty) Ltd, CAM Jersey Ltd, and JCI
(Isle of Man) Ltd for:-  
    
    R67,942 ($10,827) being the costs of issuing DRD shares;
    
    R77 million ($12.3 million) being profits made by third parties who were issued DRD shares at the time; and
    
    R4.7 million (0.8 million) being costs incurred to validate the shares invalidly issued.We have been notified by the defendants of their intention to defend the claims; however no counterclaims have been made.The defendants filed an application in the High Court of South Africa
claiming that the summons issued against them in this matter was defective. On
May 19, 2004, we succeeded in having the exception dismissed with costs and the
matter will now proceed to trial. No trial date has been set down by the High
Court of South Africa. 89




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Other Proceedings On June 12, 2002, DRD Australia Aps and DRD Australia Pty Limited
instituted proceedings against Mr. J. Stratton in the Supreme Court of Western
Australia for payment of A$2,794,318 ($1.9 million) plus interest in respect of
dishonestly assisting Mr. C. Mostert in making payments referred to below and
receiving part of the proceeds of these wrongful actions. No trial date has
been set as yet. In 2003, DRD Australasia Aps instituted three separate proceedings against
Mr. C. Mostert, Newshore Nominees (Pty) Ltd and Mr. R. Bryer in the Supreme
Court of Western Australia for payment of A$902,000 ($622,650) in respect of
unauthorized and undue payments made to Cartier Management (Pty) Ltd, and
overpayment to Goldspark Ltd and Transit Securities Inc. It is alleged that
payment was made to facilitate the intended acquisition of Dome Resources NL by
favoring Mr. J.P. Boyer, a director of Dome Resources NL at the time, as well
as other reasons. Mr. M. Silver and Fairchoice Ltd have brought an action against us and
Dome in the Supreme Court of New South Wales, Australia seeking to enforce a
contract under which Dome agreed to pay, and we agreed to guarantee, a payment
of $475,000 to Mr. M. Silver upon his retirement from the board of directors of
Dome. Mr. M. Silver retired from Domes board of directors in May 2000. The
contract was also entered into in May 2000. However, we believe that this
contract is not enforceable as it was not authorized by our directors or
shareholders nor was it authorized by Domes directors or shareholders.
Therefore, we and Dome have not made any payment to Mr. M. Silver. We believe
that this action is without merit and will continue to vigorously defend
against it. Newshore Nominees Pty Ltd, or Newshore, has brought an action against us
in the District Court of Western Australia claiming that they are owed $148,000
as payment under an invoice issued in August 2000 for financial services. The
Court ruled in favor of Newshore on March 31, 2004, ordering us to pay the
amount claimed. We have since instituted appeal proceedings. Our claim against
Newshore is still pending. Mr. V. Hoops, a former Director of ours, has claimed R6 million ($1.0
million) in damages against us for alleged constructive dismissal of his
employment. On February 4, 2003, we concluded a settlement agreement with Mr.
V. Hoops which resulted in the termination of the arbitration. The settlement
agreement contained a written statement from Mr. V. Hoops rescinding comments
made by him regarding Mr. M.M. Wellesley-Wood. The
terms of the agreement are subject to confidentiality provisions. On March 13, 2003, our former Company Secretary, Mrs. M. Eloff and on March
18, 2003 our in-house legal advisor, Mrs. B. Morton, resigned. Subsequently,
they instituted legal action against us for constructive dismissal alleging
intolerable working conditions based on allegations of invasion of privacy and
breach of constitutional rights. The matter relating to Mrs. B. Morton went to
arbitration and on May 6, 2004, her action was dismissed in our favor by the
Council for Conciliation Mediation and Arbitration. On August 4, 2004, Mrs. M.
Eloff unconditionally withdrew her claim against us. In December 1999, Blyvoor instituted proceedings against Property
Corporate of South Africa, or Procor, whereby Blyvoor has claimed that R0.9
million ($0.1 million) is owed to it by Procor pursuant to an agreement
(negotiated by our former directors) in terms of which, inter alia, Procor was
to dispose of certain properties owned by Blyvoor, collect rentals payable
during the process of selling such properties, and if the properties were not
sold, Procor agreed to purchase the properties. Procor, by way of counterclaim,
contends that Blyvoor has breached the agreement and has claimed damages in the
sum of approximately R9 million ($1.4 million). The matter is still pending. 90




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On May 20, 2003, a summons was issued by our former chairman, Mr. R.A.R.
Kebble and his son, Mr. B. Kebble, against us, Mr. M.M.
Wellesley-Wood and Associated Intelligence Network (Pty) Limited, or AIN. AIN
is a private investigator firm. Their claim is based on allegations that we
hired AIN to invade their privacy by obtaining personal information about them
and to cause them embarrassment and commercial harm. They seek compensation for
damages suffered as a result of these alleged actions in an amount of R1.0
million ($0.2 million) each from us, Mr. M.M. Wellesley-Wood and AIN jointly
and severally. In addition, they seek punitive damages in a total amount of R10
million ($1.6 million) from us and AIN jointly and severally. The punitive
damages claim is unique under South African law. Initial
hearings have taken place to decide a preliminary point raised by us that no
such claim exists in South African law. The court has ruled against us on a
technicality, making a ruling to the effect that the trial court will hear and
adjudicate this issue. We will continue to defend against these claims. We are
currently awaiting the allocation of a trial date. On May 22, 2003, we issued a summons in the High Court of Johannesburg
against Mr. R.A.R. Kebble in which we seek payment of R3.2 million ($0.5
million) plus interest. This amount represents a sum paid to Mr. R.A.R. Kebble
by us during the period beginning in September 1999, and ending in April 2000,
under a restraint of trade agreement entered into between us and Mr. R.A.R.
Kebble. We believe that Mr. R.A.R. Kebble has repudiated and/or materially
breached the provisions of this agreement. We have, accordingly, cancelled the
agreement and we seek restitution of the amounts paid. Mr. R.A.R. Kebble has
lodged a counterclaim, claiming cancellation of an agreement providing for the
payment of retirement benefits ($0.3 million), and challenging the cancellation
of share-options that he held at the time of his resignation from the our
board. Both these claims are being defended. On April 22, 2002, we issued a summons in the High Court of Johannesburg
against JCI Ltd and CAM Ltd for payment of R21.6 million ($3.4 million) plus
interest for option fees on shares that we held in Randgold & Exploration Ltd,
and in respect of which we extended an option to purchase to JCI Ltd and CAM
Ltd against payment of an agreed option fee, plus a further claim for the
reimbursement of costs, totaling R3.0 million ($0.5 million) which we had
incurred on behalf of the defendants in the attempted corporate reconstruction
of Western Areas Ltd and Randfontein Estates Gold Mine Ltd. The matter was
heard on August 30, 2004. At this date partial settlement of certain small
claims related to the larger JCI Ltd and CAM Ltd claim, to the value of R2.4
million ($0.4 million), was awarded to us by the High Court of Johannesburg. On
October 21, 2004, the High Court of Johannesburg ordered JCI Ltd and CAM Ltd to
pay us an amount of R35.7 million ($5.5 million), plus interest and costs,
including the costs of two of our legal counsel. JCI Ltds and CAM Ltds
counterclaim to recover the earlier part-payment was also dismissed with costs.
JCI Ltd and CAM Ltd made an application to the High Court of Johannesburg for
leave to appeal, which was rejected. On September 23, 2002, we and Harmony Gold Mining Company Limited, another
South African gold mining company, filed a complaint with the South African
Competition Commission against Iscor, a South African steel producer. The
complaint alleges that Iscor is abusing its dominant position by charging
excessive prices for its local flat steel products and providing inducements
for steel purchasers to refrain from importing competing steel products. The
Competition Commission dismissed our claim, and the matter has since been
referred to the Competition Tribunal, who has the authority to overrule the
determination of the commission. Pleadings in the matter have closed and we
await the allocation of a hearing date. We are not a party to any other material legal proceedings, nor to our
knowledge is any of our property the subject of any other material pending
legal proceedings. 91




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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following Operating and Financial Review and Prospects section is
intended to help the reader understand the factors that have affected the
Companys financial condition and results of operations for the historical
period covered by the financial statements and managements assessment of
factors and trends which are anticipated to have a material effect on the
Companys financial condition and results in future periods. This section is
provided as a supplement to, and should be read in conjunction with, our
audited financial statements and the other financial information contained
elsewhere in this Annual Report. Our financial statements have been prepared in
accordance with US GAAP. Our discussion contains forward looking information
based on current expectations that involve risks and uncertainties, such as our
plans, objectives and intentions. Our actual results may differ from those
indicated in such forward looking statements. The Operating and Financial Review and Prospects includes the following
sections:  
    
    Operating results:  
    
    Business overview, a general description of our business.
    
    Key drivers of our operating results and principal
factors affecting our operating results, a general description of
the principal uncertainties and variables facing our business and
the primary factors that have a significant impact on our
operating performance.
    
    Recent acquisitions and dispositions, a description of
the recent acquisitions and other transactions that have impacted,
or will impact, our performance.
    
    Key financial and operating indicators, a presentation of
the key financial measures we use to track our operating
performance.
    
    Application of critical accounting policies, a discussion
of accounting policies that require critical judgments and
estimates.
    
    Operating results, an analysis of our consolidated
results of operations during the three fiscal years presented in
our financial statements. The analysis is presented both on a
consolidated basis, and by geographic segment.  
    
    Restatement of certain items in our quarterly results for fiscal
2004.
    
    Liquidity and capital resources, an analysis of our cash flows,
borrowings and our anticipated funding requirements and sources.
    
    Outlook and trend information, a review of the outlook for, and trends affecting, our business.
    
    Off-balance sheet arrangements.
    
    Tabular disclosure of contractual obligations, being the numerical
review of our contractual future cash obligations. 92




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5A. OPERATING RESULTS Business overview We are a gold mining company engaged in underground and surface gold
mining, including exploration, extraction, processing and smelting. We have
operations comprising underground and open pit mining and surface retreatment
operations, including the requisite infrastructure and metallurgical processing
plants. Our operations are located in South Africa and Papua New Guinea. In
addition, we hold a 45.33% (19.78% at June 30, 2004) equity interest in Emperor
Mines Limited, or Emperor, in Fiji. We divide our worldwide operations into two
geographic regions, based on revenue generated from the location of the seller,
as follows:  
    
    South Africa is comprised of the North West Operations
(Harties and Buffels Sections) and the Blyvoor Section. We also
hold a 40% equity interest in Crown Gold Recoveries (Pty) Limited
which includes the Crown and ERPM Sections. On March 22, 2005, however, we announced the provisional liquidation of Buffelsfontein Gold Mines
Limited, our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed
with the SEC on March 22, 2005, which is incorporated by reference in this Annual Report.
    
    Australasia is comprised of the Tolukuma Section, a 20%
interest in the Porgera Joint Venture, or Porgera, and a 45.33%
interest in Emperor. In fiscal 2004, the South African Operations accounted for 71% of our
production, 85% of our Ore Reserves and a $57.8 million net loss after tax. The
Australasian Operations accounted for 29% of our production, 15% of our Ore
Reserves and a net profit after tax of $2.1 million. Exploration activities are undertaken in South Africa, Papua New Guinea
and Australia. From 1895 to 1997 our principal mining operation was the Durban Deep
Section. Up to 1999, our general growth strategy was to acquire existing
under-performing mines in South Africa at relatively low acquisition costs, and
turn them into profitable business units by introducing low-cost mining methods
and reducing costs through employing our experience in managing marginal gold
mines to more efficiently utilize existing infrastructures. Since 1999 our
focus has been to expand our operations outside of South Africa by acquiring
lower cash cost and higher margin mines than those in South Africa, through the
acquisition of Dome Resources NL (Tolukuma Section), our 20% interest in
Porgera and our 45.33% interest in Emperor (Vatukoula Section). Due to the continued strength of the Rand as well as the disappointing
tonnages from our South African Operations, as a result of ore pass
constraints, rock falls and labor inefficiencies, our results for fiscal 2004
decreased in comparison to fiscal 2003 and fiscal 2002. Our balance sheet has
strengthened through the inclusion of our 20% attributable portion of the
Porgera Joint Venture and the raising of additional equity. As at June 30, 2004, we had Ore Reserves of approximately 11.0 million
ounces, compared to 14.4 million ounces as at June 30, 2003. Despite the
acquisition of our 20% interest in Porgera which added 1.4 million ounces to
our Ore Reserves, we were unable to off-set the effect of the strong Rand which
decreased our Ore Reserves from our South African Operations from 14.3 million
ounces in fiscal 2003 to 9.4 million ounces in fiscal 2004, before the effect
of depletion. Ore Reserves have decreased because the stronger Rand has reduced
the amount of reserves which are economically viable to mine. Key drivers of our operating results and principal factors affecting our
operating results The principal uncertainties and variables facing our business and, therefore,
the key drivers of our operating results are:  
    
    The price of gold, which fluctuates widely in local currencies;
    
    The tonnages and gold content thereof, impacting on the amount of gold we produce at our operations;
    
    The cost of producing that gold as a result of mining efficiencies; and
    
    General economic factors, such as exchange rate fluctuations and
inflation, and factors affecting mining operations in the developing
countries in which we operate. 93




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Gold price Our revenues are derived primarily from the sale of gold produced at our
mines. As a result, our operating results are directly related to the price of
gold which can fluctuate widely and is affected by numerous factors beyond our
control, including industrial and jewellery demand, expectations with respect
to the rate of inflation, the strength of the Dollar (the currency in which the
price of gold is generally quoted) and of other currencies, interest rates,
actual or expected gold sales by central banks, forward sales by producers,
global or regional political or economic events, and production and cost levels
in major gold-producing regions such as South Africa. In addition, the price of
gold sometimes is subject to rapid short-term changes because of speculative
activities. The demand for and supply of gold may affect gold prices, but not
necessarily in the same manner that supply and demand affect the prices of
other commodities. The supply of gold consists of a combination of new
production from mining and existing stocks of bullion and fabricated gold held
by governments, public and private financial institutions, industrial
organizations and private individuals. As a general rule we sell the gold
produced at market prices to obtain the maximum benefit from prevailing gold
prices, although we have previously entered into hedging arrangements, such as
forward sales or other derivative instruments, which established a price in
advance for the sale of our future gold production. During fiscal 2002, we
undertook a major restructuring of our hedge book, designed to close out our
hedge positions. The following table indicates the movement in the Dollar gold spot price
for the 2004, 2003 and 2002 fiscal years: 2004 fiscal year
    
    2003 fiscal year
    
    % increaseOpening gold spot price on July 1,
    
    $346 per ounce
    
    $315 per ounce
    
    10%Closing gold spot price on June 30,
    
    $396 per ounce
    
    $346 per ounce
    
    14%Lowest gold spot price during the fiscal year
    
    $343 per ounce
    
    $302 per ounce
    
    14%Highest gold spot price during the fiscal year
    
    $427 per ounce
    
    $382 per ounce
    
    12%Average gold spot price for the fiscal year
    
    $389 per ounce
    
    $334 per ounce
    
    16%
 2003 fiscal year
    
    2002 fiscal year
    
    % increaseOpening gold spot price on July 1,
    
    $315 per ounce
    
    $271 per ounce
    
    16%Closing gold spot price on June 30,
    
    $346 per ounce
    
    $315 per ounce
    
    10%Lowest gold spot price during the fiscal year
    
    $302 per ounce
    
    $265 per ounce
    
    14%Highest gold spot price during the fiscal year
    
    $382 per ounce
    
    $327 per ounce
    
    17%Average gold spot price for the fiscal year
    
    $334 per ounce
    
    $296 per ounce
    
    13%
 % increase /2002 fiscal year
    
    2001 fiscal year
    
    (decrease)Opening gold spot price on July 1,
    
    $271 per ounce
    
    $290 per ounce
    
    (7%)Closing gold spot price on June 30,
    
    $315 per ounce
    
    $271 per ounce
    
    16%Lowest gold spot price during the fiscal year
    
    $265 per ounce
    
    $260 per ounce
    
    2%Highest gold spot price during the fiscal year
    
    $327 per ounce
    
    $291 per ounce
    
    12%Average gold spot price for the fiscal year
    
    $296 per ounce
    
    $269 per ounce
    
    10%
 A significant upward trend in the Dollar gold price has been noted over
the past few years, however, as the majority of our production has been sourced
from our South African operations during those three fiscal years, the impact
of the Rand/Dollar exchange rate has been significant on our operating results.
Whereas the Dollar gold price has shown consistent growth over the last three
fiscal years, the Rand gold price (based on average prices for the year) has
moved from R3,004 per ounce in fiscal 2002 to R3,023 per ounce in fiscal 2003
and finally down to R2,684 per ounce in fiscal 2004. 94




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Gold production and production costs Gold production from our subsidiaries, as well as our 20% attributable
share of Porgera, totaled 808,145 ounces during fiscal 2004, in comparison to
792,996 ounces in fiscal 2003, and 1,027,440 ounces in fiscal 2002. Our costs and expenses consist primarily of production costs, royalties
and depreciation and amortization. Production costs include labor, contractor
services, stores, electricity and other related costs, incurred in the
production of gold. Labor is the largest component of production costs
constituting 50% of production costs for fiscal 2004, as the majority of our
mining operations are deep level underground mines which are more labor
intensive. At our South African Operations, production decreased from 955,485 ounces
in fiscal 2002, produced from 24.6 million tonnes milled at an average yield of
1.27g/t, to 724,900 ounces in fiscal 2003, produced from 10.1 million tonnes
milled at an average yield of 2.19g/t, and 574,955 ounces produced from 6.3
million tonnes milled at an average yield of 2.85g/t in fiscal 2004. Due to the
decline in the Rand gold price over the last three fiscal years, our South
African Operations have increasingly focused on mining higher grade ore panels,
therefore leading to an increased yield from the tonnages milled. As the South
African mines are low-margin producers, the combined strengthening of the Rand,
ore pass constraints and rock falls, higher than expected increases by
government or monopolistic producers in the cost of consumable inventories,
such as water, electricity, and steel, and higher than expected increases in
labor costs, without associated increases in efficiencies and volumes, have
required us to restructure our South African Operations, including recently
initiating 60-day reviews at the Blyvoor and North West Operations. At our Australasian Operations production decreased from 71,955 ounces in
fiscal 2002, produced from 0.2 million tonnes milled at an average yield of
13.56g/t, to 68,096 ounces in fiscal 2003, produced from 0.2 million tonnes
milled at an average yield of 13.07g/t, and then increased in fiscal 2004, to
233,190 ounces, produced from 1.1 million tonnes milled at an average yield of
6.38g/t. The acquisition of our 20% interest in Porgera contributed 147,475
ounces, produced from 0.9 million tonnes milled at an average yield of 4.87g/t.
The Tolukuma Section has been a consistent producer at a high grade of
13.60g/t in fiscal 2004, 13.07g/t in fiscal 2003 and 13.56g/t in fiscal 2002. Due to the accessibility of the Ore Reserves at our Australasian

Operations and the high yield per tonne milled, these operations produced at a
cash cost1 of $221 per ounce and an total cost2 of $354 per ounce in fiscal
2004, compared with our South African Operations that produced at a cash cost
of $393 per ounce and an total cost of $458 per ounce in fiscal 2004. General economic factors As at October 31, 2004, we have six operations in two countries (South
Africa and Papua New Guinea), and we are exposed to a number of factors, which
could impact on our profitability, resulting from exchange rate fluctuations,
inflation and other risks relating to these specific countries. In conducting
mining operations, we recognize the inherent risks and uncertainties of the
industry, and the wasting nature of the assets. Effect of exchange rate fluctuations and the strength of the Rand As of June 30, 2004, approximately 70% of our revenues are generated in
South Africa, and approximately 30% of our revenues are generated from
operations in Papua New Guinea. Most of our production costs, therefore, are
denominated in local currencies, such as the South African Rand and the Papua
New Guinean Kina. In fiscal 2004, we derived 100% of our revenues in Dollars
and incurred 84% of our production costs in these local currencies. In fiscal 2004, the weakening of the Dollar against the Rand accounted for
approximately $93 per ounce, or 98% of the total increase in cash costs per
ounce for our South African operations from fiscal 2003. As the price of gold
is denominated in Dollars and we realize our revenues in Dollars, the
depreciation of the Dollar against these local currencies reduces our
profitability. Based upon average rates during the respective years, the Rand
strengthened by 24% against the Dollar in fiscal 2004 compared to fiscal 2003.
This has lead to an effective decrease of 11.2% in the average Rand gold price
in comparison to June 30, 2003. The Kina, based on average rates in the
respective fiscal years, strengthened by 16% against the Dollar in fiscal 2004
compared to fiscal 2003.   1
 2 Total costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to production costs
see Item 5A:. Operating Results. 95




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As an unhedged gold producer we do not enter into forward gold sales
contracts to reduce our exposure to market fluctuations in the Dollar gold
price or the exchange rate movements of the Rand and Kina. If revenue from gold
sales falls for a substantial period below our cost of production at our
operations, we could determine that it is not economically feasible to continue
commercial production at any or all of our operations or to continue the
development of some or all of our projects. Our weighted average total costs
per ounce for the operations of our wholly-owned subsidiaries, as well as
Porgera, was $428 per ounce of gold produced in the 2004 fiscal year, $256 in
the 2003 fiscal year and $388 in the 2002 fiscal year. The average gold price
received was $389 per ounce in fiscal 2004, $334 per ounce in fiscal 2003 and
$253 per ounce in fiscal 2002. In addition, to fund local operations and comply with South African
exchange controls, we hold funds in local currencies, such as the Rand and
Australian Dollar. The Dollar value of these currencies may be affected by
exchange rate fluctuations and, as a result, our cash and cash equivalents
reported in Dollars could change. At June 30, 2004, approximately 66% of our
cash and cash equivalents, being $14.8 million, were held in such currencies in
comparison to 100%, or $44.4 million at June 30, 2003. Effect of inflation In the past, our operations have been materially adversely affected by
inflation. As we are unable to control the prices at which our gold is sold, if
there is a significant increase in inflation in South Africa, and to a lesser
extent in Papua New Guinea, without a concurrent devaluation of the local
currency or an increase in the price of gold, our costs will increase,
negatively effecting our operating results. The movement in the Rand/Dollar exchange rate, based upon average rates
during the respective years, and the local annual inflation rate, as measured
by the South African Consumer Price Index, or CPIX, are set out in the table
below: 2004
    
    2003
    
    2002Year ended June 30,
    
    (%)
    
    (%)
    
    (%)The average Rand/Dollar exchange rate (strengthened)/weakened by
    
    
    (23.9
    )
    
    
    (11.0
    )
    
    
    33.1Less: CPIX (inflation rate)
    
    
    4.8
    
    
    
    9.6
    
    
    
    7.0Net effect
    
    
    (28.7
    )
    
    
    (20.6
    )
    
    
    26.1
 The South African CPIX inflation rate has stabilized somewhat over the
last three fiscal years, showing a decrease in fiscal 2004 in comparison to
historical trends. However, the effect of the movements in exchange rate has
exacerbated the effect on profitability experienced as a result of the movement
in the CPIX inflation rate, as illustrated above. South African political, economic and other factors We are a South African company and a majority of our operations are in
South Africa. As a result, we are subject to various economic, fiscal, monetary
and political factors that affect South African companies generally. South
African companies are subject to exchange control regulations. Governmental
officials have from time to time stated their intentions to lift South Africas
exchange control regulations when economic conditions permit such action. Over
the last few years, certain aspects of exchange controls for financial
institutions and individuals have been incrementally relaxed. 96




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It is, however, impossible to predict when the South African Government
will remove exchange controls in their entirety. South African companies remain
subject to restrictions on their ability to export and deploy capital outside
of the Southern African Common Monetary Area, unless dispensation has been
granted by the South African Reserve Bank. For a detailed discussion of
exchange controls, see Item 10D.: Exchange controls. On May 1, 2004, the Mineral and Petroleum Resources Development Act, or
MPRD Act, became effective. Prior to the introduction of the MPRD Act, private
ownership in mineral rights and statutory mining rights in South Africa could
be acquired through the common law or by statute. Now, all mineral rights have
been placed under the custodianship of the South African government under the
provisions of the MPRD Act, and old order proprietary rights need to be
converted to new order rights of use within certain prescribed periods. We are
currently in the process of submitting the required information. This process
is described more fully under Item 4B.: Business Overview  South Africa 
Common Law Mineral Rights and Statutory Mining Rights. Papua New Guinea political, economic and other factors Our operations based in Papua New Guinea are also subject to political and
economical uncertainties, including the risk of civil rebellion, expropriation,
nationalization, renegotiation of existing contracts, mining licenses and
permits, changes in laws or taxation policies, currency exchange restrictions
and international monetary fluctuations. Recent acquisitions and dispositions The global gold mining industry has experienced active consolidation and
rationalization activities in recent years. Accordingly, we have been, and
expect to continue to be, involved in a number of acquisitions and dispositions
as part of this global trend and to identify value-adding business combinations
and acquisition opportunities. To ensure that our Ore Reserve base is
maintained, or increased, we are currently focusing on acquiring low cost, high
margin mines in other global regions. Our recent acquisitions, over the last
fiscal year, include a 20% interest in the Porgera Joint Venture in Papua New
Guinea for an acquisition price of $77.1 million, comprising $16.7 million in
shares and $59.2 million in cash, net of cash acquired, and by July 30, 2004,
we had increased our interest in Emperor from 19.78%, as at June 30, 2004, to
45.33% through a takeover offer announced in March 2004. We acquired 29,097,269
Emperor shares in exchange for 6,612,679 of our ordinary shares, valued at
$16.6 million, based on the market value of our shares on the date of issue. Beginning in July 2002, we entered into a series of transactions,
consistent with our black economic empowerment strategy (see Item 4B.:
Business Overview), resulting in the sale of 60% of our interest in Crown
Gold Recoveries (Pty) Limited, or CGR, to Khumo Bathong Holdings (Pty) Limited,
or KBH, for R105.0 million ($11.6 million). In October 2002, CGR acquired 100%
of the outstanding share capital of, and loan accounts in, East Rand
Proprietary Mines Limited, or ERPM, for R100 million ($11.0 million). In June 2002, we entered into an agreement with Bophelo Trading (Pty)
Limited, subsequently renamed Mogale Gold (Pty) Limited, or Mogale, for the
sale of the West Wits gold plant and certain related assets for R25 million
($2.4 million) to process certain sand dumps, surface materials, freehold areas
and surface right permits located at the West Wits Section. We retain the right
to mine underground by virtue of certain mining titles and mining
authorizations on the property. As part of the agreement, we agreed to
indemnify Mogale against any loss, damage or expense which Mogale might incur
as a result of any liability in connection with the transferred assets, the
cause of which arose prior to this sale. The effective date of this sale was
July 21, 2003, when all of the conditions precedent were fulfilled and Mogale
was granted a mining license. For further details on these transactions refer to Item 4A.: History and
Development of the Company. 97




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##### Table of Contents



Key financial and operating indicators We consider the key performance measures for the growth of our business
and its profitability to be gold revenue, production, production costs, cash
costs per ounce and total costs per ounce, capital expenditure and Ore
Reserves. The following table presents the key performance measurement data for
the past three fiscal years: Operating data1 Year ended June 30,2004
    
    2003
    
    2002Revenues ($000)
    
    
    313,290
    
    
    
    261,342
    
    
    
    303,858Gold production (ounces)
    
    
    808,145
    
    
    
    792,996
    
    
    
    1,027,440Production costs ($000)
    
    
    277,491
    
    
    
    235,359
    
    
    
    218,056Revenue ($/oz)
    
    
    389
    
    
    
    334
    
    
    
    253Cash costs ($/oz)
    
    
    343
    
    
    
    297
    
    
    
    212Total costs ($/oz)
    
    
    428
    
    
    
    250
    
    
    
    388Capital expenditure ($000)
    
    
    26,917
    
    
    
    13,414
    
    
    
    8,188Ore Reserves (ounces)
    
    
    11,016,000
    
    
    
    14,408,000
    
    
    
    16,263,000
 Revenue Revenue is primarily derived from the sale of gold. The following table
analyzes the revenue per operation: Year ended June 30,2004
    
    2003
    
    2002Mining operations
    
    $000
    
    $000
    
    $000Blyvoor Section
    
    
    90,066
    
    
    
    81,753
    
    
    
    73,705North West Operations
    
    
    130,036
    
    
    
    151,923
    
    
    
    160,596West Wits Section2
    
    
    
    
    
    
    4,796
    
    
    
    6,897Crown Gold Section3
    
    
    
    
    
    
    
    
    
    
    40,606Other
    
    
    
    
    
    
    
    
    
    
    4Total South African Operations
    
    
    220,102
    
    
    
    238,472
    
    
    
    281,808Tolukuma Section
    
    
    32,743
    
    
    
    22,870
    
    
    
    22,050Porgera Joint Venture4
    
    
    60,445
    
    
    
    
    
    
    
    Total Australasian Operations
    
    
    93,188
    
    
    
    22,870
    
    
    
    22,050Total
    
    
    313,290
    
    
    
    261,342
    
    
    
    303,858
   1
 2 With effect from July 21, 2003, we disposed of the West Wits operating mining
assets in a black economic empowerment deal to Mogale, for $2.4 million. 3 With effect July 1, 2002, we disposed of 60% of our interest in this mining
operation in a black economic empowerment deal, to KBH. CGR is equity accounted
from fiscal 2003 onwards and is referred to as Crown Gold Recoveries (Pty)
Limited, or the Crown Section. 4 With effect from October 14, 2004, we acquired a 20% interest in the
unincorporated Porgera Joint Venture. This interest is proportionately
consolidated from that date. 98




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##### Table of Contents



For fiscal 2004, revenue increased from $261.3 million in fiscal 2003 to
$313.3 million, with the average gold price received by us increasing to $389
per ounce in fiscal 2004, compared to $334 per ounce in fiscal 2003. The
acquisition of our 20% interest in Porgera contributed $60.4 million to revenue
for fiscal 2004. Other movements in revenue are attributable to changes in
production volumes, from a total of 792,996 ounces in fiscal 2003 to 808,145
ounces in fiscal 2004. For fiscal 2003, revenue decreased from $303.9 million in fiscal 2002 to
$261.3 million, with the average gold price received by us increasing to $334
per ounce, compared to $253 per ounce in fiscal 2002. Included in the realized
price of $253 per ounce in fiscal 2002, is a $43 per ounce adverse affect of
the hedges in place during that fiscal year. With effect July 1, 2002 we
disposed of 60% of our interest in the Crown Gold Section, which contributed
$40.6 million to revenue in fiscal 2002. Other movements in revenue are
attributable to changes in production volumes, from a total of 1,027,440 ounces
in fiscal 2002 to 792,996 ounces in fiscal 2003. Gold production The following table analyzes the production per operation: Year ended June 30,Production in ouncesMining operations
    
    2004
    
    2003
    
    2002Blyvoor Section
    
    
    233,094
    
    
    
    247,626
    
    
    
    253,025Surface operations
    
    
    34,883
    
    
    
    44,626
    
    
    
    52,854Underground operations
    
    
    198,211
    
    
    
    203,000
    
    
    
    200,171North West Operations
    
    
    341,861
    
    
    
    462,743
    
    
    
    540,550Surface operations
    
    
    43,180
    
    
    
    78,447
    
    
    
    103,686Underground operations
    
    
    298,681
    
    
    
    384,296
    
    
    
    436,864West Wits Section 1
    
    
    
    
    
    
    14,531
    
    
    
    23,245Crown Gold Section 2
    
    
    
    
    
    
    
    
    
    
    138,665Total South African Operations
    
    
    574,955
    
    
    
    724,900
    
    
    
    955,485Porgera3
    
    
    147,475
    
    
    
    
    
    
    
    Tolukuma Section
    
    
    85,715
    
    
    
    68,096
    
    
    
    71,955Total Australasian Operations
    
    
    233,190
    
    
    
    68,096
    
    
    
    71,955Total
    
    
    808,145
    
    
    
    792,996
    
    
    
    1,027,440
 For fiscal 2004, our total gold production increased by 15,149 ounces, or
2%, to 808,145 ounces from 792,996 ounces produced in fiscal 2003. Gold
production from our South African Operations decreased by 21% from 724,900
ounces produced in fiscal 2003 to 574,955 ounces in fiscal 2004. This is
attributable to us ceasing mining unprofitable gold reserves as a result of the
lower Rand per kilogram gold price. Gold production at the Australasian
Operations increased by 242% from 68,096 ounces in fiscal 2003 to 233,190
ounces in fiscal 2004, mainly due to the acquisition of our 20% attributable
interest in the Porgera Joint Venture and improved gold recovery at the
Tolukuma Section.   1
 2 With effect July 1, 2002, we disposed of 60% of our interest in this mining
operation in a black economic empowerment deal to KBH. CGR is equity accounted
from fiscal 2003 onwards and is referred to as Crown Gold Recoveries (Pty)
Limited, or the Crown Section. 3 With effect from October 14, 2004, we acquired a 20% interest in the
unincorporated Porgera Joint Venture. This interest is proportionately
consolidated from that date. 99




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##### Table of Contents



For fiscal 2003, our total gold production decreased by 234,444 ounces, or
23%, to 792,996 ounces from 1,027,440 ounces produced in fiscal 2002. Gold
production from our South African Operations decreased by 24% from 955,485
ounces produced in fiscal 2002 to 724,900 ounces in fiscal 2003. This is
attributable to the sale of 60% of our interest in the Crown and ERPM Sections
that contributed 138,665 ounces of gold production in fiscal 2002. In addition
a decrease of 77,807 ounces was noted at the North West Operations, resulting
from a decrease in yield due to a shift from predominantly high grade panels to
lower grade panels. Gold production at the Australasian Operations decreased by
5% from 71,955 ounces in fiscal 2002 to 68,096 ounces in fiscal 2003. A more detailed review of gold production at each of our operations is
provided under Item 4D.: Property, Plants and Equipment. Cash costs1and total costs2per ounce Our operational focus is to increase production, improve productivity and
reduce costs. With the appreciation in the Rand against the Dollar, the
increase in labor costs and decrease in operating efficiencies at our South
African mines, our cash costs for fiscal 2004 increased to $343 per ounce of
gold from $297 per ounce of gold in fiscal 2003 and our total costs increased
to $428 per ounce of gold from $250 per ounce of gold in fiscal 2003. This
increase was offset in part by the acquisition of a 20% interest in Porgera,
whose cash costs were $215 per ounce of gold, for fiscal 2004. For fiscal 2003,
our cash costs increased to $297 per ounce of gold from $212 per ounce of gold
in fiscal 2002, principally due to the appreciation of the Rand against the
Dollar. Prior to fiscal 2003, our cash costs decreased from an average of $267
per ounce of gold in 2000 to $212 per ounce of gold in 2002 principally due to
the depreciation of the Rand. Our total costs per ounce have decreased from
$388 per ounce in fiscal 2002 to $250 per ounce in fiscal 2003 and increased to
$428 per ounce in fiscal 2004. The cash costs per ounce for our South African Operations increased by 31%
whereas the cash costs per ounce for the Australasian operations decreased by
21% in fiscal 2004, compared to fiscal 2003. The increase in cash costs per
ounce at our South African operations was mainly due to the strengthening of
the Rand, operational difficulties and the placing of the Number 6 Shaft at the
Harties Section (North West Operations) on a care and maintenance program.
The decrease in cash costs per ounce at our Australasian Operations was
primarily a result of our acquisition of Porgera which operated at a cash cost
of $215 per ounce in fiscal 2004. Our cash cost for fiscal 2003 was $297 per ounce, which is $85 per ounce,
or 40%, higher than cash costs of $212 per ounce recorded in fiscal 2002. This
change was primarily due to stronger local currencies against the Dollar. The
cash costs per ounce for our South African and Australasian operations
increased by 42% and 13%, respectively, in fiscal 2003, compared to fiscal
2002. The increases in cash costs per ounce at these operations were mainly due
to the stronger local currencies against the Dollar and, for our South African
operations, production difficulties experienced at the North West Operations. Our total cost per ounce increased from $250 per ounce in fiscal 2003 to
$428 per ounce in fiscal 2004. This increase is mainly as a result of the
weakening of the Dollar against the local operating currencies. The total cost
per ounce of $250 recorded in fiscal 2003 included a profit on financial
instruments of $43.8 million ($55 per ounce) as a result of the significant
appreciation of the Rand against the Dollar. In addition, the total cost per
ounce of $428 recorded in fiscal 2004 included additional depreciation of $19.5
million ($24 per ounce), primarily due to the acquisition of Porgera.   1
 2 Total costs per ounce is a non-US GAAP financial measure of performance that
we use to determine cash generating capacities of the mines and to monitor
performance of our mining operations. For a reconciliation to production costs
see Item 5A:. Operating Results. 100




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##### Table of Contents



Our total cost per ounce of gold decreased to $250 in fiscal 2003 from
$388 in fiscal 2002. This decrease is primarily attributable to the profit on
financial instruments in fiscal 2003 as a result of the significant
appreciation of the Rand against the Dollar, whereas in fiscal 2002,
significant costs were incurred in the closing out of our hedge book, leading
to a loss of derivative instruments of $147.2 million ($143 per ounce) in
fiscal 2002. Reconciliation of cash costs per ounce, total costs and total costs per ounce Cash costs per ounce, total costs and total costs per ounce are not US
GAAP financial measures. Cash costs of production include costs for all mining, processing,
administration, royalties and production taxes, but exclude depreciation,
depletion and amortization, rehabilitation, employment termination costs,
corporate administration costs, capital costs and exploration costs. Cash costs
per ounce are calculated by dividing production costs by ounces of gold
produced. Cash costs per ounce have been calculated on a consistent basis for
all periods presented. Total production costs include cash costs of production, depreciation,
depletion and amortization and the accretion of rehabilitation, reclamation and
closure costs. Total costs, as calculated and reported by us, include total production
costs, plus other operating and non-operating income, finance charges and other
operating and non-operating costs, but excludes taxation, minority interest,
equity in loss from associates and the cumulative effect of accounting changes.
These costs are excluded as the mines do not have control over these costs and
they have little or no impact on the day-to-day operating performance of the
mines. Total costs per ounce are calculated by dividing total costs by
attributable ounces of gold produced. Total costs and total costs per ounce
have been calculated on a consistent basis for all periods presented. Cash costs per ounce, total costs and total costs per ounce are non-US
GAAP financial measures that should not be considered by investors in isolation
or as alternatives to production costs, net (loss)/profit applicable to common
stockholders, (loss)/profit before tax and other items or any other measure of
financial performance presented in accordance with US GAAP or as an indicator
of our performance. While the Gold Institute has provided definitions for the
calculation of cash costs, the calculation of cash costs per ounce, total costs
and total costs per ounce 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. However, we believe that cash
costs per ounce and total costs and total costs per ounce are useful indicators
to investors and management of an individual mines performance and of the
performance of our operations as a whole as they provide:  
    
    an indication of a mines profitability and efficiency;
    
    the trend in costs;
    
    a measure of a mines margin per ounce, by comparison of the cash
costs per ounce by mine to the price of gold; and
    
    a benchmark of performance to allow for comparison against other
mines and mining companies. A reconciliation of production costs to total costs, cash costs per ounce
and total costs per ounce, for each of the three years in the period ending
June 30, 2004, is presented below. In addition, we have also provided below
detail of the ounces of gold produced by mine for each of those periods. 101




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For the year ended June 30, 2004(in $000, except as otherwise noted) Total SouthAfricanBlyvoor
    
    North West
    
    West Wits 1
    
    Other2
    
    OperationsProduction costs4
    
    
    90,366
    
    
    
    134,465
    
    
    
    
    
    
    
    1,189
    
    
    
    226,020Plus:Depreciation and amortization
    
    
    2,643
    
    
    
    2,263
    
    
    
    
    
    
    
    698
    
    
    
    5,604Movement in rehabilitation
provision, reclamation
and closure costs
    
    
    779
    
    
    
    2,206
    
    
    
    109
    
    
    
    (30
    )
    
    
    3,064Total production costs
    
    
    93,788
    
    
    
    138,934
    
    
    
    109
    
    
    
    1,857
    
    
    
    234,688Plus:Employment termination costs
    
    
    899
    
    
    
    7,064
    
    
    
    
    
    
    
    
    
    
    
    7,963Movement in gold in process
    
    
    579
    
    
    
    (80
    )
    
    
    
    
    
    
    
    
    
    
    499Non-operating income
    
    
    (192
    )
    
    
    (881
    )
    
    
    (136
    )
    
    
    (23,125
    )
    
    
    (24,334
    )Interest expense
    
    
    906
    
    
    
    162
    
    
    
    
    
    
    
    6,800
    
    
    
    7,868Other operating expenses5
    
    
    3,667
    
    
    
    5,754
    
    
    
    1,430
    
    
    
    25,798
    
    
    
    36,649Total costs
    
    
    99,647
    
    
    
    150,953
    
    
    
    1,403
    
    
    
    11,330
    
    
    
    263,333Gold produced (ounces) 6
    
    
    233,094
    
    
    
    341,861
    
    
    
    
    
    
    
    
    
    
    
    574,955Cash costs per ounce ($  per ounce)
    
    
    388
    
    
    
    393
    
    
    
    
    
    
    
    
    
    
    
    393Total costs per ounce ($  per ounce)
    
    
    427
    
    
    
    442
    
    
    
    
    
    
    
    
    
    
    
    458
   [Continued from above table, first column(s) repeated] Total AustralasianPorgera3
    
    Tolukuma
    
    Other1
    
    Operations
    
    TotalProduction costs4
    
    
    31,650
    
    
    
    19,821
    
    
    
    
    
    
    
    51,471
    
    
    
    277,491Plus:Depreciation and amortization
    
    
    9,260
    
    
    
    7,340
    
    
    
    7,931
    
    
    
    24,531
    
    
    
    30,135Movement in rehabilitation
provision, reclamation
and closure costs
    
    
    180
    
    
    
    148
    
    
    
    63
    
    
    
    391
    
    
    
    3,455Total production costs
    
    
    41,090
    
    
    
    27,309
    
    
    
    7,994
    
    
    
    76,393
    
    
    
    311,081Plus:Employment termination costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,963Movement in gold in process
    
    
    (1,499
    )
    
    
    
    
    
    
    
    
    
    
    (1,499
    )
    
    
    (1,000
    )Non-operating income
    
    
    (9
    )
    
    
    (118
    )
    
    
    11,602
    
    
    
    11,475
    
    
    
    (12,859
    )Interest expense
    
    
    1,103
    
    
    
    226
    
    
    
    (1,285
    )
    
    
    44
    
    
    
    7,912Other operating expenses5
    
    
    2,223
    
    
    
    3,032
    
    
    
    (9,025
    )
    
    
    (3,770
    )
    
    
    32,879Total costs
    
    
    42,908
    
    
    
    30,449
    
    
    
    9,286
    
    
    
    82,643
    
    
    
    345,976Gold produced (ounces) 6
    
    
    147,475
    
    
    
    85,715
    
    
    
    
    
    
    
    233,190
    
    
    
    808,145Cash costs per ounce ($  per ounce)
    
    
    215
    
    
    
    231
    
    
    
    
    
    
    
    221
    
    
    
    343Total costs per ounce ($  per ounce)
    
    
    291
    
    
    
    355
    
    
    
    
    
    
    
    354
    
    
    
    428
   1
 2 Relates to other non-core operating entities within the Group. 3 With effect from October 14, 2004, we acquired a 20% interest in the Porgera
Joint Venture. 4 Production costs equate to cash costs of production. 5 Other operating expenses comprise impairment of assets, management and
consulting fees, post retirement medical benefits, loss/(profit) on derivative
instruments, loss/(profit) on sale of mining assets, profit on disposal of
subsidiary, write-off of investments and loans, and selling, administration and
general charges. 6 The gold production numbers exclude production from our 40% held associate,
Crown Gold Recoveries (Pty) Limited, which holds the Crown and ERPM Sections,
and our 19.78% investment in Emperor, but includes our 20% attributable
interest in the Porgera Joint Venture. 102




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##### Table of Contents



For the year ended June 30, 2003(in $000, except as otherwise noted) Total South African
    
    AustralasianBlyvoor
    
    North West
    
    West Wits 1
    
    Other 2
    
    operations
    
    operations 3
    
    TotalProduction costs4
    
    
    65,240
    
    
    
    144,568
    
    
    
    4,859
    
    
    
    1,587
    
    
    
    216,254
    
    
    
    19,105
    
    
    
    235,359Plus:Depreciation and amortization
    
    
    1,509
    
    
    
    2,047
    
    
    
    402
    
    
    
    83
    
    
    
    4,041
    
    
    
    6,561
    
    
    
    10,602Movement in rehabilitation
provision, reclamation and
closure costs
    
    
    130
    
    
    
    934
    
    
    
    71
    
    
    
    306
    
    
    
    1,441
    
    
    
    (27
    )
    
    
    1,414Total production costs
    
    
    66,879
    
    
    
    147,549
    
    
    
    5,332
    
    
    
    1,976
    
    
    
    221,736
    
    
    
    25,639
    
    
    
    247,375Plus:Employment termination costs
    
    
    85
    
    
    
    821
    
    
    
    53
    
    
    
    542
    
    
    
    1,501
    
    
    
    
    
    
    
    1,501Movement in gold in process
    
    
    (160
    )
    
    
    687
    
    
    
    131
    
    
    
    
    
    
    
    658
    
    
    
    593
    
    
    
    1,251Non-operating income
    
    
    (391
    )
    
    
    (1,215
    )
    
    
    (251
    )
    
    
    (19,746
    )
    
    
    (21,603
    )
    
    
    1,519
    
    
    
    (20,084
    )Interest expense
    
    
    530
    
    
    
    210
    
    
    
    10
    
    
    
    5,544
    
    
    
    6,294
    
    
    
    615
    
    
    
    6,909Other operating expenses5
    
    
    (39,764
    )
    
    
    688
    
    
    
    (640
    )
    
    
    (289
    )
    
    
    (40,005
    )
    
    
    1,631
    
    
    
    (38,374
    )Total costs
    
    
    27,179
    
    
    
    148,740
    
    
    
    4,635
    
    
    
    (11,973
    )
    
    
    168,581
    
    
    
    29,997
    
    
    
    198,578Gold produced (ounces) 6
    
    
    247,626
    
    
    
    462,743
    
    
    
    14,531

    
    
    
    
    
    
    
    724,900
    
    
    
    68,096
    
    
    
    792,996Cash costs per ounce ($  per ounce)
    
    
    263
    
    
    
    312
    
    
    
    334
    
    
    
    
    
    
    
    298
    
    
    
    281
    
    
    
    297Total costs per ounce ($  per ounce)
    
    
    110
    
    
    
    321
    
    
    
    319
    
    
    
    
    
    
    
    233
    
    
    
    441
    
    
    
    250
   1
 2 Relates to other non-core operating entities within the Group. 3 The only significant mining operation within the Australian region is the
Tolukuma Section based in Papua New Guinea. 4 Production costs equate to cash costs of production. 5 Other operating expenses comprise impairment of assets, management and
consulting fees, post retirement medical benefits, loss/(profit) on derivative
instruments, loss/(profit) on sale of mining assets, profit on disposal of
subsidiary, write-off of investments and loans, and selling, administration and
general charges 6 These production numbers exclude production from our 40% held associate,
Crown and ERPM, and our 19.81% investment in Emperor. 103




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For the year ended June 30, 2002(in $000, except as otherwise noted) Total SouthAfrican
    
    AustralasianBlyvoor
    
    North West
    
    West Wits
    
    Crown Gold 1
    
    Other2
    
    operations
    
    operations 3
    
    TotalProduction costs4
    
    
    46,579
    
    
    
    118,265
    
    
    
    6,136
    
    
    
    28,254
    
    
    
    980
    
    
    
    200,214
    
    
    
    17,842
    
    
    
    218,056Plus:Depreciation and amortization
    
    
    933
    
    
    
    2,068
    
    
    
    43
    
    
    
    2,162
    
    
    
    1,668
    
    
    
    6,874
    
    
    
    7,059
    
    
    
    13,933Movement in rehabilitation
provision, reclamation and
closure costs
    
    
    4
    
    
    
    159
    
    
    
    
    
    
    
    23
    
    
    
    (1,318
    )
    
    
    (1,132
    )
    
    
    358
    
    
    
    (774
    )Total production costs
    
    
    47,516
    
    
    
    120,492
    
    
    
    6,179
    
    
    
    30,439
    
    
    
    1,330
    
    
    
    205,956
    
    
    
    25,259
    
    
    
    231,215Plus:Employment termination costs
    
    
    
    
    
    
    308
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    388
    
    
    
    
    
    
    
    388Movement in gold in process
    
    
    (25
    )
    
    
    (113
    )
    
    
    (48
    )
    
    
    (18
    )
    
    
    
    
    
    
    (204
    )
    
    
    493
    
    
    
    289Non-operating income
    
    
    (117
    )
    
    
    (209
    )
    
    
    (1,121
    )
    
    
    (41
    )
    
    
    (710
    )
    
    
    (2,198
    )
    
    
    349
    
    
    
    (1,849
    )Interest expense
    
    
    837
    
    
    
    8
    
    
    
    800
    
    
    
    3
    
    
    
    421
    
    
    
    2,069
    
    
    
    316
    
    
    
    2,385Other operating expenses5
    
    
    34,462
    
    
    
    109,844
    
    
    
    2,436
    
    
    
    8,106
    
    
    
    10,926
    
    
    
    165,774
    
    
    
    229
    
    
    
    166,003Total costs
    
    
    82,673
    
    
    
    230,330
    
    
    
    8,246
    
    
    
    38,489
    
    
    
    12,047
    
    
    
    371,785
    
    
    
    26,646
    
    
    
    398,431Gold produced (ounces)6
    
    
    253,025
    
    
    
    540,550
    
    
    
    23,245
    
    
    
    138,665
    
    
    
    
    
    
    
    955,485
    
    
    
    71,955
    
    
    
    1,027,440Cash costs per ounce ($ per ounce)
    
    
    184
    
    
    
    219
    
    
    
    264
    
    
    
    204
    
    
    
    
    
    
    
    210
    
    
    
    248
    
    
    
    212Total costs per ounce ($ per ounce)
    
    
    327
    
    
    
    426
    
    
    
    355
    
    
    
    278
    
    
    
    
    
    
    
    389
    
    
    
    370
    
    
    
    388
   1
 2 Relates to other non-core operating entities within the Group. 3 The only significant mining operation within the Australian region was the
Tolukuma Section based in Papua New Guinea. 4 Production costs equate to cash costs of production. 5 Other operating expenses comprise impairment of assets, management and
consulting fees, post retirement medical benefits, loss/(profit) on derivative
instruments, loss/(profit) on sale of mining assets, profit on disposal of
subsidiary, write-off of investments and loans, and selling, administration and
general charges 6 These production numbers exclude production from our 40% held associate, CGR. 104




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##### Table of Contents



Capital expenditure Total capital expenditure during fiscal 2004 was $26.9 million, compared
to $13.4 million in fiscal 2003, which represents a $13.5 million, or 101%,
increase in capital expenditure on a group level. In South Africa, capital
expenditure increased from $10.7 million in fiscal 2003 to $14.8 million in
fiscal 2004, mainly due to the inclusion of new capital development projects,
which included the opening up of reserves at North West Operations (Buffels and
Harties Sections) amounting to $2.2 million, the completion of the Number 4 and
5 slimes dam project at Blyvoor amounting to $6.9 million, and the
strengthening of the South African Rand against the Dollar by 16% during fiscal
2004. Capital expenditure in the Australasian operations, increased from $2.7
million in fiscal 2003, to $12.2 million in fiscal 2004. The increase partly
related to the strengthening of the local currencies against the Dollar, and
the inclusion of $8.7 million of capital expenditure at Porgera, which includes
capitalized deferred stripping costs of $4.1 million. Total capital expenditure during fiscal 2003 was $13.4 million, compared
to $8.2 million in fiscal 2002, which represents a $5.2 million, or 63%,
increase in capital expenditure on a group level. In South Africa, capital
expenditure increased from $6.4 million in fiscal 2002 to $10.7 million in
fiscal 2003, mainly due to the inclusion of several capital projects and the
South African Rand strengthening by 11% against the Dollar. Capital projects
in South Africa, for fiscal 2003, included a number of projects at North West
Operations, mining equipment at the Blyvoor Section and the North West
operations, as well as the development of Ore Reserves. Capital expenditure at
the Australasian operations, increased from $1.8 million in fiscal 2002, to
$2.7 million in fiscal 2003, with the increase in expenditure mainly due to
expenditure on mobile plant and equipment. Ore Reserves As at June 30, 2004, our Ore Reserves, were estimated at 11.0 million
ounces, as compared to approximately 14.4 million ounces at June 30, 2003,
representing a 24% decrease. The decrease is due to depletion during the year,
which constitutes 6% of the decrease, with the remaining 18% decrease mostly
due to the decrease in the Rand gold price and the application of economic
cut-off at the end of the life of mine plans when planning the mining of Ore
Reserves. The reduction was offset in part by the purchase of a 20% interest in
Porgera which added 1.4 million attributable ounces. Our Ore Reserves decreased
from 16.3 million ounces of gold in fiscal 2002 to 14.4 million ounces in
fiscal 2003. This resulted in slightly higher depreciation and amortization
charges. 105




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##### Table of Contents



We seek to increase our reserves through development and to acquire additional
new reserves through acquisitions. Year ended June 30,(000 ounces)
    
    2004
    
    2003
    
    2002Blyvoor Section
    
    
    4,329
    
    
    
    5,780
    
    
    
    7,235North West Operations
    
    
    5,047
    
    
    
    8,483
    
    
    
    8,414West Wits Section
    
    
    
    
    
    
    
    
    
    
    Crown Gold Section
    
    
    
    
    
    
    
    
    
    
    536Total South African operations
    
    
    9,376
    
    
    
    14,263
    
    
    
    16,185Porgera 1
    
    
    1,437
    
    
    
    
    
    
    
    Tolukuma Section
    
    
    203
    
    
    
    145
    
    
    
    78Total Australasian operations
    
    
    1,640
    
    
    
    145
    
    
    
    78Total
    
    
    11,016
    
    
    
    14,408
    
    
    
    16,263Associates2
    
    
    505
    
    
    
    1,211
    
    
    
    
 Application of critical accounting policies Some of our significant accounting policies as described in note 2 to our
consolidated financial statements, require the application of significant
judgment by management in selecting the appropriate assumptions for calculating
financial estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty and are based on our historical experience,
terms of existing contracts, managements view on trends in the gold mining
industry and information from outside sources. Management believes the following critical accounting policies involve the
more significant judgments and estimates used in the preparation of our
consolidated financial statements and could potentially impact our financial
results and future financial performance:  
    
    Mining assets
    
    Deferred stripping costs
    
    Impairment of mining assets
    
    Deferred income and mining taxes
    
    Reclamation and closure costs
    
    Environmental rehabilitation costs
    
    Collectability of receivables
    
    Contingent liabilities Management has discussed the development and selection of each of these
critical accounting policies with the Board of Directors and the Audit
Committee, both of which have approved and reviewed the disclosure of these
policies.   1
 2
Comprise our 40% interest in CGR, which owns the Crown and ERPM Sections. 106




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Mining assets Actual expenditures incurred for mineral property interests, mine
development costs, mine plant facilities and equipment are capitalized to the
specific mine to which the cost relates. Amortization is calculated on a
mine-by-mine basis (i.e. the cost pools are the individual mines) using the
units of production method. Under the units of production method, we
estimate the amortization rate based on actual production over total Proven and
Probable Ore Reserves of the particular mine. This rate is then applied to
actual costs capitalized to date to arrive at the amortization expense for the
period. Proven and Probable Ore Reserves of the particular mine reflect
estimated quantities of economically and legally recoverable reserves, as
determined in accordance with the SECs Industry Guide 7 under the US
Securities Exchange Act of 1934, as amended. The estimate of the total reserves
of our mines could be materially different from the actual gold mined due to
changes in the factors used in determining our Ore Reserves, such as the gold
price, foreign currency exchange rates, labor costs, engineering evaluations of
assay values derived from sampling of drill holes and other openings. Any
change in managements estimate of the total Proven and Probable Reserves,
would impact the amortization charges recorded in our consolidated financial
statements. Deferred stripping costs We have only one significant open-pit operation, at Porgera, where
stripping costs incurred during the production phase to remove additional waste
are charged to operating costs on the basis of the average life of mine
stripping ratio. For other open-pit operations stripping costs are expensed in
the period in which they are incurred. Stripping costs included in mining
assets as at June 30, 2004, for Porgera are $3.5 million (June 30, 2003: $nil)
with $4.1 million capitalized to mining assets during fiscal 2004. During
fiscal 2004, the average stripping ratio was 7.1 in comparison with the Life of
Mine stripping ratio of 3.5. Wedge and mudstone failure on the west wall of the
Stage 5 pit at Porgera created unplanned waste material which had to be removed
and negatively affected the stripping ratio. The stripping ratio is determined
based on the life of mine plan. The estimate of the total reserves of the mine
could be materially different from the actual gold mined and from the actual
usage of the mine due to changes in the factors used in determining the
economic value of our mineral reserves and deferred stripping costs, such as
the gold price and foreign currency exchange rates. Any change in managements
estimate of the total expected future life of the mine would impact the
amortization charge recorded and deferred stripping capitalized in our
consolidated financial statements. Impairment of mining assets The impairment of long-lived assets is accounted for in accordance with
Statement of Financial Accounting Standards, or SFAS, No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. Under SFAS 144, long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset or group of assets may not be recoverable, including a reduction in the
extent to which a gold plant is used, a dramatic change in the manner in which
the Ore Reserves are used, a substantial drop in the gold price, a change in
the law or environment in the country in which the Ore Reserves are based or
gold is sold, forecasts showing lack of long-term profitability or production
costs are in excess of an amount originally expected when the asset was
acquired or constructed. Recoverability of an asset or asset group is assessed
by comparing the carrying amount of an asset or group of assets to the
estimated future undiscounted net cash flows of the asset or group of assets.
Estimates of future cash flows include estimates of future gold prices and
foreign exchange rates. Therefore, changes could occur which may affect the
recoverability of our mining assets. If an asset or asset group is considered
to be impaired, the impairment which is recognized is measured as the amount by
which the carrying amount of the asset or group of assets exceeds the
discounted future cash flows expected to be derived from that asset or group of
assets. The expected future cash flows are discounted at a rate based on the
risk-free inter-bank interest rate indices in the respective geographic
locations in which our assets are held. The asset or asset group is the lowest
level for which there are identifiable cash flows that are largely independent
of other cash flows. In carrying out the economic valuations, an assessment is
made of the future cash flows expected to be generated by these assets, taking
into account current market conditions and the expected lives of our assets.
The lowest level for which there are identifiable cash flows that are largely
independent of other cash flows is calculated on a mine-by-mine basis. We make
the analysis periodically on a mine-by-mine basis or when indicators of
impairment exist. During fiscal 2004, $1.4 million was recorded as an
impairment and during fiscal 2002, $2.2 million was recorded as an impairment
through applying these principles. 107




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Deferred income and mining taxes We follow the liability method of accounting for deferred income and
mining tax whereby we recognize the tax consequences of temporary differences
by applying current statutory tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain
assets and liabilities. Changes in deferred tax assets and liabilities include
the impact of any tax rate changes enacted during the year. A valuation allowance is raised against deferred tax assets which are not
considered more likely than not to be realizable. These determinations are
based on the projected realization of tax allowances and tax loss carry
forwards. Assessing the recoverability of deferred tax assets requires
management to make significant estimates related to expectations of future
taxable income. If these tax assets are not more likely than not to be
realized, an adjustment to the valuation allowance would be required, which
would be charged to income in the period that the determination was made. If we
determine that it is more likely than not that we would be able to realize the
tax assets in the future, in excess of the recorded amount thereof, an
adjustment to reduce the valuation allowance would be recorded. Management
considers historical taxable positions in determining if a tax asset will be
utilized, specifically with reference to the immediately preceding three fiscal
years. As a result of these determinations, additional valuation allowances of
$25.3 million and $41.9 million were recorded during fiscal 2004 and 2003,
respectively. The bulk of these related to the South African Operations. During
fiscal 2002, a reversal of $23.9 million in the valuation allowances was
recorded, due to the profitability of the South African Operations, in that
year, as a result of the stronger Rand gold price. Reclamation and closure costs In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards 143, Accounting for Asset Retirement
Obligations, or SFAS 143. SFAS 143, which came into effect for fiscal years
beginning after June 15, 2002 and which we adopted on July 1, 2002. SFAS 143
requires that the fair value of liabilities for asset retirement obligations be
recognized in the period in which they are incurred. A corresponding increase
to the carrying amount of the related asset, where one is identifiable, is
recorded and is depreciated over the life of the asset. Prior to the adoption
of SFAS 143, we accrued for the estimated reclamation and closure liability
through annual charges to earnings over the estimated life of the mine. The provision for asset retirement obligations relates to expected costs
associated with the demolition of gold plants, shaft headgear and shaft
infrastructure. Estimates of these costs are based on our knowledge at the time
of creating the provision. Determining these costs is complex and requires
management to make estimates and judgments because most of the removal
obligations will be fulfilled in the future and contracts and regulations often
have vague descriptions of what constitutes removal. These estimates are
subject to changes in regulations and unexpected movements in inflation rates
and is, therefore, subject to annual review to ensure that the asset and
liability is a fair reflection of the expected reclamation and closure costs as
at June 30 of every year. The actual liability for rehabilitation costs can
vary significantly from our estimate and, as a result, the liabilities that we
report can vary significantly, if our assessment of these costs changes. As we
use the expected cash flow technique to determine our future liability, the
liability is determined by discounting the estimated cash flows using a
credit-adjusted risk-free rate. Thus, the effect our credit standing is
reflected in the discount rate rather than in the estimated cash flows. As at
June 30, 2004, the discount rate was determined to be 6%. As a result of
changes in estimates, additional liabilities of $2.0 million, $0.6 million and
$0.7 million were raised in fiscal 2004, 2003 and 2002, respectively. 108




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Environmental rehabilitation costs Where a related asset is not easily identifiable, other estimated
rehabilitation costs associated with the revegetation of tailings dams,
revegetation of rock dumps and the rehabilitation of open cast areas are
accrued as tailings are deposited. The estimated costs of rehabilitation are
reviewed annually and adjusted as appropriate for changes in legislation,
technology or other circumstances. Based on current environmental regulations
and known rehabilitation requirements, our management has included its best
estimate of these obligations in our Provision for Rehabilitation. However, it
is reasonably possible that these estimates of our ultimate rehabilitation
liabilities could change as a result of changes in regulations or cost
estimates. As a result of changes in estimates, additional liabilities of $1.5
million, $0.8 million and $0.1 million were raised in fiscal 2004, 2003 and
2002, respectively. In South Africa, annual contributions are made to dedicated Rehabilitation
Trust Funds, to fund the estimated cost of rehabilitation during and at the end
of the life of the relevant mine. Collectability of receivables In determining the collectability of receivables, management judgment is
required in instances where uncertainty exists over the period and amount of
cash flows which will be received. In determining this expectation, operational
and economical circumstances affecting the receivable are considered. These
principles were applied in evaluating the collectability of the receivables
owed by CGR, ERPM, KBH and Mogale. As a result, advances to the value of $1.9
million and $5.2 million were provided for in fiscal 2004 and 2003,
respectively. 109




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##### Table of Contents



Operating Results The following is a summary of our operating results for the past three
fiscal years. Emperor has been accounted for as an investment, accounted for at
market value and CGR as an associate, accounted for under the equity method,
therefore neither of their results are presented on a line-by-line basis. Year ended June 30,
    
    Increase/(decrease)2004
    
    2003
    
    2002
    
    2004
    
    2003$000
    
    $000
    
    $000
    
    %
    
    %REVENUESProduct sales
    
    
    313,290
    
    
    
    261,342
    
    
    
    303,858
    
    
    
    20
    %
    
    
    (14
    %)Blyvoor Section
    
    
    90,066
    
    
    
    81,753
    
    
    
    73,705
    
    
    
    10
    %
    
    
    11
    %North West Operations
    
    
    130,036
    
    
    
    151,923
    
    
    
    160,596
    
    
    
    (14
    %)
    
    
    (5
    %)West Wits Section
    
    
    
    
    
    
    4,796
    
    
    
    6,897
    
    
    
    (100
    %)
    
    
    (31
    %)Crown Gold Section
    
    
    
    
    
    
    
    
    
    
    40,606
    
    
    
    
    
    
    
    (100
    %)Other1
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    (100
    %)Total South African Operations
    
    
    220,102
    
    
    
    238,472
    
    
    
    281,808
    
    
    
    (8
    %)
    
    
    (15
    %)Porgera Joint Venture
    
    
    60,445
    
    
    
    
    
    
    
    
    
    
    
    100
    %Tolukuma Section
    
    
    32,743
    
    
    
    22,870
    
    
    
    22,050
    
    
    
    43
    %
    
    
    4
    %Total Australasian Operations
    
    
    93,188
    
    
    
    22,870
    
    
    
    22,050
    
    
    
    308
    %
    
    
    4
    %Production costs
    
    
    277,491
    
    
    
    235,359
    
    
    
    218,056
    
    
    
    18
    %
    
    
    8
    %Blyvoor Section
    
    
    90,366
    
    
    
    65,240
    
    
    
    46,579
    
    
    
    39
    %
    
    
    40
    %North West Operations
    
    
    134,465
    
    
    
    144,568
    
    
    
    118,265
    
    
    
    (7
    %)
    
    
    22
    %West Wits Section
    
    
    
    
    
    
    4,859
    
    
    
    6,136
    
    
    
    (100
    %)
    
    
    (21
    %)Crown Gold Section
    
    
    
    
    
    
    
    
    
    
    28,254
    
    
    
    
    
    
    
    (100
    %)Other1
    
    
    1,189
    
    
    
    1587
    
    
    
    980
    
    
    
    (25
    %)
    
    
    62
    %Total South African Operations
    
    
    226,020
    
    
    
    216,254
    
    
    
    200,214
    
    
    
    5
    %
    
    
    8
    %Porgera Joint Venture
    
    
    31,650
    
    
    
    
    
    
    
    
    
    
    
    100
    %Tolukuma Section
    
    
    19,821
    
    
    
    17,498
    
    
    
    16,065
    
    
    
    13
    %
    
    
    9
    %Other1
    
    
    
    
    
    
    1,607
    
    
    
    1,777
    
    
    
    (100
    %)
    
    
    (10
    %)Total Australasian Operations
    
    
    51,471
    
    
    
    19,105
    
    
    
    17,842
    
    
    
    169
    %
    
    
    7
    %Movement in gold in process
    
    
    (1,000
    )
    
    
    1,251
    
    
    
    289
    
    
    
    (180
    %)
    
    
    333
    %Movement in rehabilitation provision,
reclamation and closure costs
    
    
    3,455
    
    
    
    1,414
    
    
    
    (774
    )
    
    
    144
    %
    
    
    (283
    %)OTHER OPERATING EXPENSESDepreciation and amortization
    
    
    30,135
    
    
    
    10,602
    
    
    
    13,933
    
    
    
    184
    %
    
    
    (24
    %)Blyvoor Section
    
    
    2,643
    
    
    
    1,509
    
    
    
    933
    
    
    
    75
    %
    
    
    62
    %North West Operations
    
    
    2,263
    
    
    
    2,047
    
    
    
    2,068
    
    
    
    11
    %
    
    
    (1
    %)West Wits Section
    
    
    
    
    
    
    402
    
    
    
    43
    
    
    
    (100
    %)
    
    
    835
    %Crown Gold Section
    
    
    
    
    
    
    
    
    
    
    2,162
    
    
    
    
    
    
    
    (100
    %)Other1
    
    
    698
    
    
    
    83
    
    
    
    1,668
    
    
    
    741
    %
    
    
    (95
    %)Total South African Operations
    
    
    5,604
    
    
    
    4,041
    
    
    
    6,874
    
    
    
    39
    %
    
    
    (41
    %)Porgera Joint Venture
    
    
    9,260
    
    
    
    
    
    
    
    Tolukuma Section
    
    
    7,340
    
    
    
    2,332
    
    
    
    3,182
    
    
    
    215
    %
    
    
    (27
    %)Other1
    
    
    7,931
    
    
    
    4,229
    
    
    
    3,877
    
    
    
    88
    %
    
    
    9
    %Total Australasian Operations
    
    
    24,531
    
    
    
    6,561
    
    
    
    7,059
    
    
    
    274
    %
    
    
    (7
    %)
   1
 110




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##### Table of Contents



Year ended June 30,
    
    Increase/(decrease)2004
    
    2003
    
    2002
    
    2004
    
    2003$000
    
    $000
    
    $000
    
    %
    
    %Employment termination costs
    
    
    7,963
    
    
    
    1,501
    
    
    
    388
    
    
    
    431
    %
    
    
    287
    %Blyvoor Section
    
    
    899
    
    
    
    95
    
    
    
    
    
    
    
    958
    %North West Operations
    
    
    7,064
    
    
    
    821
    
    
    
    308
    
    
    
    760
    %
    
    
    167
    %West Wits Section
    
    
    
    
    
    
    53
    
    
    
    
    
    
    
    (100
    %)Crown Gold Section
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    542
    
    
    
    80
    
    
    
    (100
    %)
    
    
    578
    %Total South African Operations
    
    
    7,963
    
    
    
    1,501
    
    
    
    388
    
    
    
    431
    %
    
    
    287
    %Porgera Joint Venture
    
    
    
    
    
    
    
    
    
    
    Tolukuma Section
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    Total Australasian Operations
    
    
    
    
    
    
    
    
    
    
    Impairment of assets
    
    
    4,266
    
    
    
    
    
    
    
    2,167
    
    
    
    
    
    
    
    (100
    %)Management and consulting fees
    
    
    2,448
    
    
    
    1,650
    
    
    
    1,888
    
    
    
    48
    %
    
    
    (13
    %)Post retirement medical benefits
    
    
    
    
    
    
    
    
    
    
    1,786
    
    
    
    
    
    
    
    (100
    %)Loss/(profit) on derivative instruments
    
    
    1,166
    
    
    
    (43,821
    )
    
    
    147,153
    
    
    
    (103
    %)
    
    
    (130
    %)Loss/(profit) on sale of mining assets
    
    
    55
    
    
    
    (1,729
    )
    
    
    606
    
    
    
    (103
    %)
    
    
    385
    %Profit on disposal of subsidiary
    
    
    
    
    
    
    (5,302
    )
    
    
    
    
    
    
    (100
    %)Write off of investments and loans
    
    
    
    
    
    
    
    
    
    
    86
    
    
    
    
    
    
    
    (100
    %)SELLING, ADMINISTRATION AND GENERAL CHARGES(including stock based compensation costs of $2,310,000
(2003: $4,313,000 and 2002: $2,503,000))
    
    
    24,944
    
    
    
    10,828
    
    
    
    13,254
    
    
    
    130
    %
    
    
    (18
    %)NET OPERATING (LOSS)/INCOME
    
    
    (37,633
    )
    
    
    49,589
    
    
    
    (94,974
    )
    
    
    (176
    %)
    
    
    (152
    %)NON-OPERATING INCOME/(LOSS)Interest and dividends
    
    
    2,124
    
    
    
    8,703
    
    
    
    2,219
    
    
    
    (76
    %)
    
    
    292
    %Unrealized foreign exchange gains
    
    
    10,672
    
    
    
    11,229
    
    
    
    567
    
    
    
    (51
    %)
    
    
    1880
    %Profit/(loss) on sale of other assets and listed investments
    
    
    63
    
    
    
    152
    
    
    
    
    
    
    
    (59
    %)FINANCE COSTSInterest expense
    
    
    (7,912
    )
    
    
    (6,909
    )
    
    
    (2,385
    )
    
    
    (15
    %)
    
    
    (190
    %)(LOSS)/PROFIT BEFORE TAX AND OTHER ITEMS
    
    
    (32,686
    )
    
    
    62,764
    
    
    
    (94,573
    )
    
    
    (152
    %)
    
    
    34
    %Income and mining tax (expense)/benefit
    
    
    (14,230
    )
    
    
    (41,765
    )
    
    
    42,864
    
    
    
    66
    %
    
    
    (200
    %)Equity in loss from associates
    
    
    (8,827
    )
    
    
    (9,452
    )
    
    
    
    
    
    
    7
    %(LOSS)/PROFIT AFTER TAX
    
    
    (55,743
    )
    
    
    11,547
    
    
    
    (51,709
    )
    
    
    (583
    %)
    
    
    122
    %Minority interest
    
    
    7
    
    
    
    
    
    
    
    NET (LOSS)/PROFIT BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE
    
    
    (55,750
    )
    
    
    11,547
    
    
    
    (51,709
    )
    
    
    (583
    %)
    
    
    122
    %
 111




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##### Table of Contents



Comparison of financial performance for the fiscal year ended June 30, 2004
with fiscal year ended June 30, 2003 Revenue The following table illustrates the year-on-year change in revenue by
evaluating the contribution of each segment to the total change on a
consolidated basis for fiscal 2004 in comparison to fiscal 2003: Impact of change in volumeInternal
    
    Impact ofTotal revenue
    
    Acquisitions/
    
    growth/
    
    change in
    
    
    
    
    
    Total revenue2003
    
    (dispositions)
    
    (decline)
    
    price
    
    Net change
    
    2004Blyvoor Section
    
    
    81,753
    
    
    
    
    
    
    
    (4,798
    )
    
    
    13,111
    
    
    
    8,313
    
    
    
    90,066North West Operations
    
    
    151,923
    
    
    
    
    
    
    
    (39,687
    )
    
    
    17,800
    
    
    
    (21,887
    )
    
    
    130,036West Wits Section
    
    
    4,796
    
    
    
    (4,796
    )
    
    
    
    
    
    
    
    
    
    
    (4,796
    )Total South African operations
    
    
    238,472
    
    
    
    (4,796
    )
    
    
    (44,485
    )
    
    
    30,911
    
    
    
    (18,370
    )
    
    
    220,102Porgera Joint Venture
    
    
    
    
    
    
    60,445
    
    
    
    
    
    
    
    
    
    
    
    60,445
    
    
    
    60,445Tolukuma Section
    
    
    22,870
    
    
    
    
    
    
    
    5,917
    
    
    
    3,956
    
    
    
    9,873
    
    
    
    32,743Total Australasian operations
    
    
    22,870
    
    
    
    60,445
    
    
    
    5,917
    
    
    
    3,956
    
    
    
    70,318
    
    
    
    93,188Total
    
    
    261,342
    
    
    
    55,649
    
    
    
    (38,568
    )
    
    
    34,867
    
    
    
    51,948
    
    
    
    313,290
 Revenue for fiscal 2004 increased by $51.9 million, or 20%, to $313.3
million, primarily due to the increase in revenue from the Australasian
operations of $70.3 million. The acquisition of a 20% interest in Porgera on
October 14, 2003 contributed to $60.4 million of the increase in revenue from
Australasian operations. The remainder of the increase in revenue from the
Australasian operations consisted of $5.9 million from improved output at the
Tolukuma Section and an increase in the Dollar price of gold which contributed
$4.0 million. In contrast, production difficulties at the Blyvoor Section and
North West Operations lead to a decrease in revenue from our South African
operations of $44.5 million. This was partially offset by the improvement in
the Dollar gold price which increased revenue by $30.9 million. 112




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##### Table of Contents



Production costs The following table illustrates the year-on-year change in production
costs by evaluating the contribution of each segment to the total change on a
consolidated basis for fiscal 2004 in comparison to fiscal 2003: Impact of change in volumeTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totalproduction
    
    
    
    
    
    Internal
    
    Impact of
    
    
    
    
    
    
    
    
    
    productioncosts
    
    Acquisitions/
    
    growth/
    
    change in
    
    Foreign
    
    Net
    
    costs2003
    
    (dispositions)
    
    (decline)
    
    costs
    
    exchange
    
    change
    
    2004Blyvoor Section
    
    
    65,240
    
    
    
    
    
    
    
    (3,829
    )
    
    
    7,486
    
    
    
    21,468
    
    
    
    25,126
    
    
    
    90,366North West Operations
    
    
    144,568
    
    
    
    
    
    
    
    (37,765
    )
    
    
    (4,282
    )
    
    
    31,945
    
    
    
    (10,103
    )
    
    
    134,465West Wits Section
    
    
    4,859
    
    
    
    (4,859
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,859
    )
    
    
    Other1
    
    
    1,587
    
    
    
    
    
    
    
    
    
    
    
    (680
    )
    
    
    282
    
    
    
    (398
    )
    
    
    1,189Total South African operations
    
    
    216,254
    
    
    
    (4,859
    )
    
    
    (41,594
    )
    
    
    2,524
    
    
    
    53,695
    
    
    
    9,766
    
    
    
    226,020Porgera Joint Venture
    
    
    
    
    
    
    31,650
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,650
    
    
    
    31,650Tolukuma Section
    
    
    17,498
    
    
    
    
    
    
    
    4,527
    
    
    
    (4,963
    )
    
    
    2,759
    
    
    
    2,323
    
    
    
    19,821Other1
    
    
    1,607
    
    
    
    
    
    
    
    (1,607
    )
    
    
    
    
    
    
    
    
    
    
    (1,607
    )
    
    
    Total Australasian operations
    
    
    19,105
    
    
    
    31,650
    
    
    
    4,527
    
    
    
    (4,963
    )
    
    
    2,759
    
    
    
    32,266
    
    
    
    51,471Total
    
    
    235,359
    
    
    
    26,791
    
    
    
    (37,067
    )
    
    
    (2,440
    )
    
    
    56,454
    
    
    
    42,132
    
    
    
    277,491
 The following table lists the components of production costs for each of
the years set forth below: Years ended June 30,Costs
    
    2004
    
    2003Labor
    
    
    50
    %
    
    
    42
    %Contractor Services
    
    
    19
    %
    
    
    22
    %Inventory
    
    
    20
    %
    
    
    25
    %Electricity
    
    
    11
    %
    
    
    11
    %
 As gold mining in South Africa is very labor intensive, labor costs and
contractor services are the largest components of production costs in that
region. Production costs are linked directly to the level of production of a
specific fiscal year. Production costs in fiscal 2004 increased by 18% to
$277.5 million compared to production costs of $235.4 million in fiscal 2003.
This increase is primarily attributable to the significant appreciation of the
Rand against the Dollar during fiscal 2004. A 23.9% strengthening in the
average Rand/US Dollar exchange rate was noted during fiscal 2004, with a 16.2%
strengthening of the average Kina/US Dollar exchange rate. In addition,
operational difficulties at our South African operations led to an increase in
production costs. The decline in volume for fiscal 2004 in comparison to fiscal 2003,
relates mostly to the decrease in gold production from 462,743 ounces in fiscal
2003 to 341,861 ounces in fiscal 2004, at the North West Operations. This is
attributable to the stopping of mining unprofitable gold reserves as a result
of the lower Rand per kilogram gold price. There was internal restructuring of
resources and the placing of the Number 6 Shaft at the Harties Section on a
care and maintenance program, as well as phasing out of surface mining
operations and lower grade at the Blyvoor Section. Production costs at Porgera, acquired during fiscal 2004, amounted to
$31.7 million, with a comparative contribution to production of 147,475 ounces.
The Tolukuma Section contributed $19.8 million to production costs and 85,715
ounces to gold production.   1
 113




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##### Table of Contents



Rehabilitation provision and amounts contributed to environmental trust funds As of June 30, 2004, we estimate our total rehabilitation provision, being
the discounted estimate of future costs, to be $39.1 million, $31.6 million
relating to the South African operations and $7.5 million relating to the
Australasian operations, as compared to $24.6 million at June 30, 2003, with
$16.0 million relating to the South African operations and $8.6 million
relating to the Australasian operations. As a result of changes in estimates
accretion of $3.4 million was recorded in fiscal 2004, and $1.4 million was
recorded in fiscal 2003. A total of $22.8 million was invested in our various environmental trust
funds as at the end of fiscal 2004, as compared to $17.9 million for fiscal
2003. The increase is mostly attributable to the strengthening of the Rand
against the Dollar in fiscal 2004. Additional contributions were also made
during the year under review, due to under funding of the liability. The
shortfall between the funds in the trust and the estimated provisions, in South
Africa, is expected to be financed by ongoing financial contributions over the
remaining production life of the mine. Depreciation and amortization Depreciation and amortization charges were $30.1 million for fiscal 2004
compared to $10.6 million for fiscal 2003. This increase is mainly due to our
increase in the asset base for our Australian operations, as a result of our
acquisition of a 20% interest in Porgera ($9.3 million) and the continued
weakening of the Dollar against the local functional currencies ($1.3 million).
The remainder of the increase ($8.9 million) is as a result of the decreased
Ore Reserves. Employment termination costs Employment termination costs increased to $8.0 million for fiscal 2004 as
compared to $1.5 million for fiscal 2003. This increase is due to the reduction
of 3,000 employees at the North West Operations during the year with the
placing of the Number 6 Shaft at Harties on care and maintenance and the
closure of Number 11 Shaft at Buffels as it had reached the end of its economic
life, as well the effect of a stronger Rand against the Dollar as these
termination costs are incurred in Rands. Impairment of assets During fiscal 2004 impairments of $4.3 million were recorded. These
impairments relate to the following:  
    
    Loans made that are seen to be irrecoverable,
which amounted to $1.9 million. $1.1 million of loans were advanced to
enable the West Wits mine to be sold as part of black economic
empowerment to Mogale. This balance is seen to be irrecoverable due to
Mogale having been placed under judicial management during fiscal 2004.
$0.8 million relates to funds advanced to KBH, which we impaired as
KBHs main asset is a 60% interest in CGR and ERPM which are incurring
losses.
    
    Excess carrying value of mining assets over their fair values, which
amounted to $1.4 million, at the North West Operations.
    
    Goodwill in Net-Gold Services Limited, acquired during fiscal 2004,
impaired as a result of losses recorded in this entity, which amounted
to $1.0 million.No impairments were recorded in fiscal 2003. 114




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##### Table of Contents



Management and consulting fees Management and consulting fees in fiscal 2004 increased by $0.7 million to
$2.4 million compared to $1.7 million in fiscal 2003. These expenses relate to
the evaluation of possible acquisitions. Loss/(profit) on derivative instruments Changes in the fair value of derivative instruments in fiscal 2004
resulted in a loss of $1.2 million, as compared with a profit of $43.8 million
in fiscal 2003. The decrease mostly relates to the closing out of a major
portion of the Eskom gold for electricity contract during fiscal 2004. During
fiscal 2004, a total amount of $25.1 million was used to close out 265,000
ounces under the Eskom gold for electricity contract. As at June 30, 2004 and
October 31, 2004, the remaining portion on the contract was 50,000 ounces. The
appreciation of the Rand during fiscal 2003 and the resulting positive effect
that these changes had on the fair value of our derivative instruments
contributed to the profit on derivative financial instruments in that period. Selling, administration and general charges The selling, administration and general charges increased in fiscal 2004
to $24.9 million as compared to $10.8 million in fiscal 2003. The increase of
$14.1 million comprises realized foreign exchange movements of $8.4 million,
additional corporate salary expenses of $2.2 million, expenses in respect of
Porgera of $2.2 million, additional DRD (Isle of Man) office costs of $1.1
million and costs associated with preparatory work for complying with the
Sarbanes-Oxley Act of 2002 of $0.2 million. As most of the administrative
charges are incurred in South Africa, where our head office is based, the
strengthening of the Rand against the Dollar by 24% had a significant impact on
the administrative costs incurred. Interest and dividends Interest and dividend income decreased by $6.6 million, or 76%, from $8.7
million during fiscal 2003 to $2.1 million during fiscal 2004. The decrease in
mostly attributable to a decrease in our cash and cash equivalents from $44.4
million as at June 30, 2003 to $22.5 million as at June 30, 2004, and interest
income of $3.2 million accrued to us in respect of interest on amounts owed by
associates, during fiscal 2003. Unrealized foreign exchange gains Our functional currency is the Rand for our South African operations and
the Papua New Guinean Kina for our Papua New Guinean operations. The unrealized
foreign exchange non-cash gain of $10.7 million for fiscal 2004, compared to
$11.2 million for fiscal 2003, represents the effect of the translation of
monetary items, primarily external debt, which is denominated in currencies
other than our functional currencies. Interest expense Interest expense increased to $7.9 million for fiscal 2004 as compared to
$6.9 million for fiscal 2003. The increase was due primarily to the inclusion
of a full year of interest for our 6% Senior Convertible Notes due 2006, which
were issued on November 12, 2002, increasing the interest charge from $4.7
million in fiscal 2003 to $5.9 million in fiscal 2004. Income and mining tax expense The net tax expense of $14.2 million for fiscal 2004 comprises a current
taxation charge of $7.4 million mainly relating to Porgera and a deferred tax
charge of $6.8 million mainly comprising of valuation allowances raised against
deferred tax assets at Blyvoor. During fiscal 2003 a deferred tax charge of
$41.8 million was recorded comprising valuation allowances of $60.2 million
primarily raised against deferred tax assets at the North West Operations and a
credit of $18.4 million as a result of changing the tax rate from 30% in
fiscal 2002 to the maximum mining tax rate applicable to our South African
mining operations of either 37% or 46% for fiscal 2003. 115




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Equity in loss from associate Losses amounting to $8.8 million were recorded against advances of the
same amount made to our associate during fiscal 2004. During fiscal 2003 our
attributable portion of our associates losses amounted to $4.2 million which
were recorded against our equity investment in our associate. In addition,
advances of $5.2 million were impaired in fiscal 2003. On February 18, 2005, we published a trading statement as discussed in our Form 6-K filed with
the SEC on the same day, which is incorporated by reference in this Annual Report. Comparison of financial performance for fiscal year ended June 30, 2003 with
fiscal year ended June 30, 2002 Revenue The following table illustrates the year-on-year change in revenue by
evaluating the contribution of each segment to the total change on a
consolidated basis for fiscal 2003 in comparison to fiscal 2002: Impact of change in volumeInternal
    
    Impact ofTotal revenue
    
    Acquisitions/
    
    growth/
    
    change in
    
    
    
    
    
    Total revenue2002
    
    (dispositions)
    
    (decline)
    
    price
    
    Net change
    
    2003Blyvoor Section
    
    
    73,705
    
    
    
    
    
    
    
    (1,573
    )
    
    
    9,621
    
    
    
    8,048
    
    
    
    81,753North West Operations
    
    
    160,596
    
    
    
    
    
    
    
    (23,116
    )
    
    
    14,443
    
    
    
    (8,673
    )
    
    
    151,923West Wits Section
    
    
    6,897
    
    
    
    4,311
    
    
    
    (6,897
    )
    
    
    485
    
    
    
    (2,101
    )
    
    
    4,796Crown Section
    
    
    40,610
    
    
    
    (40,610
    )
    
    
    
    
    
    
    
    
    
    
    (40,610
    )Total South African operations
    
    
    281,808
    
    
    
    (36,299
    )
    
    
    (31,586
    )
    
    
    24,548
    
    
    
    (43,336
    )
    
    
    238,472Tolukuma Section
    
    
    22,050
    
    
    
    
    
    
    
    (1,183
    )
    
    
    2,003
    
    
    
    820
    
    
    
    22,870Total Australasian operations
    
    
    22,050
    
    
    
    
    
    
    
    (1,183
    )
    
    
    2,003
    
    
    
    820
    
    
    
    22,870Total
    
    
    303,858
    
    
    
    (36,299
    )
    
    
    (32,769
    )
    
    
    26,551
    
    
    
    (42,516
    )
    
    
    261,342
 Revenue for fiscal 2003 decreased by 14% to $261.3 million from $303.9
million in fiscal 2002 primarily due to a decrease in revenue from the South
African operations following the sale of 60% of our interest in the Crown
Section to KBH, effective July 1, 2002. The Crown Section had contributed $40.6
million to revenue during fiscal 2002. Following the disposal, the results of
the Crown Section are no longer consolidated with our results. Our remaining
40% interest in the Crown Section has been accounted for using the equity
method in the 2003 fiscal year. Production at the North West Operations was
also down 77,807 ounces from fiscal 2002. This decrease was due to the
implementation of the 2003 mining plan, which included the medium grade areas.
Under this plan, the tons of ore treated from underground sources increased,
but the grades decreased, and hence the ounces produced decreased. The decrease
in production was partially offset by a stronger Dollar gold price received
during the year. The average gold price received by us was $334 per ounce in
fiscal 2003, compared to $253 per ounce in fiscal 2002. 116




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##### Table of Contents



Production costs

The following table illustrates the year-on-year change in production
costs by evaluating the contribution of each segment to the total change on a
consolidated basis for fiscal 2003 in comparison to fiscal 2002:

Impact of change in volumeTotal
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Totalproduction
    
    
    
    
    
    Internal
    
    Impact of
    
    
    
    
    
    
    
    
    
    productioncosts
    
    Acquisitions/
    
    growth/
    
    change in
    
    Foreign
    
    
    
    
    
    costs2002
    
    (dispositions)
    
    (decline)
    
    costs
    
    exchange
    
    Net change
    
    2003Blyvoor Section
    
    
    46,579
    
    
    
    
    
    
    
    (994
    )
    
    
    12,753
    
    
    
    6,902
    
    
    
    18,661
    
    
    
    65,240North West Operations
    
    
    118,265
    
    
    
    
    
    
    
    (17,023
    )
    
    
    28,032
    
    
    
    15,294
    
    
    
    26,303
    
    
    
    144,568West Wits Section
    
    
    6,136
    
    
    
    3,836
    
    
    
    (6,136
    )
    
    
    509
    
    
    
    514
    
    
    
    (1,277
    )
    
    
    4,859Crown Section
    
    
    28,254
    
    
    
    (28,254
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,254
    )
    
    
    Other1
    
    
    980
    
    
    
    
    
    
    
    
    
    
    
    437
    
    
    
    170
    
    
    
    607
    
    
    
    1,587Total South African operations
    
    
    200,214
    
    
    
    (24,418
    )
    
    
    (24,153
    )
    
    
    41,731
    
    
    
    22,880
    
    
    
    16,040
    
    
    
    216,254Porgera Joint VentureTolukuma Section
    
    
    16,065
    
    
    
    
    
    
    
    (862
    )
    
    
    3,399
    
    
    
    (1,105
    )
    
    
    1,433
    
    
    
    17,498Other
    
    
    1,777
    
    
    
    
    
    
    
    
    
    
    
    (265
    )
    
    
    95
    
    
    
    (170
    )
    
    
    1,607Total Australasian operations
    
    
    17,842
    
    
    
    
    
    
    
    (862
    )
    
    
    3,134
    
    
    
    (1,009
    )
    
    
    1,263
    
    
    
    19,105Total
    
    
    218,056
    
    
    
    (24,418
    )
    
    
    (25,015
    )
    
    
    44,865
    
    
    
    21,871
    
    
    
    17,303
    
    
    
    235,359
 With effect July 1, 2002 we disposed of 60% of the interest in the Crown
Section in a black economic empowerment deal. The entity is accounted for as an
associate from fiscal 2003 onwards. The following table lists the components of production costs for each of
the years set forth below: Years ended June 30,Costs
    
    2003
    
    2002Labor
    
    
    42
    %
    
    
    41
    %Contractor Services
    
    
    22
    %
    
    
    20
    %Inventory
    
    
    25
    %
    
    
    26
    %Electricity
    
    
    11
    %
    
    
    13
    %
 As gold mining in South Africa is very labor intensive, labor costs and
contractor services are the largest components of our production costs in that
region. Production costs are linked directly to the level of production of a
specific fiscal year. We incurred production costs of $235.4 million in fiscal
2003, compared to $218.1 million in fiscal 2002. The increase of 8% is mostly
as a result of the significant appreciation of the Rand against the Dollar
during fiscal 2003, as well as production difficulties at the North West
Operations, leading to increased consumption of consumables and labor costs at
that section. In addition, during fiscal 2003, an average wage increase of 8.5%
over and above inflation for our South African mining employees was implemented
pursuant to our labor agreements. This contributed to our increase in
production costs. The majority of our production costs are incurred in local
currencies.   1
 117




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##### Table of Contents



Rehabilitation provision As of June 30, 2003, we estimate our total rehabilitation provision being
the discounted estimate of future costs, to be $24.6 million as opposed to
$17.9 million at June 30, 2002. As a result of changes in estimates, additional
liabilities of $1.4 million were raised in fiscal 2003, and $0.5 million were
raised in fiscal 2002. A total of $17.9 million was invested in our various environmental trust
funds at the end of fiscal 2003, as compared to $12.1 million for fiscal 2002.
The increase in Dollar terms is attributable to the strengthening of the Rand
against the Dollar in fiscal 2003 and additional contributions of $0.2 million
in fiscal 2003. The shortfall will be financed by ongoing financial
contributions. Depreciation and amortization Depreciation and amortization charges were $10.6 million for fiscal 2003
as compared to $13.9 million for fiscal 2002. This decrease is mainly due to
the decrease in the ore reserves as a result of our sale of 60% of our interest
in the Crown Section to KBH, effective July 1, 2002. Employment termination costs Employment termination costs increased to $1.5 million for fiscal 2003 as
compared to $0.4 million for fiscal 2002. This increase is mainly due to the
gradual reduction in the workforce at the North West Operations during the
year, as well the effect of a stronger Rand against the Dollar as our
termination costs are incurred in Rands. Impairment of assets During fiscal 2003 no impairment charges were recorded. During fiscal
2002, we recorded an impairment charge of $2.2 million at the Durban Roodepoort
Deep Mine. In view of continued low Rand gold prices and high costs of
production, and cessation of operational synergies between Durban Roodepoort
Deep Mine and Randfontein Estates, underground mining operations ceased
permanently at Shaft Numbers 6, 7 and 9 and the Circular Shaft. This closure of
operations resulted in write downs which represent the excess carrying values
of the mining assets over their fair values, based on the future discounted
cash flows from operations. Management and consulting fees Management and consulting fees in fiscal 2003 decreased by $0.2 million to
$1.7 million compared to $1.9 million in fiscal 2002. These expenses mostly
related to the evaluation of possible acquisitions. Post retirement medical benefits The expense of $1.8 million incurred during 2001 related to a Continuation
and Widow Members, or CAWMS, Post Retirement Medical Liability assumed at the
Blyvoor mining operations. This liability was settled in full during fiscal
2004. (Profit)/loss on derivative instruments The fair value adjustment on financial instruments in fiscal 2003 was
$43.8 million, as compared with a loss of $147.2 million in fiscal 2002. The
appreciation of the Rand during fiscal 2003 and the resulting positive effect
that these changes had on the fair value of our derivative instruments
contributed to the large increase in the profit on financial instruments.
Closing out of the majority of our hedge positions in fiscal 2002 resulted in
realized losses of $126.4 million. In addition an unrealized fair value
adjustment of $20.8 million was recorded in fiscal 2002. 118




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(Profit)/loss on sale of mining assets The profit of $1.7 million recorded during fiscal 2003 related to the sale
of the West Wits mining assets to Mogale, in contrast to a profit of $0.3
million recorded in fiscal 2002. Profit on disposal of subsidiary The profit of $5.3 million recorded in fiscal 2003 related to the sale of
60% of the Crown Section to KBH on July 1, 2002. Selling, administration and general charges The selling, administration and general charges decreased in fiscal 2003
to $10.8 million as compared to $13.3 million in fiscal 2002. The
implementation of a flatter management structure and the concerted effort of
management to institute tighter financial controls also contributed to the
decrease. Interest and dividends Interest and dividends increased by $6.5 million, or 295%, from $2.2
million during fiscal 2002 to $8.7 million during fiscal 2003. This was mainly
as a result of increased cash resources and interest accrued on loan funding to
associates. Unrealized foreign exchange gains Our functional currency is the Rand for our South African operations and
the Papua New Guinean Kina for the Tolukuma Section. The unrealized foreign
exchange gain of $11.2 million for fiscal 2003, compared to $0.6 million for
fiscal 2002, represented the effect of the translation of monetary items,
primarily external debt, which is denominated in currencies other than our
functional currencies. Interest expense Our interest expense increased to $6.9 million for fiscal 2003 as compared
to $2.4 million for fiscal 2002. The increase was due primarily to the
increased interest charge as a result of our issuing of the $66 million 6%
Senior Convertible Notes due 2006 on November 12, 2002, as well as the effect
of stronger Rand against the Dollar. Income and mining tax (expense) / benefit The net tax expense for fiscal 2003 comprises a deferred tax charge of
$41.8 million comprising valuation allowances of $60.2 million primarily raised
against deferred tax assets at the North West Operations and a credit of $18.4
million as a result of changing the tax rate from 30% in fiscal 2002 to the
maximum mining tax rate applicable to our South African mining operations of
either 37% or 46% for fiscal 2003. The net tax benefit for fiscal 2002
comprises a deferred tax credit of $42.9 million relating to deferred tax
assets raised at the South African operations. Equity in loss from associates A loss of $9.4 million was recorded during fiscal 2003 in relation to the
associates, CGR and ERPM. This represented the absorption of losses to the
limit of the remaining equity investment ($4.2 million) and amounts owed by
associates that are seen to be irrecoverable ($5.2 million). 119




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RESTATEMENT OF US GAAP QUARTERLY RESULTS We have restated certain items in our quarterly results for fiscal 2004 as filed with the SEC under
cover of Forms 6-K on October 31, 2003, February 25, 2004, May 5, 2004, May 10, 2004, and August
19, 2004. Although this resulted in the restatement of the financial results for each of the
quarters during fiscal 2004, this did not result in a restatement or revision to our financial
results for fiscal 2004 as a whole, which were originally announced on August 10, 2004, and
subsequently furnished to the SEC on August 19, 2004 under cover of a Form 6-K. Due to the restatement of our quarterly results for the first and second quarters of fiscal 2004,
we have also restated the unaudited pro forma financial statements of the Company and Orogen
Minerals (Porgera) Limited and Mineral Resources Porgera Limited for the six months ended December
31, 2003, giving effect to our acquisition of a 20% interest in the Porgera Joint Venture, as
originally filed with the SEC under cover of a Form 6-K on October 1, 2004. This restatement is
reflected in a Form 6-K filed with the SEC on November 29, 2004. The restatement arises with respect to two separate accounting matters. Equity in losses of CGR Under US GAAP, an investment in an associate includes the equity investment in and funds advanced
to the entity. Under US GAAP we have treated CGR, which owns the Crown and ERPM Section, as an
associate and, accordingly, our interest in CGR is accounted for using the equity method. Our
investment in CGR was reflected as $nil as at June 30, 2003. Under US GAAP, we incorrectly reflected our advances to CGR and ERPM in fiscal 2004 as separate
financial instruments during the quarters presented. CGR and ERPM recorded significant losses
throughout fiscal 2004. However, no impairments of these loans were recorded in our first, second
and third quarters of fiscal 2004. The loans were fully impaired in the fourth quarter of fiscal
2004. Under US GAAP, we should have recognized our portion of the losses recorded by CGR against the
advances, forming part of our investment, in the respective quarters in which the losses were
recorded. We have suspended all further funding by us to CGR and ERPM until revised operational plans are
submitted to us to enable us to assess the future cash flow of both operations. Harties Number 6 Shaft, North West Operations With the conclusion of the 60-day review performed at the North West Operations, including the
Number 6 Shaft, in the first quarter of 2004 we accelerated the depreciation charge with respect to
the mining assets associated with the Number 6 Shaft. Our expectation at the time was that the
shaft would not be utilized in the future. However, in January and February 2004, following a
detailed survey at the Number 6 Shaft to consider if limited high grade mining of some of the
remaining pillars was financially viable, we made a business decision to bring the upper section of
the Number 6 Shaft and the associated mining assets back into production. The accelerated
depreciation charge reported in the first quarter of fiscal 2004 was reversed in the third quarter
of fiscal 2004. Because no activities had taken place to indicate the abandonment of the Number 6
Shaft, depreciation should not have been accelerated in the first quarter and subsequently reversed
in the third quarter. The impact of these restatements on our financial results for the quarters in fiscal 2004 is as
follows: Group Statement of Operations Quarter endedFiscal year ended($ million)
    

Sep
30,2003
    
    

Dec 31,2003
    
    
    Mar 31,2004
    
    
    June 30,2004
    
    
    June 30,2004Net (loss)/profit
applicable to
stockholders, as
previously reported
    
    
    (21.8
    )
    
    
    (1.4
    )
    
    
    9.7
    
    
    
    (42.3
    )
    
    
    (55.8
    )Adjusted for:Equity losses of CGR
    
    
    (7.6
    )
    
    
    (1.2
    )
    
    
    
    
    
    
    8.8
    
    
    
    Depreciation
adjustment for
Harties Number 6
Shaft, North West
Operations
    
    
    4.9
    
    
    
    
    
    
    
    (4.9
    )
    
    
    
    
    
    
    Net (loss)/profit
applicable to
stockholders, as restated
    
    
    (24.5
    )
    
    
    (2.6
    )
    
    
    4.8
    
    
    
    (33.5
    )
    
    
    (55.8
    )Group Balance SheetsAs at($ million)
    

Sep
30,2003
    
    
    Dec 31,2003
    
    
    Mar 31,2004
    
    
    June 30,2004
    
    
    As at June 30,2004Receivables, as previously reported
    
    
    13.5
    
    
    
    19.2
    
    
    
    18.2
    
    
    
    19.5
    
    
    
    19.5Receivables, as restated
    
    
    11.6
    
    
    
    16.8
    
    
    
    15.8
    
    
    
    19.5
    
    
    
    19.5Non-current investments, as previously reported
    
    
    40.5
    
    
    
    72.7
    
    
    
    80.3
    
    
    
    69.6
    
    
    
    69.6Non-current investments, as restated
    
    
    34.8
    
    
    
    66.3
    
    
    
    73.9
    
    
    
    69.6
    
    
    
    69.6Mining assets, as previously reported
    
    
    81.6
    
    
    
    157.6
    
    
    
    168.0
    
    
    
    156.9
    
    
    
    156.9Mining assets, as restated
    
    
    86.5
    
    
    
    162.5
    
    
    
    168.0
    
    
    
    156.9
    
    
    
    156.9
 120




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5B. LIQUIDITY AND CAPITAL RESOURCES Net cash utilized by operating activities Net cash of $25.1 million was utilized by operating activities for fiscal
2004 as compared to cash utilized by operating activities of $23.9 million for
fiscal 2003 and cash utilized by operating activities of $64.2 million for
fiscal 2002. During fiscal 2004, the net working capital movement represented
an inflow of cash of $3.1 million, compared to an outflow of $23.0 million in
fiscal 2003, mostly due to the inclusion for the first time of net cash flows
from our 20% interest in the Porgera Joint Venture in fiscal 2004. In line with
our hedging policy which precludes forward selling of gold, the amount of
derivative instruments have decreased resulting in a decrease in the cash
outflow associated with these instruments. In fiscal 2004, $25.1 million was
used to close out 265,000 ounces under the Eskom gold for electricity contract.
The decrease in cash utilized in fiscal 2003 compared with fiscal 2002 was
primarily due to improved profitability. For the last three fiscal years, our
operating activities consistently utilized cash. This is mainly attributable to
the marginal nature of the South African Operations and the pressures
experienced as a result of a decline in the Rand gold price without a
corresponding decrease in production costs. Net cash utilized by investing activities Net cash utilized in investing activities increased to $94.1 million in
fiscal 2004 from $9.8 million in fiscal 2003 as compared to cash generated from
investing activities of $2.9 million for fiscal 2002. The increase in cash
utilized in investing in fiscal 2004 is a result of funds advanced to CGR and
ERPM of $8.8 million, our acquisition of a 20% interest in the Porgera Joint
Venture for $59.2 million, net of cash acquired and shares issued, our
acquisition of a 50.25% interest in Net-Gold Services Limited for $0.6 million,
net of cash acquired, and increased capital expenditure at our operations of
$26.9 million from $13.4 million in fiscal 2003. The increase in fiscal 2003
compared with fiscal 2002 is a result of our acquisition of a 19.81% stake in
Emperor for $9.6 million and an increase in capital expenditure at the
operations of $5.2 million. Capital expenditure for fiscal 2002 was $8.2 million. Capital expenditures
were predominantly on Ore Reserve development, site establishment and new
underground mining equipments at all operations. Significant capital projects
for fiscal 2002 included:  
    
    Ore Reserves development at the North West Operations at a cost of $1.6 million;
    
    Further shaft development at the Blyvoor Section at a cost of $0.5 million;
    
    Site establishment for surface retreatment operations at the Crown Gold Section at a cost of $0.4 million; and
    
    Expansion of and additions to the mobile plant and equipment at the
Tolukuma Section at a cost of $1.7 million. 121




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Capital expenditure for fiscal 2003 was $13.4 million. Capital
expenditures were predominantly on Ore Reserve development and new underground
mining equipment at all operations. Significant capital projects for fiscal
2003 included:  
    
    Ore Reserve development at the North West Operations at a cost of $2.7 million;
    
    Acquisition of new mining equipment at the North West Operations at a cost of $1.2 million;
    
    Ore Reserve development at the Blyvoor Section at a cost of $2.1 million; and
    
    Expansion of and additions to the mobile plant and equipment at the
Tolukuma Section at a cost of $1.0 million. Capital expenditure for fiscal 2004 was $26.9 million. In fiscal 2004,
capital expenditures were predominantly on Ore Reserve development, building a
slimes dam reclamation facility at the Blyvoor Section and the inclusion of our
20% share of the capital expenditure of Porgera. Redundant capital equipment
was sold during the year, the proceeds of which amounted to $3.4 million.
Significant capital projects for fiscal 2004 included:  
    
    Ore Reserve development at the North West Operations at a cost of
$2.2 million;
    
    Construction of the processing facilities at Number 4 and 5 Slimes
Dams at the Blyvoor Section at a cost of $6.9 million;
    
    Extensions to the Number 6 Slimes Dam at the Blyvoor Section at a
cost of $0.7 million;
    
    Expansion of and additions to the mobile plant and equipment at the
Tolukuma Section at a cost of $2.5 million; and
    
    Capital expenditure of $8.7 million with respect to our 20% interest
in Porgera, which includes the capitalization of deferred stripping
costs of $4.1 million. As
of November 30, 2004, we anticipated decreasing our capital expenditure in fiscal 2005 by about a
third from our capital expenditure for fiscal 2004. We expect to incur $18.6
million of capital expenditure on mining equipment and development, upgrading
existing underground operations and upgrading current metallurgical plants as
follows:  
    
    the North West Operations  $6.4 million;
    
    the Blyvoor Section  $0.3 million;
    
    Porgera  $7.9 million (our 20% attributable share); and
    
    the Tolukuma Section  $4.0 million. On March 22, 2005, however, we announced the provisional liquidation of Buffelsfontein Gold Mines
Limited, our subsidiary that owns our North West Operations, as discussed in our Form 6-K filed
with the SEC on March 22, 2005, which is incorporated by reference in this Annual Report. Net cash generated in financing activities Net cash generated from financing activities increased to $88.6 million in
fiscal 2004 from $55.4 million in fiscal 2003 and $67.6 million in fiscal 2002.
During fiscal 2004, we raised $108.7 million principally through the issue of
41,463,639 ordinary shares to Investec and Investec (Mauritius) under various
agreements (refer to Item 10C.: Material Contracts). We repaid $19.1 million
of the short-term portion of our long-term loans and we drew down $2.8 million
from our R100 million ($15.9 million) Investec facility entered into on June
24, 2004. During fiscal 2003, we raised a net $63.6 million through the issue of a
$66 million aggregate principal amount of 6% Senior Convertible Notes due 2006,
$9.0 million through the issue of our shares to institutional investors and we
repaid $25.1 million of our long-term liabilities. On March 26, 2003, we
discharged our obligation of R72.5 million ($8.0 million) to JP Morgan Chase
Bank under an International Bullion Master Agreement. During fiscal 2002 we
raised $51.1 million through issuing our shares to institutional investors, the
proceeds of which were used to restructure our hedge book and we raised a net
amount of $18.5 million through borrowings. 122




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Borrowings and funding Our external sources of capital include the issuance of debt, bank
borrowings and the issuance of equity securities. Senior Convertible Notes On November 12, 2002, we issued $66,000,000 aggregate principal amount of
6% Senior Convertible Notes due 2006, in a private placement to qualified
institutional buyers and to non-US persons. As of October 31, 2004, no notes
have been converted. We issued the notes at a purchase price of 100% of the
principal amount thereof. If not converted or previously redeemed, the notes
will be repaid at 102.5% of their principal amount plus accrued interest on the
fifth business day following their maturity date in November 2006. The notes are convertible
into our ordinary shares, or, under certain conditions, ADSs, at a conversion
price of $3.75 per share or ADS, subject to adjustment in certain events. We
are entitled to redeem the notes at their accreted value plus accrued interest,
if any, subject to certain prescribed conditions being fulfilled, after
November 12, 2005. As of June 30, 2004, the effective interest rate on the
convertible notes was 8.71% per annum and the outstanding balance was $61.1
million. As of October 31, 2004, the effective interest rate on the convertible
notes was 8.71% per annum and the outstanding balance was $62.6 million. Industrial Development Corporation Loan On July 18, 2002, Blyvoor entered into a loan agreement with IDC for R65.0
million ($10.4 million) specifically for financing capital expenditures
incurred by Blyvoor in completing the Blyvoor expansion project. The loan bears
interest at 1% below the prime rate of First National Bank of Southern Africa
Limited on overdraft. The loan is repayable in 48 monthly installments. The
loan is secured by means of a general notarial bond over the Blyvoor
metallurgical plant. The loan agreement prohibits us from disposing of or further encumbering
the secured assets and places restrictions over our ability to change the
business of Blyvoor. Current restructuring changes have not impacted on the
terms of the loan agreement. As of June 30, 2004, we have drawn down R33.1 million ($5.3 million) under
this facility. As of June 30, 2004, the interest rate on this loan was 10.5%.
At October 31, 2004, the outstanding balance was R28.6 million ($4.7 million)
with an applicable interest rate of 10.0%. Investec Bank Limited We
have entered into four separate funding facilities with Investec Bank
Limited, or Investec, or its affiliates: On June 24, 2004, we entered into the first facility of R100.0 million
($15.9 million) with Investec. The facility bears interest at the three-month
Johannesburg Interbank Acceptance Rate, or JIBAR, plus 300 basis points. As at
June 30, 2004, the undrawn balance on this facility was $9.6 million. As at
October 31, 2004, this facility had been fully utilized and settled by us
issuing 7,850,657 ordinary shares to the value of $15.9 million, based on the
market value on the date of issue. This facility was a general funding facility
and was not renewable. On September 15, 2004, we entered into the second facility of R100.0
million ($15.9 million) with Investec. The facility bears interest at the
three-month JIBAR plus 300 basis points. We may elect to repay the facility in
cash or by the issue of our ordinary shares, valued at market value on the date
of issue. As at October, 31 2004, R80.0 million ($13.0 million) had been
utilized under this facility and R60.0 million ($9.8 million) had been settled
by us issuing 5,033,911 ordinary shares, based on the market value at the date
of issue. This facility is a general funding facility and is not renewable. As
at the date of this Annual Report the facility had been fully utilized. On October 14, 2004, our subsidiary, DRD (Isle of Man) entered into the
third facility of $15.0 million with Investec Bank (Mauritius) Limited, or
Investec (Mauritius). The facility may be used to finance future acquisitions
or rights offers by companies in which we wish to acquire shares, or with prior
written consent of Investec (Mauritius), it may be used for any other purpose.
The facility bears interest at the three-month London Interbank Offered Rate,
or LIBOR, plus 300 basis points. Funds advanced and interest on this facility
must be repaid in cash in equal installments every three months from the date
of the relevant advance so that the amount of the advance is paid in full to
Investec (Mauritius) on or before November 12, 2007. The facility is secured by
DRD (Isle of Man)s shares in Emperor Mines Limited, DRD (Porgera) Limited and
Tolukuma Gold Mines Limited. The loan agreement prohibits us from disposing of
or further encumbering the secured assets. The facility restricts the flow of
payments from DRD (Isle of Man) to the Company through requiring that all net
operating cash or cash distributions received by DRD (Isle of Man) in respect
of the secured assets must be used to first service our interest and principal
payment obligations under the facility by requiring that we hold, in a debt
servicing account, sufficient cash to cover our quarterly principal payments.
Any funds in excess of these repayment requirements may be transferred to the
Company. Investec (Mauritius) has the option to require DRD (Isle of Man) to pay 50% of any payments, which are a
distribution, by or on behalf of DRD (Isle of Man) to or for the account of the
Company as a prepayment of the facility. The facility agreement contains a
number of additional customary restrictive covenants. On November 12, 2004,
$7.0 million was drawn under this facility to fund our portion of the Emperor
rights offering. On December 10, 2004, we entered into the fourth facility of R100.0 million ($17.2 million)
with Investec. The facility bears interest at the three month JIBAR plus 300 basis points. As at
March 31, 2005, the undrawn balance on this facility was $6.9 million. This facility is a general
funding facility and is not renewable. 123




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Compliance with Loan Covenants We have been in compliance with all material covenants contained in the
above mentioned convertible notes indenture and loan agreements during the
periods covered by our financial statements included in this Annual Report. Anticipated funding requirements and sources At June 30, 2004, we had cash and cash equivalents of $22.5 million, and
negative working capital (defined as current assets less current liabilities)
of $25.0 million, compared to cash and cash equivalents of $44.4 million, and
working capital of $2.4 million at June 30, 2003 and cash and cash equivalents
of $23.9 million and negative working capital of $34.3 million at June 30,
2002. At October 31, 2004, our cash and cash equivalents were $24.4 million. We incurred significant losses during fiscal 2004 and have continued to
incur losses for the first quarter of fiscal 2005 at our South African
Operations. At the end of fiscal 2004 our current liabilities exceeded our
current assets. At the end of fiscal 2004, these facts gave rise to doubt as to
our ability to meet our current obligations in the normal course of business. As
at June 30, 2004, we estimated that our anticipated commitments
for fiscal 2005 will be between $60.0
million and $65.0 million, which includes costs of restructuring our South
African Operations of $4.3 million, capital expenditure of $18.6 million as
discussed above, interest payments on our convertible notes of $3.9 million,
the current portion of long-term loans of $5.4 million and
working capital of approximately $32.8 million.
This range excludes our obligation to subscribe for rights under Emperors 2004
rights offering, which is addressed separately below. As at June 30, 2004 we
expected to finance these commitments from cash resources of $22.5
million at that date, net cash generated by offshore operations, undrawn borrowing
facilities of $9.6 million and the second Investec facility of R100 million
($15.9 million). At October 31, 2004, we have restructured our South African Operations in
order to reduce losses from these operations and in an attempt to return them
to profitability. The restructuring of our South African Operations has
involved focusing on mining from higher contributing areas, reducing our labor
force by approximately 8,000 employees (approximately 5,000 retrenchments and
the balance through natural attrition) and reducing mining in isolated areas.
At this date, $11.3 million of these anticipated commitments for fiscal 2005
had been paid, including costs of restructuring our South African Operations of
$4.3 million. At October 31, 2004, we expected to finance our remaining commitments from
existing cash resources of $24.4 million at that date, from anticipated net cash generated by offshore
operations after servicing our debt obligation for the third Investec
facility secured by the assets of those facilities and from undrawn borrowing facilities of $2.9 million at that date. In addition, we are
in the process of negotiating an additional general funding facility of R100
million ($16.3 million) with Investec. There can be no assurance that we will obtain this additional or any other funding on acceptable terms or at all. It is managements belief that existing cash resources, net cash generated
from operations and additional funding will be sufficient to meet our anticipated commitments for fiscal 2005 as described above. In making this statement, management has assumed that
there will be a decrease in production from South Africa, due to the
restructuring, with an increase in production outside South Africa due to the
inclusion of Porgera for the full fiscal 2005. Management has also taken into
account our latest internal financial operating results, which indicate that
since the restructuring was completed in September 2004, the South African
Operations have achieved break-even at a net operating cash level and that our
offshore operations are generating favorable operating cash flows which are
comparable with fiscal 2004. Management has assumed a current gold price and exchange rate. 124




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Our estimated working capital, capital expenditure and other funding
commitments, as well as our sources of liquidity, would be adversely affected
if:  
    
    the restructuring of our South African Operations is not successful
in ensuring these operations return to positive net cash flow (up to
September 30, 2004, our South African Operations had negative net cash
flows);
    
    our offshore operations fail to generate net cash flows from
operations consistent with fiscal 2004 levels and after taking into
account the inclusion of Porgera for the full fiscal 2005;
    
    there is an adverse variation in the price of gold or foreign
currency exchange rates in relation to the US Dollar, particularly with
respect to the Rand;
    
    we default on our borrowing arrangements, including the third
Investec (Mauritius) facility of $15.0 million or the Senior Convertible
Notes, and we are therefore required to accelerate the repayment of
funds;
    
    Investec (Mauritius) exercises it discretion under the third Investec
(Mauritius) facility to require us to make a prepayment of 50% of any
payments made by the intermediate holding companies of our offshore
operations to the Company using cash flows generated from our offshore
operations; or
    
    our operating results or financial condition are adversely affected
by the uncertainties and variables facing our business discussed under
Item 5A in the section entitled Operating Results or the factors
described in Item 3D in the section titled Risk Factors. In such circumstances, we could have insufficient capital to meet our
current obligations in the normal course of business, which would have an
adverse impact on our financial position and our ability to continue operating
as a going concern. We would need to reassess our operations, consider further
restructuring and/or obtain additional debt or equity funding. There can be no assurance that we will obtain
this additional or any other funding on acceptable terms or at all. Emperor rights offering In addition to the above mentioned commitments, our wholly-owned
subsidiary, DRD (Isle of Man), has subscribed for its entitlement under
Emperors A$20.4 million ($14.6 million) non-renounceable rights offering, of
20,522,122 Emperor shares, which at A$0.45 per share, amounts to A$9.2 million
($7.0 million). We did not participate in any of the shortfall to the rights
offer. We have funded our participation in this rights offering out of the
third Investec (Mauritius) facility of $15 million. Interest and principal
payments will be funded from our net cash generated from offshore operations.
The repayment terms and restriction of funds under this facility are discussed
in detail above.  5C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.We are not involved in any research and development and have no registered patents or licenses.5D. TREND INFORMATION The marginal nature of our South African Operations and the ageing
infrastructure at these mines has reduced the operational flexibility of the
Group. The importance of these operations in terms of our total production
ounces, has reduced from 93% in fiscal 2002 to 71% in fiscal 2004. We expect
that the overall proportion of the Groups production from our South African
operations will continue to diminish over time. 125




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Our South African mines have undergone significant changes over the past
three fiscal years as a result of the continued strengthening of the Rand, resulting in a lower gold price, and the
above inflation increase in costs. Accordingly, our
South African Operations incurred a loss for the Group of $55.8 million in
fiscal 2004 and the Group may incur a loss in fiscal 2005. We entered into
three separate 60-day review processes during fiscal 2004 at the Blyvoor,
Buffels and Harties Sections in an attempt to restore profitability. The 60-day
review process at the Harties Section was completed during fiscal 2004 and the
60-day review processes at the Blyvoor and Buffels Sections were completed in
fiscal 2005. The restructuring has resulted in the retrenchment of
approximately 5,000 employees, which is roughly a third of our South African
workforce. In fiscal 2004, employment termination costs amounted to $8.0
million. In fiscal 2005 the employment termination costs were $4.3 million.
Whether we will need to engage in any further restructuring, and
consequentially incur further restructuring costs, depends on several variables
which are discussed under Item 5B.: Liquidity and Capital
Resources  Anticipated Funding Requirements and
Sources, including the strength of the South African Rand. If the South African Rand strengthens further or if our restructuring
efforts are unsuccessful in restoring profitability to our South African
Operations, we would review and consider various alternative approaches for our
South African business. If the economic climate improves in the medium-term, we
could consider placing certain of our operations on a care and maintenance
program, like we did for the Number 6 Shaft at the Harties Section during
fiscal 2004, allowing us to incur minimal costs while being able to reassess
our future activities associated with the operation. Alternatively, we could
consider a controlled closure program for some or all of our South African
Operations, which would involve downsizing operations and reducing development
to such a level as to only generate sufficient gold revenue from the remaining
reserves, together with asset sales, to meet closure costs and obligations. We
are aware that it would currently be unlikely that we would be able to sell any
of our South African Operations, as in the current market there are few buyers
for marginal South African gold mines. Our strategy to increase the production from operations outside South
Africa has provided diversification to counter the poor performance from the
South African Operations. At October 31, 2004, we have produced 80,000 ounces
from the Tolukuma Section and 190,000 ounces from our 20% interest in the
Porgera Joint Venture. We have subscribed for our entitlement under Emperors
non-renounceable rights offering, and we did not participate in any of the
shortfall to the rights offer. We will continue to hold our 45.33% interest in
Emperor. As part of our strategic growth objective we plan to diversify our
production base outside South Africa through organic growth at existing mines
and acquisitions of, gold mining operations that meet our strategic criteria.
As discussed in Item 3D.: Risk Factors there are inherent risks involved in
acquisitions. In addition, we would need to find financing for these
acquisitions through additional borrowings which may not be available on
favorable terms, or at all. We could also seek to use our shares as
consideration for acquisitions as we have done in the past, but this will be
dependent on market conditions, such as our share price and our ability to
satisfy listing requirements for any such share issues.  5E. OFF-BALANCE SHEET ITEMS The Company does not engage in off-balance sheet financing activities, and
does not have any off-balance sheet debt obligations, special purposes entities
or unconsolidated affiliates. 126




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5F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS Payments due by periodLess than
    
    Between
    
    Between
    
    More thanTotal
    
    1 year
    
    1-3 years
    
    3-5 years
    
    5 years$000
    
    $000
    
    $000
    
    $000
    
    $000Long-term loans
    
    
    69,180
    
    
    
    9,315
    
    
    
    59,865
    
    
    
    
    
    
    
    Derivative instruments 1
    
    
    13,292
    
    
    
    1,131
    
    
    
    12,161
    
    
    
    
    
    
    
    Purchase obligations  contracted capital expenditure 2
    
    
    1,671
    
    
    
    1,671
    
    
    
    
    
    
    
    
    
    
    
    Environmental rehabilitation, reclamation and closure
costs3
    
    
    39,221
    
    
    
    
    
    
    
    
    
    
    
    7,378
    
    
    
    31,843Total contractual cash obligations
    
    
    123,364
    
    
    
    12,117
    
    
    
    72,026
    
    
    
    7,378
    
    
    
    31,843
 
 5G. SAFE HARBOR See Special Note regarding Forward-Looking Statements.   1
 2 Represents planned capital expenditure for which contractual obligations
exist. 3 Operations of gold mining companies are subject to extensive environmental
regulations in the various jurisdictions in which they operate. These
regulations establish certain conditions on the conduct of our operations.
Pursuant to environmental regulations, we are also obliged to close our
operations and reclaim and rehabilitate the lands upon which we have conducted
our mining and gold recovery operations. The gross estimated closure costs at
existing operating mines and mines in various stages of closure are reflected
in this table. For more information on environmental rehabilitation
obligations, see Item 4D.:Property, Plant and Equipment and Note 17
Provision for environmental rehabilitation, reclamation and closure costs to
our financial statements. 127




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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 
 6A. DIRECTORS AND SENIOR MANAGEMENT Directors and Executive Officers Our board of directors may consist of not less than four and not more than
twenty directors. As of June 30, 2004, our board consisted of seven directors
and two alternate directors, while as of June 30, 2003, our board consisted of
six directors and two alternate directors. In accordance with JSE listing requirements and our Articles of
Association, one third of the directors comprising the board of directors, on a
rotating basis, are subject to re-election at each annual general shareholders
meeting. Additionally, all directors are subject to re-election at the first
annual general meeting following their appointment. Retiring directors normally
make themselves available for re-election. The address of each of our executive directors and non-executive directors
is the address of our principal executive offices. Executive Directors Mark
Michael Wellesley-Wood(53) Chief Executive Officer. Mr. M.M.
Wellesley-Wood was appointed Non-Executive Chairman in May 2000 and appointed
Chairman and Chief Executive Officer in November 2000. Mr. M.M. Wellesley-Wood
was appointed Executive Chairman from December 19, 2003 to
March 1, 2005. He reassumed the role of Chief Executive Officer
from March 1, 2005. He holds a degree in
Mining Engineering from the Royal School of Mines, Imperial College, London and
an MBA from City Business School. He is a Chartered Engineer, a Member of the
Institution of Mining and Metallurgy, a former Member of the Stock Exchange in
London, a Fellow of the Securities Institute and a Member of the Society of
Investment Professionals. Mr. M.M. Wellesley-Wood has been involved in all
aspects of raising finance and financial advice for mining companies since
1977. Mr. M.M. Wellesley-Wood is also a director of Oxus Gold Limited, WCS
Limited and Emperor Mines Limited. He was Chairman of the Unwins Wine Group
Limited from December 2001 to December 2003 and now serves on its Major
Shareholder Committee. On August 3, 2004 he was appointed as the Managing
Director of Emperor Mines Limited. Ian Louis Murray(38) Chief Financial Officer.
Mr. I.L. Murray was appointed Manager Corporate Finance in 1997, alternate
director in July 1999, Chief Financial Officer in November 2000 and Deputy
Chief Executive Officer in January 2003. Mr. I.L. Murray resigned as Chief
Financial Officer in January 2003 but re-assumed that position on June 30, 2003
upon the resignation of Mr. J.H. Dissel. Mr. I.L. Murray was appointed Chief
Executive Officer from December 19, 2003 to January 17,
2005 and Chief Financial Officer from December 19, 2003 to
January 17, 2005. He was reappointed Chief Financial Officer
with effect from March 8, 2005. Mr. I.L.
Murray obtained his B.Comm degree from the University of Cape Town and is a
member of the South African Institute of Chartered Accountants, and the
Chartered Institute of Management Accountants. He also has an Advanced Taxation
Certificate from the University of South Africa. Prior to joining us, Mr. I.L.
Murray was group financial and administration manager of Bioclones (Pty)
Limited, a subsidiary of S A Breweries Limited from August 1995 to January
1997. Mr. I.L. Murray is also a director of G.M. Network Limited and Net-Gold
Services Limited. Non-Executive Directors Moltin Paseka Ncholo(41). Dr. M.P. Ncholo was appointed as a
non-executive director in 2002 and as our non-executive Chairman in
February 2005. Dr. M.P. Ncholo was awarded his doctorate in
Philosophy in 1992 and became an advocate of the High Court of South African in
1994. Prior to becoming the chairman of KBH and ERPM in 1999, he was
director-general of the Department of Public Service and Administration. Dr.
M.P. Ncholo is also a director of CGR and Mvelaphanda Resources Limited. David Christopher Baker(45). Mr. D.C. Baker was appointed as a
non-executive director in 2002. Mr. D.C. Baker is a qualified metallurgist and
started his career at the CRA Broken Hill mine in Australia. During 1986 he
joined Capel Court Powell in Sydney as a mining analyst and later joined James
Capel in London in a similar position. In 1992, Mr. D.C. Baker joined Merrill
Lynch Investment Management as director Global Natural Resources where as
portfolio manager he successfully managed the Mercury Gold Metal Open Fund
since its launch in 1995. In 2001, Mr. D.C. Baker helped established Baker
Steel Capital Manager LLP, a boutique investment house that specializes in
managing clients funds in the natural resource market. Mr. D.C. Baker is also
a director of Northcliffe Holdings Pty. Ltd, Serpent Investment Pty. Ltd,
Emperor Mines Limited, Genus Natural Resources Fund and Baker Steel Limited and
is a partner in Baker Steel Capital Managers LLP. Mr. D.C. Baker resigned from
our Board on October 27, 2004 due to increased commitments. 128




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Geoffrey Charles Campbell(43). Mr. G.C. Campbell was appointed as
non-executive director in 2002 and as senior independent non-executive director
on December 19, 2003. Mr. G.C. Campbell is a qualified geologist and started
his professional career working on gold mines in Wales and Canada. In 1986 he
joined Sheppards Stockbrokers in London as a mining analyst. In 1988 he joined
the Australian stockbrokers, Ord Minnett, and spent some time working for its
sister company, Fleming Martin, in New York, as a senior research analyst. In
1995 Mr. G.C. Campbell joined Merrill Lynch Investment Managers to run the Gold
and General Fund, one of the largest gold mining investment funds. He was also
Research Director for Merrill Lynch Investment Managers, responsible for
coordinating investment research across the entire group. Mr. G.C. Campbell is
currently the managing director of Boatlaunch Limited. Robert Peter Hume(64). Mr. R.P. Hume was appointed as a non-executive
director in 2001. Mr. R.P. Hume has forty one years experience in the auditing
field of which the last eighteen years were as a partner in the firm KPMG at
its East London office. Since retirement in 1999, he spent five years as an
investment manager at Sasfin Frankel Pollak in East London. Mr. R.P. Hume is
also a director of King Consolidated Holdings Limited. Douglas John Meldrum Blackmur(61). Professor D.J.M. Blackmur was
appointed as a non-executive director in October 2003. Professor D.J.M.
Blackmur holds a doctorate in industrial relations from the University of
Queensland and has a career which spans more than 35 years,
primarily in management, regulation, industrial relations and
universities, including positions held at Shell
Australia, the University of Queensland, the Queensland University of
Technology, the Canberra Institute of Technology, New Zealand
Qualifications Authority and the University of the Western Cape. He currently holds the
position of Standard Bank Professor of Management at the University of the Western Cape. James Turk(61). Mr. J. Turk was appointed as a non-executive director on
October 27, 2004. Mr. J. Turk is the founder and a director of G.M. Network
Limited (GoldMoney.com), the operator of a digital gold currency payment
system. He has specialized in international banking, finance and investments
since graduating in 1969 from George Washington University with a B.A. degree
in International Economics. He began his business career with The Chase
Manhattan Bank (now J.P. Morgan Chase). In 1980 he joined RTB, Inc., the
private investment and trading company of a prominent precious metals trader.
He moved to the United Arab Emirates in 1983 to be appointed Manager of the
Commodity Department of the Abu Dhabi Investment Authority. In this position he
was responsible for developing and implementing the investment strategies for
the Authoritys portfolio of precious metals. Since resigning from this
position in 1987, he has written The Freemarket Gold and Money Report, an
investment newsletter and has been the author of several books on money and
banking. Alternate Directors Anton Lubbe(45). Mr. A. Lubbe was appointed an alternate director on July
1, 2003. On March 23, 2005, Mr. A. Lubbe resigned from his
position as an alternate member to the board and as Divisional Director: New
Business and Growth Projects. Deon Thomas van der Mescht(41). Mr. D. T. van der Mescht was appointed an
alternate director on July 1, 2003. On August 5, 2004, Mr. D. T. van der Mescht
resigned from his position as Divisional Director: South African Operations and
as an alternate member to the board. 129




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Divisional Directors Johann Engels(51) Divisional Director: Group Human Resources. Mr. J.
Engels was appointed Group Human Resources Manager in July 2002 and Divisional
Director: Group Human Resources on July 1, 2002. Mr. J. Engels has a BA Honours
degree in psychology and has 27 years experience in the mining industry,
including positions held at Loraine Gold Mines Limited and Avgold Limited,
Hartebeestfontein Division. Mr. J. Engels is an alternate director of Rand
Mutual Assurance Limited. Grant Dempsey (43) Divisional Director: Consulting Engineer. Mr. G.
Dempsey was appointed Divisional Director: Consulting Engineer in May 2004. Mr.
G. Dempsey is qualified as a Mechanical and Electrical Engineer and also has a
B.Com degree in Business Management. Furthermore, Mr. G. Dempsey has 26 years
of experience in the mining industry, including positions held at Vaal Reef
Exploration and Mining Company and Western Deep Levels. Richard Lewis Johnson (53)Divisional Director: Australasia. Mr. R.L.
Johnson was appointed Divisional Director: Australia in February 2003. Mr. R.
Johnson has 34 years of experience in the mining industry, with a BSc Mining
Engineering Honours degree and a Graduate Diploma in Mining Engineering (Wits),
and is a Fellow of the Australasian Institute of Mining and Metallurgy. He has
been appointed to the boards of Tolukuma Gold Mines Limited and DRD (Porgera)
Limited and is our appointed representative on the Management Committee of the
Porgera Joint Venture. Mr. R. Johnson was appointed as a non-executive
director of Emperor Mines Limited on August 3, 2004. Wayne Gregory Koonin (34)Mr. W.G.
Koonin was appointed Divisional Director: Group Finance in
October 2003. In November 2004, Mr. W.G. Koonin resigned
from his position. Michael Patrick Marriott (49)Divisional Director: South African
Operations. Mr. M.P. Marriott was appointed General Manager Projects in March
2004. He was appointed as Divisional Director: South African Operations on
August 10, 2004. Mr. M. Marriott is qualified in metalliferrous mining. Mr. M.
Marriott has 31 years experience in the gold mining industry, including
positions held at Anglo American Gold Division, Cluff Resources, Ashanti
Goldfields Zimbabwe, Independence Gold Mining Zimbabwe and Highland African
Mining Company Limited. Senior Management and Executive Officers William Thomas Beer(52) Chief Administration Officer. Mr. W.T. Beer was
appointed Chief Administration Officer in January 2002. He was appointed as our
Joint Venture Representative to Crown Gold Recoveries on August 10, 2004 and
will be joining the Crown Gold Recoveries Board in October 2004. Mr. W.T. Beer
has 22 years of management experience. Ilja David Graulich (32) General Manager Investor Relations. Mr. I.D.
Graulich was appointed General Manager Investor Relations in February 2003. Mr.
I.D. Graulich is a former financial journalist and has 6 years of experience
across a number of media sectors including mining editor of a pre-eminent South
African financial newspaper. Mr. I.D. Graulich is also alternate director of
Rand Refinery Limited, G. M. Network Limited and Net-Gold Services Limited. Daniel Johannes Pretorius(37) Legal Advisor. Mr. D.J. Pretorius was
appointed Legal Advisor in May 2003 and as Group Legal Counsel in February
2004. Mr. D.J. Pretorius is an attorney admitted in the High Court of South
Africa, and has 11 years of legal experience in the mining industry, 9 years of
which were in private practice. Andrea Isolde Townsend(37) Group Company Secretary. Ms. A.I. Townsend was
appointed Group Company Secretary in October 2003. With effect
from March 31, 2005, Ms. A.I. Townsend has resigned. With
effect from April 1, 2005, Mr. Themba John Gwebu was
appointed Group Company Secretary. 130




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Changes in our Board of Directors and Executive Officers The following changes occurred in our board of directors and executive
officers from July 1, 2003 to October 31, 2004. Appointments
    
    Title
    
    DateD.T. van der Mescht
    
    (Divisional Director: South African Operations and
Alternate Director)
    
    July 1, 2003*A. Lubbe
    
    (Divisional Director: New Business and Growth Projects and
Alternate Director)
    
    July 1, 2003*A.I. Townsend
    
    (Group Company Secretary)
    
    October 1, 2003W.G. Koonin
    
    (Divisional Director: Group Finance)
    
    October 1, 2003D.J.M. Blackmur
    
    (Non-Executive Director)
    
    October 21, 2003M.M. Wellesley-Wood
    
    (Executive Chairman)
    
    December 19, 2003#I.L. Murray
    
    (Chief Executive Officer and Chief Financial Officer)
    
    December 19, 2003#G.C. Campbell
    
    (Senior Independent Non-Executive Director)
    
    December 19, 2003#M.P. Marriott
    
    (Divisional Director: South African Operations)
    
    August 10, 2004J. Turk
    
    (Non-Executive Director)
    
    October 27, 2004
 Resignations
    
    Title
    
    DateD.T. van der Mescht
    
    (Divisional Director: South African
    
    August 5, 2004*Operations and Alternate Director)D.C. Baker
    
    (Non-Executive Director)
    
    October 27, 2004
  *
    
    Effective date#
    
    Reappointment date Directors Terms of Service The following table shows the date of appointment, expiration of term and
number of years of service with us of each of the directors as at
October 31, 2004: Year first
    
    Term ofDirector
    
    Title
    
    Appointed
    
    current officeM.M. Wellesley-Wood
    
    Executive Chairman
    
    
    2000
    *
    
    2 yearsI.L. Murray
    
    Chief Executive Officer
    
    
    2000
    *
    
    2 yearsChief Financial OfficerM.P. Ncholo
    
    Non-Executive Director
    
    
    2002
    
    
    3 yearsG.C. Campbell
    
    Non-Executive Director
    
    
    2002
    
    
    3 yearsR.P. Hume
    
    Non-Executive Director
    
    
    2001
    *
    
    3 yearsD.C.
Baker1
    
    Non-Executive Director
    
    
    2002
    
    
    3 yearsD.J.M. Blackmur
    
    Non-Executive Director
    
    
    2003
    
    
    2 yearsA.
Lubbe2
    
    Alternate Director
    
    
    2003
    
    
    D.T.
van der Mescht3/4
    
    Alternate Director
    
    
    2003
    
    
    
 * Reappointed in 2003.   1 Mr. D.C. Baker resigned from our board of directors on October 27, 2004.2 Alternate director to Mr. I.L. Murray.3 Mr. D.T. van der Mescht resigned from our board of directors on August 5,
2004, for personal reasons and to pursue other interests.4 Alternate director to Mr. M.M. Wellesley-Wood. 131




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There are no family relationships between any of our executive officers or
directors. There are no arrangements or understandings between any of our
directors or executive officers and any other person by which any of our
directors or executive officers have been so elected or appointed. 
 6B. COMPENSATION Our Articles of Association provide that the directors fees should be
determined from time to time in a general meeting or by a quorum of
non-executive directors. The total amount of directors remuneration paid for
the year ended June 30, 2004 was R12.4 million ($1.8 million). Both Messrs.
M.M. Wellesley-Wood and I.L. Murray waived their semi-annual bonus payment,
which were determined by the Remuneration Committee and was payable in July
2003, until our cash flow position improved. These semi-annual bonuses of $0.1
million were paid in January 2004. Non-executive directors receive a basic fee
of $20,000 per annum, subcommittee fees of $2,000 per annum for each
subcommittee of which they are a member and $4,000 per annum for each
subcommittee of which they are chairperson. During the year ended June 30,
2004, we contributed R0.4 million ($0.1 million) to our defined contribution
plans for our officers and directors. The following table sets forth the
compensation for our directors for the year ended June 30, 2004: Retirement fundcontributions/Change in terms of
    
    Bonus/Restraint of
    
    
    
    
    
    Share optionBasic Salary/Fees
    
    employment payment
    
    Trade/Expenses
    
    Total
    
    scheme gainsDirectors
    
    ($000)
    
    ($000)
    
    ($000)
    
    ($000)
    
    ($000)ExecutiveM.M. Wellesley-Wood 1
    
    
    490
    
    
    
    253
    
    
    
    82
    
    
    
    825
    
    
    
    221I.L. Murray
2
    
    
    324
    
    
    
    
    
    
    
    115
    
    
    
    439
    
    
    
    A. Lubbe (Alternate director)
    
    
    155
    
    
    
    
    
    
    
    39
    
    
    
    194
    
    
    
    35D.T. van der Mescht (Alternate director)
    
    
    179
    
    
    
    
    
    
    
    33
    
    
    
    212
    
    
    
    103Subtotal
    
    
    1,148
    
    
    
    253
    
    
    
    269
    
    
    
    1,670
    
    
    
    359Non-ExecutiveM.P. Ncholo
    
    
    22
    
    
    
    
    
    
    
    
    
    
    
    22
    
    
    
    G.C. Campbell
    
    
    32
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    R. Hume
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    8D. Baker
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    64D.J.M. Blackmur 3
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    Subtotal
    
    
    133
    
    
    
    
    
    
    
    
    
    
    
    133
    
    
    
    72Total
    
    
    1,281
    
    
    
    253
    
    
    
    269
    
    
    
    1,803
    
    
    
    431
   1 Under the terms of Mr. M.M. Wellesley-Woods agreement of employment, he is
entitled to receive a change in terms of employment payment by relinquishing
the post of Chief Executive Officer of the Company, equal to 92% of his total
remuneration package calculated on the basis of the annual remuneration package
under that agreement as determined on December 1, 2003. The roles of Chairman
and Chief Executive Officer were separated as required by the JSE Listing
Rules, which came into effect January 1, 2004. No other payment of this nature
was made to any officer of the Company in fiscal 2004. The Remuneration
Committee approved the payment which amounted to R1.748 million ($0.253
million). This amount became payable during May 2004, but payment has been
deferred, at Mr. M.M. Wellesley-Woods request.2 Under the terms of Mr. I.L. Murrays agreement of employment he is entitled
to receive a change in terms of employment payment when he relinquishes the
post of Chief Financial Officer. Mr. I.L. Murray was previously the Deputy
Chief Executive Officer and Chief Financial Officer until December 2003, at
which time the role of Chairman and Chief Executive Officer were separated and
Mr. M.M. Wellesley-Wood was appointed as Executive Chairman and Mr. I.L. Murray
was appointed as Chief Executive Officer and Chief Financial Officer. If and
when he relinquishes the post of Chief Financial Officer and upon the Board
appointing a replacement Chief Financial Officer, he would become entitled to
an amount equal to 93% of his annual South African remuneration package
calculated on the basis of the remuneration package under that agreement as
determined on December 1, 2003. Such payment would amount to R1.395 million
($0.202 million) and was approved by the Remuneration Committee. No other
payment of this nature was made to any officer of the Company in fiscal 2004.
As at October 31, 2004 the roles of Chief Executive Officer and Chief Financial
Officer have not yet been separated.3 Professor D.J.M. Blackmur was appointed to our board of directors on October
21, 2003. 132




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Refer to Item 6E Share Ownership for details of share options held by
directors. Compensation of senior management Our senior management comprises its executive directors and executive
officers. Under the JSE Listing Rules we are not required to, and we do not
otherwise, disclose compensation paid to individual senior managers other than
executive directors. However, the aggregate compensation paid to executive
officers, excluding compensation paid to executive directors, in fiscal 2004
was $2.4 million (fiscal 2003: $1.3 million), representing 20 executive
officers in fiscal 2004 and 15 executive officers in fiscal 2003. We pay compensation principally in South African Rands. However, for the
purpose of this annual report, the Rand values have been converted to Dollars
using the following average Rand/Dollar rate of exchanges: fiscal 2004: R6.90 =
$1.00; fiscal 2003: R9.06 = $1.00; and fiscal 2002: R10.12 = $1.00. Bonuses or incentives are paid based upon performance against
predetermined key performance indicators. Should an executive director meet all
the targets set in terms of such predetermined key performance indicators, he
will be entitled to a bonus of 40% or 50% of his remuneration package,
depending on his particular agreement. Should an executive director not meet
all the targets set in terms of the predetermined key performance indicators,
he will be entitled to a lesser bonus as determined by the Remuneration
Committee. Service Agreements Service contracts negotiated with each executive and non-executive
director incorporate their terms and conditions of employment and are approved
by our Remuneration Committee. The Companys executive directors, Mr. M.M. Wellesley-Wood and Mr. I.L.
Murray, entered into agreements of employment with us and DRD (Isle of Man)
Limited, or DRD (Isle of Man), on the May 7, 2004. These agreements regulate
the employment relationship with Messrs. M.M. Wellesley-Wood and I.L. Murray
for the period that commenced on December 1, 2003 and ending on November 30,
2005. Separate agreements of employment were entered into with us and DRD (Isle
of Man) to reflect the proportionate distribution of time and effort which they
apply between our South African and Australasian operations. Mr. M.M. Wellesley-Wood receives from us an all-inclusive remuneration
package of R1.9 million ($0.3 million), and from DRD (Isle of Man) $250,000 per
annum (payable in pounds sterling in accordance with the exchange rate in
effect on December 1, 2003, in an amount of £145,000 per annum). He is also
eligible, under both agreements, to receive an incentive bonus of up to 40% of
his annual remuneration package in respect of each of four bonus cycles of 6
months each, over the duration of his appointment, on condition that he
achieves certain agreed key performance indicators. Mr. M.M. Wellesley-Woods
agreements also provide that he will receive a total of up to 460,000 of our
ordinary shares in four equal tranches at intervals of 6 months over the
duration of his agreements of employment. In terms of a JSE listing
requirement these allotments were subject to
approval by shareholders. We have since decided, and Mr. M.M. Wellesley-Wood
has agreed, that we will not seek the consent of our shareholders and that he
will not be issued these shares. We are, however, seeking an alternate means of
achieving the objective of the retention incentive, which is not related to the
receiving of our shares. Our agreement further provides that Mr. M.M.
Wellesley-Wood became entitled to an amount equal to 92% of his remuneration
package from us, by virtue of his relinquishing the position of Chief Executive
Officer and Deputy Chairman of the Company. Mr. I.L. Murray receives from us an all-inclusive remuneration package of
R1.5 million ($0.2 million) and from DRD (Isle of Man) $200,000 per annum. Mr.
I.L. Murray is eligible, under both agreements, for an incentive bonus in
respect of up to 50% of his annual remuneration package in respect of each of
four bonus cycles of 6 months each over the duration his appointment, on
condition that he achieves certain key performance indicators. Mr. I.L.
Murrays agreements also provide that he will receive a total of up to 366,000
of our ordinary shares in four equal tranches at intervals of 6 months over the
duration of his agreements of employment. In terms of a JSE listing
requirement these allotments were subject to
approval by shareholders. We have since decided, and Mr. I.L. Murray has
agreed, that we will not seek the consent of our shareholders and that he will not be issued these shares. We are, however,
seeking an alternate means of achieving the objective of the retention
incentive, which is not related to the receiving of our shares. Our agreement
further provides that if he relinquishes the post of Chief Financial Officer
and the Board appoints a replacement Chief Financial Officer, he will become
entitled to an amount equal to 93% of his South African remuneration package
calculated on the basis of the remuneration package as determined on
December 1, 2003. 133




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Each service agreement with our directors provides for the provision of
benefits to the director where the agreement is terminated by us, or DRD (Isle
of Man) Limited in the case of our executive officers, except where terminated
as a result of certain action on the part of the director, or upon the director
reaching a certain age, or by the director upon the occurrence of a change of
control of us. A termination of a directors employment upon the occurrence of
a change of control of us is referred to as an eligible termination. Upon an
eligible termination, the director is entitled to receive a payment equal to at
least one years salary or fees, but not more than four years salary or fees,
depending on the period of time that the director has been employed. Upon an
eligible termination, all options held by the director under our share option
scheme become exercisable by the director at any time prior to the closing of
the transaction involving a change of control or, in certain circumstances in
the case of executive directors, during the thirty day period following the
closing of such a transaction. Additionally, upon an eligible termination, the
executive directors become entitled to any of the shares granted to such
executive director that have not yet vested, subject to shareholder approval.
Moreover, the Board of Directors may, at its discretion, accelerate the
issuance of shares granted to the executive directors that are scheduled to
vest following the expiration of the agreement in the event that the agreement
automatically terminates and is not extended or replaced by another agreement
with the executive director. Messrs. M.P. Ncholo, G.C. Campbell, R. Hume and D.C. Baker each have
service agreements which run for fixed three year periods until March 20, 2005,
July 1, 2005, October 10, 2004 and January 22, 2005, respectively. Mr. D.C.
Baker resigned from our board of directors on October 27, 2004 and his service
agreement was terminated. Professor D.J.M. Blackmurs service agreement runs
for a fixed two year period until October 21, 2005. After their respective two
and three year periods, the agreements continue indefinitely until terminated
by either party on not less than three months prior written notice. 
 6C. BOARD PRACTICE Board of Directors As at October 31, 2004 the board of directors comprises two executive
directors (Messrs. Wellesley-Wood and Murray) and five non-executive directors
(Messrs. Campbell, Blackmur, Hume, Ncholo and Turk). Mr. I.L. Murray has an
alternate in the person of Messrs. A. Lubbe. The non-executive directors are
independent under the Nasdaq requirements and the South African King II Report,
with the exception of Dr. M.P. Ncholo, by virtue of his shareholding in KBH,
the 60% shareholder of CGR, and Mr. J. Turk, by virtue of his directorship of
G.M. Network Limited (GoldMoney.com) the holding company of Net-Gold Services
Limited in which we have a 50.25% interest. In accordance with the King II Report on corporate governance, as
encompassed in the JSE Listing Rules, and in accordance with the South African
Combined Code, the responsibilities of Chairman and Chief Executive Officer
were separated during January 2004. Mr. M.M. Wellesley-Wood
was appointed Executive
Chairman and Mr. I.L. Murray was appointed as Chief Executive Officer. In
December 2004, Mr. G.C. Campbell was appointed senior independent non-executive
director. In future, the evaluation of the Chairmans performance will be
considered by the non-executive directors led by the senior independent
non-executive director. An additional non-executive director, Professor D.J.M.
Blackmur, was appointed on October 21, 2003. Mr. D.C. Baker resigned from our
board of directors on October 27, 2004 and Mr. D.T. van der Mescht, an
alternate director, resigned on August 5, 2004 and no replacement has been
appointed as yet. The board has not established a nomination committee, as it
is our policy for details of a prospective candidate to be distributed to all
directors for formal consideration at a full meeting of the board. A
prospective candidate would be invited to attend a meeting and be interviewed
before any decision is taken. In compliance with the Nasdaq rules a majority of
independent directors will select or recommend director nominees. 134




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The boards main roles are to create value for shareholders, to provide
leadership of the Company, to approve the Companys strategic objectives and to
ensure that the necessary financial and other resources are made available to
the management to enable them to meet those objectives. The board retains full
and effective control over the Company, meeting on a quarterly basis with
additional ad hoc meetings being arranged when necessary, to review strategy
and planning and operational and financial performance. The board further
authorizes acquisitions and disposals, major capital expenditure, stakeholder
communication and other material matters reserved for its consideration and
decision under its terms of reference. The board also approves the annual
budgets for the various operational units. The board is responsible for monitoring the activities of executive
management within the Company and ensuring that decisions on material matters
are referred to the board. The board approves all the terms of reference for
the various subcommittees of the board, including special committees tasked to
deal with specific issues. Only the executive directors are involved with the
day-to-day management of the Company. To assist new directors, an induction program has been established by the
Company, which includes background materials, meetings with senior management,
presentations by the Companys advisors and site visits. The directors are
assessed annually, both individually and as a board, as part of an evaluation
process, which is driven by an independent consultant. In addition, the
Remuneration Committee formally evaluates the executive directors and the
alternate directors on an annual basis, based on objective criteria. All directors, in accordance with the Companys Articles of Association,
are subject to retirement by rotation and re-election by shareholders. In
addition, all directors are subject to re-election by shareholders at the first
annual general meeting following their appointment. The appointment of new
directors is approved by the board as a whole. The names of the directors
submitted for re-election are accompanied by sufficient biographical details in
the notice of the forthcoming annual general meeting to enable shareholders to
make an informed decision in respect of their re-election. All directors have access to the advice and services of the Company
Secretary, who is responsible to the board for ensuring compliance with
procedures and regulations of a statutory nature. Directors are entitled to
seek independent professional advice concerning the affairs of the Company at
the Companys expense, should they believe that course of action would be in
the best interests of the Company. A majority of the non-executive directors have share options under the
Companys share option scheme, but do not believe that this interferes with
their independence. Particulars regarding directors remuneration and share
options, as well as their interest in the issued ordinary share capital of the
Company, are set out in full reporting Item 6A.: Directors, Senior Management
and Employees and Item 6E.: Share ownership, respectively. Board meetings are held quarterly in South Africa or internationally. The
structure and timing of the Companys board meetings, which are scheduled over
2 or 3 days, allows adequate time for the non-executive directors to interact
without the presence of the executive directors. The board meetings include the
meeting of the Risk Committee, Audit Committee and Remuneration Committee which
act as sub committees to the main Board. Each sub committee is chaired by one
of the Independent Non-Executive Directors who provide a formal report back to
the main Board, as part of the quarterly reporting process. Each sub committee
meets for approximately half a day. Certain senior members of staff are
invited to attend the sub committee meetings. The board sets the standards and values of the Company and much of this
has been embodied in the Companys Code of Ethics and Conduct, a copy of which
is available on our website at www.drdgold.com. The Code of Ethics and Conduct
applies to all directors, officers and employees, including the principal
executive, financial and accounting officers, in accordance with Section 406 of
the US Sarbanes-Oxley Act of 2002, the related US securities laws and the
Nasdaq rules. The Code contains provisions under which employees can report
violations of Company policy or any applicable law, rule or regulation,
including US securities laws. The Company has a wholly owned subsidiary, DRD (Isle of Man) Limited, and
has established a subsidiary board on the Isle of Man. This board comprises of
three non-executive directors, Mr. M.G. Gisborne, Mr. P.F. Matthews
and Mr. G.C. Campbell. Mr. M.M. Wellesley-Wood is the executive chairman,
with Mr. I.L. Murray acting as his alternate. 135




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Board Committees The board has established a number of standing committees to enable it to
properly discharge its duties and responsibilities and to effectively fulfill
its decision-making process. Each committee acts within written terms of
reference which have been approved by the Board and under which specific
functions of the board are delegated. The terms of reference for all committees
can be obtained by application to the Company Secretary at the Companys
registered office. Each committee has defined purposes, membership
requirements, duties and reporting procedures. Minutes of the meetings of
these committees are circulated to the members of the committees and made
available to the board. Remuneration for non-executive directors for their
services on the committees concerned is determined by the board. Currently this
is in the case of each committee: Chairman $4,000 per annum; members $2,000 per
annum. The committees are subject to regular evaluation by the board with
respect to performance and effectiveness. The following information reflects the composition and activities of these
committees. Executive Committee As at June 30, 2004, the Executive Committee consisted of Mr. I.L. Murray
(Chairman), Mr. M.M. Wellesley-Wood, Mr. W.T. Beer, Mr. G. Dempsey, Mr. J.
Engels, Mr. I.D. Graulich, Mr. W.G. Koonin, Mr. A.
Lubbe, Mr. M.P. Marriott, Mr.
D.J. Pretorius, Mr. R.L. Johnson and Ms. A.I. Townsend. The Executive Committee meets on a weekly basis to review current
operations in detail, develop strategy and policy proposals for consideration
by the Board of Directors, implement its directives and consider disclosure
controls and procedures. Members of the Executive Committee who are unable to
attend the meetings in person, are able to participate via teleconference
facilities, to allow participation in the discussion and conclusions reached. Committees of the Board of Directors Remuneration Committee The Remuneration Committee consists of Mr. G.C. Campbell (Chairman), and
Professor D.J.M. Blackmur. The Remuneration Committee, which is comprised of non-executive directors,
has been appointed by the board of directors. The committee meets quarterly,
but may meet more often on an ad hoc basis if required. The Remuneration
Committee is governed by its terms of reference and is responsible for
approving the remuneration policies of the Company, the terms and conditions of
employment, and the eligibility and performance measures of the Durban
Roodepoort Deep (1996) Share Option Scheme applicable to the executive and non
executive directors and senior management. The committees objective is to evaluate and recommend to the board
competitive packages which will attract and retain executives of the highest
caliber and encourage and reward superior performance. The committee also aims
to ensure that criteria are in place to measure individual performance. The
committee approves the performance-based bonuses of the executive directors
based on such criteria. The Divisional Director: Group Human Resources provides
the committee with access to comparative industry surveys, which assist in
formulating remuneration policies. As and when required the committee may also
engage the services of independent consultants to evaluate and review
remuneration policies and related issues and brief members on pertinent issues.
The committee has in the past year engaged the services of such consultants to
review the employment contracts of the executive directors. 136




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The remuneration policy, relating to the remuneration of directors and
senior executives, is based on a reward system comprising of four principal
elements:  1.
    
    Basic remuneration, as benchmarked against industry norms;2.
    
    Bonuses or incentives, which are measured against agreed outcomes or Key
Performance Indicators, or KPIs;3.
    
    Short-term rewards for exceptional performance; and4.
    
    Long-term retention of key employees based on scarcity of skill and
strategic value, using share options granted under the Durban Roodepoort
Deep (1996) Share Option Scheme or shares for the executive directors. A copy of the policy is available by application to the Company Secretary
at the Companys registered office. Audit Committee As at June 30, 2004, the Audit Committee consisted of: Mr. R.P. Hume
(Chairman), Mr. D.C. Baker and Mr. G.C. Campbell. Mr. D.C. Baker resigned on
October 27, 2004 and Professor D.J.M Blackmur was appointed to the Audit
Committee on November 2, 2004. The Audit Committee comprises solely of non-executive directors, all of
whom are independent. The primary responsibilities of the Audit Committee, as
set out in the Audit Committee charter, is to assist the board in carrying out
its duties relating to accounting policies, internal financial control,
financial reporting practices and the preparation of accurate financial
reporting and financial statements in compliance with all applicable legal
requirements and accounting standards. A copy of the charter is available by
application to the Company Secretary at the Companys registered office. The Audit Committee meets quarterly with the external auditors, the
Companys internal audit practitioner, the Chief Financial Officer and the
Divisional Director : Group Finance to review the audit plans of the internal
auditors, to ascertain the extent to which the scope of the internal audits can
be relied upon to detect weaknesses in the internal controls and to review the
annual and interim financial statements prior to approval by the board. The
Audit Committee reviews our annual results, the effectiveness of our system of
internal financial controls, internal audit procedures and legal and regulatory
compliance. The committee also reviews the scope of work carried out by our
internal auditors and holds regular discussions with the external auditors and
internal auditors. The committee appoints, re-appoints and removes the external auditors and
approves the remuneration and terms of engagement of the external auditors.
The committee is required to pre-approve, and has pre-approved, non-audit
services provided by our external auditors. The Companys external audit
function is currently being undertaken by KPMG Inc. The Companys internal and external auditors have unrestricted access to
the chairman of the Audit Committee and, where necessary, to the Chairman of
the board and Chief Executive Officer. All important findings arising from
audit procedures are brought to the attention of the committee and, if
necessary, to the board. Risk Committee As at June 30, 2004 the Risk Committee consisted of Professor D.J.M
Blackmur (Chairman); Mr. D.C. Baker and Mr. M.M. Wellesley-Wood. Mr. D.C. Baker
resigned on October 27, 2004. The Risk Committee was established during January 2004
with a non-executive
chairman. Its overall objective is to assist the main Board in the discharge of
its duties relating to risk management and control responsibilities, assurance
issues, health, safety and environmental compliance, and the monitoring and
reporting of all these matters. The Risk Committee facilitates communication
between the board, the Audit Committee, internal auditors and other parties
engaged in risk management activities. The terms of reference of the Risk
Committee can be obtained by application to the Company Secretary at the
Companys registered office. 137




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The Risk Committees role is to ensure that:  
    
    an effective risk management program is implemented and maintained;  
    
    risk management awareness is promoted amongst all employees;  
    
    risk programs (financing/insurance) adequately protect the Company against catastrophic risks;  
    
    regular risk assessments are conducted;  
    
    total cost of risk in the long term is reduced;  
    
    the protection of the Groups assets is promoted throughout the Group;  
    
    the health and safety and well being of all stakeholders is improved; and  
    
    the Companys activities are carried out in such a way so as to ensure the safety and health of employees. The Risk Committee meets quarterly and reports to the board. Additional
ad hoc meetings may be arranged as and when required. Certain members of
executive management are invited to attend Risk Committee meetings on a regular
basis, such as the Chief Executive Officer, Divisional Director: Group Finance,
the Group Risk Manager, the Group Financial Manager, the Operational Managers,
the Group Legal Counsel, the manager responsible for safety, health and
environment and the Chief Administration Officer. Following the release of the King II Report, in South Africa, containing
minimum practices to be adopted, we have formulated a risk corporate governance
structure, which has been approved by the board. The system to manage risk involves all significant business and
operational risks which could undermine the achievement of business objectives
and undermine the preservation of shareholders values. The significant risks
facing the Group including those at operations have been identified and have
been included in Item 3D.: Risk factors. Persons have been appointed to
address each risk and the results thereof, are reviewed by senior management
through regular risk meetings. The aim of the internal control systems is for
management to provide reasonable assurance that the objectives will be met. In
addition to the above initiatives the Group also employs third party
consultants to benchmark our operations against other mining operations
throughout South Africa and more than 300 different mining companies
worldwide. An important aspect of risk management is the transfer of risk to third
parties to protect the Company from any major disaster. We have embarked on a
program to ensure that our major assets and potential business interruption and
liability claims are covered by group insurance policies that encompass our
operations world-wide. The majority of the cover is through reputable
insurance companies in London and Europe and the insurance programs are renewed
on an annual basis. Insurance premiums for the Group have been reduced by more
than 30% in fiscal 2004, due to the risk initiatives undertaken in the Group.
A cell captive has been established to enable further reduction in annual
insurance premiums. An insurance company, Fortis Limited, has been established
to provide workers compensation insurance to the Tolukuma Section in Papua New
Guinea. A saving of 90% against the workers compensation insurance premium
paid in fiscal 2003, was achieved in fiscal 2004. 138




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6D. EMPLOYEES Employees The geographic breakdown of our employees (including contractors who are
contracted employees employed by third parties), was as follows at the end of
each of the past three fiscal years: Year ended June 3020041
    
    20031
    
    2002South Africa
    
    
    12,986
    
    
    
    18,766
    
    
    
    20,405Australasia
    
    
    751
    
    
    
    472
    
    
    
    529Total
    
    
    13,737
    
    
    
    19,238
    
    
    
    20,934
 The total number of employees at June 30, 2004 of 13,737 comprises 2,372
contractors and 11,365 employees who are directly employed by us and our
wholly-owned Group companies. As of October 31, 2004, we had approximately
11,226 employees. The decrease in the number of employees in fiscal 2004, is
due to the restructuring at the North West Operations which included the
retrenchment of approximately 2,200 employees in September 2003 and 1000
employees in April 2004, and the reduction of contractors. The decrease in the
number of employees in fiscal 2003, is due to the sale of 60% of our interest
in the Crown Section, effective July 1, 2002. As of June 30, 2004, 2003 and 2002, the breakdown of our employees
(excluding Porgera, Emperor, CGR and ERPM) by main categories of activity was
as follows: Year ended June 30,Category of Activity
    
    2004
    
    2003
    
    2002Mining  Our Employees
    
    
    7,507
    
    
    
    9,877
    
    
    
    9,262Mining  Contractors
    
    
    2,372
    
    
    
    4,426
    
    
    
    6,172Engineering
    
    
    2,183
    
    
    
    2,871
    
    
    
    3,064Metallurgy
    
    
    728
    
    
    
    960
    
    
    
    1,244Mineral Resources
    
    
    256
    
    
    
    361
    
    
    
    356Administration
    
    
    240
    
    
    
    243
    
    
    
    281Environmental
    
    
    105
    
    
    
    155
    
    
    
    187Human Resources
    
    
    204
    
    
    
    185
    
    
    
    174Medical
    
    
    116
    
    
    
    129
    
    
    
    159Safety
    
    
    26
    
    
    
    31
    
    
    
    35Total
    
    
    13,737
    
    
    
    19,238
    
    
    
    20,934
 Labor Relations As
at June 30, 2004, we employed and contracted approximately 13,737 people
in South Africa and Papua New Guinea. Approximately 70% of South African
employees are members of trade unions or employee associations. This excludes
all employees of the Crown Section and ERPM Section, and all employees from our
20% interest in the Porgera Joint Venture and our 19.78% interest in the
Emperor Section. There were no material incidents of industrial action or labor
unrest at our operations during fiscal 2004.   1Excludes employees of Porgera, Emperor, CGR and ERPM. 139




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South Africas labor relations environment remains a platform for social
reform, while the political transitions that have taken place in the country
have reduced the impact of organized labor on political transformation.
National Union of Mineworkers, or NUM, the major union in the mining industry in South Africa, is
influential in the tripartite alliance between the ruling African National
Congress, the Congress of South African Trade Unions, or COSATU, and the South
African Communist Party as it is the biggest affiliate of COSATU. The
relationship between management and labor unions remains cordial. The Durban
Roodepoort Deep / National Union of Mineworkers, or DRD/NUM, co-ordinating
forum meets regularly to discuss matters pertinent to both parties at Group
level, while operations level forums continue to deal with local matters. The
2003 to 2005 wage agreements provided for a wage increase based on the greater
of an inflation-linked increase measured from the Consumer Price Inflation
Index, or CPIX, plus 1% or otherwise 7%. This agreement took effect from July
1, 2004, with an actual increase of 7%. Wage agreements were also signed with
the other recognized unions and associations. For details of restructuring within the South African Operations see Item
4D.: Property, Plant and Equipment. By statute we are required to pay each employee who is dismissed for
reasons based on the operational requirements of our operations, a severance
package of not less than one weeks remuneration for every completed year of
service. In the aforementioned agreements with organized labor we undertook, as
in the past, to pay packages equal to two weeks basic pay for every completed
year of service as part of a balancing compromise with the labor unions between
the high additional costs of non-financial items and incentive payments (which
are deemed part of remuneration), and an additional one week benefit based on
basic pay. The Tolukuma Section in Papua New Guinea is not unionized, however, labor
relations and the relationship with the surrounding communities are maintained
by way of worker consultative committees and a community forum lead by the
Community Relations Manager. AIDS represents a very serious threat to us and the gold mining industry
as a whole in terms of the potential reduced productivity and increased medical
costs. The exact extent of infection in our workforce is not known at present,
although it is roughly estimated by the industry that the prevalence of HIV,
the virus that causes AIDS, in the South African industry is currently
approximately 30% to 40%. We have several AIDS awareness campaigns in place at
our operations. Blyvoor has contracted AngloGold Health Services to provide all health
care services, including a wellness program, which treats AIDS related
illnesses, provides counseling on healthy life styles and monitors the
progression of the HIV virus. Similar services are offered at our North West
Operations by our 100% owned subsidiary, Duff Scott Hospital (Pty) Limited. Safety statistics Due to the importance of our labor force, we continuously strive to create
a safe and healthy working environment. These objectives are clearly reflected
in the following overall statistics for our managed mines (including the Crown
and ERPM Sections, but excluding Porgera): Year ended June 30,(Per million man hours)
    
    2004
    
    2003Lost time injury frequency rate (LTIFR)1
    
    
    8.63
    
    
    
    11.96Reportable incidence1
    
    
    3.49
    
    
    
    3.34Fatalities1
    
    
    0.25
    
    
    
    0.31Number of fatalities (average per month)
    
    
    0.92
    
    
    
    1.60
   1 Calculated as follows: Actual number of instances divided by the total number
of man hours worked multiplied by one million. 140




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6E. SHARE OWNERSHIP As of October 31, 2004, options to purchase ordinary shares held by
directors were as follows: Directors Options
    
    
    
    
    
    Options
    
    
    
    
    
    OptionsOptions at
    
    granted
    
    Average
    
    exercised
    
    Average
    
    lapsed
    
    Options atJune 30,
    
    during the
    
    Exercise
    
    during the
    
    Exercise
    
    during the
    
    Nov 1,2003
    
    period
    
    price (R)
    
    year
    
    Price (R)
    
    year
    
    2004
    
    Expiration Dates1ExecutiveM.M. Wellesley Wood.
    
    
    933,665
    
    
    
    215,800
    
    
    
    17.53
    
    
    
    125,553
    
    
    
    6.48
    
    
    
    
    
    
    
    1,023,912
    
    
    
    4/30/12-10/27/13I.L. Murray
    
    
    650,071
    
    
    
    143,300
    
    
    
    17.53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    793,371
    
    
    
    8/21/10-10/27/13Alternate DirectorsA. Lubbe 2
    
    
    170,458
    
    
    
    213,500
    
    
    
    18.63
    
    
    
    25,000
    
    
    
    7.26
    
    
    
    
    
    
    
    358,958
    
    
    
    10/1/11-11/1/17D.T. van der Mescht
3
    
    
    224,995
    
    
    
    132,800
    
    
    
    18.47
    
    
    
    50,000
    
    
    
    6.46
    
    
    
    
    
    
    
    307,795
    
    
    
    10/1/11-4/26/14Non-ExecutiveP.M. Ncholo
    
    
    38,500
    
    
    
    9,300
    
    
    
    17.53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,800
    
    
    
    3/20/12-10/27/13G.C. Campbell
    
    
    42,900
    
    
    
    12,000
    
    
    
    17.53
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,900
    
    
    
    3/20/12-10/27/13R.P. Hume
    
    
    68,650
    
    
    
    11,100
    
    
    
    17.53
    
    
    
    6,000
    
    
    
    7.26
    
    
    
    
    
    
    
    73,750
    
    
    
    10/1/11-10/27/13D.C. Baker
    
    
    81,800
    
    
    
    11,100
    
    
    
    17.53
    
    
    
    43,300
    
    
    
    14.23
    
    
    
    
    
    
    
    49,600
    
    
    
    9/26/11-10/27/13D.J.M. Blackmur4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Each option is representative of a right to acquire one ordinary share at
a predetermined exercise price. Closed periods apply to share trading by directors and other employees,
whenever certain employees of the Company become or could potentially become
aware of material price sensitive information, such as information relating to
an acquisition, quarterly results etc., which is not in the public domain.
When these employees have access to this information an embargo is placed on
share trading for those individuals concerned. The embargo need not involve
the entire Company in the case of an acquisition and may only apply to the
board of directors, executive committee, and the financial and new business
teams, but in the case of quarterly results the embargo is group-wide. Under the listings requirements of the JSE, we are not required to
disclose, and we do not otherwise disclose or ascertain, share ownership of
individual executive officers in our share capital. However, to the best of our
knowledge, we believe that our ordinary shares held by executive officers, in
aggregate, do not exceed 1 percent of the Companys issued ordinary share
capital. For details of share ownership of directors see Item 7A.: Major
Shareholders Durban Roodepoort Deep (1996) Share Option Scheme We operate a securities option plan as an incentive tool for our executive
directors, non-executive directors and senior employees whose skills and
experience are recognized as being essential to the Companys performance. In
terms of the scheme rules, a maximum of 15% of the issued ordinary shares is
reserved for issuance thereunder and no participant may hold options at any
time, which if exercised in full, would exceed 2% of our issued share capital
at that time. As at October 31, 2004, the number of issued and exercisable
share options is approximately 3.6% of the issued ordinary share capital, which
is within the National Association of Pension Funds (United Kingdom)
international accepted guideline of 3 - 5% for such schemes. In addition, the participants in the Scheme are fully
taxed at their maximum marginal tax rate on any gains realized on the exercise
of their options.   1 Certain directors hold options which expire at various times. For those
directors, a range is provided indicating the earliest and latest expiration
dates.2 Mr. A. Lubbe was appointed to our board of directors as an alternate director
on July 1, 2003.3 Mr. D.T. van der Mescht was appointed to our board of directors as an
alternate directors on July 1, 2003. He subsequently resigned from his position
of Divisional Director : South African Operations and as alternate member of
the board on August 5, 2004.4 Professor D.J.M. Blackmur was appointed to our board of directors on October
21, 2003. 141




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The price at which an option may be exercised is the lowest seven day
trading average of the closing market prices of an ordinary share on the JSE,
as confirmed by our directors, during the three months preceding the day on
which the employee is granted the option. Each option remains in force for ten
years after the date of grant, subject to the terms of the option plan. Options
granted under the plan vest at the discretion of our directors, but primarily
according to the following schedule over a maximum of a three year period: Percentage vested in each period
    
    Period after the original date of the option grant25%
    
    6 months25%
    
    1 year25%
    
    2 years25%
    
    3 years
 Any options not exercised within ten years from the original date of the
option grant will expire and may not thereafter be exercised. Options to purchase a total of 8,345,363 ordinary shares were outstanding
on June 30, 2004, of which options to purchase 3,383,479 ordinary shares were
currently exercisable. In fiscal 2004, a total of 115 employees participated in
the scheme including directors, non executive directors and other senior
employees. The outstanding options are exercisable at purchase prices that
range from R4.52 to R36.08 per share and expire ten years from the date of
issue to the participants. 142




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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 
 7A. MAJOR SHAREHOLDERS As
of October 31, 2004, our issued capital consisted of:  
    
    251,625,006 ordinary shares of no par value; and
    
    5,000,000 cumulative preference shares. To our knowledge, we are not directly or indirectly owned or controlled by
another corporation or any person or foreign government and there are no
arrangements, the operation of which may at a subsequent date result in a
change in control of us. Based on information available to us, as of October 31, 2004:  
    
    there were 4,597 record holders of our ordinary shares in South
Africa, who held approximately 7,526,065 or approximately 2.99% of our
ordinary shares;
    
    there was one record holder of our cumulative preference shares in
South Africa, who held 5,000,000 or 100% of our cumulative preference shares;
    
    there were no record holders of our ordinary shares or ADSs
underlying the 6% Senior Convertible Notes due 2006;
    
    there were no US record holders of our ordinary shares, excluding
those shares which are held as part of our ADS program; and
    
    there were 3,701 record holders of our ADSs in the United States, who
held approximately 205,273,787 or approximately 81.58% of our ordinary shares. The following table set forth information regarding the beneficial
ownership of our ordinary shares as of October 31, 2004 by:  
    
    each of our directors; and  
    
    any person whom the directors are aware of as at October 31, 2004 who
is interested directly or indirectly in 5% or more of our ordinary
shares. Shares Beneficially OwnedHolder
    
    Number
    
    PercentM. M. Wellesley-Wood.
    
    
    *I.L. Murray
    
    
    *A. Lubbe
    
    
    *M.P. Ncholo
    
    
    *G.C. Campbell
    
    
    *R.P. Hume
    
    
    *D.C. Baker
    
    
    *Bank of New York ADRs
    
    
    205,273,787
    
    
    
    81.58101 Barclay StreetNew York, NY 10011
  *
    
    Indicates share ownership of less than 1% of our outstanding ordinary shares. 143




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Dr. M.P. Ncholos interest does not include 4,794,889 of our ordinary
shares held by KBH, of which Dr. M.P. Ncholo is the Chairman. The shares
originally issued to KBH were subject to a put and call derivative instrument
between KBH and Investec Bank Limited, or Investec, with the shares held as
security. Investec exercised their option and took possession of the shares in
three equal tranches in June, July and August 2004. Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Ordinary shares issuable pursuant to options, to the extent the options are
currently exercisable or convertible within 60 days of October 31, 2004, are
treated as outstanding for computing the percentage of any other person. As of
October 31, 2004, we are not aware of anyone owning 5% or more of our ordinary
shares other than the Bank of New York which holds 81.58% of our issued
ordinary shares through our ADR program. Unless otherwise noted, each person or
group identified possesses sole voting and investment power with respect to the
shares, subject to community property laws where applicable. Unless indicated
otherwise, the business address of the beneficial owner is: DRDGOLD Limited, 45 Empire Road, Parktown, Johannesburg, South Africa, 2193. Cumulative Preference Shares Randgold and Exploration Company Limited, or Randgold, owns 5,000,000
(100%) of our cumulative preference shares. Randgolds address is 5 Press
Avenue, Selby, Johannesburg, South Africa. The holders of cumulative preference shares do not have voting rights
unless any preference dividend is in arrears for more than six months. The
terms of issue of the cumulative preference shares are that they carry the
right, in priority to the Companys ordinary shares, to receive a dividend
equal to 3% of the gross future revenue generated by the exploitation or the
disposal of the Argonaut mineral rights acquired from Randgold & Exploration
Company Limited in September 1997. However, they will obtain voting rights once
the Argonaut Project becomes an operational gold mine. Additionally, holders of
cumulative preference shares may vote on resolutions which adversely affect
their interests and on the disposal of all or substantially all of our assets
or mineral rights. There is currently no active trading market for our
cumulative preference shares. No shareholder has voting rights which differ
from the voting rights of any other shareholder. 144




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7B. RELATED PARTY TRANSACTIONS iProp Loan Note On June 12, 2002, we entered into a loan agreement with Crown Gold
Recoveries (Pty) Limited, or CGR, in terms of which an amount of R37.7 million
($3.6 million) is recorded as owing by CGR to us. CGR was an indirect
wholly-owned subsidiary of Crown Consolidated Gold Recoveries (Pty) Limited, or
CCGR. We have sold 60% of our interest in CGR to Khumo Bathong Holdings (Pty)
Limited, or KBH. This amount was originally owed by CGR to iProp Ltd
(previously known as RMP Properties SA Limited), or iProp, in terms of a
secured loan note. In an arrangement in which JCI Gold Limited, or JCI, paid
iProp R38.0 million ($3.7 million) in exchange for an issue by us to JCI Gold
of 8,000,000 ordinary shares, the loan note was ceded to us. The loan note has
now been cancelled and restated in terms of the loan agreement entered into on
June 12, 2002. The total amount outstanding on this loan as of October 31,
2004, is R50.2 million ($8.2 million). The loan bears interest at the prime
rate of The Standard Bank of South Africa Limited. As of June 30, 2004 the
interest rate was 11.5% per annum and as of October 31, 2004, the interest rate
on this loan stood at 11%. The loan is repayable on demand within seven years.
Interest is payable annually in arrears. The loan is unsecured. In terms of the
loan agreement the principal amount will be repaid in equal annual
installments. As at October 31, 2004, this balance was still owing to us,
however, we have recognized losses generated by CGR and its subsidiary against
this loan and it is carried at a nil value. R.A.R. Kebble A loan received from Mr. R.A.R. Kebble, amounting to R5.3 million ($0.51
million) was repaid during the year ended June 30, 2002. Interest on this
amount during that fiscal year amounted to R0.4 million ($0.04 million). We entered into an agreement with Mr. R.A.R. Kebble in March 2002 whereby
Mr. R.A.R. Kebble retired from employment with us with effect from March 19,
2002 and ceased to be a director of our board with effect from June 30, 2002.
Pursuant to that agreement we undertook to pay an amount of R3.1 million ($0.3
million) to Mr. R.A.R. Kebble on June 30, 2002. We believe that we are not
required to pay this amount and we have not done so. One of the reasons for
this is that we believe we have a counterclaim against Mr. R.A.R. Kebble in
excess of this claim. C. Press Loan During fiscal 2003 Mr. C. Press, a director of Net-Gold Services (Pty)
Limited, or Net-Gold, a consolidated subsidiary company, loaned an amount of
US$24,946 to Net-Gold. This loan is interest free, unsecured and has no fixed
terms of repayment. The funds were used for short-term working capital
advances. As at October 31, 2004, the full balance was still outstanding. Crown Gold Recoveries (Pty) Ltd, or CGR In connection with the sale by us of 60% of our interest in CGR we agreed
to lend KBH R5.3 million ($0.7 million) under a loan agreement entered into on
June 12, 2002. Prior to this, CGR was an indirect wholly-owned subsidiary of
ours. The loan bears interest at the prime rate of The Standard Bank of South
Africa Limited. As of October 31, 2004, the outstanding balance was R7.3
million ($1.2 million). The loan is repayable on demand within five years.
Interest is payable annually in arrears. The loan was secured by KBHs pledge
to us of 49,928,824 shares in ERPM. However, since the acquisition of ERPM by
CGR, the loan is no longer secured. The strategic value of this transaction was
that it has enabled us to introduce a black empowerment entity, KBH, which is
necessary in terms of the new Mining Charter. On June 12, 2002, we entered into two loan agreements with CGR, the first
being for R0.9 million ($0.09 million) and the second being for R37.7 million
($3.6 million). The first loan is payable on demand within three years and
interest is payable annually in arrears and the second loan is payable on
demand within seven years and interest is payable annually in arrears. The
total amount outstanding on these loans, as at October 31, 2004, is R50.7
million ($8.2 million), however, we have recognized losses generated by CGR and
its subsidiary against this loan and it is carried at a nil value. 145




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At the same date, we entered into a shareholders agreement with KBH, the
Industrial Development Corporation, or IDC, CCGR and CGR. This agreement provides that the board of CGR shall comprise
two directors appointed by CCGR and three directors appointed by KBH. The
agreement also provides that certain business matters such as amending the
memorandum and articles of association of CGR, canceling the services agreement
with us or incurring certain indebtedness requires the approval of CGR, in the
case of shareholder matters, or a director appointed by CGR in the case of
directors matters. Additionally, the agreement places restrictions on our
ability to dispose of shares of CGR without the prior written consent of the
other shareholders. The shareholder agreement also provides that unless its
board of directors determines otherwise, CGR shall declare an annual dividend
of a minimum of 30% of the net profits of CGR after taxes and interest. As of
October 31, 2004, no dividends have been declared. This shareholders agreement also documents three previously interest free
loans from CCGR to CGR totaling R190.0 million ($30.3 million). Under the terms
of the share purchase agreement, 57% (R108.0 million ($17.2 million)) of the
principal amount of these loans were sold to IDC and 3% (R5.7 million ($0.9
million)) to KBH. However, upon KBH exercising its option to purchase IDCs
interest in CGR, IDCs portion of this loan was ceded to KBH. These balances
are still outstanding as at October 31, 2004, however, we have recognized
losses generated by CGR and its subsidiaries against this loan and it is
carried at a nil value. These loans currently bear interest at the prime rate charged by The
Standard Bank of South Africa Limited on overdraft which as of October 31,
2004, stood at 11%. It is the intention of the parties to amend the terms of
the three shareholders loans. It is expected that the shareholders loans will
continue to bear interest at the prime rate and the interest will be repayable
in equal monthly payments over the period of the loans. The conditions in
CCGRs shareholder loan to CGR, which waive the requirement that CGR maintain
an interest cover ratio of 2.5 to 1, will be deleted. Dr. M.P. Ncholo, one of our non-executive directors, is also the chairman
of KBH. The 4,794,889 shares originally issued to KBH were subject to a put and
call option instrument between KBH and Investec, with the shares held as
security. The option was exercised and Investec took possession of the shares
in three equal tranches in June, July and August 2004. East Rand Proprietary Mines Limited On October 10, 2002, Daun et Cie AG, Courthiel Holdings (Pty) Ltd, KBH,
Claas Edmond Daun, Paul Cornelis Thomas Schouten, Moltin Paseka Ncholo,
Masechaba Palesa Moletsane Ncholo, Michelle Patience Baird, Derek Sean
Webbstock, or collectively the Sellers, and CGR, entered into an agreement in
terms of which CGR agreed to purchase from the Sellers the entire issued share
capital and shareholders claims of ERPM. Dr. M.P. Ncholo is one of our
non-executive directors and we own a 40% interest in CGR. The purchase price
for the acquisition of the shares and the claims was R100 million ($9.5
million). CGR loaned an amount of R60 million ($5.7 million) to the Sellers as
an interest free loan, and CGR received from the Sellers, as security for the
loan, a pledge of the entire issued share capital of ERPM and a cession of the
Sellers claims to CGR. The conditions of the sale were fulfilled and the
amount was deemed to be paid to the Sellers on account of the purchase price.
An existing mortgage bond registered by ERPM in favor of Courthiel Holdings
(Pty) Ltd securing shareholder loans in the sum of R10 million ($1.9 million)
was also ceded to CGR as security on October 11, 2002. The full amount is still
owing under the bond. The competition authorities approval for the acquisition of ERPM by CGR
was obtained and the R60 million ($5.7 million) loan was deemed to be part
payment of the purchase price. As to the balance of the purchase price of R40
million ($3.8 million), KBH, a 40% shareholder in CGR, agreed to use its best
endeavors to obtain a loan of R40 million ($3.8 million) from the IDC which was
paid to the Sellers as final part payment of the purchase price of the ERPM
acquisition. CGR procured the release of the Sellers from all statutory
environmental obligations, including obligations to furnish guarantees and the
like to the Department of Minerals and Energy, or DME, affairs, and ERPM will
assume the Sellers responsibilities in this regard. CGR acquired ERPM as is,
without indemnification for any disclosed or undisclosed liabilities, which
could require CGR to incur significant financial obligations to satisfy any
liability. On October 10, 2002, in order to enable CGR to effect payment of the
purchase price of the acquisition of ERPM, we entered into a loan agreement
with CGR pursuant to which we agreed to lend to CGR the sum of R60 million
($5.7 million). The loan bore interest at the rate of 18.4% and was secured by
a notarial general covering bond over all movable assets of CGR. This loan has
been repaid. 146




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On January 1, 2003 and April 7, 2003, we advanced to CGR R9.8 million
($1.6 million) and R2.1 million ($0.3 million), respectively, on the same
terms. These amounts were advanced for ERPM acquisition costs and working
capital requirements respectively. Additionally, on September 18, 2002, in connection with CGRs acquisition
of ERPM, we provided a working capital facility of R10.0 million ($1.6 million)
to ERPM. The loan bears interest at the prime rate charged by The Standard Bank
of South Africa Limited on overdraft and as of October 31, 2004, the interest
rate on the loan stood at 11%. The loan is secured by a pledge of certain
movable assets of ERPM. Furthermore, from July 1, 2003 to April 30, 2004, funds were advanced to
ERPM by way of a capital expansion loan of R32.2 million ($5.1 million) and on
September 1, 2003, by way of debentures of R16.0 million ($2.6 million). These
funds were utilized to fund infrastructure upgrades and the purchase of mining
equipment. The loan facility is repayable in equal installments over the next
5 years and bears interest at prime less 0.5%. The debentures are repayable in
78 months from issue date and bear interest at prime less 2.5%. In addition
the debentures attract a royalty of 0.267% of the gross revenue received from
net smelter revenue. As a result of the low Rand gold price coupled with a number of unforeseen
operational setbacks, the structured capital expansion and underground resource
development plan at ERPM was abandoned. All project finance loans advanced to
CGR and ERPM, and included above, totaling $8.8 million were included in the
investment in our associate, against which losses recorded by the associate,
were recognized against these advances in fiscal 2004. Management Service Agreements We provide management services for CGR and ERPM under management service
agreements entered into with each of them. These services include financial
management, gold administration and hedging, technical and engineering
services, mineral resource services and other management related services. We
own a 40% interest in CGR. ERPM is a wholly-owned subsidiary of CGR. These
arrangements allow us to monitor and provide input on the management of these
companies in which we have an investment. For CGR we provide management services with KBH. The management services
at ERPM are provided exclusively by us. Our management fee for services
performed at the Crown Section was R0.7 million ($0.07 million) per month and
our management fee for services performed at the ERPM Section is approximately
R1.5 million ($0.1 million) per month. The agreement with CGR entered on July
1, 2002, was for one year and was renewable annually. The agreement with the
ERPM Section entered on July 1, 2002, was for a fixed two year period with an
option to renew. In April 2004, the management fees were revised to R0.3
million ($ 0.04 million) per month for both the Crown Section and the ERPM
Section. Rand Refinery Agreement On October 12, 2001, we entered into an agreement with Rand Refinery
Limited, or RRL, for the refining and sale of all of our gold produced in South
Africa. Under the agreement, RRL performs the final refining of our gold and
casts it into troy ounce bars. RRL then sells the gold on the same day as
delivery, at the London afternoon close price on the day the gold is sold. In
exchange for this service, we pay RRL a variable refining fee plus fixed
marketing, loan and administration fees. For fiscal 2004 this amounted to $0.9
million. Mr. W.G. Koonin, our Divisional Director: Group Finance, is also a
director of RRL and has been appointed as a member of their audit committee.
Also, Mr. I.D. Graulich, our General Manager: Investor Relations, is an
alternate director to Mr. W. G. Koonin. We currently own 10.6% of RRL (which is
jointly owned by South African gold mining companies). Consultancy Service Agreement On September 2, 2002, we entered into a consultancy service agreement with
one of our non-executive directors, Mr. N. Goodwin. Under this agreement, Mr.
N. Goodwin provided us with project management services at the Argonaut
Project. The agreement was for a fixed one year term from September 2, 2002, so
long as the Argonaut Project was ongoing. Under this agreement, Mr. N. Goodwin was paid a fee of $400 per day. Mr.
Goodwin worked for 128 days under this agreement for a total amount of $51,200.
Mr. N. Goodwin resigned as a non-executive director effective January 29, 2003.
This agreement was terminated as of February 26, 2003. 147




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Assistance with regards to funeral expenses During fiscal 2004, financial assistance was provided by ERPM, our 40%
associate company with KBH, to the family of Dr. M.P. Ncholo, a non-executive
director of our Company, and executive director of KBH, with regards to funeral
expenses relating to the death of a family member who was a temporary employee
of ERPM. In terms of ERPMs practice, the funds were advanced on compassionate
grounds to assist the family with costs associated with the funeral. This
amounted to R90,447 ($14,414). At October 31, 2004 this amount was still
outstanding in the accounts of ERPM. Employment agreements with executive directors Mr. M.M. Wellesley-Wood receives from the Company an all-inclusive
remuneration package of R1.9 million ($0.3 million), and from DRD (Isle of Man)
$250,000 per annum. He is also eligible, under his agreement with us and his
agreement with DRD (Isle of Man), to receive an incentive bonus of up to 40% of
his annual remuneration package in respect of each of four bonus cycles of 6
months each, over the duration of his appointments, on condition that he
achieves certain agreed key performance indicators. Mr. M.M. Wellesley-Woods
agreements also provide that he will receive a total of up to 460,000 of our
ordinary shares in four equal tranches at intervals of 6 months over the
duration of his agreements of employment. In terms of a JSE listing
requirement these allotments were subject to
approval by shareholders. We have since decided, and Mr. M.M. Wellesley-Wood
has agreed, that we will not seek the consent of our shareholders and that he
will not be issued these shares. We are, however, seeking an alternate means of
achieving the objective of the retention incentive, which is not related to the
receiving of our shares. Our agreement further provides that Mr. M.M.
Wellesley-Wood became entitled to an amount equal to 92% of his annual
remuneration package from us, by relinquishing the position of Chief Executive
Officer and Deputy Chairman of the Company. Mr. I.L. Murray receives from the Company an all-inclusive remuneration
package of R1.5 million ($0.2 million) and from DRD (Isle of Man) $200,000 per
annum. Mr. I.L. Murray is eligible, under his agreement with us and his
agreement with DRD (Isle of Man), to receive an incentive bonus in respect of
up to 50% of his annual remuneration package in respect of each of four bonus
cycles of 6 months each over the duration his appointments, on condition that
he achieves certain key performance indicators. Mr. I.L. Murrays agreements
also provide that he will receive a total of up to 366,000 of our ordinary
shares in four equal tranches at intervals of 6 months over the duration of his
agreements of employment. In terms of a JSE listing
requirement these allotments were subject to approval by
shareholders. We have since decided, and Mr. I.L. Murray has agreed, that we
will not seek the consent of our shareholders and that he will not be issued
these shares. We are, however, seeking an alternate means of achieving the
objective of the retention incentive, which is not related to the receiving of
our shares. If he relinquishes the post of Chief Financial Officer and the
Board appoints a replacement Chief Financial Officer, he will become entitled
to an amount equal to 93% of his annual South African remuneration package
calculated on the basis of the remuneration package as determined on December
1, 2003. Appointment of J. Turk as Non-Executive Director Mr. J. Turk was appointed as a non-executive director on October 27, 2004. Mr.
J. Turk is the founder and a director of G.M. Network Limited (GoldMoney.com).
In April 2004, we acquired 50.25% of the shares in Net-Gold Services Limited, a
subsidiary of G.M. Network Limited (GoldMoney.com). 
 7C. INTERESTS OF EXPERTS AND COUNSEL Not
applicable. 148




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ITEM 8. FINANCIAL INFORMATION 
 8A. CONSOLIDATED FINANCIAL STATEMENTS AND OTHER INFORMATION See Item 18.: Financial Statements. Legal Proceedings See Legal proceedings under Item 4D.: Property, plant and equipment. Dividend Policy See Item 10B.: Memorandum and Articles of Association. 
 8B. SIGNIFICANT CHANGES See note 25 Subsequent Events under Item 18.: Financial Statements. 
 ITEM 9. THE OFFER AND LISTING 
 9A. OFFER AND LISTING DETAILS The following tables set forth, for the periods indicated, the high and
low market sales prices and average daily trading volumes of our ordinary
shares on the JSE and ADSs on the Nasdaq SmallCap Market. Price Per
    
    Price Per
    
    Average DailyOrdinary Share
    
    ADS
    
    TradingR
    
    $
    
    VolumeOrdinaryYear Ended
    
    High
    
    Low
    
    High
    
    Low
    
    Share
    
    ADSsJune 30, 2000
    
    
    14.40
    
    
    
    6.70
    
    
    
    2.38
    
    
    
    0.94
    
    
    
    219,120
    
    
    
    671,956June 30, 2001
    
    
    10.70
    
    
    
    4.40
    
    
    
    1.40
    
    
    
    0.59
    
    
    
    141,868
    
    
    
    593,520June 30, 2002
    
    
    55.00
    
    
    
    6.50
    
    
    
    5.59
    
    
    
    0.79
    
    
    
    246,934
    
    
    
    2,085,179June 30, 2003
    
    
    49.20
    
    
    
    15.60
    
    
    
    4.72
    
    
    
    2.11
    
    
    
    245,634
    
    
    
    2,809,445June 30, 2004
    
    
    27.75
    
    
    
    15.00
    
    
    
    4.10
    
    
    
    2.20
    
    
    
    118,454
    
    
    
    4,084,794
 Price PerOrdinary Share
    
    Price Per ADS
    
    Average DailyR
    
    $
    
    Trading VolumeOrdinaryYear Ended
    
    Quarter
    
    High
    
    Low
    
    High
    
    Low
    
    Share
    
    ADSsJune 30, 2003
    
    
    Q1
    
    
    
    49.20
    
    
    
    22.00
    
    
    
    4.72
    
    
    
    2.22
    
    
    
    292,687
    
    
    
    3,222,610Q2
    
    
    
    45.00
    
    
    
    25.80
    
    
    
    4.54
    
    
    
    2.87
    
    
    
    279,442
    
    
    
    3,067,297Q3
    
    
    
    38.50
    
    
    
    17.00
    
    
    
    4.38
    
    
    
    2.11
    
    
    
    224,280
    
    
    
    2,776,048Q4
    
    
    
    23.75
    
    
    
    15.60
    
    
    
    2.93
    
    
    
    2.18
    
    
    
    181,448
    
    
    
    2,160,115June 30, 2004
    
    
    Q1
    
    
    
    26.50
    
    
    
    16.51
    
    
    
    3.54
    
    
    
    2.20
    
    
    
    122,825
    
    
    
    4,164,865Q2
    
    
    
    21.00
    
    
    
    15.00
    
    
    
    3.24
    
    
    
    2.30
    
    
    
    139,668
    
    
    
    4,541,106Q3
    
    
    
    27.75
    
    
    
    20.33
    
    
    
    4.10
    
    
    
    2.98
    
    
    
    119,205
    
    
    
    4,881,572Q4
    
    
    
    22.01
    
    
    
    15.30
    
    
    
    3.58
    
    
    
    2.23
    
    
    
    90,656
    
    
    
    2,682,855
 149




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Price PerOrdinary Share
    
    Price Per ADS
    
    Average DailyR
    
    $
    
    Trading VolumeOrdinaryMonth Ended
    
    High
    
    Low
    
    High
    
    Low
    
    Share
    
    ADRsApril 30, 2004
    
    
    22.01
    
    
    
    18.40
    
    
    
    3.58
    
    
    
    2.57
    
    
    
    112,860
    
    
    
    3,431,329May 31, 2004
    
    
    19.10
    
    
    
    16.40
    
    
    
    2.98
    
    
    
    2.23
    
    
    
    62,487
    
    
    
    2,892,960June 30, 2004
    
    
    18.50
    
    
    
    15.30
    
    
    
    2.98
    
    
    
    2.33
    
    
    
    99,793
    
    
    
    1,731,815July 31, 2004
    
    
    15.60
    
    
    
    14.10
    
    
    
    2.70
    
    
    
    2.25
    
    
    
    145,004
    
    
    
    1,859,826August 31, 2004
    
    
    15.50
    
    
    
    10.30
    
    
    
    2.57
    
    
    
    1.53
    
    
    
    232,023
    
    
    
    4,355,741September 30, 2004
    
    
    15.80
    
    
    
    10.30
    
    
    
    2.64
    
    
    
    1.63
    
    
    
    275,466
    
    
    
    2,303,178
 
 9B. PLAN OF DISTRIBUTION Not applicable. 
 9C. MARKETS Nature of Trading Markets The principal trading market for our equity securities is the JSE and the
Australian Stock Exchange, or ASX, and our ADSs that trade on the Nasdaq
SmallCap Market in the form of ADRs under the symbol DROOY. Our ordinary
shares trade on the JSE under the symbol DUR. Our ordinary shares also trade
on the LSE (symbol: DBNR), the Marche Libre on the Paris Bourse (symbol: DUR),
Brussels Bourse (symbol: DUR) in the form of International Depository Receipts,
Port Moresby Stock Exchange (symbol: DUR) and ASX (symbol: DRD). The ordinary
shares also trade on the over the counter markets in Berlin, Stuttgart and the
Regulated Unofficial Market on the Frankfurt Stock Exchange. The ADRs are
issued by The Bank of New York, as depositary. Each ADR represents one ADS.
Each ADS represents one of our ordinary shares. Prior to February 2001, our
ADSs traded on the Nasdaq National Market. Nasdaq Exemptions Exemption from the
shareholder approval requirements Between August and December 2003, the Company entered into a series of
discounted issuances with several different investors resulting in the issuance
of ordinary shares, and securities convertible into ordinary shares, totaling
46,843,902, or 25.43% of the total shares outstanding on a pre-issuance basis.
Included within those issuances, on December 12, 2003, the Company entered into
an agreement granting Investec the option to acquire 10.2 million ordinary
shares. The Company requested an exemption from Nasdaq Marketplace Rule
4350(i)(1)(D) in reliance upon Nasdaq Marketplace Rule 4350(a). Rule
4350(i)(1)(D) provides that shareholder approval is required upon issuing 20%
or more of the common stock or 20% or more of the voting power outstanding
before the issuance for less than the greater of book or market value of the
stock. Nasdaq granted this exemption on the basis that the shareholder approval
requirements of Rule 4350(i)(1)(D) are contrary to generally accepted business
practices of companies located in South Africa. The South African Companies Act of 1973 (as amended) requires issuers to
obtain shareholder approval before the issuance of any shares or rights to
shares, which approval can be provided by specific authority or a general
authority granted by means of a resolution passed by shareholders in a general
meeting. JSE Listing Requirements require 75% shareholder approval for any
issuance of shares for cash. JSE Listing Requirements do, however, permit an
issuer to issue shares for cash under a general authority granted by its
shareholders, but not in excess of 15% of the companys total issued share
capital during any financial year under that authority, or the general
authority. In terms of the specific issuances for which the Company received
the exemption from Nasdaq described above, there was no JSE requirement that
would mandate specific shareholder approval for these transactions. The JSE
Listing Requirements accept a general authority by our shareholders under
certain circumstances. The shareholders had approved a general authority which
covered the relevant transactions by resolutions passed at the Companys annual
general meetings in November 2003. In addition, included in the shares issued
for cash were approximately 24.4 million shares to the value of R435.5 million
($63.1 million) which were used for the acquisition of the Porgera Joint
Venture. Approval was obtained from the JSE to deem these shares to be a vendor
placing. Exemption from the quorum requirements Nasdaqs Marketplace Rules, which apply to all companies listed on the Nasdaq Stock Market and
Nasdaq SmallCap Market, state in Rule 4350(f) that the minimum quorum for any meeting of holders of
the companys common stock must be no less than 33 1/3% of the issuers outstanding shares.
Consistent with the practice of companies incorporated in South Africa, our articles of association
only require a quorum of three members. As a result, and in connection with the listing of our
ADSs on the Nasdaq National Market in July 1996, we requested, and Nasdaq granted us in October
1996, an exemption from compliance with the Rule 4350(f) quorum requirement. 150




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9D. SELLING SHAREHOLDERS Not applicable. 
 9E. DILUTION Not applicable. 
 9F. EXPENSES OF THE ISSUE Not applicable. 
 ITEM 10. ADDITIONAL INFORMATION 
 10A. SHARE CAPITAL Not Applicable. 
 10B. MEMORANDUM AND ARTICLES OF ASSOCIATION Description of Our Memorandum and Articles of Association and Ordinary Shares On
June 30, 2004, we had 300,000,000 ordinary shares, no par value, and
5,000,000 cumulative preference shares, authorized for issuance. On that date,
we had issued 233,307,667 ordinary shares and 5,000,000 cumulative preference
shares. On October 31, 2004, we had 600,000,000 ordinary shares, no par value, and
5,000,000 cumulative preference shares, R0.10 par value, authorized for
issuance. On that date, we had issued 244,768,294 ordinary shares and 5,000,000
cumulative preference shares. On September 28, 2004, an Extraordinary General
Meeting voted to increase the authorized share capital to 600,000,000 ordinary
shares. Set out below are brief summaries of certain provisions of our Articles of
Association, or our Articles, the South African Companies Act, 1973 (as
amended), or the Companies Act, and the requirements of the JSE, all as in
effect on October 31, 2004. The summary does not purport to be complete and is
subject to and qualified in its entirety by reference to the full text of the
Articles, the Companies Act, and the requirements of the JSE. We are registered under the Companies Act under registration number
1895/000926/06. As set forth in Section 4-Objects of our Memorandum of
Association, our purpose is to explore and exploit mineral rights and establish
and own mining enterprises. Borrowing Powers Our directors may, at their discretion, raise or borrow or secure the
payment of any sum or sums of money for our use as they see fit. For so long as
we are a listed company, the directors shall so restrict our borrowings and
exercise all voting and other rights or powers of control exercisable by us in
relation to our subsidiary companies so that the aggregate principal amount
outstanding in respect of us and any of our subsidiary companies, as the case
may be, exclusive of inter-company borrowings, shall not, except with the
consent of our shareholders at a general meeting, exceed R30 million or the
aggregate from time to time of our issued and paid up capital, together with
the aggregate of the amounts standing to the credit of all distributable and
non-distributable reserves, any of our share premium accounts and our
subsidiaries share premium accounts certified by our auditors and which form
part of our and our subsidiaries financial statements, whichever is higher. 151




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Share Ownership Requirements Our directors are not required to hold any shares to qualify or be
appointed as a director. Voting by Directors A director may authorize any other director to vote for him at any meeting
at which neither he nor his alternate director appointed by him is present. Any
director so authorized shall, in addition to his own vote, have a vote for each
director by whom he is authorized. The quorum necessary for the transaction of the business of the directors
may be fixed by the directors, and unless so fixed shall be not less than two. Directors are required to notify our board of directors of interests in
companies and contracts. If a directors interest is under discussion,
depending on the nature of the interest, he shall not be allowed to vote and
shall not be counted, for the purpose of any resolution regarding his interest,
in the quorum present at the meeting. The Code of Corporate Practices and Conduct of the King II Report on
Corporate Governance for South Africa, 2002 sets out guidelines to promote the
highest standards of corporate governance among South African companies. The
board of directors believes that our business should be conducted according to
the highest legal and ethical standards. In accordance with their practice, all
remuneration of directors is approved by the Remuneration Committee. Under South African common law, directors are required to comply with
certain fiduciary duties to the company and to exercise proper care and skill
in discharging their responsibilities. Age Restrictions There is no age limit for directors. Election of Directors Directors may be appointed at a general meeting from time to time. The
directors may appoint any eligible person as a director but he shall only hold
office until the next annual general meeting when the relevant director shall
be eligible for election. One third of our directors, on a rotating basis, are
subject to re-election at each annual general shareholders meeting. Retiring
directors usually make themselves available for re-election. General Meetings On the request of 100 shareholders or shareholders holding not less than
one-twentieth of our share capital which carries the right of voting at general
meetings, we shall within 14 days of the lodging of a request by such
shareholders issue a notice to shareholders convening a general meeting for a
date not less than 21 days and not more than 35 days from the date of the
notice. Directors may convene general meetings at any time. Our annual general meeting and a meeting of our shareholders for the
purpose of passing a special resolution may be called by giving 21 days advance
written notice of that meeting. For any other general meeting of our
shareholders, 14 days advance written notice is required. Our Articles provide that if at a meeting convened upon request by our
shareholders a quorum is not present within one half hour after the time
selected for the meeting, such meeting shall be dissolved. The necessary quorum
is three members present in person or represented by proxy. 152




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Voting Rights The holders of our ordinary shares are generally entitled to vote at
general meetings and on a show of hands have one vote per person and on a poll
have one for every share held. The holders of our cumulative preference shares
are not entitled to vote at a general meeting unless any preference dividend is
in arrears for more than six months at the date on which the notice convening
the general meeting is posted to the shareholders. However, they will obtain
voting rights once the Argonaut Project becomes an operational gold mine.
Additionally, holders of cumulative preference shares may vote on resolutions
which adversely affect their interests and on resolutions regarding the
disposal of all or substantially all of our assets or mineral rights. When
entitled to vote, holders of our cumulative preference shares are entitled to
one vote per person on a show of hands and that portion of the total votes
which the aggregate amount of the nominal value of the shares held by the
relevant shareholder bears to the aggregate amount of the nominal value of all
shares issued by us. Dividends We may, in a general meeting, or our directors may, from time to time,
declare a dividend to be paid to the shareholders in proportion to the number
of shares they each hold. No dividend shall be declared except out of our
profits. Dividends may be declared either free or subject to the deduction of
income tax or duty in respect of which we may be charged. Holders of ordinary
shares are entitled to receive dividends as and when declared by the directors.
Holders of cumulative preference shares are entitled to receive cumulative
preferential dividends in priority to the holders of our ordinary shares equal
to the prescribed portion of 3% of our future revenue generated by the
exploitation or other application of the mineral rights represented by the
Argonaut Project. All unclaimed dividends are forfeited back to us after a
period of twelve years. Ownership Limitations There are no limitations imposed by our Articles or South African law on
the rights of shareholders to hold or vote on our ordinary shares or securities
convertible into our ordinary shares. Winding-up If we are wound-up, then the assets remaining after payment of all of our
debts and liabilities, including the costs of liquidation, shall be applied to
repay to the shareholders the amount paid up on our issued capital and
thereafter the balance shall be distributed to the shareholders in proportion
to their respective shareholdings. On a winding up, our cumulative preference
shares rank, in regard to all arrears of preference dividends, prior to the
holders of ordinary shares. As of October 31, 2004, no such dividends have been
declared. Except for the preference dividend and as described in this paragraph
our cumulative preference shares are not entitled to any other participation in
the distribution of our surplus assets on winding-up. Reduction of Capital We may, by special resolution, reduce the share capital authorized by our
Memorandum of Association, or reduce our issued share capital including,
without limitation, any stated capital, capital redemption reserve fund and
share premium account by making distributions and buying back our shares. Amendment of the Articles of Association Our Articles may only be altered by the passing of a special resolution. A
special resolution is passed when the shareholders holding at least 25% of the
total votes of all the members entitled to vote are present or represented by
proxy at a meeting and, if the resolution was passed on a show of hands, at
least 75% of those shareholders voted in favor of the resolution and, if a poll
was demanded, at least 75% of the total votes to which those shareholders are
entitled were cast in favor of the resolution. 153




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Consent of the Holders of Cumulative Preference Shares However, the rights and conditions attaching to the cumulative preference
shares may not be cancelled, varied or added, nor may we issue shares ranking,
regarding rights to dividends or on winding up, in priority to or equal with
our cumulative preference shares, or dispose of all or part of our mineral
rights without the consent in writing of the registered holders of our
cumulative preference shares or the prior sanction of a resolution passed at a
separate class meeting of the holders of our cumulative preference shares. Distributions Under an amendment to the Articles on October 21, 2002, we are authorized
to make payments in cash or in specie to our shareholders in accordance with
the provisions of the Act and other consents required by law from time to time.
We may, for example, in a general meeting, upon recommendation of our
directors, resolve that any surplus funds representing capital profits arising
from the sale of any capital assets and not required for the payment of any
fixed preferential dividend, be distributed among our ordinary shareholders.
However, no such profit shall be distributed unless we have sufficient other
assets to satisfy our liabilities and to cover our paid up share capital. 
 10C. MATERIAL CONTRACTS Below is a brief summary of material contracts entered into by us, other
than in the ordinary course of business, during the two years immediately
preceding the date of this report. Loan Agreement between Industrial Development Corporation of South Africa Ltd.
and Blyvooruitzicht Gold Mining Company Ltd, dated July 18, 2002.
  Under this agreement IDC loaned R65 million ($6.3 million) to Blyvoor
specifically for financing capital expenditures incurred by Blyvoor in
completing the Blyvoor expansion project. The loan bears interest at 1%
below the prime rate of First National Bank Limited of Southern Africa.
The loan is repayable in 48 monthly installments. Agreement of Loan and Pledge between Durban Roodepoort Deep, Limited and East
Rand Proprietary Mines Ltd, dated September 18, 2002.
  Under this agreement we provided ERPM with a working capital facility of
R10 million ($0.9 million). The loan bears interest at the prime rate on
overdraft which is currently 17%. The loan is secured by a pledge of
certain movable assets of ERPM. Management Services Agreement between Durban Roodepoort Deep, Limited, Khumo
Bathong Holdings (Pty) Ltd and Crown Gold Recoveries (Pty) Ltd, dated
October 1, 2002.
  Under this agreement we agreed to provide certain management services to
CGR for a management service fee of R0.7 million ($0.1 million) per month. Agreement amongst Durban Roodepoort Deep, Limited, West Witwatersrand Gold
Mines Limited and Bophelo Trading (Pty) Ltd, dated October 1, 2002.
  Under this agreement we agreed to sell the West Wits gold plant and
certain related assets for R25 million ($2.4 million) to process certain
sand dumps, surface materials, freehold areas and surface right permits
located at the West Wits Section. The purchase price was to be paid in
installments from September 30, 2002. This agreement was superseded by the
following agreement. 154




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Memorandum of Agreement made and entered between Durban Roodepoort Deep,
Limited, West Witwatersrand Gold Mines Limited, Mogale Gold (Proprietary)
Limited and Luipaards Vlei Estates (Proprietary) Limited, dated June 6,
2003.
  This agreement amended the payment terms for the remainder of the purchase
price of the agreement amongst Durban Roodepoort Deep, Limited, West
Witwatersrand Gold Mines Limited and Bophelo Trading (Pty) Ltd, dated
October 1, 2002. Mogale Gold (Proprietary) Limited was previously known as
Bophelo Trading (Pty) Ltd. This agreement also included Luipaards Vlei as
a surety and co-principal debtor to Mogale and also imposes the obligation
to obtain certain authorizations on Mogale and provides that Mogale may
use permits covering a portion of the West Wits Section without us
abandoning them. Under this agreement, we determined the remainder of the
selling price to be paid for the West Wits gold plant to be R8.3 ($1.1
million). This amount is to be paid within 4 years from the date of the
agreement. Letter Agreement between Durban Roodepoort Deep, Limited and The Standard Bank
of South Africa, represented by its Standard Corporate and Merchant Bank
Division, dated October 7, 2002.
  In this letter agreement, SCMB agreed to provide us with various direct
and indirect banking facilities. These facilities include a general short
term banking facility, business line of credit, liquidating credit line,
performance guarantees and derivative products. The aggregate amount
available under these facilities is R176.3 million ($17.0 million). The
rate of interest varies between the various facilities. As of October 31,
2004, approximately R46 million ($7.5 million) of this facility has been
utilized. Memorandum of Agreement between Daun Et Cie A.G., Courthiel Holdings (Pty) Ltd,
Khumo Bathong Holdings (Pty) Ltd, Claas Edmond Daun, Paul Cornelis Thomas
Schouten, Moltin Paseka Ncholo, Michelle Patience Baird, Derek Sean
Webbstock, as sellers, and Crown Gold Recoveries (Pty) Ltd, as purchaser,
dated October 10, 2002.
  Under this agreement, CGR purchased from the sellers the entire issued
share capital and shareholders claims of ERPM for a purchase price of
R100 million ($9.5 million). As a result of this acquisition, the pledge
by KBH of its ERPM stock to us has lapsed. Memorandum of Loan Agreement between Durban Roodepoort Deep, Limited and Crown
Gold Recoveries (Pty) Ltd, dated October 10, 2002.
  Under this agreement we loaned CGR R60 million in connection with the
acquisition of ERPM by CGR. This loan bears interest at a rate of 18.4%
and must be repaid within four months of our security interest becoming
effective. This loan was repaid during fiscal 2003. Management Services Agreement between Durban Roodepoort Deep, Limited and East
Rand Proprietary Mines Ltd, dated October 10, 2002.
  Under this agreement we agreed to provide certain management services to
ERPM for a management service fee of approximately R1.5 million ($0.1
million) per month. Purchase Agreement between Durban Roodepoort Deep, Limited and CIBC World
Markets Corp., dated November 4, 2002.
  Under this agreement, CIBC World Markets Corp. agreed to purchase up to a
principal amount of $66,000,000 of our 6% Senior Convertible Notes due
2006, or the Notes, in a private placement for a purchase price of up to
$66,000,000. CIBC World Markets Corp. has purchased these notes pursuant
to this agreement. 155




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Registration Rights Agreement between Durban Roodepoort Deep, Limited and CIBC
World Markets Corp., dated November 4, 2002.
  Under this agreement we agreed to file with the Securities and Exchange
Commission within 90 days after the date of the initial issuance of the
Notes, and to use our reasonable best efforts to cause to become effective
within 180 days after the date of the initial issuance of the Notes, a
shelf registration statement with respect to the resale of the Notes and
the resale of the ordinary shares underlying the ADSs issuable upon
conversion of the Notes. The shelf registration statement was declared
effective on September 30, 2003. Indenture between Durban Roodepoort Deep, Limited, as Issuer, and The Bank of
New York, as Trustee, dated November 12, 2002.
  This Indenture contains the terms under which we issued a principal amount
of the Notes in a private placement in November 2002. Letter Agreement for sale of shares in Emperor Mines Limited, between DRD (Isle
of Man) Limited and Kola Ventures Limited, dated December 13, 2002.
  This agreement contains the terms under which we purchased 14% of Emperor
Mines Limited for A$11.5 million ($7.8 million), at December 13, 2002. Confirmation, between Durban Roodepoort Deep, Limited, and Investec Bank
(Mauritius) Limited, dated August 14, 2003.
  Under this agreement we granted Investec (Mauritius) an option to purchase
up to 18 million of our ordinary shares, at a strike price per share of
95% of the trade-weighted average price of our American Depository Shares,
or ADSs, for the 30 days period to exercise. Amendment to Confirmation, dated September 4, 2003, between Durban Roodepoort
Deep and Investec Bank (Mauritius) Limited.
  This agreement amended the terms of the confirmation dated August 14,
2003, increasing the number of ordinary shares covered by the option to 27
million. On September 9, 2003, Investec (Mauritius) exercised the option
in respect of 18 million ordinary shares at a price of $2.3967 per
ordinary share for a total consideration of $42.1 million. On September
12, 2003, Investec (Mauritius) exercised the remaining portion of the
option, acquiring an additional 9 million ordinary shares, at a price of
$2.4242 per share for a total consideration of $21.7 million. Confirmation, between Durban Roodepoort Deep, Limited and Investec Bank
(Mauritius) Limited, dated December 17, 2003.
 On December 17, 2003, we entered into an option agreement with Investec
(Mauritius) granting Investec (Mauritius) the option to acquire 10.2 million
ordinary shares. The strike price per share of the option is 95.5% of the
trade-weighted average price of our ADSs for the 10 days prior to exercise. The
option had an expiry date of March 15, 2004. The option was exercised on
February 19, 2004 at a price of $3.21 per share for a total consideration of
$32.3 million. Of this $19.3 million was used to close out 180,000 ounces or
57.1% of the then committed 315,000 ounces under the Eskom gold for electricity
contract. 156




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Deed of Amalgamation for the Corporate Restructuring of Orogen Minerals
(Porgera) Limited, Mineral Resources Porgera Limited and Dome Resources
(PNG) Limited, dated October 14, 2003.
  Under this agreement, we acquired two of the wholly-owned subsidiaries of
Oil Search Limited, or OSL, Orogen Minerals (Porgera) Limited, or OMP, and
Mineral Resources Porgera Limited, MRP. The transaction was affected
though an amalgamation of OMP and MRP with our wholly-owned subsidiary
Dome Resources (PNG) Limited. As a result of the amalgamation, OMP,
subsequently renamed DRD (Porgera) Limited, is the surviving entity. The
final purchase price of the transaction was $77.1 million, which was
comprised of $60.3 million in cash and 6,643,902 ($16.7 million) of our
ordinary shares, determined based on the prevailing market value of the
Companys shares on November 22, 2003. Porgera Joint Venture Operating Agreement between Placer (P.N.G.) Pty Limited
and Highlands Gold Properties Pty. Limited and PGC (Papua New Guinea) Pty
Limited, dated November 2, 1988.
  This Joint Venture Operating Agreement was incorporated by reference in
the Deed of Amalgamation (referred to above) and indicates the role of
manager and managers relationship with the management committee. Undertaking, between Oil Search Limited and DRD (Isle of Man) Limited, dated
October 14, 2003.
  This agreement removes the rights of all parties to the Deed of
Amalgamation to claim that completion, as that term is defined in the Deed
of Amalgamation, has not occurred and to invoke certain rights under the
Deed of Amalgamation relating to failure on the part of OSL and Orogen
Minerals Limited, the holding company of OMP and MRP, to comply with
certain document delivery requirements. Loan Assignment Agreement between Orogen Minerals Limited, DRD (Isle of Man)
and Orogen Minerals (Porgera) Limited, dated October 14, 2003.
  Under this agreement, Orogen Minerals Limited assigned its rights to a
loan owed to it by OMP, to DRD (Isle of Man). Agreement between Orogen Minerals Limited and DRD (Isle of Man) Limited, dated
October 14, 2003.
  Under this agreement, DRD (Isle of Man) Limited agreed to pay up to the
maximum stamp duty incurred in connection with the transaction
contemplated by the Deed of Amalgamation. The maximum amount of this duty
is $3.69 million. DRD (Isle of Man) Limited also agreed to pay any stamp
duty top up, as calculated in the Deed of Amalgamation. All or a portion
of these amounts may be refunded to DRD (Isle of Man) Limited. Agreement of Employment between Durban Roodepoort Deep, Limited and Mr. D.J.M.
Blackmur, dated as of October 21, 2003.
  The agreement states the employment terms and basis of remuneration for
this director, with regards to duties for Durban Roodepoort Deep, Limited.
Mr. D.J.M. Blackmur receives a gross all-inclusive fee of $24,000 per
annum, for all the services to be rendered by him in terms of this
agreement. The term of the contract is from October 21, 2003 to October
21, 2005. Banking Facilities Agreement made and entered between Durban Roodepoort Deep,
Limited and Standard Bank of South Africa, Limited, dated November 14,
2003.
  The agreement awards to the Company certain banking facilities with
Standard Bank of South Africa, Limited. The banking facilities include
credit card facilities ($11,155), fleet management services ($5,100),
performance guarantee facilities ($1.5 million) and derivative product
facilities ($18.7 million). 157




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Agreement of Employment between Durban Roodepoort Deep, Limited and Mr. M.M.
Wellesley-Wood, dated as of December 1, 2003.
  The agreement states the employment terms and basis of remuneration for
this executive director, with regards to duties for Durban Roodepoort
Deep, Limited. The term of the contract is from December 1, 2003 to
November 30, 2005. Mr. M.M. Wellesley-Wood receives an all-inclusive
remuneration package of R1.9 million ($0.3 million), from us. He is also
eligible to receive an incentive bonus of up to 40% of his annual
remuneration package in respect of each of four bonus cycles of 6 months
each, over the duration of his appointments, on condition that he achieves
certain agreed key performance indicators. Mr. M.M. Wellesley-Woods
agreement also provides that he will receive a total of up to 250,000 of
our ordinary shares in four equal tranches at intervals of 6 months over
the duration of his agreement of employment. In terms of a  JSE listing
requirement  these allotments were subject
to approval by shareholders. We have since decided, and Mr. M.M.
Wellesley-Wood has agreed, that we will not seek the consent of our
shareholders and that he will not be issued these shares. We are, however,
seeking an alternate means of achieving the objective of the retention
incentive, which is not related to the receiving of our shares. Service Agreement between DRD (Isle of Man) Limited and Mr. M.M.
Wellesley-Wood, dated as of December 1, 2003.
  The agreement states the employment terms and basis of remuneration for
this executive director, with regards to duties for DRD (Isle of Man)
Limited. Mr. M.M. Wellesley-Wood receives an all-inclusive remuneration
package of $250,000 per annum, from DRD (Isle of Man). The term of the
contract is from December 1, 2003 to November 30, 2005. He is also
eligible to receive an incentive bonus of up to 40% of his annual
remuneration package in respect of each of four bonus cycles of six months
each, over the duration of his appointment, on condition that he achieves
certain agreed key performance indicators. Agreement of Employment between Durban Roodepoort Deep, Limited and Mr. I.L.
Murray, dated as of December 1, 2003.
  The agreement states the employment terms and basis of remuneration
for this executive director, with regards to duties for Durban Roodepoort
Deep, Limited. Mr. I.L. Murray receives an all-inclusive remuneration
package of R1.5 million ($0.2 million) from us. Mr. I.L. Murray is
eligible for an incentive bonus in respect of up to 50% of his annual
remuneration package in respect of each of four bonus cycles of 6 months
each over the duration his appointments, on condition that he achieves
certain key performance indicators. Mr. I.L. Murrays agreement also
provides that he will receive a total of up to 198,000 of our ordinary shares in four equal tranches at intervals of 6 months over the duration
of his agreement of employment. In terms of a JSE listing
requirement these allotments were subject to approval
by shareholders. We have since decided, and Mr. I.L. Murray has agreed,
that we will not seek the consent of our shareholders and that he will not
be issued these shares. We are, however, seeking an alternate means of
achieving the objective of the retention incentive, which is not related
to the receiving of our shares. The term of the contract is from December
1, 2003 to November 30, 2005. Service Agreement between DRD (Isle of Man) Limited and Mr. I.L. Murray, dated
as of December 1, 2003.
  The agreement states the employment terms and basis of remuneration for
this executive director, with regards to duties for DRD (Isle of Man)
Limited. Mr. I.L. Murray receives an all-inclusive remuneration package
of $200,000 per annum, from DRD (Isle of Man). The term of the contract is
from December 1, 2003 to November 30, 2005. He is also eligible to receive
an incentive bonus of up to 50% of his annual remuneration package in
respect of each of four bonus cycles of six months each, over the duration
of his appointment, on condition that he achieves certain agreed key
performance indicators. Subscription and Option Agreement made and entered between DRD (Isle of Man)
Limited, Net-Gold Services Limited and G.M. Network Limited, dated January
26, 2004.
  Under this agreement we subscribed for 50.25% of Net-Gold Services
Limiteds shares in issue. In addition a put and call option was awarded
with regards to the exchange of the shares that we acquired in Net-Gold
Services Limited for 523.26 shares in G.M. Network Limited. The options
expire on December 31, 2007. 158




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Forward Bullion Transaction Agreements made and entered between Durban
Roodepoort Deep, Limited and Investec Bank Limited, dated February 4,
2004, February 6, 2004, February 11, 2004 and February 12, 2004.
 These agreements constitute forward bullion sales transactions whereby a
total of 90,000 ounces of gold bullion was forward purchased from Investec
Bank Limited. Loan Agreement made and entered between Durban Roodepoort Deep, Limited and
Investec Bank Limited, dated June 24, 2004.
 The agreement makes available to the Company a loan facility of R100
million ($15.9 million). The facility bears interest at the three-month
Johannesburg Interbank Acceptance Rate, or JIBAR, plus 300 interest basis
points. Investec calls for payment by delivering a repayment notice.
Upon receipt of the notice we may elect to repay the facility in cash or
by the issue of our shares. Termination Agreement made and entered between Durban Roodepoort Deep, Limited,
Eskom Holdings Limited and Investec Bank Limited, dated June 24, 2004.
 During fiscal 2004 we entered into a series of agreements with Investec to
close out a significant portion of the remaining hedge position held with
Eskom Holdings Limited. This agreement terminates the previous forward
bullion transaction agreements in place with Investec and Eskom Holdings
Limited, through affecting the Novation Agreement made and entered between
J Aron & Company, Eskom Holdings Limited and Investec, dated June 24,
2004. Novation Agreement made and entered between J Aron & Company, Eskom Holdings
Limited and Investec Bank Limited, dated June 24, 2004.
 This agreement transfers the rights, liabilities, duties and obligations
that Eskom Holdings Limited were bound to under the Eskom gold for
electricity hedge contract, to Investec, thereby creating a counterparty
relationship between Investec and J Aron & Company. Memorandum of Understanding made and entered between Buffelsfontein Gold Mines
Limited, Buffels Division and The National Union of Mineworkers, The
United Association of South Africa, The Mine Workers Union (Solidarity)
and The South African Electrical Workers Association regarding
retrenchments associated with Number 9, 10 and 12 Shafts of Buffelsfontein
Division, dated August 6, 2004.
 This agreement states the effect of the 60-day operational review under
Section 189A of the South African Labor Relations Act, on the retrenchment
of employees, based on the condition that the proposals and measures that
are introduced as a result of the 60-day review prove to be effective in
restoring the Buffels Section, North West Operations, to profitability,
and on the Buffels Section attaining a sustainable gold price to cost
ratio, that is budgeted tonnage, grade, kilograms and working costs. CCMA Settlement Agreement made and entered between Blyvooruitzicht Gold Mining
Company Limited and The United Association of South Africa, South African
Equity Workers Association, Solidarity and The National Union of
Mineworkers regarding the retrenchment of up to 2,000 employees of the
Blyvooruitzicht Gold Mining Company, dated September 2, 2004.
 This agreement outlines the sustainability thresholds of the Blyvoor
Sections business plan and the acknowledgements of these thresholds by
the participants. Furthermore, the agreement outlines the retrenchment of
up to 2,000 employees to return the Blyvoor Section to initially
break-even point, then to work towards operating profitably over the next
six months. 159




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Loan Agreement made and entered between Durban Roodepoort Deep, Limited and
Investec Bank Limited, dated September 15, 2004.
 The agreement makes available to the Company a second loan facility of
R100 million ($15.9 million). The facility bears interest at the
three-month JIBAR plus 300 interest basis points. Investec calls for
payment by delivering a repayment notice. Upon receipt of the notice we
may elect to repay the facility in cash or by the issue of our shares. Subscription Agreement made and entered between DRD (Isle of Man) Limited and
Durban Roodepoort Deep, Limited, dated September 21, 2004.
 The agreement indicates the Companys intention to subscribe for 135
ordinary shares in DRD (Isle of Man) Limited at a subscription price of
$100,000 per shares, being a total subscription price of $13.5 million. Loan Agreement made and entered between DRD (Isle of Man) Limited and Investec
Bank (Mauritius) Limited, dated October 14, 2004.
 The agreement
makes available to our subsidiary, DRD (Isle of Man) a third loan
facility of $15.0 million with Investec Bank (Mauritius) Limited, or
Investec (Mauritius). Subject to the terms of the agreement the
facility may be used to finance future acquisitions or rights offers
by companies in which we wish to acquire shares, or it may be used
for any other purpose with prior written consent of Investec
(Mauritius). The facility bears interest at the three-month London
Interbank Offered Rate, or LIBOR, plus 300 basis points. Funds
advanced and interest on this facility shall be repaid in cash in
equal installments every three months from the date of that advance so that the amount of the
advance is paid in full to Investec (Mauritius) within 36 months. The
facility is secured by DRD (Isle of Man)s shares in Emperor
Mines Limited, DRD (Porgera) Limited and Tolukuma Gold Mines Limited.
The loan agreement prohibits us from disposing of or further
encumbering the secured assets. The facility restricts the flow of
payments from DRD (Isle of Man) to the Company through requiring that
all net operating cash or cash distributions received by DRD (Isle of
Man) in respect of the secured assets must be used to first service
our interest and principal payment obligations under the facility in
accordance with the terms of the facility agreement. The agreement
requires that we hold, in a debt servicing account, sufficient cash
to cover our quarterly principal payments. Any funds in excess of
these repayment requirements may be utilized by the Company. In
addition, if DRD (Isle of Man) intends to make any payment, which is
a distribution, by or on behalf of it to or for the Company, Investec
(Mauritius) has the option to require DRD (Isle of Man) to pay 50% of
the distribution funds as a prepayment of the facility. The facility
agreement contains a number of additional customary restrictive
covenants. On November 12, 2004, $7.0 million was drawn under this
facility to fund our portion of the Emperor rights offering. 
 10D. EXCHANGE CONTROLS The following is a summary of the material South African exchange control
measures, which has been derived from publicly available documents. The
following summary is not a comprehensive description of all the exchange
control regulations. The discussion in this section is based on the current law
and positions of the South African Government. Changes in the law may alter the
exchange control provisions that apply to you, possibly on a retroactive basis. Introduction Dealings in foreign currency, the export of capital and revenue, payments
by residents to non-residents and various other exchange control matters in
South Africa are regulated by the South African exchange control regulations,
or the Regulations. The Regulations form part of the general monetary policy of
South Africa. The Regulations are issued under section 9 of the Currency and
Exchanges Act, 1933 (as amended). In terms of the Regulations, the control over
South African capital and revenue reserves, as well as the accruals and
spending thereof, is vested in the Treasury (Ministry of Finance), or the
Treasury. The Treasury has delegated the administration of exchange controls to the
Exchange Control Department of the South African Reserve Bank, or SARB, which
is responsible for the day to day administration and functioning of exchange
controls. SARB has a wide discretion. Certain banks authorized by the Treasury
to co-administer certain of the exchange controls, are authorized by the
Treasury to deal in foreign exchange. Such dealings in foreign exchange by
authorized dealers are undertaken in accordance with the provisions and
requirements of the exchange control rulings, or Rulings, and contain certain
administrative measures, as well as conditions and limits applicable to
transactions in foreign exchange, which may be undertaken by authorized dealers. Non-residents have been granted
general approval, in terms of the Rulings, to deal in South African assets, to
invest and disinvest in South Africa. 160




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The Regulations provide for restrictions on exporting capital from the
Common Monetary Area consisting of South Africa, Namibia, and the Kingdoms of
Lesotho and Swaziland. Transactions between residents of the Common Monetary
Area, are not subject to these exchange control regulations. There are many inherent disadvantages to exchange controls including
distortion of the price mechanism, problems encountered in the application of
monetary policy, detrimental effects on inward foreign investment and
administrative costs associated therewith. The South African Finance Minister
has indicated that all remaining exchange controls are likely to be dismantled
as soon as circumstances permit. Since 1998, there has been a gradual
relaxation of exchange controls. The gradual approach to the abolition of
exchange controls adopted by the Government of South Africa is designed to
allow the economy to adjust more smoothly to the removal of controls that have
been in place for a considerable period of time. The stated objective of the
authorities is equality of treatment between residents and non-residents with
respect to inflows and outflows of capital. The focus of regulation, subsequent
to the abolition of exchange controls, is expected to favor the positive
aspects of prudential financial supervision. The present exchange control system in South Africa is used principally to
control capital movements. South African companies are not permitted to
maintain foreign bank accounts without SARB approval and, without the approval
of SARB, are generally not permitted to export capital from South Africa or
hold foreign currency. In addition, South African companies are required to
obtain the approval of SARB prior to raising foreign funding on the strength of
their South African balance sheets, which would permit recourse to South Africa
in the event of defaults. Where 75% or more of a South African Companys
capital, voting power, power of control or earnings is directly or indirectly
controlled by non-residents, such a corporation is designated an affected
person by SARB, and certain restrictions are placed on its ability to obtain
local financial assistance. We are not, and have never been, designated an
affected person by SARB. Foreign investment and outward loans by South African companies are also
restricted. In addition, without the approval of SARB, South African companies
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. South African
companies establishing subsidiaries, branches, offices or joint ventures abroad
are generally required to submit financial statements on these operations as
well as progress reports to SARB on an annual basis. As a result, a South
African Companys ability to raise and deploy capital outside the Common
Monetary Area is restricted. Although exchange controls have been gradually relaxed since 1998,
unlimited outward transfers of capital are not permitted at this stage. Some of
the more salient changes to the South African exchange control provisions over
the past few years have been as follows:  
    
    corporations wishing to invest in countries outside the Common
Monetary Area, in addition to what is set out below, apply for
permission to enter into corporate asset/share swap and share placement
transactions to acquire foreign investments. The latter mechanism
entails the placement of the locally quoted corporations shares with
long-term overseas holders who, in payment for the shares, provide the
foreign currency abroad which the corporation then uses to acquire the
target investment;  
    
    corporations wishing to establish new overseas ventures are permitted
to transfer offshore up to R1.0 billion ($159.4 million) to finance
approved investments abroad and up to R2.0 billion ($318.7 million) to
finance approved new investments in African countries. However, the
approval of SARB is required in advance. On application to SARB,
corporations are also allowed to use part of their local cash holdings
to finance up to 10% of approved new foreign investments where the cost
of these investments exceeds the current limits;  
    
    as a general rule, SARB requires that more than 50% of equity of the
acquired off-shore venture is acquired within a predetermined period of
time, as a prerequisite to allowing the expatriation of funds. If these
requirements are not met, SARB may instruct that the equity be disposed
of. In our experience (with the acquisition of Emperor Mines) SARB has
taken a commercial view on this, and has on occasion extended the period
of time for compliance; and 161




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
    
    remittance of directors fees payable to persons permanently resident
outside the Common Monetary Area may be approved by authorized dealers,
in terms of the Rulings. Authorized dealers in foreign exchange may, against the production of
suitable documentary evidence, provide forward cover to South African residents
in respect of fixed and ascertained foreign exchange commitments covering the
movement of goods. Persons who emigrate from South Africa are entitled to take limited amounts of
money out of South Africa as a settling-in allowance. The balance of the
emigrants funds will be blocked and held under the control of an authorized
dealer. These blocked funds may only be invested in:  
    
    blocked current, savings, interest bearing deposit accounts in the
books of an authorized dealer in the banking sector;  
    
    securities quoted on the JSE and financial instruments listed on the
Bond Exchange of South Africa which are deposited with an authorized
dealer and not released except temporarily for switching purposes,
without the approval of SARB. Authorized dealers must at all times be
able to demonstrate that listed or quoted securities or financial
instruments which are dematerialized or immobilized in a central
securities depository are being held subject to the control of the
authorized dealer concerned; or  
    
    mutual funds. Aside from the investments referred to above, blocked Rands may only be
utilized for very limited purposes. Dividends declared out of capital gains or
out of income earned prior to emigration remain subject to the blocking
procedure. It is not possible to predict when existing exchange controls will
be abolished or whether they will be continued or modified by the South African
Government in the future. Sale of Shares Under present exchange control regulations in South Africa, our ordinary
shares and ADSs are freely transferable outside the Common Monetary Area
between non-residents of the Common Monetary Area. In addition, the proceeds
from the sale of ordinary shares on the JSE on behalf of shareholders who are
not residents of the Common Monetary Area are freely remittable to such
shareholders. Share certificates held by non-residents will be endorsed with
the words non-resident, unless dematerialized. Dividends Dividends declared in respect of shares held by a non-resident in a
Company whose shares are listed on the JSE are freely remittable. Any cash dividends paid by us are expected to be paid in Rands. Holders of
ADSs on the relevant record date will be entitled to receive any dividends
payable in respect of the shares underlying the ADSs, subject to the terms of
the deposit agreement entered on August 12, 1996, and as amended and restated,
between the Company and The Bank of New York, as the depository. Subject to
exceptions provided in the deposit agreement, cash dividends paid in Rand will
be converted by the depositary to Dollars and paid by the depositary to holders
of ADSs, net of conversion expenses of the depositary, in accordance with the
deposit agreement. The depositary will charge holders of ADSs, to the extent
applicable, taxes and other governmental charges and specifies fees and other
expenses. Voting rights There are no limitations imposed by South African law or by our Articles
on the right of non-South African shareholders to hold or vote our ordinary
shares. 162




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10E. TAXATION Material Income Tax Consequences This is a discussion of the material income tax considerations under South
African and United States tax law. No representation with respect to the
consequences to any particular purchaser of our securities is made hereby.
Prospective purchasers are urged to consult their own tax advisers with respect
to their particular circumstances and the effect of US national, state or local
tax laws to which they may be subject. South Africa South Africa imposes tax on worldwide income of South African residents.
Generally, South African non-residents do not pay tax in South Africa except in
the following circumstances: Income Tax Non-residents will pay income tax on any amounts received by or accrued to
them from a source within (or deemed to be within) South Africa. Interest
earned by a non-resident on a debt instrument issued by a South African company
will be regarded as being derived from a South African source but will be
regarded as exempt from taxation in terms of section 10(1)(hA) of the South
African Income Tax Act, 1962 (as amended), or the Income Tax Act. This
exemption does not apply if:  
    
    the non-resident has been a resident of South Africa at any time and
carried on a business in South Africa;  
    
    the non-resident was a resident of the Common Monetary Area, in other
words, Lesotho, Namibia and Swaziland, and in such an event the
non-resident shall be deemed to be a resident of South Africa;  
    
    the interest is effectively connected with a business carried on by
the non-resident in South Africa; and/or  
    
    the recipient of the interest is a natural person, unless he was
absent from South Africa for at least 183 days in aggregate during the
year of assessment in which the interest was received or accrued. No withholding tax is deductible in respect of interest payments made to
non-resident investors. No income tax is payable on dividends paid to residents or non-residents,
in terms of Section 10(1)(k) of the Income Tax Act except in respect of foreign
dividends received by or accrued to residents of South Africa. Accordingly,
there is no withholding tax on dividends received by or accrued to non-resident
shareholders of companies listed in South Africa and non-residents will receive
the same dividend as South African resident shareholders. Prior to payment of
the dividend, the Company pays secondary tax on companies at a rate of 12.5% of
the excess of dividends declared over dividends received in a dividend cycle
but the full amount of the dividend declared is paid to shareholders. Capital Gains Tax Non-residents are generally not subject to capital gains tax, or CGT, in
South Africa. They will only be subject to CGT on gains arising from the
disposal of capital assets if the assets disposed of consist of:  
    
    immovable property owned by the non-residents situated in South
Africa, or any interest or right in or to immovable property. A
non-resident will have an interest in immovable property if it has a
direct or indirect shareholding of at least 20% in a Company, where 80%
or more of the net assets of that Company (determined on a market value
basis) are attributable directly or indirectly to immovable property; or  
    
    any asset of a permanent establishment of a non resident in South
Africa through which a trade is carried on. 163




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If the non-residents are not subject to CGT because the assets disposed of
do not fall within the categories described above, it follows that they will
also not be able to claim the capital losses arising from the disposal of the
assets. Taxation of dividends South Africa imposes a corporate tax known as Secondary Tax on Companies,
or STC, on the distribution of earnings in the form of dividends, and, at
present, the STC tax rate is equal to 12.5%. In 1993, all existing gold mining companies, in South Africa, had the
option to elect to be exempt from STC. If the election was made, a higher tax
rate would apply for both mining and non-mining income. In fiscal 2004, 2003
and 2002, the tax rates for taxable mining and non-mining income, for companies
that elected the STC exemption were 46% and 38%, respectively. During those
same years the tax rates for companies that did not elect the STC exemption
were 37% and 30%, respectively. In 1993, the Company elected not to be exempt
from STC, as this would have meant that the Company would have been liable for
normal taxation at the higher rates of 46% for mining income and 38% for
non-mining income. The Company, having chosen not to be subject to the STC
exemption, is subject to 37% tax on mining income and 30% for non-mining
income. However, with the exception of Blyvoor, all of the Companys
subsidiaries elected the STC exemption. Any dividends paid by Blyvoor, being a
wholly-owned subsidiary of the Company, would be exempt from STC. Any
dividends paid by the Company, to the extent that they are paid out of income
from Blyvoor, will be subject to STC. South Africa does not impose any withholding tax or any other form of tax
on dividends paid to US holders with respect to shares. Should South Africa
decide in the future to impose a withholding tax on dividends paid to a US
holder with respect to shares, the Treaty would limit the rate of this tax to 5
percent of the gross amount of the dividends if a US holder holds directly at
least 10 percent of our voting stock and 15 percent of the gross amount of the
dividends in all other cases. The above provisions shall not apply if the
beneficial owner of the dividends is resident in the US, carries on business in
South Africa through a permanent establishment situated in South Africa, or
performs in South Africa independent personal services from a fixed base
situated in South Africa, and the dividends are attributable to such permanent
establishment or fixed base. United States Certain United States Federal Income Tax Consequences The following is a discussion of certain United States, or US, federal
income tax consequences to US holders (as defined below) of the purchase,
ownership and disposition of ordinary shares or ADSs. It deals only with US
holders who hold ordinary shares or ADSs as capital assets for US federal
income tax purposes. This discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended, or the Code, published rulings,
judicial decisions and the Treasury regulations, all as currently in effect and
all of which are subject to change, possibly on a retroactive basis. This
discussion has no binding effect or official status of any kind; we cannot
assure holders that the conclusions reached below would be sustained by a court
if challenged by the Internal Revenue Service. This discussion does not address all aspects of US federal income taxation
that may be applicable to holders in light of their particular circumstances
and does not address special classes of US holders subject to special treatment
(such as dealers in securities or currencies, partnerships or other
pass-through entities, financial institutions, life insurance companies, banks,
tax-exempt organizations, certain expatriates or former long-term residents of
the United States, persons holding ordinary shares or ADSs as part of a
hedge, conversion transaction, synthetic security, straddle,
constructive sale or other integrated investment, persons whose functional
currency in not the US dollar, or persons that actually or constructively own
ten percent or more of our voting stock). This discussion addresses only US
federal income tax consequences and does not address the effect of any state,
local, or foreign tax laws that may apply, or the alternative minimum tax. 164




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A US holder is a holder of ordinary shares or ADSs that is, for US
federal income tax purposes,  
    
    a citizen or resident of the US;
    
    a corporation that is organized under the laws of the US or any political subdivision thereof;  
    
    an estate, the income of which is subject to US federal income tax without regard to its source; or  
    
    a trust, if a court within the US is able to exercise primary
supervision over the administration of the trust and one or more US
persons have the authority to control all substantial decisions of the
trust or if the trust has made a valid election to be treated as a US
person. If a partnership holds any ordinary shares or ADSs, the tax treatment of a
partner will generally depend on the status of the partner and on the
activities of the partnership. Partners of partnerships holding any notes,
ordinary shares or ADSs are urged to consult their tax advisors. Because individual circumstances may differ, US holders of ordinary shares
or ADSs are urged to consult their own tax advisors concerning the US federal
income tax consequences applicable to their particular situations as well as
any consequences to them arising under the tax laws of any foreign, state or
local taxing jurisdiction. Ownership of Ordinary Shares or ADSs For purposes of the Code, US holders of ADSs will be treated for US
federal income tax purposes as the owner of the ordinary shares represented by
those ADSs. Exchanges of ordinary shares for ADSs and ADSs for ordinary shares
generally will not be subject to US federal income tax. For US federal income tax purposes, distributions with respect to the
ordinary shares or ADSs, other than distributions in liquidation and
distributions in redemption of stock that are treated as exchanges, will be
taxed to US holders as ordinary dividend income to the extent that the
distributions do not exceed our current and accumulated earnings and profits.
For US federal income tax purposes, the amount of any distribution received by
a US holder will equal the Dollar value of the sum of the South African Rand
payments made (including the amount of South African income taxes, if any,
withheld with respect to such payments), determined at the spot rate on the
date the dividend distribution is includable in such US holders income,
regardless of whether the payment is in fact converted into Dollars. Generally,
any gain or loss resulting from currency exchange fluctuations during the
period from the date a US holder includes the dividend payment in income to the
date such holder converts the payment into Dollars will be treated as ordinary
income or loss. Distributions, if any, in excess of our current and accumulated
earnings and profits will constitute a non-taxable return of capital and will
be applied against and reduce the holders basis in the ordinary shares or
ADSs. To the extent that these distributions exceed the US holders tax basis
in the ordinary shares or ADSs, as applicable, the excess generally will be
treated as capital gain, subject to the discussion below under the heading
Passive Foreign Investment Company. We do not intend to calculate our
earnings or profits for US federal income tax purposes. Under the recently enacted Jobs and Growth Tax Relief Reconciliation Act
of 2003, the maximum US federal income tax rate on dividends paid to
individuals through 2008 is reduced to 15%. This reduced rate generally would
apply to dividends paid by us if, at the time such dividends are paid, either
(i) we are eligible for benefits under a qualifying income tax treaty with the
US or (ii) our ordinary shares or ADSs with respect to which such dividends
were paid are readily tradable on an established securities market in the US.
However, this reduced rate is subject to certain important requirements and
exceptions, including, without limitation, certain holding period requirements
and an exception applicable if we are treated as a passive foreign investment
company as discussed under the heading Passive Foreign Investment Company. US
holders are urged to consult their own tax advisors regarding the US federal
income tax rate that will be applicable to their receipt of any dividends paid
with respect to the ordinary shares and ADSs. For purposes of this discussion, the spot rate generally means a rate
that reflects a fair market rate of exchange available to the public for
currency under a spot contract in a free market and involving representative
amounts. A spot contract is a contract to buy or sell a currency on or before
two business days following the date of the execution of the contract. If such
a spot rate cannot be demonstrated, the US Internal Revenue Service has the
authority to determine the spot rate. 165




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Dividend income derived with respect to the ordinary shares or ADSs will
constitute portfolio income for purposes of the limitation on the use of
passive activity losses and, therefore, generally may not be offset by passive
activity losses, and as investment income for purposes of the limitation on
the deduction of investment interest expense. Such dividends will not be
eligible for the dividends received deduction generally allowed to a US
corporation under Section 243 of the Code. Dividend income will be treated as
foreign source income for foreign tax credit and other purposes. In computing
the separate foreign tax credit limitations, dividend income should generally
constitute passive income, or in the case of certain US holders, financial
services income. As discussed under Taxation  South Africa above, South Africa currently
does not impose any withholding tax on distributions with respect to the
ordinary shares or ADSs. Should South Africa decide in the future to impose a
withholding tax on such distributions, the tax treaty between the United States
and South Africa would limit the rate of this tax to 5 percent of the gross
amount of the distributions if a US holder holds directly at least 10 percent
of our voting stock and to 15 percent of the gross amount of the distributions
in all other cases. In addition, if South Africa decided in the future to
impose a withholding tax on distributions with respect to the ordinary shares
or ADSs, a determination would need to be made at such time as to whether any
South African income taxes withheld would be treated as foreign income taxes
eligible for credit against such US holders US federal income tax liability,
subject to limitations and conditions generally applicable under the Code. Any
such taxes may be eligible at the election of such US holder, for deduction in
computing such US holders taxable income. The limitation on foreign taxes
eligible for credit is calculated separately with respect to specific classes
of income. The calculation of foreign tax credits and, in the case of a US
holder that elects to deduct foreign taxes, the availability of deductions is
complex and involves the application of rules that depend on a US holders
particular circumstances. US holders are urged to consult their own tax
advisors regarding the availability to them of foreign tax credits or
deductions in respect of South African income taxes, if any, withheld. Disposition of Ordinary Shares or ADSs Upon a sale, exchange, or other taxable disposition of ordinary shares or
ADSs, a US holder will recognize gain or loss in an amount equal to the
difference between the US dollar value of the amount realized on the sale or
exchange and such holders adjusted tax basis in the ordinary shares or ADSs.
Subject to the application of the passive foreign investment company rules
discussed below, such gain or loss generally will be capital gain or loss and
will be long-term capital gain or loss if the US holder has held the ordinary
shares or ADSs for more than one year. The deductibility of capital losses is
subject to limitations. Gain or loss recognized by a US holder on the taxable
disposition of ordinary shares or ADSs generally will be treated as US-source
gain or loss for US foreign tax credit purposes. In the case of a cash basis US holder who receives Rand in connection with
the taxable disposition of ordinary shares or ADSs, the amount realized will be
based on the spot rate as determined on the settlement date of such exchange. A
US holder who receives payment in Rand and converts Rand into US Dollars at a
conversion rate other than the rate in effect on the settlement date may have a
foreign currency exchange gain or loss that would be treated as ordinary income
or loss. An accrual basis US holder may elect the same treatment required of cash
basis taxpayers with respect to a taxable disposition of ordinary shares or
ADSs, provided that the election is applied consistently from year to year.
Such election may not be changed without the consent of the Internal Revenue
Service. In the event that an accrual basis holder does not elect to be treated
as a cash basis taxpayer, such US holder may have a foreign currency gain or
loss for US federal income tax purposes because of the differences between the
US dollar value of the currency received prevailing on the trade date and the
settlement date. Any such currency gain or loss will be treated as ordinary
income or loss and would be in addition to gain or loss, if any, recognized by
such US holder on the disposition of such ordinary shares or ADSs. 166




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Passive Foreign Investment Company A special and adverse set of US federal income tax rules apply to a US
holder that holds stock in a passive foreign investment company, or PFIC. We
would be a PFIC for US federal income tax purposes if for any taxable year
either (i) 75% or more of our gross income, including our pro rata share of the
gross income of any company in which we are considered to own 25% or more of
the shares by value, were passive income or (ii) 50% or more of our average
total assets (by value), including our pro rata share of the assets of any
company in which we are considered to own 25% or more of the shares by value, were assets that produced or were held for the production of
passive income. If we were a PFIC, US holders of the ordinary shares or ADSs
would be subject to special rules with respect to (i) any gain recognized upon
the disposition of the ordinary shares or ADSs and (ii) any receipt of an
excess distribution (generally, any distributions to a US holder during a
single taxable year that is greater than 125% of the average amount of
distributions received by such US holder during the three preceding taxable
years in respect of the ordinary shares or ADSs or, if shorter, such US
holders holding period for the ordinary shares or ADSs). Under these rules:  
    
    the gain or excess distribution will be allocated ratably over a US
holders holding period for the ordinary shares or ADSs, as applicable;  
    
    the amount allocated to the taxable year in which a US holder
realizes the gain or excess distribution will be taxed as ordinary
income;  
    
    the amount allocated to each prior year, with certain exceptions,
will be taxed at the highest tax rate in effect for that year; and  
    
    the interest charge generally applicable to underpayments of tax will
be imposed in respect of the tax attributable to each such year. Although we generally will be treated as a PFIC as to any US holder if we
are a PFIC for any year during a US holders holding period, if we cease to
satisfy the requirements for PFIC classification, the US holder may avoid PFIC
classification for subsequent years if such holder elects to recognize gain
based on the unrealized appreciation in the ordinary shares or ADSs through the
close of the tax year in which we cease to be a PFIC. Additionally, if we are a
PFIC, a US holder who acquires ordinary shares or ADSs from a decedent would be
denied the normally available step-up in tax basis for such notes, ordinary
shares or ADSs to fair market value at the date of death and instead would have
a tax basis equal to the lower of the fair market value or the decedents tax
basis. A US holder who beneficially owns stock in a PFIC must file Form 8621
(Return by a Shareholder of a Passive Foreign Investment Company or Qualified
Electing Fund) with the Internal Revenue Service for each tax year such holder
holds stock in a PFIC. This form describes any distributions received with
respect to such stock and any gain realized upon the disposition of such stock. A US holder of the ordinary shares or ADSs that are treated as marketable
stock under the PFIC rules may be able to avoid the imposition of the special
tax and interest charge described above by making a mark-to-market election.
Pursuant to this election, the US holder would include in ordinary income or
loss for each taxable year an amount equal to the difference as of the close of
the taxable year between the fair market value of the ordinary shares or ADSs
and the US holders adjusted tax basis in such ordinary shares or ADSs. Losses
would be allowed only to the extent of net mark-to-market gain previously
included by the US holder under the election for prior taxable years. If a
mark-to-market election with respect to ordinary shares or ADSs is in effect on
the date of a US holders death, the tax basis of the ordinary shares or ADSs
in the hands of a US holder who acquired them from a decedent will be the
lesser of the decedents tax basis or the fair market value of the ordinary
shares or ADSs. US holders desiring to make the mark-to-market election are
urged to consult their tax advisors with respect to the application and effect
of making the election for the ordinary shares or ADSs. In the case of a US holder who holds ordinary shares or ADSs and who does
not make a mark-to-market election, the special tax and interest charge
described above will not apply if such holder makes an election to treat us as
a qualified electing fund in the first taxable year in which such holder owns
the ordinary shares or ADSs and if we comply with certain reporting
requirements. However, we do not intend to supply US holders with the
information needed to report income and gain pursuant to a qualified electing
fund election in the event that we are classified as a PFIC. We believe that we were not a PFIC for our 2004 fiscal year ended June 30,
2004. However, the tests for determining whether we would be a PFIC for any
taxable year are applied annually and it is difficult to make accurate
predictions of future income and assets, which are relevant to this
determination. In addition, certain factors in the PFIC determination, such as
reductions in the market value of our capital stock, are not within our control
and can cause us to become a PFIC. Accordingly, there can be no assurance that we will not become a
PFIC. 167




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Rules relating to a PFIC are very complex. US holders are urged to consult
their own tax advisors regarding the application of PFIC rules to their
investments in our ordinary shares or ADSs. Information Reporting and Backup Withholding Payments made in the United States or through certain US-related financial
intermediaries of dividends or the proceeds of the sale or other disposition of
our ordinary shares or ADSs may be subject to information reporting and US
federal backup withholding if the recipient of such payment is not an exempt
recipient and fails to supply certain identifying information, such as an
accurate taxpayer identification number, in the required manner. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. The backup withholding tax rate is
currently 28%. For payments made after 2010, the backup withholding rate will
be increased to 31%. Payments made with respect to our ordinary shares or ADSs
to a US holder must be reported to the Internal Revenue Service, unless the US
holder is an exempt recipient or establishes an exemption. Any amount withheld
from a payment to a US holder under the backup withholding rules is refundable
or allowable as a credit against the holders US federal income tax, provided
that the required information is furnished to the Internal Revenue Service. US Gift and Estate Tax An individual US holder of ordinary shares or ADSs will be subject to US
gift and estate taxes with respect to ordinary shares or ADSs in the same
manner and to the same extent as with respect to other types of personal
property. 
 10F. DIVIDENDS AND PAYING AGENTS Not applicable. 
 10G. STATEMENT BY EXPERTS Not applicable. 
 10H. DOCUMENTS ON DISPLAY You may request a copy of our US Securities and Exchange Commission
filings, at no cost, by writing or calling us at DRDGOLD Limited, P.O. Box 390, Maraisburg, Johannesburg, South Africa 1700. Attn: Group
Company Secretary. Tel No. 27-11-381-7800. A copy of each report submitted in
accordance with applicable United States law is available for public review at
our principal executive offices. A copy of each document concerning us that is referred to in this Annual
Report on Form 20-F, is available for public view at our principal executive
offices at DRDGOLD Limited, 45 Empire Road, Parktown,
Johannesburg, South Africa 2193. 
 10I. SUBSIDIARIES Not applicable. 168




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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and Qualitative Disclosures About Market Risk General In the normal course of our operations, we are exposed to market risk,
including commodity price, foreign currency, interest, liquidity and credit
risks. We enter into transactions which make use of derivative instruments to
economically hedge certain exposures. These instruments include interest rate
swaps and gold lease rate swaps. The decision to use these types of
transactions is based on our hedging policy. Although most of these instruments
are used as economic hedges, none of them qualify for hedge accounting and,
consequently, are marked-to-market through the statements of operations in
accordance with our accounting policies. We do not hold or issue derivative
financial instruments for speculative purposes, nor do we hedge forward gold
sales. Commodity price risk The market price of gold has a significant effect on our results of
operations, our ability and the ability of our subsidiaries to pay dividends
and undertake capital expenditures, and the market price of our ordinary shares
or ADSs. Historically, gold prices have fluctuated widely and are affected by
numerous industry factors over which we have no control. The aggregate effect
of these factors on the gold price is impossible for us to predict. The price
of gold may not remain at a level allowing us to economically exploit our
reserves. It is not our policy to hedge this commodity price risk. Until May 2002, we used forward contracts, options and swaps to reduce our
risk exposure to volatility in the gold price. The total gold production
committed under our hedging program as of July 1, 2001, was 802,625 ounces over
a three-year period. Consequently, our shareholders were exposed to opportunity
loss as a result of an increase in the price of gold. During fiscal 2002, our management reached the conclusion that our hedge
book structure would make it difficult for us to accomplish our strategy of
providing our investors with exposure to increases in the price of gold, as
gains would be offset against potential losses on the forward contracts. As a
result, our policy is not to hedge forward gold sales however we do hedge
specified projects, acquisitions and capital expenditure and we consistently
take advantage of opportunities in the market to close out the remainder of the
Eskom gold for electricity contract. As a result of this decision in May 2002, we entered into equal and
opposite positions of all outstanding derivatives (excluding the Eskom gold for
electricity contract) to effectively close these positions out and eliminate
any existing commitment to sell our gold production. The loss that we realized
on the existing positions was $72.8 million. The various counterparties, J.P.
Morgan Chase Bank, J. Aron & Company and UBS AG, each agreed to accept a
portion of the amounts due to them under the restructuring immediately in cash,
which amounted to approximately $38.1 million, with the remainder, which
amounted to approximately $34.7 million, to be paid over an 18 month period.
These balances have therefore been treated as long-term loans. Of this amount,
$6.6 million due to J.P. Morgan Chase Bank was secured by a general notarial
covering bond and surety mortgage over the metallurgical plants of the Blyvoor,
West Wits and Buffels Sections and was due to be repaid by June 2003. We repaid
the full amount to J.P. Morgan Chase Bank on March 26, 2003 and obtained a
release of these assets. During July 2003, J. Aron & Company was paid in full
and during August 2003 UBS AG was paid in full. Eskom gold for electricity contract In October 2000, we entered into a contract to buy electricity from Eskom,
the parastatal authority in South Africa responsible for the supply of
electricity. Under the terms of our agreement, we pay Eskom standard
electricity tariff for all energy we consume, including the 75 GWh per month
specified in the contract. This contract expires in September 2005. In
addition, every 12 month-period starting in October we adjust the amounts paid
in that period in accordance with an established formula based on the gold
price. 169




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The gold price adjustment is based on the notional amount of 15,000 ounces
per month of gold multiplied by the difference between the contracted gold
price, which is the price that was agreed on the date of the transaction for a
determined period, and the arithmetic average of London PM close for each
business day in the calculation period. We have concluded that (1) the contract in its entirety does not meet the
definition of a derivative instrument and therefore it does not have to be
carried on our balance sheet at fair value; (2) the embedded gold for
electricity forward contract possesses economic characteristics that are not
clearly and closely related to the economic characteristics of the host
contract; and (3) a separate, stand-alone instrument with the same terms would
qualify as a derivative instrument. Accordingly, the embedded derivative was
separated from the host contract and carried at fair value. As discussed in note 16 to our financial statements, the fair value of the
gold for electricity contract was a liability of $3.1 million as at June 30,
2004 (a liability of $30.9 million as at June 30, 2003). The fair value
reflects the difference between the price that was agreed on the date of the
transaction and the forward price on June 30, 2004. Therefore, the $3.1 million
reflects the loss as at June 30, 2004 when the gold price was R2,451 per ounce
against an average contract price of R2,256 per ounce. If the spot Rand gold
price is trading above the strike of the gold for electricity contract, the
instrument has a negative value and will result in us paying Eskom. Similarly
if the spot Rand gold price is trading below the strike of the gold for
electricity contract, Eskom would settle with us. During fiscal 2004, due to the lower Rand gold price, we closed out
265,000 ounces of the Eskom gold for electricity contract in line with our
policy of not hedging gold production, at a cost of $25.1 million. To fund the
closing out of the first 180,000 ounces at a cost of $19.3 million, we entered
into an option agreement with Investec (Mauritius), on December 17, 2003, to
acquire 10.2 million ordinary shares. The strike price per share of the option
is 95.5% of the trade-weighted average price of our ADSs for the 10 days prior
to exercise. The option had an expiry date of March 15, 2004. The option was
exercised on February 19, 2004, at a price of $3.21 per share for a total
consideration of $32.3 million. To fund the closing out of the following 85,000
ounces of the Eskom hedge, we entered into a R100.0 million ($15.9 million)
short-term loan facility with Investec Bank Limited, a South African bank, on
June 24, 2004. This loan has been settled. For the year endingJune 30,2005
    
    2006Eskom gold for electricity contract (by maturity)Ounces (notional)
    
    
    5,000
    
    
    
    45,000Average price (R/ounce)
    
    
    2,256
    
    
    
    2,256
 The above table reflects the number of ounces committed and the average
contract price over the remaining period of the contract. A 10% increase or
decrease in the average Rand gold price would change the loss/(profit) on
derivative instruments by $1.7 million. Put options bought Put options bought refer to the right, but not the obligation to sell a
predetermined amount of gold at a predetermined price on a predetermined date.
During fiscal 2003, the remaining put options were closed out. This resulted
in a cash inflow of $7.1 million. Included in profit/(loss) on derivative
instruments is $nil for fiscal 2004 and fiscal 2002, and a profit of $9.5
million for fiscal 2003, relating to these instruments. 170




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Other positions The Company had entered into a gold rate lease swap and call position
transactions which had been accounted for on a mark-to-market basis in prior
fiscal years, and which matured or were closed out in the fiscal 2004. During fiscal 2004, a gold lease rate swap for 109,875 ounces, at a rate
of 0.20%, matured. A gold lease rate swap is a contract whereby the Company and a
counterparty select a notional amount of gold, and thereafter over the life of
the contract one party pays a fixed lease rate based on that amount of gold and
the other party pays a floating lease rate based on the same amount of gold.
The Company had exposure to increases in the three-month lease rate up to June
2004. The volume the swap was based on decreases every quarter until it reached
zero (by June 2004). Every quarter the Company received a fixed cash flow equal
to 0.2% per annum of the volume and $280/oz, and paid the three-month floating
lease rate converted at the then market spot rate. During fiscal 2003, the Company bought call options as a risk management
tool to protect the maximum exposure on the gold for electricity contract.
Options covering a total of 272,110 ounces were purchased for $14.9 million.
These contracts were to expire by September 2005. During fiscal 2004, the
Company took advantage of the lower Rand gold price and closed out 265,000
ounces of the Eskom gold for electricity contract in line with its policy of
not hedging gold production. Accordingly the exposure for which the call
options were bought as a risk management tool had been significantly reduced
and the call options were closed out during fiscal 2004, recording a gain of
$0.1 million. The fair value of the call positions bought was an asset of $6.6
million as at June 30, 2003. Included in profit/(loss) on derivative instruments is a loss of $3.2
million for fiscal 2004, a profit of $40.9 million for fiscal 2003 and a loss
of $91.0 million for fiscal 2002, respectively, relating to these instruments. Concentration of credit risk Our financial instruments do not represent a concentration of credit risk,
because we deal with a variety of major banks and financial institutions
located in South Africa and Australia, after evaluating the credit ratings of
the representative financial institutions. Furthermore, our accounts receivable
and loans are regularly monitored and assessed for recoverability. Where it is
appropriate to raise a provision, an adequate level of provision is maintained. In addition, our South African operations all deliver their gold to Rand
Refinery Limited, or RRL, which refines the gold to saleable purity levels and
then sells the gold, on our behalf, on the bullion market. The gold is sold by
RRL on the same day as it is delivered and settlement is made within two days.
Once the gold has been assayed by RRL, the risks and rewards of ownership have
passed. The Tolukuma Section delivers their gold to one customer, N.M. Rothschild
and receives proceeds within two days. The concentration of credit risk in
Australia is mitigated by the reputable nature of the customer and the
settlement of the proceeds within a week. Porgera delivers their gold to AGR Matthey (Australia) who refines the
gold and then delivers it to the Bank of Western Australia Limited, or
BankWest, at a price negotiated by us. The concentration of credit risk in
Australia is mitigated by the reputable nature of the customer and the
settlement of the proceeds within two days. Foreign currency risk Our functional currency for the South African operations is the South
African Rand and for the Tolukuma Section and Porgera it is the Papua New
Guinea Kina. Although gold is sold in Dollars, we are obliged to convert this
into Rands for our South African operations under the South African Reserve
Bank regulations. We are thus exposed to fluctuations in the Dollar/Rand
exchange rate. We conduct our operations in South Africa and Papua New Guinea
predominantly in Rand and Kina respectively. Currently, foreign exchange
fluctuations affect the cash flow that we will realize from our operations as
gold is sold in Dollars while production costs are incurred primarily in Rands
and Papua New Guinean Kina. Our results are positively affected when the Dollar
strengthens against these foreign currencies and adversely affected when the
Dollar weakens against these foreign currencies. Our cash and cash equivalent
balances are held in Dollars, Rands and Papua New Guinean Kina; holdings
denominated in other currencies are relatively insignificant. Certain of our
financial liabilities are denominated in a currency other than the Rand. We are
thus exposed to fluctuations in the Rand exchange rate with the relevant
currency. 171




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Based on our fiscal 2004 financial results, a hypothetical 10%
increase/decrease in Rand/Dollar exchange rate would have approximately a $22.3
million increase/decrease impact on revenues and a $15.6 million
increase/decrease impact on net profit after tax. Based on our fiscal 2004 financial results, a hypothetical 10%
increase/decrease in Australian Dollar/Dollar exchange rate would have
approximately a $9.4 million increase/decrease impact on revenues and a $6.6
million increase/decrease impact on net profit after tax. We have not entered into any foreign exchange hedging contracts to attempt
to mitigate our foreign currency risk. Interest rate and liquidity risk Fluctuations in interest rates impact on the value of short-term cash
investments and financing activities, giving rise to interest rate risks. Interest rate swap agreement An interest rate swap agreement was entered into to minimize the exposure
to changes in interest rates with regard to the coupon payable on our
$66,000,000 of 6% Senior Convertible Notes due 2006 (refer to note 18 of the
financial statements). The fixed coupon rate (in Dollars) was swapped for a
floating South African interest rate, calculated at the JIBAR plus 200 basis
points per annum. An amount of 60% of the coupon rate is subject to this swap
agreement, based on the requirements of the South African Reserve Bank, as this
represents the amount of the funds raised utilized in South Africa. The
maturity date of this agreement is November 2006. A 0.5% increase or decrease
in the assumed weighted average interest rate would change loss/(profit) on
derivative instruments by $8,400. As discussed in note 16 to our financial statements, the fair value of the
interest rate swap agreement was a liability of $2.0 million as at June 30,
2004 (a liability of $1.8 million as at June 30, 2003). Liquidity In the ordinary course of business, we receive cash from our operations
and are required to fund working capital and capital expenditure requirements.
This cash is managed to ensure surplus funds are invested in a manner to
achieve maximum returns while minimizing risks. Funding deficits for our mining
operations have been financed through the issue of additional shares, by
utilizing undrawn committed borrowing facilities and obtaining new facilities
at competitive rates to fund our working capital requirements. Lower interest
rates result in lower returns on investments and deposits and also may have the
effect of making it less expensive to borrow funds at then current rates.
Conversely, higher interest rates result in higher interest payments on loans
and overdrafts. As at June 30, 2004, undrawn committed borrowing facilities
amounted to $14.7 million and at October 31, 2004, these amounted to $8.4
million. 172




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Long-term debt Set out below is an analysis of our debt (in $000s) as at June 30, 2004,
analyzed between fixed and variable interest rates and classified by currency. Dollar
    
    Randdenominated
    
    denominatedloans
    
    loans
    
    Total$000
    
    $000
    
    $000Interest rateVariable rate
    
    
    n/a
    
    
    
    8,046
    
    
    
    8,046Weighted average interest rate
    
    
    n/a
    
    
    
    10.7
    %
    
    
    n/aFixed rate
    
    
    61,134
    
    
    
    
    
    
    
    61,134Weighted average interest rate
    
    
    6.0
    %
    
    
    n/a
    
    
    
    n/aTotal
    
    
    61,134
    
    
    
    8,046
    
    
    
    69,180Repayment period2005
    
    
    3,910
    
    
    
    5,405
    
    
    
    9,3152006
    
    
    3,910
    
    
    
    2,641
    
    
    
    6,5512007
    
    
    53,314
    
    
    
    
    
    
    
    53,314Total
    
    
    61,134
    
    
    
    8,046
    
    
    
    69,180
 Labor risk Approximately 70% of the labor force at our South African Operations are
members of labor unions. The majority of the union members are blue-collar
employees. The unions negotiate two year wage agreements which are binding on
employees in the respective bargaining units, the largest of which consists of
occupational groupings of mainly blue collar workers in the organization. These
agreements are valid from July 1 in the first year to June 30 of the second
year. The levels of unionization for operations outside South Africa varies. It
is mostly contained amongst blue collar workers and membership is below 50%. 
 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES Not applicable. 173




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PART II 
 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES There have been no material defaults in the payment of principal,
interest, a sinking or purchase fund installment, or any other material
defaults with respect to any indebtedness of ours. 
 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS Not applicable. 
 ITEM 15. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness
of our disclosure controls and procedures (as this term is defined under the rules of the SEC) as
of June 30, 2004. Based on this evaluation, as of June 30, 2004, our Chief Executive Officer and
our Chief Financial Officer concluded that, as a result of the material weaknesses in our internal
control over financial reporting described below, our disclosure controls and procedures were not
effective in recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by the Company in the reports that it files or submits under the US
Securities Exchange Act of 1934, or the Exchange Act, and were not effective in ensuring that
information required to be disclosed by the Company in the reports it files or submits under the
Exchange Act is accumulated and communicated to the Companys management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. In the process of conducting our audit for fiscal 2004, during the period from May to August 2004
our auditors identified accounting errors in our reported US GAAP quarterly results for fiscal 2004
that related to the recognition of losses of our equity accounted associate, CGR and its subsidiary
ERPM, and the incorrect recognition of accelerated depreciation related to the Number 6 Shaft at
our North West Operations, as disclosed in Item 5A under Restatement of US GAAP Quarterly
Results, which they brought to the attention of our Divisional Director: Group Finance, who
promptly advised our senior management. As a result of these errors, in this Annual Report we have
restated our Group quarterly financial statements for fiscal 2004 in the manner specified in Item
5A under Restatement of US GAAP Quarterly Results. These restatements affected the Group
quarterly financial statements as previously disclosed under cover of Forms 6-K filed with the SEC
on October 31, 2003, February 25, 2004, May 5, 2004, May 10, 2004, and August 19, 2004. These
restatements did not result in any restatement or revision to our financial results for fiscal 2004
as a whole. As previously disclosed, effective on October 14, 2003, we acquired a 20% interest in the Porgera
Joint Venture through our acquisition of Orogen Minerals (Porgera) Limited, or OMP, and Mineral
Resources Porgera Limited, or MRP. The Porgera Joint Venture has not historically prepared its
accounts in accordance with US GAAP. The preparation of separate historical US GAAP financial
statements of OMP and MRP and pro forma financial statements for the Company and OMP and MRP in
connection with this acquisition took us nearly 12 months after the acquisition, requiring us to
suspend sales under our outstanding Registration Statement (No. 333-102800) relating to our 6%
Senior Convertible Notes due 2006. Our senior management had been aware since November 2003 of the
requirement to file these financial statements in order to keep our outstanding Registration
Statement compliant with relevant SEC disclosure requirements. In addition, due to the restatement
of our quarterly results for fiscal 2004, we were required to restate the unaudited pro forma
financial statements of the Company and OMP and MRP for the six months ended December 31, 2003.
The necessary financial reporting systems have now been implemented to report in accordance with US
GAAP the results of our 20% interest in the Porgera Joint Venture on an ongoing basis, and as
reported in this Annual Report. In connection with the accounting errors in our reported US GAAP quarterly results for fiscal 2004
described above, in late September 2004 our senior management, in conjunction with our auditors,
identified material weaknesses in our internal control over financial reporting at a Group level
with respect to our US GAAP quarterly financial reporting processes. Separately, in October 2004,
in connection with the preparation of separate US GAAP historical financial statements of OMP and
MRP and pro forma financial statements for the Company and OMP and MRP in connection with our
acquisition of the 20% interest in the Porgera Joint Venture, our auditors identified material
weaknesses in our internal control over financial reporting at a Group level relating to our
failure to monitor the SECs reporting requirements in relation to acquisitions. In summary, the
material weaknesses (which were reported to our Audit Committee) were as follows:  (a)

A lack of sufficient knowledge and experience among our internal accounting personnel
regarding the application of US GAAP and SEC requirements.(b)

Insufficient written policies and procedures for accounting and financial reporting with
respect to the requirements and application of US GAAP and SEC requirements.(c)

Insufficient emphasis by management on evaluating our compliance with US GAAP and SEC
requirements. 174




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As part of the communications by KPMG with our Audit Committee with respect to KPMGs audit
procedures for fiscal 2004, KPMG informed the Audit Committee that these deficiencies constituted
material weaknesses. The lack of sufficient knowledge and experience among our internal accounting personnel regarding
the application of US GAAP and SEC requirements primarily reflects the limited availability in
South Africa of potential accounting employee candidates who have US GAAP experience or expertise.
Although we mitigated this weakness in fiscal years 1999 through 2002 through the use of external
accounting advisors with US GAAP expertise, we did not employ such advisors for our US GAAP
quarterly reporting, which we commenced in the second quarter of fiscal 2003, or for the
preparation of our US GAAP annual financial statements for fiscal 2003 or 2004. Accordingly, when
a set of facts gave rise to significant accounting and reporting issues that raised issues of
judgment during these periods, these issues were not always properly identified and evaluated
internally, prior to discussion with our external auditors. Our accounting and financial reporting personnel did not have any objective written policies and
procedures to follow that dealt with US GAAP and SEC disclosure requirements, and as a result, US
GAAP issues were not always dealt with in a consistent manner and were not always properly
identified during the periods for which we did not employ an external accounting advisor with US
GAAP expertise. We also did not have our quarterly US GAAP results reviewed by our auditors. The insufficient emphasis by management on evaluating our compliance with US GAAP requirements
reflected a lack of US GAAP knowledge in our management team. This was compounded by the
substantial turnover in our senior management during the period from July 1, 2001 through June 30,
2003, as previously disclosed in our Annual Report on Form 20-F for fiscal 2002, as amended. Among
other things, this resulted in Mr. I. L. Murray taking on the roles of both Chief Executive Officer
and Chief Financial Officer for all of fiscal 2004. With respect to our US GAAP quarterly reporting processes, we believe that these material
weaknesses existed from the time we commenced quarterly reporting under US GAAP in the second
quarter of fiscal 2003 and manifested themselves in errors in certain of those quarterly results.
During our fiscal 2003 audit, our auditors identified accounting errors in our reported US GAAP
quarterly results for the fourth quarter of fiscal 2003 and for the first quarter of fiscal 2004,
relating to a reversal of an impairment charge for the Number 6 Shaft at our North West Operations,
an increase in the valuation allowance against the deferred tax asset for our North West Operations
and an adjustment to the fair value of our 6% Senior Convertible Notes due 2006. We disclosed the
final restated financial results for the fourth quarter of fiscal 2003 in our Annual Report on Form
20-F for fiscal 2003, filed with the SEC on December 30, 2003. We are not aware of any errors in
our published US GAAP quarterly financial statements other than those that have been subsequently
corrected and restated, as disclosed in this Item 15. With respect to our US GAAP annual reporting processes, we believe that the circumstances that
contributed to these material weaknesses existed as early as fiscal 1996, when we began reporting
on an annual basis under US GAAP, at least insofar as they related to a lack of sufficient
knowledge and experience among our internal accounting personnel regarding the application of US
GAAP and SEC requirements and insufficient emphasis by management on evaluating our compliance with
US GAAP and SEC requirements. Although we believe that these internal circumstances were
effectively mitigated through fiscal 2002 in relation to our audited annual financial statements
through our use of external accounting advisors with US GAAP expertise to assist us in identifying
US GAAP issues and in preparing our annual US GAAP financial statements, we did not obtain such
outside advice in connection with the preparation of our quarterly US GAAP reports, which we
commenced publishing for the second quarter of fiscal 2003, or for the preparation of our US GAAP
annual financial statements for fiscal 2003 or 2004. In order to address the material weaknesses our senior management has reviewed our US GAAP
financial reporting processes and has prepared a US GAAP action plan. Management has discussed the
US GAAP action plan with the Audit Committee and will continue to provide periodic updates on
progress made. This plan has been designed to generally improve our US GAAP reporting processes
and to strengthen our control processes and procedures in order to prevent a recurrence of the
circumstances that resulted in the need to restate our quarterly financial statements and the
material weaknesses identified above. Our senior management will continue to review our US GAAP
financial reporting processes, in conjunction with the implementation of Section 404 of the
Sarbanes-Oxley Act, and intends to complete this review by the end of
May 2005, and implement the
US GAAP action plan outlined below by the end of fiscal 2005. The US GAAP action plan comprises the following initiatives:  1.

We will arrange for our senior management and certain other accounting and finance-related
personnel to attend training sessions on US GAAP and financial reporting responsibilities and
SEC disclosure requirements. To date, our Manager of Internal Audit and Compliance has
attended a US GAAP update course in London in December 2004.2.

We are in the process of modifying the mandate of our internal audit function to place
greater emphasis on the adequacy of, and compliance with, procedures relating to internal
control over US GAAP financial reporting and have engaged an internationally recognized
accounting firm to assist in formulating an internal audit plan.3.

In October 2004, we hired a Manager of Internal Audit and Compliance, who is a certified
public accountant with knowledge of, and experience with, US GAAP and SEC disclosure
requirements. In particular, she has spent three years as an external auditor with an
internationally recognized accounting firm where her experience included the review of
periodic SEC filings of US companies, followed by two years experience as an internal auditor
of the parent company of two US listed companies, where her focus was primarily on compliance
with the Sarbanes-Oxley Act.4.

We are in the process of engaging an internationally recognized accounting firm to provide us
with technical advice on specific or unusual US GAAP matters and SEC disclosure requirements
on an ongoing basis.5.

We have engaged an internationally recognized accounting firm to assist in monitoring and
improving our internal controls and procedures in connection with the implementation of
Section 404 of the Sarbanes-Oxley Act. We are in the process of evaluating, documenting and
testing our internal control procedures in preparation for the requirements of Section 404 of
the Sarbanes-Oxley Act. We expect the monitoring and evaluation of the adequacy of our
internal control over financial reporting will continue into fiscal 2007. During the course
of this process, we may identify additional deficiencies that we will need to remedy.6.

We are in the process of developing detailed US GAAP financial reporting checklists to
provide guidance to internal accounting staff with regard to US GAAP and SEC reporting
requirements. We estimate that the costs we incurred up to January 2005 on the implementation of our US GAAP
action plan are approximately $230,000. We expect to continue to incur annual costs to maintain
the US GAAP action plan of approximately $620,000, which does not include the cost of a review of
our semi-annual financial results by our independent auditors. We have experienced difficulties in finding internal personnel and external advisors in South
Africa with sufficient US GAAP experience. Concurrent quarterly reporting under both South African
Generally Accepted Accounting Principles, or SA GAAP, as the primary basis for reporting for South
African purposes, and US GAAP, as the primary basis for our Exchange Act filings, imposes a
significant time and expense burden on a business of our size. Going forward, we believe it is a
more prudent use of our staff resources and funds to cease quarterly financial reporting and
instead report financial information semi-annually under both SA GAAP (or International Financial
Reporting Standards, or IFRS when it becomes applicable for financial years commencing on or after
January 1, 2005) and US GAAP, with our first semi-annual financial statements to be released for the half-year
ended December 31, 2004. Our external auditors, KPMG Inc, have been engaged to perform a review,
under Statement of Auditing Standards No. 100 Interim Financial Information, of our semi-annual
financial statements for the half-year ended December 31, 2004. Quarterly releases, which
commenced for the quarter ended September 30, 2004, will be limited to production data and capital
expenditure only. As of June 30, 2004, with regards to the scope of our assessment, we did not have the right or
authority to assess, modify or dictate the internal control over financial reporting of the Porgera
Joint Venture, nor have we reviewed its internal control over financial reporting. We also lacked
the ability, in practice, to make this assessment, as we did not have control of this entity.
Accordingly, our conclusions regarding the effectiveness of our disclosure controls and procedures
and internal control over financial reporting do not extend to the disclosure controls and
procedures and internal control over financial reporting of the Porgera Joint Venture. However, we
do have adequate internal control over financial reporting in place to ensure that the financial
information for the Porgera Joint Venture is appropriately included in our financial statements.
We have disclosed key subtotals in note 12 of Item 18: Financial Statements. Changes in Internal Control over Financial Reporting During the year ended June 30, 2004, there were no changes in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. As disclosed above, however, we are in the process of implementing a US GAAP action plan that
we believe will result, during the fiscal year ended June 30, 2005, in the substantial elimination
or mitigation of the material weaknesses identified by our auditors in connection with the audit of
our financial statements as of and for the year ended June 30, 2004. 
 ITEM 16. CORPORATE GOVERNANCE 
 16A. AUDIT COMMITTEE FINANCIAL EXPERT There is at least one member of our audit committee that possesses the
relevant attributes sufficient to have an understanding of South African
Generally Accepted Accounting Practice, or SA GAAP, and financial statements
and the ability to assess the general application of SA GAAP. However, we do
not have an audit committee financial expert (as defined in Item 16A of the
Form 20-F) as no member of the Audit Committee currently has the required US
GAAP experience. The board is satisfied that the skills, experience and attributes of the
members of the audit committee are sufficient to enable those members to
discharge the responsibilities of the audit committee. 175




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16B. CODE OF ETHICS AND CONDUCT We have adopted a Code of Ethics and Conduct that applies to all senior
executives including our Chairman, the Chief Executive Officer, Chief
Financial Officer and the Divisional Director: Group Finance, Group Financial
Manager and Financial Manager at each mining operation. The Code of Ethics and
Conduct can be accessed on the Companys website at www.drdgold.com. 
 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES KPMG Inc has served as our independent public accountants for the fiscal
years ending June 30, 2004 and 2003, for which audited financial statements
appear in this Annual Report. The Annual General Meeting elects the auditors
annually. The following table presents the aggregate fees for professional services
and other services rendered by KPMG to us in fiscal 2004 and 2003: Auditors remuneration Year ended June 30,2004
    
    2003$000
    
    $000Audit fees
    
    
    720
    
    
    
    294Audit-related fees
    
    
    
    
    
    
    Tax fees
    
    
    250
    
    
    
    277All other fees
    
    
    
    
    
    
    970
    
    
    
    571
 Audit fees billed for the annual audit services engagement, which are
those services that the external auditor reasonably can provide, include the
company audit; statutory audits; comfort letters and consents; attest services;
and assistance with and review of documents filed with the SEC. Fees for tax services include fees billed for tax compliance, tax advice
and tax planning services. The Audit Committee appoints, re-appoints and removes the external
auditors as well as determines the remuneration and terms of engagement of the
external auditors. The committee pre-approves, and has pre-approved, all
non-audit services provided by the external auditors. The Audit Committee
considered all of the fees mentioned above and determined that such fees are
compatible with maintaining KPMG Incs independence. 
 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES Not
applicable. 
 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER Not
applicable. 176




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PART III 
 ITEM 17. FINANCIAL STATEMENT Not applicable. 
 ITEM 18. FINANCIAL STATEMENTS The following financial statements and related auditors reports are filed
as part of this Annual Report. PageReport of the independent registered public accounting firm
    
    F-1Report of Deloitte & Touche
    
    F-2Consolidated statements of operations for the years ended June 30, 2004, 2003 and 2002
    
    F-3Consolidated balance sheets at June 30, 2004 and 2003
    
    F-4Consolidated statement of stockholders equity for the years ended June 30, 2004, 2003 and 2002
    
    F-5 to F-6Consolidated statements of cash flows for the years ended June 30, 2004, 2003 and 2002
    
    F-7Notes to the consolidated financial statements
    
    F-8 to F-59
 Separate
consolidated financial statements and notes, thereto for Crown Gold
Recoveries (Pty) Limited and its subsidiaries for its fiscal years
ended June 30, 2004 and 2003, have been filed pursuant to
Rule 3-09 of Regulation S-X. Reference is made to Exhibit 15.1
to our Annual Report on Form 20-F. 177




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DURBAN ROODEPOORT DEEP, LIMITED
Report of the Independent Registered Public Accounting Firm to the Board of Directors
and Stockholders of Durban Roodepoort Deep, Limited We have audited the accompanying consolidated balance sheets of Durban
Roodepoort Deep, Limited and its subsidiaries as of June 30, 2004 and 2003, and
the related consolidated statements of operations, stockholders equity and
cash flows for each of the years in the two-year period ended June 30, 2004.
These consolidated financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our
opinion. In our opinion, based on our
audits, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Durban Roodepoort
Deep, Limited and its subsidiaries at June 30, 2004 and 2003, and the
consolidated results of its operations and its cash flows for each of the years
in the two-year period ended June 30, 2004, in conformity with accounting
principles generally accepted in the United States of America. As discussed in Note 2 to the consolidated financial statements, Durban
Roodepoort Deep, Limited and its subsidiaries changed its method of accounting
for asset retirement obligations effective July 1, 2002. KPMG Inc
Registered Accountants and Auditors
Chartered Accountants (SA) /s/ Johan Holtzhausen
    
    /s/ Carel SmitJohan Holtzhausen
    
    Carel SmitDirector
    
    Director
 Johannesburg, Republic of South Africa
November 29, 2004 F-1




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DURBAN ROODEPOORT DEEP, LIMITED
Report of the Independent Registered Public Accounting Firm to the Board of Directors
and Stockholders of Durban Roodepoort Deep, Limited We have audited the accompanying consolidated statement of operations of Durban
Roodepoort Deep, Limited, and the related consolidated statements of
stockholders equity and cash flow for the year ended June 30, 2002. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit. We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit (which includes the conversion to generally accepted accounting
principles in the United States) provides a reasonable basis for our opinion. In our opinion, based on our audit the consolidated financial statements
referred to above present fairly, in all material respects, the consolidated
results of operations of Durban Roodepoort Deep, Limited and its consolidated
cash flow for the year ended June 30, 2002, in conformity with accounting
principles generally accepted in the United States of America. /s/ DELOITTE & TOUCHEDeloitte & ToucheRegistered Accountants and AuditorsChartered Accountants (SA)Johannesburg, Republic of South AfricaSeptember 29, 2003
 F-2




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##### Table of Contents



Durban Roodepoort Deep, Limited
Consolidated Statements of Operations for the years ended June 30 2004
    
    2003
    
    2002Notes
    
    
    
    
    
    $000
    
    $000
    
    $000REVENUESProduct sales
    
    
    
    
    
    
    
    
    
    
    313,290
    
    
    
    261,342
    
    
    
    303,858COSTS AND EXPENSES
    
    
    
    
    
    
    
    
    
    
    279,946
    
    
    
    238,024
    
    
    
    217,571Production costs
    
    
    
    
    
    
    
    
    
    
    277,491
    
    
    
    235,359
    
    
    
    218,056Movement in gold in process
    
    
    
    
    
    
    
    
    
    
    (1,000
    )
    
    
    1,251
    
    
    
    289Movement in rehabilitation provision, reclamation and closure costs
    
    
    17
    
    
    
    
    
    
    
    3,455
    
    
    
    1,414
    
    
    
    (774
    )OTHER OPERATING EXPENSESDepreciation and amortization
    
    
    10
    
    
    
    
    
    
    
    30,135
    
    
    
    10,602
    
    
    
    13,933Employment termination costs
    
    
    5
    
    
    
    
    
    
    
    7,963
    
    
    
    1,501
    
    
    
    388Impairment of assets
    
    
    6
    
    
    
    
    
    
    
    4,266
    
    
    
    
    
    
    
    2,167Management and consulting fees
    
    
    
    
    
    
    
    
    
    
    2,448
    
    
    
    1,650
    
    
    
    1,888Post retirement medical benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,786Loss/(profit) on derivative instruments
    
    
    
    
    
    
    
    
    
    
    1,166
    
    
    
    (43,821
    )
    
    
    147,153Loss/(profit) on sale of mining assets
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    (1,729
    )
    
    
    606Profit on disposal of subsidiary
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    (5,302
    )
    
    
    Write off of investments and loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86SELLING, ADMINISTRATION AND GENERAL CHARGES(including stock based compensation costs of $2,310,000 (2003:$4,313,000 and 2002: $2,503,000))
    
    
    
    
    
    
    
    
    
    
    24,944
    
    
    
    10,828
    
    
    
    13,254NET OPERATING (LOSS)/INCOME
    
    
    
    
    
    
    
    
    
    
    (37,633
    )
    
    
    49,589
    
    
    
    (94,974
    )NON-OPERATING INCOME/(LOSS)Interest and dividends
    
    
    
    
    
    
    
    
    
    
    2,124
    
    
    
    8,703
    
    
    
    2,219Unrealized foreign exchange gains
    
    
    18
    
    
    
    
    
    
    
    10,672
    
    
    
    11,229
    
    
    
    567Profit on sale of other assets and listed investments
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    152
    
    
    
    FINANCE COSTSInterest expense
    
    
    
    
    
    
    
    
    
    
    (7,912
    )
    
    
    (6,909
    )
    
    
    (2,385
    )(LOSS)/PROFIT BEFORE TAX AND OTHER ITEMS
    
    
    
    
    
    
    
    
    
    
    (32,686
    )
    
    
    62,764
    
    
    
    (94,573
    )Income and mining tax (expense)/benefit
    
    
    7
    
    
    
    
    
    
    
    (14,230
    )
    
    
    (41,765
    )
    
    
    42,864Equity in loss from associates
    
    
    13
    
    
    
    
    
    
    
    (8,827
    )
    
    
    (9,452
    )
    
    
    (LOSS)/PROFIT AFTER TAX
    
    
    
    
    
    
    
    
    
    
    (55,743
    )
    
    
    11,547
    
    
    
    (51,709
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    NET (LOSS)/PROFIT BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE
    
    
    
    
    
    
    
    
    
    
    (55,750
    )
    
    
    11,547
    
    
    
    (51,709
    )Cumulative effect of accounting change (net of income tax of $Nil
in 2003)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    (173
    )
    
    
    NET (LOSS)/PROFIT APPLICABLE TO COMMON STOCKHOLDERS
    
    
    
    
    
    
    
    
    
    
    (55,750
    )
    
    
    11,374
    
    
    
    (51,709
    )BASIC (LOSS)/PROFIT PER SHARE (CENTS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING POLICY
    
    
    20
    
    
    
    
    
    
    
    (26
    )
    
    
    6
    
    
    
    (32
    )CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY (CENTS)
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BASIC (LOSS)/PROFIT PER SHARE (CENTS)
    
    
    20
    
    
    
    
    
    
    
    (26
    )
    
    
    6
    
    
    
    (32
    )DILUTED (LOSS)/PROFIT PER SHARE (CENTS) BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING POLICY
    
    
    20
    
    
    
    
    
    
    
    (26
    )
    
    
    4
    
    
    
    (32
    )CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY (CENTS)
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    DILUTED (LOSS)/PROFIT PER SHARE (CENTS)
    
    
    20
    
    
    
    
    
    
    
    (26
    )
    
    
    4
    
    
    
    (32
    )
 The accompanying notes are an integral part of these Consolidated Financial Statements. F-3




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##### Table of Contents



Durban Roodepoort Deep, Limited
Consolidated Balance Sheets at June 30 2004
    
    2003Notes
    
    $000
    
    $000ASSETSCurrent assets
    
    
    
    
    
    
    58,460
    
    
    
    90,863Cash and cash equivalents
    
    
    
    
    
    
    22,453
    
    
    
    44,423Derivative instruments
    
    
    16
    
    
    
    
    
    
    
    6,563Receivables
    
    
    8
    
    
    
    19,193
    
    
    
    21,844Receivables owing by related parties
    
    
    8
    
    
    
    321
    
    
    
    1,255Inventories
    
    
    9
    
    
    
    16,493
    
    
    
    7,912Deferred income and mining tax
    
    
    7
    
    
    
    
    
    
    
    8,866Mining assets
    
    
    10
    
    
    
    156,943
    
    
    
    83,257Cost
    
    
    
    
    
    
    327,115
    
    
    
    219,969Accumulated depreciation and amortization
    
    
    
    
    
    
    (170,172
    )
    
    
    (136,712
    )Other assetsNon-current related party receivables
    
    
    8
    
    
    
    
    
    
    
    706Non-current inventories
    
    
    9
    
    
    
    32,006
    
    
    
    Non-current assets
    
    
    11
    
    
    
    37,566
    
    
    
    27,555Total Assets
    
    
    
    
    
    
    284,975
    
    
    
    202,381LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities
    
    
    
    
    
    
    83,453
    
    
    
    88,444Bank overdraft
    
    
    
    
    
    
    1,828
    
    
    
    3,897Accounts payable and accrued liabilities
    
    
    15
    
    
    
    61,153
    
    
    
    49,964Derivative instruments
    
    
    16
    
    
    
    309
    
    
    
    15,552Short-term portion of long-term loans
    
    
    18
    
    
    
    9,315
    
    
    
    19,068Income and mining taxes payable
    
    
    
    
    
    
    2,744
    
    
    
    (37
    )Deferred income and mining tax
    
    
    7
    
    
    
    8,104
    
    
    
    Non-current liabilities
    
    
    
    
    
    
    116,741
    
    
    
    108,701Long-term loans
    
    
    18
    
    
    
    59,865
    
    
    
    63,149Deferred income and mining tax
    
    
    7
    
    
    
    13,004
    
    
    
    3,756Derivative instruments
    
    
    16
    
    
    
    4,765
    
    
    
    17,169Provision for environmental rehabilitation, reclamation and closure costs
    
    
    17
    
    
    
    39,107
    
    
    
    24,627Total Liabilities
    
    
    
    
    
    
    200,194
    
    
    
    197,145Minority interest
    
    
    
    
    
    
    929
    
    
    
    Stockholders equity
    
    
    
    
    
    
    83,852
    
    
    
    5,236Authorized300,000,000 (2003: 300,000,000) ordinary no par value shares and
5,000,000 (2003: 5,000,0000) cumulative preference sharesIssued233,307,667 (2003: 184,222,073) ordinary no par value shares and
5,000,000 (2003: 5,000,000) cumulative preference sharesCumulative preference shares
    
    
    19
    
    
    
    107
    
    
    
    107Stated capital and share premium
    
    
    19
    
    
    
    484,772
    
    
    
    360,351Additional paid in capital
    
    
    19
    
    
    
    39,347
    
    
    
    37,705Unearned stock compensation
    
    
    19
    
    
    
    (971
    )
    
    
    Accumulated deficit
    
    
    
    
    
    
    (396,154
    )
    
    
    (340,404
    )Other comprehensive loss
    
    
    
    
    
    
    (43,249
    )
    
    
    (52,523
    )Total Liabilities and Stockholders Equity
    
    
    
    
    
    
    284,975
    
    
    
    202,381
 The accompanying notes are an integral part of these Consolidated Financial Statements. F-4




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Durban Roodepoort Deep, Limited
Consolidated Statement of Stockholders Equity/(Deficit)
For the years ended June 30 Stated capital
    
    AdditionalNumber of
    
    Number of
    
    Preferred
    
    and share
    
    paid-incommon
    
    preferred
    
    stock
    
    premium
    
    capitalshares
    
    shares
    
    $000
    
    $000
    
    $000BALANCE - JULY 1, 2001
    
    
    154,529,578
    
    
    
    5,000,000
    
    
    
    107
    
    
    
    302,959
    
    
    
    30,889Exercise of employee stock options
    
    
    10,643,907
    
    
    
    
    
    
    
    
    
    
    
    7,634Issue of shares for cash
    
    
    12,000,000
    
    
    
    
    
    
    
    
    
    
    
    43,503Share issue expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,559
    )Net loss for the yearStock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,503Other comprehensive income, net of tax of nilReclassification adjustment for net gain
included in net incomeDecrease in mark-to-market on listed
investmentsForeign currency translation adjustmentsBALANCE - JUNE 30, 2002
    
    
    177,173,485
    
    
    
    5,000,000
    
    
    
    107
    
    
    
    351,537
    
    
    
    33,392Exercise of employee stock options
    
    
    2,253,699
    
    
    
    
    
    
    
    
    
    
    
    2,244Issue of shares for cash
    
    
    4,794,889
    
    
    
    
    
    
    
    
    
    
    
    6,783Share issue expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (213
    )Net profit for the yearStock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,313Other comprehensive income, net of tax of nilDecrease in mark-to-market on listed
investmentsForeign currency translation adjustmentsBALANCE - JUNE 30, 2003
    
    
    184,222,073
    
    
    
    5,000,000
    
    
    
    107
    
    
    
    360,351
    
    
    
    37,705
   [Continued from above table, first column(s) repeated] TotalOther
    
    StockholdersAccumulated
    
    comprehensive
    
    equity/
    
    Comprehensivedeficit
    
    loss
    
    (deficit)
    
    (loss)/ income$000
    
    $000
    
    $000
    
    $000BALANCE - JULY 1, 2001
    
    
    (300,069
    )
    
    
    (54,453
    )
    
    
    (20,567
    )Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    7,634Issue of shares for cash
    
    
    
    
    
    
    
    
    
    
    43,503Share issue expenses
    
    
    
    
    
    
    
    
    
    
    (2,559
    )Net loss for the year
    
    
    (51,709
    )
    
    
    
    
    
    
    (51,709
    )
    
    
    (51,709
    )Stock based compensation
    
    
    
    
    
    
    
    
    
    
    2,503Other comprehensive income, net of tax of nilReclassification adjustment for net gain
included in net income
    
    
    
    
    
    
    (2,683
    )
    
    
    (2,683
    )
    
    
    (2,683
    )Decrease in mark-to-market on listed
investments
    
    
    
    
    
    
    (719
    )
    
    
    (719
    )
    
    
    (719
    )Foreign currency translation adjustments
    
    
    
    
    
    
    9,126
    
    
    
    9,126
    
    
    
    9,126BALANCE - JUNE 30, 2002
    
    
    (351,778
    )
    
    
    (48,729
    )
    
    
    (15,471
    )
    
    
    (45,985
    )Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    2,244Issue of shares for cash
    
    
    
    
    
    
    
    
    
    
    6,783Share issue expenses
    
    
    
    
    
    
    
    
    
    
    (213
    )Net profit for the year
    
    
    11,374
    
    
    
    
    
    
    
    11,374
    
    
    
    11,374Stock based compensation
    
    
    
    
    
    
    
    
    
    
    4,313Other comprehensive income, net of tax of nilDecrease in mark-to-market on listed
investments
    
    
    
    
    
    
    (1,759
    )
    
    
    (1,759
    )
    
    
    (1,759
    )Foreign currency translation adjustments
    
    
    
    
    
    
    (2,035
    )
    
    
    (2,035
    )
    
    
    (2,035
    )BALANCE - JUNE 30, 2003
    
    
    (340,404
    )
    
    
    (52,523
    )
    
    
    5,236
    
    
    
    7,580
 F-5




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##### Table of Contents



Durban Roodepoort Deep, Limited
Consolidated Statement of Stockholders Equity/(Deficit)
For the years ended June 30 Stated capital
    
    AdditionalNumber of
    
    Number of
    
    Preferred
    
    and share
    
    paid-incommon
    
    preferred
    
    stock
    
    premium
    
    capitalshares
    
    shares
    
    $000
    
    $000
    
    $000BALANCE - JUNE 30, 2003
    
    
    184,222,073
    
    
    
    5,000,000
    
    
    
    107
    
    
    
    360,351
    
    
    
    37,705Exercise of employee stock options
    
    
    978,053
    
    
    
    
    
    
    
    
    
    
    
    1,298Issue of shares for cash
    
    
    41,463,639
    
    
    
    
    
    
    
    
    
    
    
    107,367Share issue expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (992
    )Shares issued for acquisition of joint
venture interest
    
    
    6,643,902
    
    
    
    
    
    
    
    
    
    
    
    16,748Net loss for the yearUnearned stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,642Amortization of unearned stock compensationOther comprehensive income, net of tax of nilDecrease in mark-to-market on listed
investmentsForeign currency translation adjustmentsBALANCE - JUNE 30, 2004
    
    
    233,307,667
    
    
    
    5,000,000
    
    
    
    107
    
    
    
    484,772
    
    
    
    39,347
   [Continued from above table, first column(s) repeated] TotalUnearned
    
    
    
    
    
    Other
    
    Stockholdersstock
    
    Accumulated
    
    comprehensive
    
    equity/
    
    Comprehensivecompensation
    
    deficit
    
    loss
    
    (deficit)
    
    (loss)/ income$000
    
    $000
    
    $000
    
    $000
    
    $000BALANCE - JUNE 30, 2003
    
    
    
    
    
    
    (340,404
    )
    
    
    (52,523
    )
    
    
    5,236
    
    
    
    7,580Exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,298Issue of shares for cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,367Share issue expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (992
    )Shares issued for acquisition of joint
venture interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,748Net loss for the year
    
    
    
    
    
    
    (55,750
    )
    
    
    
    
    
    
    (55,750
    )
    
    
    (55,750
    )Unearned stock compensation
    
    
    (1,642
    )Amortization of unearned stock compensation
    
    
    2,310
    
    
    
    
    
    
    
    
    
    
    
    2,310Other comprehensive income, net of tax of nilDecrease in mark-to-market on listed
investments
    
    
    
    
    
    
    
    
    
    
    4,403
    
    
    
    4,403
    
    
    
    4,403Foreign currency translation adjustments
    
    
    (1,639
    )
    
    
    
    
    
    
    4,871
    
    
    
    3,232
    
    
    
    3,232BALANCE - JUNE 30, 2004
    
    
    (971
    )
    
    
    (396,154
    )
    
    
    (43,249
    )
    
    
    83,852
    
    
    
    (48,115
    )
 Analysis of accumulated other comprehensiveloss:
    
    2001
    
    2002
    
    2003
    
    2004Mark-to-market on listed investments
    
    
    3,447
    
    
    
    45
    
    
    
    (1,714
    )
    
    
    2,689Foreign currency translation adjustments
    
    
    (57,900
    )
    
    
    (48,774
    )
    
    
    (50,809
    )
    
    
    (45,938
    )(54,453
    )
    
    
    (48,729
    )
    
    
    (52,523
    )
    
    
    (43,249
    )
 The accompanying notes are an integral part of these Consolidated Financial Statements. F-6




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##### Table of Contents



Durban Roodepoort Deep, Limited
Consolidated Statements of Cash Flows
For the years ended June 30 2004
    
    2003
    
    2002Notes
    
    $000
    
    $000
    
    $000Net cash utilized by operating activities
    
    
    
    
    
    
    (25,092
    )
    
    
    (23,878
    )
    
    
    (64,170
    )Net (loss)/profit applicable to common stockholders
    
    
    
    
    
    
    (55,750
    )
    
    
    11,374
    
    
    
    (51,709
    )Reconciliation to net cash provided by operations:Net increase in provision for rehabilitation
    
    
    
    
    
    
    9,528
    
    
    
    1,414
    
    
    
    445Depreciation and amortization
    
    
    10
    
    
    
    30,135
    
    
    
    10,759
    
    
    
    13,933Amortization of restraint of trade payments
    
    
    
    
    
    
    
    
    
    
    70
    
    
    
    124Impairment of assets
    
    
    6
    
    
    
    4,266
    
    
    
    
    
    
    
    2,167Loss/(profit) on sale of mining assets
    
    
    
    
    
    
    55
    
    
    
    (1,729
    )
    
    
    (331
    )(Profit)/loss on sale of other assets and listed investments
    
    
    
    
    
    
    (63
    )
    
    
    (152
    )
    
    
    937Stock based compensation expense
    
    
    
    
    
    
    2,310
    
    
    
    4,313
    
    
    
    2,503Share of results of associate
    
    
    
    
    
    
    8,827
    
    
    
    9,452
    
    
    
    Deferred tax provision
    
    
    
    
    
    
    6,842
    
    
    
    41,765
    
    
    
    (42,085
    )Cumulative effect of change in accounting policy
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    Unrealized losses on derivative instruments
    
    
    
    
    
    
    (35,843
    )
    
    
    (72,985
    )
    
    
    12,403Debt issuance costs amortized
    
    
    
    
    
    
    1,533
    
    
    
    
    
    
    
    Profit on disposal of subsidiary
    
    
    
    
    
    
    
    
    
    
    (5,302
    )
    
    
    Write down of investments and loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86Minority interest in loss of subsidiary
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    Effect of changes in working capital items:Receivables
    
    
    
    
    
    
    7,114
    
    
    
    (19,224
    )
    
    
    3,328Inventories
    
    
    
    
    
    
    5,014
    
    
    
    97
    
    
    
    698Movement in gold in process
    
    
    
    
    
    
    (1,000
    )
    
    
    1,251
    
    
    
    358Accounts payable and accrued liabilities (excluding short-term loans)
    
    
    
    
    
    
    (13,462
    )
    
    
    (4,683
    )
    
    
    (7,335
    )Increase in interest accruals
    
    
    
    
    
    
    2,082
    
    
    
    
    
    
    
    Movement in net taxation liability
    
    
    
    
    
    
    3,313
    
    
    
    (471
    )
    
    
    308Net cash (utilized in)/realized from investing activities
    
    
    
    
    
    
    (94,074
    )
    
    
    (9,818
    )
    
    
    2,854Additions to investments
    
    
    
    
    
    
    (10,828
    )
    
    
    (9,108
    )
    
    
    (1,961
    )Proceeds on sale of other assets and listed investments
    
    
    
    
    
    
    63
    
    
    
    196
    
    
    
    11,070Additions to mining assets
    
    
    
    
    
    
    (26,917
    )
    
    
    (13,414
    )
    
    
    (8,188
    )Proceeds on disposal of mining assets
    
    
    
    
    
    
    3,397
    
    
    
    3,594
    
    
    
    1,662Decrease in restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    271Cash paid for acquisition of joint venture interest and for subsidiaries,
net of cash acquired
    
    
    3
    
    
    
    (59,789
    )
    
    
    
    
    
    
    Proceeds on disposal of subsidiary, net of cash disposed of
    
    
    3
    
    
    
    
    
    
    
    8,914
    
    
    
    Net cash generated in financing activities
    
    
    
    
    
    
    88,626
    
    
    
    55,449
    
    
    
    67,561Proceeds from the issue of the convertible notes
    
    
    
    
    
    
    
    
    
    
    66,000
    
    
    
    Costs associated with the issue of the convertible notes
    
    
    
    
    
    
    (636
    )
    
    
    (2,395
    )
    
    
    Net proceeds from issue of shares
    
    
    
    
    
    
    108,665
    
    
    
    9,027
    
    
    
    51,137Share issue expenses
    
    
    
    
    
    
    (992
    )
    
    
    (213
    )
    
    
    (2,559
    )(Decrease)/increase in bank overdraft
    
    
    
    
    
    
    (2,069
    )
    
    
    3,365
    
    
    
    487Long-term loans received
    
    
    
    
    
    
    2,765
    
    
    
    4,733
    
    
    
    38,062Long-term loans repaid
    
    
    
    
    
    
    (19,107
    )
    
    
    (25,068
    )
    
    
    (19,566
    )Net (decrease)/increase in cash and cash equivalents
    
    
    
    
    
    
    (22,874
    )
    
    
    21,753
    
    
    
    6,245Effect of exchange rate changes on cash
    
    
    
    
    
    
    8,570
    
    
    
    (1,182
    )
    
    
    3,718Cash and cash equivalents at beginning of year
    
    
    
    
    
    
    44,423
    
    
    
    23,852
    
    
    
    13,889Cash and cash equivalents at end of year
    
    
    
    
    
    
    22,453
    
    
    
    44,423
    
    
    
    23,852Income taxes paid/(refunded)
    
    
    
    
    
    
    4,075
    
    
    
    471
    
    
    
    (153
    )Interest paid
    
    
    
    
    
    
    5,014
    
    
    
    6,909
    
    
    
    2,385
 The accompanying notes are an integral part of these Consolidated Financial Statements. F-7




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##### Table of Contents



1. NATURE OF OPERATIONS Durban Roodepoort Deep, Limited (the Company), was formed in 1895 and is a
gold mining company engaged in underground and surface gold mining including
exploration, extraction, processing and smelting. The Group (being the Company
and its subsidiaries, associates and joint ventures) focuses its operations on
the West Witwatersrand basin in South Africa and in Papua New Guinea. As at June 30, 2004, the South African operations consist of the North West
Operations (comprising the Buffels and Harties Sections), the Blyvoor Section
and its 40% interest in Crown Gold Recoveries (Pty) Limited (comprising the
Crown Section and the ERPM Section). The Australasian operations consist of
the Tolukuma Section and a 20% interest in the Porgera Joint Venture, both
based in Papua New Guinea. The Company has a 19.78% interest in Emperor Mines
Limited, located in Fiji. It also has exploration projects in South Africa,
Papua New Guinea and Australia. Beginning in July 2002, the Company entered into a series of transactions,
consistent with its black economic empowerment strategy resulting in the sale
of 60% of its interest in Crown Gold Recoveries (Pty) Limited, or CGR, to Khumo
Bathong Holdings (Pty) Limited, or KBH, for R105 million ($11.6 million). Also,
as part of this transaction, KBH repaid a portion of certain shareholder loans
on behalf of CGR. Consequently, CGR now owes 60% of those loans to KBH and 40%
of the loans to the Company. In October 2002, CGR acquired 100% of the outstanding share capital of and loan
accounts in East Rand Proprietary Mines Limited, or ERPM, for R100 million
($11.0 million). On December 16, 2002, the Company announced its proposed acquisition of 14% of
Emperor Mines Limited, an Australian listed gold mining company for A$11.5
million ($6.7 million). Since that date, the Company has increased its
percentage holding in Emperor Mines Limited to 19.78% (June 30, 2003: 19.81%)
at a total additional cost of A$5.0 million ($2.9 million). From July 6 to July
30, 2004, the Group acquired a further 25.55% of the shares in Emperor Mines
Limited to increase the shareholding to 45.33%, for an additional consideration
of $16.6 million. On October 14, 2003, the Group acquired the shares in Orogen Minerals (Porgera)
Limited, or OMP, and Mineral Resources Porgera Limited, or MRP. The
transaction was affected through the amalgamation of OMP, MRP and the Companys
wholly-owned subsidiary, Dome Resources (PNG) Limited. OMP changed its name to
DRD (Porgera) Limited. This resulted in the Company acquiring a 20% interest in
the Porgera Joint Venture in Papua New Guinea, for a consideration of $75.9
million, net of cash acquired, $16.7 million settled by way of shares and $59.2
million in cash. On April 28, 2004, the Group acquired 50.25% of the ordinary share capital of
Net-Gold Services Limited, for a cash consideration of $2.0 million. This
entity brokers the payment of purchases made by subscribers, through settlement
in gold. 2. SIGNIFICANT ACCOUNTING POLICIES The following are accounting policies used by the Group which have been
consistently applied as indicated below: Use of estimates The preparation of the financial statements in conformity with generally
accepted accounting principles in the United States requires the Groups
management to make assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. These estimates include the collectability of
related party receivables, the valuation of deferred tax assets, the impairment
of mining assets, and the estimation of reclamation and closure costs and
environmental rehabilitation costs, among others. Actual results could differ
from those estimates. F-8




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##### Table of Contents



2. SIGNIFICANT ACCOUNTING POLICIES(continued) Consolidation The consolidated financial information includes the financial statements of the
Company, its subsidiaries and investments in associates and joint ventures. A
company which is more than 50% owned by the Group which the Group controls
directly or indirectly, through other subsidiary interests, is classified as a
subsidiary. The results of any subsidiary, associate or joint venture acquired
or disposed of during the year, are consolidated from the effective date of
acquisition and up to the effective date of disposal. Intra-company transactions and balances are eliminated on consolidation. Investment in joint ventures Investments in unincorporated mining joint ventures in which the Group has
joint control, under a contractual agreement, are reported using the
proportionate consolidation method. Investment in associates Investments in associates are accounted for by the equity method of accounting.
These are entities over which the Group has the ability to exercise significant
influence, but which it does not control. The ability to exercise significant
influence is presumed where the Group owns more than 20%, but less than 50%, of
the voting stock of an investee. The Groups investments in associates are
carried in the balance sheet at an amount that reflects its share of the net
assets of the associates. The recoverable amount of the associate, that is the Groups proportionate
share of the estimate of future undiscounted distributions from the associate,
or its disposal value, if higher, is compared to the carrying value of the
associate. If an impairment exists on this basis, a reduction in the carrying
value of the associate is recorded to the extent that the carrying value
exceeds the fair value. Equity accounting involves recognizing, in the statement of operations, the
Groups share of the associates profit or loss for the year after tax to the
extent of the Groups investment in and advances to its associates. Goodwill on the acquisition of associates is included in the carrying value of
the investment in associates. Goodwill Where the excess purchase price of a business acquisition cannot be attributed
to assets acquired, including acquired properties and mineral rights, it is
included in goodwill and reviewed for impairment in accordance with the
provisions of SFAS 142, Goodwill and Other Intangible Assets. Goodwill is stated at cost less impairment. Goodwill is tested for impairment
at the reporting unit level on an annual basis, or more frequently if the Group
believes indicators of impairment exist. The performance of the test involves
a two tier process. The first step of the impairment test involves comparing
the fair value of the reporting unit with the reporting units carrying amount,
including goodwill. The fair value of the reporting unit is determined based
on estimated future discounted cash flows. If the carrying amount of the
reporting unit exceeds the reporting units fair value, the second step of the
goodwill impairment test is performed to determine the amount of the impairment
loss. The second step of the goodwill impairment test involves comparing the
implied fair value of the reporting units goodwill with the carrying amount of
that goodwill. F-9




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##### Table of Contents



2. SIGNIFICANT ACCOUNTING POLICIES(continued) Foreign currency The Groups functional currency for the South African operations is the South
African Rand and for the Papua New Guinean operations is the Papua New Guinean
Kina. Transactions denominated in currencies other than the functional currency
are recorded at the rate of exchange ruling at the transaction date. Monetary
assets and liabilities denominated in such currencies are translated at the
rates applicable at the balance sheet date and profits and losses arising as a
result of translating those assets and liabilities to the functional currency
are recorded in the statement of operations. For foreign subsidiaries, whose functional currency is a currency other than
the Rand, assets and liabilities are translated using the closing rates at year
end, and the statement of operations are translated at average rates.
Differences arising on translation are included as a component of other
comprehensive loss. The translation of amounts into US Dollars is in accordance
with Statement of Financial Accounting Standards, or SFAS No. 52, Foreign
Currency Translation, whereby assets and liabilities are translated using the
closing rates at year end, the statement of operations are translated at
average rates and equity at historical rates. The translation differences
arising as a result of converting to US Dollars using the current exchange rate
method, are included as a separate component of stockholders equity - other
comprehensive loss. Receivables Receivables consist of amounts owing by external and related parties and
include amounts of a long- and short-term nature. Provisions for uncollectible
amounts are included in determining net income or loss where a decline in the
value of the receivable has occurred. Interest on balances owed to the Group
accrues on a daily basis. Interest accrued on impaired balances owed to the
Group is not recorded as it is not considered to be recoverable. Cash and cash equivalents Cash and cash equivalents consist of all cash balances and highly liquid
investments with an original maturity of three months or less. Due to the short
maturity of the investments, the carrying amounts approximate their fair value. Non-current unlisted investments Non-current unlisted investments, in which the Group does not have significant
influence or a controlling interest, are carried at acquisition cost. Realized
gains and losses are included in determining net income or loss. Impairment
losses are included in determining net income or loss where an other than
temporary decline in the value of the investment has occurred. Non-current listed investments Non-current listed investments, are treated as available for sale, and are
accounted for at fair value with unrealized gains and losses excluded from
earnings and reported as a separate component of stockholders equity.
Realized gains and losses are included in determining net income or loss. Inventories Inventories, comprising gold in process (being gold at the stage of production
immediately prior to smelting) and supplies, are stated at the lower of cost
and market value. Costs are assigned to inventory on an average cost basis.
Costs relating to gold in process comprise all costs incurred to the stage
immediately prior to smelting, including costs of extraction, depletion and
processing, based on the relevant stage of production. Selling, refining and
general administration costs are excluded from inventory valuation. Non-current inventory comprises ore stockpile. These in-process inventories are
measured on the absorption cost method and valued at the lower of average
production cost and net realizable value, after a reasonable allowance for
further processing costs. Costs relating to ore stockpile comprise all costs
incurred to the stage immediately prior to stockpiling, including costs of
extraction and crushing, as well as processing costs associated with ore
stockpiles, based on the relevant stage of production. F-10




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##### Table of Contents



2. SIGNIFICANT ACCOUNTING POLICIES(continued) Exploration costs Mining exploration costs, including property acquisitions and mineral and
surface rights relating to exploration stage properties, are expensed as
incurred. Development costs Development costs relating to major programs at existing mines are capitalized.
Development costs consist primarily of expenditures to initially establish a
mine and to expand the capacity of operating mines. Ordinary development costs
to maintain production are expensed as incurred. Mining assets Land is recorded at cost and not depreciated. Buildings and other non-mining
fixed assets are recorded at cost less accumulated depreciation. Actual expenditures incurred for mineral property interests, mine development
costs, mine plant facilities and equipment are capitalized to the specific mine
to which the cost relates. Amortization is calculated on a mine-by-mine basis
(i.e. the cost pools are the individual mines) using the units of production
method. Under the units of production method, the Group estimates the
amortization rate based on actual production over total proven and probable ore
reserves of the particular mine. This rate is then applied to actual costs
incurred to arrive at the amortization expense for the period. Proven and
probable ore reserves of a particular mine reflect estimated quantities of
economically recoverable reserves that can be recovered in the future from
known mineral deposits that are presently accessible. Deferred stripping costs Stripping costs incurred in open-pit operations during the production phase to
remove additional waste are charged to operating costs on the basis of the
average life of mine stripping ratio and the average life of mine costs per
ton. The average stripping ratio is calculated as the number of tons of waste
material expected to be removed during the life of mine per ton of ore mined.
The average life of mine cost per ton is calculated as the total expected costs
to be incurred to mine the orebody divided by the number of tons expected to be
mined. The average life of mine stripping ratio and the average life of mine
cost per ton is recalculated annually in light of additional knowledge and
changes in estimates. The cost of the excess stripping is capitalized as mine development costs
when the actual mining costs exceed the sum of the adjusted ore tons mined,
being the actual ore tons plus the product of the actual ore tones multiplied
by the average life of mine stripping ratio, multiplied by the life of mine
cost per ton. When the actual mining costs are below the sum of the adjusted
ore tons mined, being the actual ore tons plus the product of the actual ore
tons multiplied by the average life of mine stripping ratio, multiplied by the
life of mine cost per ton, previously capitalized costs are expensed to
increase the cost up to the average. Thus, the cost of stripping in any period
will be reflective of the average stripping rates for the orebody as a whole.
Deferred stripping costs of $3.6 million, at Porgera, are classified as mining
assets and the amounts amortized are included in the depreciation and
amortization charge for all periods presented. During fiscal 2004, $4.1 million
of deferred stripping costs were capitalized to mining assets. The deferred stripping costs are included in the calculations of impairment
tests performed in accordance with the provisions of SFAS 144, Accounting for
the Impairment or Disposal of Long-Lived Assets. Borrowing costs Interest on borrowings utilized to finance qualifying capital projects under
construction is capitalized during the construction phase as part of the cost
of the project. Other borrowing costs are expensed as incurred. No borrowing
costs were capitalized during the years ended June 30, 2004, 2003 or 2002. F-11




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##### Table of Contents



2. SIGNIFICANT ACCOUNTING POLICIES(continued) Impairment of mining assets The impairment of long-lived assets is accounted for in terms of SFAS 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset or group of assets
may not be recoverable. Recoverability of an asset or asset group is assessed
by comparing the carrying amount of an asset or group of assets to the
estimated future undiscounted net cash flows of the asset or group of assets.
Estimates of future cash flows include estimates of future gold prices and
foreign exchange rates. It is therefore reasonably possible that changes could
occur which may affect the recoverability of the Groups mining assets. If an
asset or asset group is considered to be impaired, the impairment which is
recognized is measured as the amount by which the carrying amount of the asset
or group of assets exceeds the discounted future cash flows expected to be
derived from that asset or group of assets. The asset or asset group, is the
lowest level for which there are identifiable cash flows that are largely
independent of other cash flows. The lowest level for which there are
identifiable cash flows that are largely independent of other cash flows is on
a mine-by-mine basis. Therefore the Company makes the analysis on a
mine-by-mine basis. Reclamation and closure costs SFAS 143, Accounting for Asset Retirement Obligations,or SFAS 143 was
adopted by the Group with effect from July 1, 2002 and requires that the fair
value of liabilities for asset retirement obligations be recognized in the
period in which they are incurred. A corresponding increase to the carrying
amount of the related asset, is recorded and is depreciated over the life of
the asset. Prior to the adoption of SFAS 143, the Group accrued for the
estimated reclamation and closure liability through annual charges to earnings
over the estimated life of the mine. The cumulative effect of the change in
accounting policy on the balance sheet at that date was to increase Mining
Assets by $0.55 million and increase rehabilitation liabilities by $0.72
million with a cumulative effect of change in accounting principle adjustment
charge to net earnings of $0.17 million in fiscal 2003. Environmental rehabilitation costs Where a related asset is not easily identifiable, environmental rehabilitation
costs which are based on the Groups interpretation of current environmental
and regulatory requirements are accrued as and when tailings are deposited. The
estimated costs of rehabilitation are reviewed annually and adjusted as
appropriate for changes in legislation, technology or other circumstances. Environmental rehabilitation, costs and related liabilities are based on the
Groups interpretation of current environmental and regulatory requirements are
accrued and expensed as environmental damage is incurred. The estimated costs
of rehabilitation are reviewed annually and adjusted as appropriate for changes
in legislation, technology, as additional environmental damage takes place or
other circumstances. Based on current environmental regulations and known
rehabilitation requirements, management has included its best estimate of these
obligations in its rehabilitation accrual. Environmental liabilities other than rehabilitation costs which relate to
liabilities from specific events are accrued when they are known, probable and
reasonably estimable. In South Africa, annual contributions are made to dedicated rehabilitation
trust funds to fund the estimated cost of rehabilitation during and at the end
of the life of the relevant mine. The funds contributed to the trusts,
including income earned thereon, are included under non-current assets. Revenue Revenue consists of sales of gold bullion and is recognized when the product is
delivered to the relevant refinery, Rand Refinery Limited in South Africa, N.M.
Rothschild in Australasia (for the Tolukuma Section) and AGR Matthey in Papua
New Guinea (for Porgera), at which stage title, including all risks and rewards
of ownership, passes from the Group to the buyer. F-12




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2. SIGNIFICANT ACCOUNTING POLICIES(continued) Revenue(continued) Once the gold bars reach the refinery, they are assayed to determine the gold
content of each bar before being sent for refining where it is purified to
99.9% purity and cast into troy ounce bars of varying weights. The bullion is
then sold by the refinery on the same day as the delivery, and the proceeds are
remitted to the Group within two days. Derivative instruments Under SFAS 133, Accounting for Derivative Instruments and Hedging Activities,
as amended, all derivative instruments are recognized on the balance sheet at
their fair value, unless they meet the criteria for the normal purchase normal
sale exception. On the date a derivative contract is entered into, the
derivative can be designated as (1) a hedge of the fair value of a recognized
asset or liability (fair value hedge), (2) a hedge of a forecasted transaction
(cash flow hedge), or (3) a hedge of a net investment in a foreign entity. The
Groups derivative transactions, while designed to provide effective economic
hedges under the Groups risk management policies, do not qualify for hedge
accounting. Therefore, any changes in their fair value are recognized in the
statement of operations, currently. Derivative instruments are not entered into
for trading purposes. Pension plans and other employee benefits Pension plans, which are multi-employer plans in the nature of defined
contribution plans, are funded through annual contributions. Refer Note 21. In addition, the Group makes long service bonus contributions (long-service
awards) for certain eligible employees, based on qualifying ages and levels of
service, and accrues the cost of such liabilities over the service life of the
employees on an actuarial basis. Contributions in this regard are made to a
multi-employer plan. Refer Note 21. The Group contributes to a defined contribution multi-employer medical fund for
current employees and certain retirees on an annually determined contribution
basis. No contributions are made for employees retiring after December 31,
1996. Refer Note 21. Premium and debt costs Discounts and underwriting, legal and other direct costs incurred in connection
with the issuance of debt are deferred and are amortized to interest expense
using the effective interest rate method. Taxation Deferred income and mining taxes The Group follows the liability method of accounting for deferred income and
mining tax whereby the Group recognizes the tax consequences of temporary
differences by applying current statutory tax rates applicable to future years
to differences between financial statement amounts and the tax bases of certain
assets and liabilities. Changes in deferred tax assets and liabilities include
the impact of any tax rate changes enacted during the year. A valuation allowance is raised against deferred tax assets which are not
considered more likely than not to be realizable. Secondary Taxation on Companies (STC) STC is a tax levied by the South African Revenue Services on dividends declared
and becomes payable on declaration of a dividend. STC is expensed when the
related dividend is declared. F-13




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2. SIGNIFICANT ACCOUNTING POLICIES(continued) (Loss)/profit per share (Loss)/profit per share is calculated based on the net result divided by the
weighted average number of shares in issue during the year. Fully diluted
(loss)/profit per share is based upon the inclusion of potential dilutive
shares with a dilutive effect on (loss)/profit per share. In fiscal 2004, the
shares underlying the convertible notes and the shares underlying the staff
options allocated in terms of the Employee Share Option Scheme, or ESOS, along
with their respective impact on the net (loss)/profit applicable to common
stockholders, of $3.6 million and $nil, were considered in determining the
diluted (loss)/profit per share. In fiscal 2003 the shares underlying the
convertible notes and the shares underlying the staff options allocated in
terms of ESOS, along with their respective impact on the net (loss)/profit
applicable to common stockholders, of $2.6 million and $nil, were considered in
determining the diluted loss per share. In fiscal 2002 the shares underlying
the options allocated in terms of ESOS, and their respective impact on the net
loss applicable to common stockholders, of $nil, was considered in determining
the diluted loss per share. In fiscal 2004 and 2002, a loss applicable to common stockholders of $55.8
million and $51.7 million, respectively, was recorded. As a result of the
losses recorded in fiscal 2004 and 2002, the adjustments were anti-dilutive. Stock-based compensation plans At June 30, 2004, the Company has in place an Employee Share Option Scheme,
which is described more fully in Note 21. The Group has adopted the disclosure only provisions of SFAS 123, Accounting
for Stock-Based Compensation, or SFAS 123, and SFAS 148, Accounting for
Stock-Based Compensation Transition and Disclosure and amendment of SFAS 123,
and applies Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, or APB No. 25 and related Interpretations, with respect
to its accounting for its employee based compensation plan. The difference between the option strike price and the prevailing market value
of the share at grant date is recorded as an expense over the vesting period. In accordance with APB No. 25 and related Interpretations, $2.3 million,
(fiscal 2003: $4.3 million; fiscal 2002: $2.5 million) of stock-based
compensation cost was recognized as an expense for the year ended June 30,
2004. F-14




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2. SIGNIFICANT ACCOUNTING POLICIES(continued) Stock-based compensation plans(continued) The following table illustrates the effect on net (loss)/profit applicable to
common stockholders if the Company had applied the fair value recognition
provisions of SFAS 123 to its employee based compensation plan (thousands
except for earnings per share information): Year
    
    Year
    
    Yearended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002Net (loss)/profit applicable to common stockholders- as stated
    
    
    (55,750
    )
    
    
    11,374
    
    
    
    (51,709
    )- add back: stock-based compensation costs
included in statement of operations, net of
related tax effects
    
    
    2,310
    
    
    
    4,313
    
    
    
    2,504- less: total stock-based compensation costs
determined under fair value based method, net of
related tax effects
    
    
    (3,700
    )
    
    
    (4,861
    )
    
    
    (2,776
    )- pro-forma
    
    
    (57,140
    )
    
    
    10,826
    
    
    
    (51,981
    )Basic (loss)/profit per share- as stated (cents)
    
    
    (26
    )
    
    
    6
    
    
    
    (32
    )- pro-forma (cents)
    
    
    (26
    )
    
    
    6
    
    
    
    (32
    )Diluted (loss)/profit per share- as stated (cents)
    
    
    (26
    )
    
    
    4
    
    
    
    (32
    )- pro-forma (cents)
    
    
    (26
    )
    
    
    4
    
    
    
    (32
    )
 Comparatives Comparatives have been reclassified, where necessary to conform to the current
years presentation. Recent pronouncements In January 2003, the Financial Accounting Standards Board, or FASB, issued FASB
Interpretation No. 46, Consolidation of Variable Interest Entities, or FIN
No. 46. This interpretation requires that if an entity has a controlling
interest in a variable interest entity, the assets, liabilities and results of
activities of the variable interest entity should be included in the
consolidated financial statements of the entity. The provisions of this
interpretation are effective for all arrangements entered into after January
31, 2003. For those arrangements entered into prior to February 1, 2003, the
provisions of this interpretation were required to be adopted at the beginning
of the first interim or annual period beginning after June 15, 2003. However, in December 2003 the FASB published a revision to this interpretation
(hereafter referred to as FIN No. 46R) to clarify some of the provisions of
this interpretation and to exempt certain entities from its requirements.
Under the new guidance, there are new effective dates for companies that have
interests in structures that are commonly referred to as special-purposes
entities. These rules are effective for financial statements for periods
ending after March 15, 2004. The adoption of FIN No. 46R did not have any
impact on the Groups financial statements, as it did not have any variable
interest entities. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, or SFAS 149, to amend and
clarify financial accounting and reporting for derivative instruments embedded
in other contracts and for hedging activities under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. This statement requires
that contracts with comparable characteristics be accounted for similarly and
clarifies under what circumstances a contract with an initial net investment
meets the characteristics of a derivative as discussed in SFAS No. 133. In
addition, it clarifies when a derivative contains a financing component that
warrants special reporting in the statement of cash flows. This statement is
effective for contracts entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The adoption of SFAS 149
did not have an impact on the Groups financial position or results of
operations. F-15




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2. SIGNIFICANT ACCOUNTING POLICIES(continued) Recent pronouncements(continued) In March 2004, the EITF reached final consensus on the remaining issues related
to Issue 03-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. A consensus was reached regarding
disclosures about unrealized losses on available-for-sale debt and equity
securities accounted for under SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, and No. 124, Accounting for
Certain Investments Held by Not-for-Profit Organizations. The guidance for
evaluating whether an investments is other-than-temporarily impaired should be
applied in other-than-temporary impairments evaluations made in reporting
periods beginning after June 15, 2004. The disclosures are effective in annual
financial statements for fiscal years ending after December 15, 2003, for
investments accounted for under SFAS 115 and 124. In March 2004, the EITF reached final consensus on Issue 03-06, Participating
Securities and the Two-Class Method under FASB Statement No. 128, Earnings per
Share. Issue 03-6 provides guidance in determining when a security
participates in dividends such that the two-class method must be used to
calculate earnings per share. This consensus applies to reporting periods
beginning after March 31, 2004. The Company is in the process of evaluating the
impact of this consensus on its earnings per share calculations. The cumulative
preference shares in issue, will need to be considered in this regard, however
as dividends will not be payable on these until the Argonaut ore reserves are
revenue producing, these are not expected to have a significant impact. In March 2004, the EITF reached final consensus on Issue 04-3, Mining Assets:
Impairment and Business Combinations. As there is a diversity in practice in
estimating cash flows used to value mining assets or assess those assets for
impairment under SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, questions arise as to the appropriateness of including in
those cash flows (a) cash flows for a mining assets potential reserves value
beyond proven and probable (VBPP) and (b) estimates of future market price
changes. The EITF concluded the following: (1) The value attributable to VBPP and the effects of anticipated
fluctuations in the future market price of minerals should be considered when
an entity allocates the purchase price of a business combination to mining
assets. (2) An entity should consider the future cash flows associated with VBPP
in the cash flow analysis used to test mining assets for impairment under
Statement 144. (3) An entity should consider the effects of anticipated fluctuations in
the future market price of minerals in the cash flow analysis used to test
mining assets for impairment under Statement 144. This consensus applies prospectively to periods beginning after March 31, 2004. 3. ACQUISITION AND DISPOSAL OF BUSINESSES 2004 acquisitions Net-Gold Services Limited With effect from April 28, 2004, the closing date, the Group acquired 50.25% of
the shares of Net-Gold Services Limited, a subsidiary of G.M. Network Limited.
This entity brokers the payment of purchases made by subscribers, through
settlement in gold. The results of Net-Gold Services Limiteds operations have
been included in the consolidated financial statements since that date.
Included in the acquisition is an option to exchange the Groups shareholding
in Net-Gold Services Limited for approximately 14.3% of the shares in G.M.
Network Limited, a non-public company that focuses on the development of
patents and other intellectual property specifically in connection with
electronic trading on the Internet. This option is valid until December 31,
2007. F-16




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3. ACQUISITION AND DISPOSAL OF BUSINESSES(continued) The estimated fair value of the assets and liabilities acquired as part of this
transaction were as follows: $000Cash and cash equivalents
    
    
    1,378Receivables
    
    
    44Inventories
    
    
    1,034Accounts payable and accrued liabilities
    
    
    (655
    )Fair value of net assets at date of acquisition
    
    
    1,80150.25% thereof
    
    
    905Goodwill arising on acquisition (refer Note 14)
    
    
    1,095Consideration
    
    
    2,000Less cash and cash equivalents of acquired entity
    
    
    (1,378
    )Net consideration
    
    
    622Settled by way of cash and cash equivalents
    
    
    622
 Porgera Joint Venture With effect from October 14, 2003, the Group acquired the shares in Orogen
Minerals (Porgera) Limited, or OMP, and Mineral Resources Porgera Limited, or
MRP. The transaction was affected through the amalgamation of OMP, MRP and the
Companys wholly-owned subsidiary, Dome Resources (PNG) Limited. OMP changed
its name to DRD (Porgera) Limited. This resulted in the Company acquiring a 20%
interest in the Porgera Joint Venture in Papua New Guinea. The Porgera mines
main business focus is the extraction of gold. The estimated fair value of the assets and liabilities acquired as part of this
transaction were as follows: $000Cash and cash equivalents
    
    
    1,219Receivables
    
    
    3,036Taxation receivable
    
    
    1,877Inventories
    
    
    9,504Mining assets
    
    
    63,812Non-current inventories
    
    
    27,826Accounts payable and accrued liabilities
    
    
    (6,659
    )Deferred income and mining tax
    
    
    (19,799
    )Provision for environmental rehabilitation
    
    
    (3,682
    )Fair value of attributable net assets at date of acquisition (20% interest)
    
    
    77,134Attributable net assets at date of acquisition
    
    
    77,134Less cash and cash equivalents of acquired entity
    
    
    (1,219
    )Net consideration
    
    
    75,915Settled by way of cash and cash equivalents
    
    
    59,167Settled by way of shares issued
    
    
    16,748Net consideration
    
    
    75,915
 F-17




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3. ACQUISITION AND DISPOSAL OF BUSINESSES(continued) Porgera Joint Venture(continued) The fair value of the 6,643,902 no par value shares issued was $16.7 million,
determined based on the prevailing market value of Durban Roodepoort Deep,
Limited shares on November 22, 2003 (refer Note 19), in final settlement of the
purchase price determined on October 14, 2003. Fortis Limited With effect May 21, 2004, the Group acquired the shares in Fortis Limited, or
Fortis, a company dealing with insurance and reinsurance activities, in Papua
New Guinea. Fortis was acquired for a consideration of $712,000, the only asset
of Fortis being cash and cash equivalents of $712,000. 2004 disposals The Group made no disposals during the year. 2003 acquisitions The Group made no acquisitions during the year. 2003 disposals Crown Gold Recoveries (Pty) Limited Effective July 1, 2002, the Company engaged in a transaction consistent with
its black economic empowerment strategy by entering into a share purchase
agreement with the Industrial Development Corporation of South Africa, or IDC,
and Khumo Bathong Holdings (Pty) Limited, or KBH. Under this share purchase
agreement, the Company sold 57% of its interest in Crown Gold Recoveries (Pty)
Limited, or CGR, to IDC and 3% of its interest in CGR to KBH for a total
consideration of $11.7 million, and realized a profit of $5.3 million. KBH obtained an option to purchase IDCs shares in CGR. IDC and KBH also each
purchased their respective share of three shareholder loans, aggregating $21.0
million owed by CGR to the Company. As part of this transaction, the Company loaned KBH $0.7 million to fund that
entitys initial purchase of the 3% interest in CGR. The loan bears interest at
the prime rate of The Standard Bank of South Africa on overdraft plus 3% per
annum. This loan has a term of five years from July 1, 2002 and is repayable on
demand. This loan was secured by a pledge of 49,928,824 shares of ERPM held by
KBH. However, since the acquisition of ERPM by CGR, the loan is no longer
secured. As of June 30, 2004, the loan has been impaired (Refer Note 13). Shortly thereafter, KBH chose to exercise its option to purchase all of IDCs
interest in CGR. As a result, with effect from July 15, 2002, the share capital
of CGR is now owned 40% by the Company and 60% by KBH. Also, as part of this
transaction, KBH repaid IDCs portion of the shareholder loans on behalf of
CGR. Consequently, CGR now owes 60% of the loans to KBH and 40% of the loans to
the Company. As a result of this transaction, CGR is no longer a subsidiary of the Company.
The results of operations and the financial position of CGR are no longer
consolidated into the Groups annual financial statements. The Companys
remaining 40% interest in CGR is equity accounted as an investment in an
associate. F-18




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3. ACQUISITION AND DISPOSAL OF BUSINESSES(continued) The aggregate carrying value of the assets and liabilities disposed as part of
this transaction were as follows: $000Cash and cash equivalents
    
    
    2,738Other current assets
    
    
    2,730Mining assets
    
    
    13,886Other assets
    
    
    739Current liabilities
    
    
    (6,310
    )Provision for environmental rehabilitation
    
    
    (2,317
    )Long-term liabilities
    
    
    (882
    )Net assets
    
    
    10,58460% thereof
    
    
    6,350Cash proceeds received
    
    
    11,652Profit realized on sale of subsidiary
    
    
    5,302Impairment of loan due by CGR
    
    
    (4,164
    )Cash proceeds received
    
    
    11,652Less cash and cash equivalents of entity disposed of
    
    
    (2,738
    )Net cash flow on disposal of subsidiary
    
    
    8,914
 2002 acquisitions The Group made no acquisitions during the year. 2002 disposals The Group made no disposals during the year. 4. RELATED PARTY TRANSACTIONS The Company has related party relationships with its associates and with its
directors and senior management. All contracts with related parties for the supply of goods and services are
approved in accordance with the Companys procurement policies. The contract
terms are compared to similar suppliers of goods and services to benchmark that
the contract is on market related terms. Mr. C. Press Loan During fiscal 2003, Mr. C. Press, a director of Net-Gold Services (Pty)
Limited, or Net-Gold, a consolidated subsidiary, loaned an amount of US$24,946
to Net-Gold. This loan is interest free, unsecured and has no fixed terms of
repayment. The funds were used for short-term working capital advances. As at
June 30, 2004 the full balance was still outstanding. F-19




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4. RELATED PARTY TRANSACTIONS(continued) Rand Refinery Agreement On October 12, 2001, we entered into an agreement with Rand Refinery Limited,
or RRL, for the refining and sale of all of our gold produced in South Africa.
Under the agreement, RRL performs the final refining of our gold and casts it
into troy ounce bars. Then, RRL sells the gold on the same day as delivery, for
the London afternoon fixed price on the day the gold is sold. In exchange for
this service, we pay RRL a variable refining fee plus fixed marketing, loan and
administration fees. Mr. W.G. Koonin, our Divisional Director: Group Finance,
is also a director of RRL and has been appointed as a member of their audit
committee. Also, Mr. I.D. Graulich, our General Manager: Investor Relations, is
an alternate director to Mr. W. G. Koonin. We currently own 10.6% of RRL (which
is jointly owned by South African mining companies). Consultancy Service Agreement The Company entered into a consultancy service agreement with one of our
non-executive directors, Mr. N. Goodwin. Under this agreement, Mr. N. Goodwin
provided the Company with project management services at the Argonaut Project.
This agreement took effect on September 2, 2002. The agreement was for a fixed
one year term from September 2, 2002, so long as the Argonaut Project was
ongoing. Under this agreement, Mr. N. Goodwin was paid a fee of $400 per day.
Mr. Goodwin worked for 128 days under this agreement for a total amount of
$51,200. Mr. N. Goodwin resigned as a non-executive director effective January
29, 2003. This agreement was terminated as of February 26, 2003. Dr. M.P. Ncholo Funeral Assistance During fiscal 2004, financial assistance was provided by ERPM, our 40%
associate company with KBH, to the family of Dr. M.P. Ncholo, a non-executive
director of our Company, and executive director of KBH, with regards to funeral
expenses relating to the death of a family member who was a temporary employee
of ERPM. In terms of ERPMs practice, the funds were advanced on compassionate
grounds to assist the family with costs associated with the funeral. This
amounted to R90,447 ($14,414). At November 1, 2004 this amount was still
outstanding in the accounts of ERPM. Issue of shares to Khumo Bathong Holdings (Pty) Limited KBH subscribed for 4,794,889 of the Companys ordinary shares (representing
2.06% of its outstanding shares at June 30, 2004) for a cash subscription price
of $6.8 million during the year ended June 30, 2003. Purchase of 100% of East Rand Proprietary Mines Limited by CGR In October 2002, CGR entered into an agreement to acquire 100% of the
outstanding share capital of and loan accounts in East Rand Proprietary Mines
Limited, or ERPM, for $11.0 million. In connection with this transaction, the
Company provided ERPM with a loan of $1.3 million. In addition, an amount of
$8.0 million was lent by the Company to CGR which CGR advanced to the then
shareholders of ERPM as an interest free loan. CGR received from the
shareholders, as security for the loan, a pledge of the entire issued share
capital of ERPM and a cession of the shareholders claim to CGR. The South
African competition authorities approved the transaction and the $8.0 million
loan is deemed to be part payment of the purchase price of $11.0 million by CGR
for the acquisition of the shares and the claims of ERPM. We have recognized
losses generated by CGR against this loan and the loan is therefore carried at
nil value. F-20




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4. RELATED PARTY TRANSACTIONS(continued) Transactions with Associate Companies During the year ended June 30, 2004, the Company earned $1.0 million (fiscal
2003: $1.3 million) in management fees from CGR and $2.0 million (fiscal 2003:
$1.4 million) in management fees from ERPM, of which $0.3 million was
outstanding at June 30, 2004 (June 30, 2003: $1.3 million). At June 30, 2004
CGR owed the Group $34.3 million (June 30, 2003: $25.9 million), KBH owed the
Group $1.1 million (June 30, 2003: $0.8 million), and ERPM owed the Group
$10.2 million (June 30, 2003: $3.7 million). Interest amounting to $2.9
million (fiscal 2003: $3.1 million) was payable to the Group on the loans to
CGR, $0.1 million (fiscal 2003: $0.1 million) was payable to the Group on the
loans to KBH, and $0.7 million (fiscal 2003: $0.2 million) was payable to the
Group on the loans to ERPM for the year ended June 30, 2004. No interest income
on the loans was recorded as it was not considered to be recoverable. No
dividends were received from associates in fiscal 2004 or fiscal 2003. As of
June 30, 2004, we have recognized losses generated by CGR and ERPM against
these loans and they are therefore carried at nil value (refer Note 13). Transactions with Consolidated African Mines Limited, or CAM, and JCI Gold
Limited, or JCI Consolidated African Mines Limited, or CAM, JCI Gold Limited, or JCI, Western
Areas Limited and Laverton Gold NL were all related parties by reason of having
common directorships, either through an individual or through a family
relationship. All of these companies were, at the time the transactions were
consummated, related, either directly or indirectly, to Mr. R.A.R. Kebble who
was at that time Chairman of the Company. Either Mr. R.A.R. Kebble or his son,
Mr. B. Kebble, were directors of these companies. These companies are no longer
related parties of the Company, effective June 30, 2002. Subsequent to that
date there were no transactions with these companies. Western Areas Limited A total of R111.3 million ($18.3 million) was owed by us to Western Areas
Limited, or WAL, for advances made between December 1999 and January 2000. The
proceeds of the loan were used as follows:  
    
    between December 14, 1999 and January 11, 2000, the Company
purchased 7,187,000 ordinary shares of Randgold, 6,268,000 ordinary
 shares of JCI and 15,128,500 shares of CAM (the Sale Shares) for a
total of R98.2 million ($16.2 million) in contemplation of a proposed
group restructuring with affiliated companies; and  
    
    to purchase 812,100 ordinary shares of Randfontein Estates
Limited for a purchase price of R8.6 million ($1.4 million) together
with 2,349,000 options at a purchase price of R4.4 million ($0.7
million). These shares and options were purchased as part of a
strategy to consolidate the various companies in which CAM, JCI and
WAL had an interest into one corporate group. The Randfontein Estates
Limited shares and options were sold on January 15, 2001 and the
proceeds retained. The Company entered into an agreement with WAL regarding its debt on or about
April 25, 2001. In this agreement, the Company acknowledged, that its debt to
WAL amounted to R132.8 million ($17.3 million) as of March 1, 2001. CAM and JCI
agreed to be jointly and severally liable as sureties for this amount. In August 2001, the Company and WAL entered into an agreement fixing the
interest rate on the debt owed to WAL by the Company at 14%. On or about October 9, 2001, the Company concluded a contract of guarantee and
cession as security for payment with Investec Bank Limited, or Investec. Under
the terms of this agreement, the Company agreed to guarantee WALs obligations
to Investec up to the value of the Sale Shares. Also, the Company ceded the
Sale Shares, as security, to and in favor of Investec allowing Investec to sell
the Sale Shares in the event that WAL defaulted. F-21




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4. RELATED PARTY TRANSACTIONS(continued) Western Areas Limited(continued) The agreement with Investec describes the debt owed to the Company by CAM and
JCI, including the monthly option fee then outstanding, as R20.8 million ($2.6
million) plus any further monthly option fee as of June 30, 2001. This
agreement also states that this amount and all monthly option fees accruing
after June 30, 2001 would bear interest at the rate of 1% above the prime rate
charged by The Standard Bank of South Africa. This agreement also states that the debt owed to the Company by CAM and JCI
would become immediately due and payable upon the occurrence of a default by
WAL. Such amount to be paid directly to WAL by CAM and JCI on the Companys
behalf with any excess being repaid to the Company. On or about September 26, 2001, the Sale Shares were ceded to Investec and WAL
granted the Company a put option in respect of the Sale Shares at a total price
of at least R116.4 million ($13.3 million). CAM and JCI undertook to apply all
dividends received from WAL in respect of their shareholdings to the reduction
of all amounts owed by them to the Company. The parties agreed that the monthly
option fee would be payable to exercise their rights under the call option for
the duration of the Companys guarantee and cession and agreed that if Investec
exercised its rights under that guarantee, the rights of CAM and JCI under the
call option would terminate. On or about December 13, 2001, WAL repaid its debt to Investec. On December 13,
2001, the Company put the Sale Shares to WAL in satisfaction of the debt which
amounted to R149.4 million ($14.4 million) including interest owed by the
Company resulting in a loss of $0.9 million. The option fee payable to the Company by CAM and JCI for the period of November
2001 up to December 13, 2001 amounted to R21.6 million ($2.0 million) plus VAT
in the amount of R3.0 million ($0.3 million) plus interest in the amount of
R1.7 million ($0.2 million) at the prescribed rate of 15.5% per annum from
January 25, 2001 to the date of payment. On December 13, 2001, the Company invoiced JCI on behalf of JCI and CAM in
these amounts. On December 14, 2001, the Company made a demand on CAM and JCI
for the amount of R32.8 million ($3.0 million). On December 24, 2001, the
Companys attorneys made demands on CAM and JCI for the same amount. The
Company has instituted legal proceedings against JCI and CAM for the recovery
of these amounts. The matter was heard on August 30, 2004. At this date
partial settlement of certain small claims related to the larger JCI Ltd and
CAM Ltd claim, to the value of R2.4 million ($0.4 million), was awarded by the
High Court of Johannesburg, however the Company has provided in full in the
financial year ended June 30, 2002, for the balance outstanding by CAM against
the probable bad debt. Refer Note 8. On October 21, 2004, the High Court of Johannesburg ordered JCI Ltd and CAM Ltd
to pay us an amount of R35.7 million ($5.5 million), plus interest and costs,
including the costs of two counsel. JCI Ltds and CAM Ltds counterclaim to
recover the earlier part-payment was also dismissed with costs. JCI Ltd and CAM
Ltd made an application to the High Court of Johannesburg for leave to appeal,
which was rejected. F-22




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##### Table of Contents



4. RELATED PARTY TRANSACTIONS(continued) Laverton Gold NL Laverton Gold NL is also a related party because Mr. J. Stratton, a director of
CAM and Consolidated African Mines Jersey, or CAMJ, was a corporate advisor to
the Company. In May 2000, the Companys board appointed a special committee to investigate
irregular related party transactions involving Mr. J. Stratton from the
Companys office in Perth, Australia (which has now been closed). The related
party transactions involved the issuance of approximately 8.2 million Company
ordinary shares (the Rawas Shares) in exchange for assets of the Rawas group,
that owned the Rawas gold mine in Indonesia, pursuant to agreements between the
Company and Laverton Gold NL, an Australian listed company. During July and October 1999, the Company allotted and issued the Rawas Shares
at the market value of $12.4 million to several creditors of Laverton or its
subsidiaries, including CAMJ, JCI and related companies, in anticipation of
receiving shares of, and claims against, the companies in the Rawas Group and
the rights to the Rawas mine. The allocation of the Rawas Shares was based on
each creditors relative exposure. No proper valuation proceedings were
conducted prior to the issuance. According to the evidence gathered during the course of the investigation, the
Companys board determined that, faced with pressure from its creditors (i)
Laverton arranged the issue by the Company of its ordinary shares to creditors
in consideration for assets of no value, for the benefit of Laverton and its
creditors and not for the Company; (ii) to avoid the South African Companies
Act requirement for a special resolution, the Company had issued the Rawas
Shares at an inflated issue price unrelated to the true value of the
consideration; (iii) as the special resolution was not obtained, the allotment
and issue of ordinary shares for the Rawas transaction was unlawful and
invalid. Upon discovery by the board of the unlawful transactions, the board
decided to rescind the agreements with Laverton NL during fiscal 2001. At that
time, the Company had received ownership of the claims against, but not the
shares of, the companies in the Rawas Group. As a result of this rescission the
shares of the Rawas Group were never delivered to the Company. Because of subsequent splits and consolidations resulting in validly issued
ordinary shares being consolidated with invalid Rawas Shares, it was not
possible to distinguish the Rawas Shares from the other issued ordinary shares
of the Company. None of the Rawas Shares, and their holders at the time, could
be identified and, therefore, none of the Rawas Shares could be removed from
the Companys members register. In July 2002 the High Court of South Africa
validated Rawas shares. The $12.4 million value of the Rawas shares was credited to stated capital in
the financial statements. During fiscal 2000, the Company wrote off the
attributed $12.4 million value of the shares on the statement of operations as
aborted acquisition costs and loans made by the Company to members of the Rawas
Group, amounting to $2.9 million, as no amounts have been recovered on these
loans. The Company has instituted various legal proceedings in South Africa and
Australia in connection with these related party transactions. Mr. R.A.R. Kebble A loan received from Mr. R.A.R. Kebble, amounting to R5.3 million ($0.51
million) was repaid during the year ended June 30, 2002. Interest on this
amount during that fiscal year amounted to R0.4 million ($0.04 million). Executive directors On May 23, 2001, the executive directors made advances to the Company for
working capital purposes which bear interest. The loans were repaid on December
31, 2001, with $30,000 in interest paid during fiscal 2002. F-23




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##### Table of Contents



4. RELATED PARTY TRANSACTIONS(continued) FW Services CC During 2002, the Company paid $0.7 million to FW Services CC for services
provided by FW Services CC, for the repair of electrical motors in pumps and
winches. FW Services CC is a related party to Mr. F. Weideman, a previous
executive director of the Company who resigned as a director on March 1, 2002.
In addition, during 2002 the Company paid $0.03 million to Mr. N. Pretorius for
services rendered as a legal advisor to the Company. Mr. N. Pretorius is
related to Mr. F. Weideman and was subsequently appointed as the Companys
Legal Advisor in May 2003. Libra Accounting CC During 2002, the Company made use of Libra Accounting CC for corporate
administrative accounting services, a related party to Mr. W.T Beer, the Chief
Administrative Officer of the Company. During 2002, the Company paid $0.1
million to Libra Accounting CC for services rendered. 5. EMPLOYMENT TERMINATION COSTS Year
    
    Year
    
    Yearended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000Blyvoor Mine (a)
    
    
    899
    
    
    
    85
    
    
    
    North West Mine (b)
    
    
    7,064
    
    
    
    821
    
    
    
    308West Wits Mine
    
    
    
    
    
    
    53
    
    
    
    Other (c)
    
    
    
    
    
    
    542
    
    
    
    807,963
    
    
    
    1,501
    
    
    
    388
 (a) In an effort to reduce the cost structure at this South African mining
operation, voluntary retrenchments were offered to employees during 2004, and
approximately 220 employees accepted the offer. This gave rise to an expense of
$0.9 million for the year ended June 30, 2004. No balance was outstanding with
regards to these payments as at June 30, 2004. (b) On July 21, 2003, the Company entered into a 60-day review period on the
North West Operations designed to restore the operations to profitability. On
August 25, 2003, management announced a proposal to meet this target. This
proposal was submitted to all stakeholders, including organized labor, the
Department of Labour and the Department of Minerals and Energy for their input.
Agreement was reached with all labor organizations and the process was finally
completed on September 21, 2003, with some 2,400 employees retrenched with the
placing of certain infrastructure (Number 6 Shaft at the Harties Section) on a
care and maintenance program. In addition Number 11 Shaft at the Buffels
Section of the North West Operations was closed in April 2004 leading to the
retrenchment of 600 employees. The total retrenchment costs for the North West
Operations for fiscal 2004, were $7.1 million. No balance was outstanding with
regards to these payments as at June 30, 2004. During fiscal 2003, the Group initiated an exercise between the North West
Operations and the Blyvoor Section, to centralize certain services provided to
both mines. This resulted in the retrenchment of 363 employees at a cost of
$0.8 million. During fiscal 2002, the North West Operations initiated a voluntary
retrenchment project, to reduce the production cost base. This resulted in the
retrenchment of 133 employees at a cost of $0.3 million. (c) During fiscal 2003 two directors retired from active duty. Retrenchment
payments of $0.1 million were made to Mr. V. Hoops (HR Director) and $0.4
million to Mr. F. Coetzee (Chief Operating Officer). No balance was outstanding
with regards to these payments as at June 30, 2003.  F-24




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##### Table of Contents



6. IMPAIRMENT OF ASSETS Year
    
    Year
    
    Yearended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000Mining assets- Durban Deep Section (a)
    
    
    
    
    
    
    
    
    
    
    2,167- North West Operations (b)
    
    
    1,373
    
    
    
    
    
    
    
    Other assets (c)
    
    
    1,868
    
    
    
    
    
    
    
    Goodwill (d)
    
    
    1,025
    
    
    
    
    
    
    
    4,266
    
    
    
    
    
    
    
    2,167
 (a) In view of continued low Rand gold prices and high cost of production, and
cessation of operational synergies between Durban Deep Section and Randfontein
Estates, underground mining operations ceased permanently at Shaft Numbers 6, 7
and 9 and the Circular Shaft. This closure of the underground mining operations
has resulted in a write down to zero of the related mining assets. (b) In view of continued low Rand gold prices, the planned expansion project at
the South Plant of the North West Operations was abandoned. Accordingly initial
capital expenditures incurred were written off. (c) Consistent with the Groups black economic empowerment strategy, the West
Wits Operations assets were sold during fiscal 2003 to a black economic
empowerment partner, Bophelo Trading (Pty) Limited, subsequently renamed Mogale
Gold (Pty) Limited. During fiscal 2004, Mogale has been placed under judicial
management and the balance of the purchase price owed is therefore seen to be
irrecoverable. In addition, funds advanced to Khumo Bathong Holdings (Pty)
Limited have been impaired as the most significant asset owned by this entity
is its 60% interest in CGR and ERPM, which are currently experiencing liquidity
problems. (d) As a result of the losses recorded by Net-Gold Services Limited, goodwill
recorded on the acquisition has been impaired (refer Note 14). F-25




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##### Table of Contents



7. DEFERRED INCOME AND MINING TAX Year
    
    Year
    
    Yearended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000(Loss)/profit before tax and other itemsSouth Africa
    
    
    (43,231
    )
    
    
    69,891
    
    
    
    (89,977
    )Foreign
    
    
    10,545
    
    
    
    (7,127
    )
    
    
    (4,596
    )(32,686
    )
    
    
    62,764
    
    
    
    (94,573
    )(a) Income and mining tax and expensesCurrent income and mining taxForeign
    
    
    (7,165
    )
    
    
    
    
    
    
    Current non-mining income taxSouth Africa
    
    
    (223
    )
    
    
    
    
    
    
    (36
    )Deferred income and mining taxSouth Africa
    
    
    (5,532
    )
    
    
    (59,890
    )
    
    
    42,855Foreign
    
    
    (1,310
    )
    
    
    (330
    )
    
    
    45Prior year rate change
    
    
    
    
    
    
    18,455
    
    
    
    Secondary tax on companies
    
    
    
    
    
    
    
    
    
    
    Total income and mining tax (expense)/benefit
    
    
    (14,230
    )
    
    
    (41,765
    )
    
    
    42,864
 Mining tax on mining income in South Africa is determined based on a formula
which takes into account the profit and revenue from mining operations during
the year. Non-mining income, which consists primarily of interest, is taxed at
a standard rate. The tax rates applicable to the mining and non-mining income
of a gold mining company depends on whether the company has elected to be
exempt from the Secondary Tax on Companies, or STC. STC is a tax on dividends
declared, which is payable by the company declaring the dividend, and, at
present, the STC tax rate is equal to 12.5%. In 1993, all existing gold mining
companies had the option to elect to be exempt from STC. If the election was made, a higher tax rate would apply for both mining and
non-mining income. In fiscal 2004, 2003 and 2002, the tax rates for taxable
mining and non-mining income, for companies that elected the STC exemption were
46% and 38%, respectively. During those same years the tax rates for companies
that did not elect the STC exemption were 37% and 30%, respectively. In 1993,
the Company elected not to be exempt from STC, as this would have meant that
the Company would have been liable for normal taxation at the higher rates of
46% for mining income and 38% for non-mining income. The Company, having chosen
not to be subject to the STC exemption, is subject to 37% tax on mining income
and 30% for non-mining income. However, with the exception of Blyvoor, all of
the Companys subsidiaries elected the STC exemption. Any dividends paid by
Blyvoor, being a wholly-owned subsidiary of the Company, would be exempt from
STC. Any dividends paid by the Company, to the extent that they are paid out
of income from Blyvoor, will be subject to STC.  F-26




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##### Table of Contents



7. DEFERRED INCOME AND MINING TAX(continued) South African deferred taxation has been provided at the effective mining rate
applicable in terms of the mining tax formula to the relevant operations at
either 37% or 46% (fiscal 2003: 37% or 46%; fiscal 2002: 30%), while the
Australasian deferred tax has been provided at the Australian statutory tax
rate of 30% (fiscal 2003: 30%; fiscal 2002: 30%). Material items causing the
Groups income tax provision to differ from the estimated effective mining tax
rates were as follows: Year
    
    Year
    
    Yearended
    
    ended
    
    endedJune 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000Mining tax at estimated effective rate
    
    
    11,772
    
    
    
    (16,549
    )
    
    
    26,540Non-mining tax at statutory rate
    
    
    5,645
    
    
    
    (19
    )
    
    
    (1,264
    )Foreign tax at statutory rates
    
    
    (6,545
    )
    
    
    
    
    
    
    2,099Taxation at normal rates
    
    
    10,871
    
    
    
    (16,568
    )
    
    
    27,375Non-deductible expenditure
    
    
    (21
    )
    
    
    (9,904
    )
    
    
    (9,478
    )Non-taxable income
    
    
    452
    
    
    
    8,105
    
    
    
    1,114Additional tax expense relating to the prior year
    
    
    (223
    )
    
    
    
    
    
    
    Rate change
    
    
    
    
    
    
    18,455
    
    
    
    Valuation allowances
    
    
    (25,309
    )
    
    
    (41,853
    )
    
    
    23,853Income and mining tax (expense)/benefit as reported
    
    
    (14,230
    )
    
    
    (41,765
    )
    
    
    42,864
 (b) Deferred income and
mining tax liabilities and assets: June 30,
    
    June 30,2004
    
    2003$000
    
    $000South AfricaDeferred income and mining tax liabilities and assets on the balance sheet
as of June 30, 2004 and 2003, relate to the following:Gross deferred income and mining tax liabilities:
    
    
    (30,474
    )
    
    
    (29,793
    )Mining assets
    
    
    (30,474
    )
    
    
    (29,052
    )Inventories
    
    
    
    
    
    
    (741
    )Gross deferred income and mining tax assets:
    
    
    126,582
    
    
    
    117,079Assessable tax loss carried forward
    
    
    96,338
    
    
    
    60,152Unredeemed capital expenditure
    
    
    23,743
    
    
    
    29,851Provision for environmental rehabilitation
    
    
    1,590
    
    
    
    2,154Financial instrument liability
    
    
    1,143
    
    
    
    15,315Inventories
    
    
    28
    
    
    
    Other provisions
    
    
    3,740
    
    
    
    9,607Deferred income and mining tax valuation allowances
    
    
    (96,108
    )
    
    
    (82,176
    )Deferred income and mining tax (liabilities)/assets
    
    
    
    
    
    
    5,110Net deferred income and mining tax liability - long-term
    
    
    (982
    )
    
    
    (3,756
    )Net deferred income and mining tax asset - current
    
    
    982
    
    
    
    8,866
 F-27




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7. DEFERRED INCOME AND MINING TAX(continued) June 30,
    
    June 30,2004
    
    2003$000
    
    $000AustralasiaDeferred income and mining tax liabilities and assets on the balance sheet
as of June 30, 2004 and 2003, relate to the following:Gross deferred income and mining tax liabilities:
    
    
    (23,780
    )
    
    
    Mining assets
    
    
    (13,920
    )
    
    
    Inventories
    
    
    (9,852
    )
    
    
    Other
    
    
    (8
    )
    
    
    Gross deferred income and mining tax assets:
    
    
    2,932
    
    
    
    Assessable tax loss carried forward
    
    
    499
    
    
    
    Provision for environmental rehabilitation
    
    
    1,584
    
    
    
    Other provisions
    
    
    849
    
    
    
    Deferred income and mining tax valuation allowances
    
    
    (260
    )
    
    
    Deferred income and mining tax liabilities
    
    
    (21,108
    )
    
    
    Net deferred income and mining tax liability - long-term
    
    
    (12,022
    )
    
    
    Net deferred income and mining tax liability - current
    
    
    (9,086
    )
    
    
    TotalDeferred
income and mining tax liabilities and assets on the balance sheet as
of June 30, 2004 and 2003, relate to the following:Gross
deferred income and mining tax liabilities:
    
    
    (54,254
    )
    
    
    (29,793
    )Mining assets
    
    
    (44,394
    )
    
    
    (29,052
    )Inventories
    
    
    (9,852
    )
    
    
    (741
    )Other
    
    
    (8
    )
    
    
    Gross
deferred income and mining tax assets:
    
    
    129,514
    
    
    
    117,079Assessable
tax loss carried forward
    
    
    96,837
    
    
    
    60,152Unredeemed
capital expenditure
    
    
    23,743
    
    
    
    29,851Provision
for environmental rehabilitation
    
    
    3,174
    
    
    
    2,154Financial
instrument liability
    
    
    1,143
    
    
    
    15,315Inventories
    
    
    28
    
    
    
    Other
provisions
    
    
    4,589
    
    
    
    9,607Deferred
income and mining tax valuation allowances
    
    
    (96,368
    )
    
    
    (82,176
    )Deferred
income and mining tax (liabilities)/assets
    
    
    (21,108
    )
    
    
    5,110Net deferred income and mining tax liability - long-term
    
    
    (13,004
    )
    
    
    (3,756
    )Net deferred income and mining tax liability - current
    
    
    (8,104
    )
    
    
    Net deferred income and mining tax asset - current
    
    
    
    
    
    
    8,866
 The classification of deferred income and mining tax assets and liabilities is
based on the related asset or liability creating the deferred tax. Valuation
allowances have been provided on deferred tax assets arising out of assessed
losses and unredeemed capital expenditure because it is more likely than not
that these losses and unredeemed capital expenditures will not be utilized in
the foreseeable future. The valuation allowance was $63.3 million as of July 1, 2001. During the years
ending June 30, 2002, 2003 and 2004, the valuation allowance decreased by $56.3
million and increased by $75.2 million and $14.2 million respectively. These
movements include foreign exchange differences. F-28




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##### Table of Contents



7. DEFERRED INCOME AND MINING TAX(continued) As at June 30, 2004 and
June 30, 2003 the Group had estimated tax losses
carried forward consisting of: UnredeemedcapitalTax losses
    
    expenditure2004
    
    2003
    
    2004
    
    2003$m
    
    $ m
    
    $m
    
    $mThe Company
    
    
    16.5
    
    
    
    24.6
    
    
    
    21.1
    
    
    
    18.2South African subsidiaries
    
    
    210.8
    
    
    
    112.2
    
    
    
    41.0
    
    
    
    51.3Australasian subsidiaries
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    229.0
    
    
    
    136.8
    
    
    
    62.1
    
    
    
    69.5
 The estimated tax losses of the Company and its subsidiaries have no expiry
date. Should a subsidiary cease to trade, the estimated tax losses would be
forfeited. Unremitted earnings of foreign subsidiaries and foreign joint ventures No provision has been made for South African income tax or foreign tax that may
result from future remittances of undistributed earnings of foreign
subsidiaries or joint ventures because it is expected that such earnings will
be permanently reinvested in these foreign entities. The distribution of these undistributed earnings of $7.5 million at June 30,
2004 by DRD (Isle of Man), in Isle of Man, Porgera and the Tolukuma Section in
Papua New Guinea, and other foreign entities would result in income and foreign
withholding taxes of approximately $2.3 million. F-29




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##### Table of Contents



8. RECEIVABLES June 30,
    
    June 30,2004
    
    2003$000
    
    $000Trade accounts receivable
    
    
    7,583
    
    
    
    14,735Less: allowances for doubtful debts  trade accounts receivables
    
    
    (93
    )
    
    
    (353
    )Interest receivable
    
    
    899
    
    
    
    Taxation receivable
    
    
    4,952
    
    
    
    3,640Prepayments of insurance
    
    
    2,435
    
    
    
    3,328Receivable from associates  management fee
    
    
    321
    
    
    
    1,255Payroll paid in advance
    
    
    3,417
    
    
    
    494Amounts owing by related parties (a)
    
    
    5,024
    
    
    
    4,220Less: allowances for doubtful debts  related parties
    
    
    (5,024
    )
    
    
    (4,220
    )Current receivables
    
    
    19,514
    
    
    
    23,099Non-current receivablesAmounts owing by related parties (b)
    
    
    841
    
    
    
    706Less: allowances for doubtful debts  related parties
    
    
    (841
    )
    
    
    Total receivables
    
    
    19,514
    
    
    
    23,805Disclosed as current receivables
    
    
    19,193
    
    
    
    21,844Disclosed as current receivables owing by related parties
    
    
    321
    
    
    
    1,255Disclosed as non-current related party receivables
    
    
    
    
    
    
    70619,514
    
    
    
    23,805
 June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000Reconciliation of allowances for
doubtful debts - related partiesOpening balance
    
    
    4,220
    
    
    
    3,040
    
    
    
    Charge to statement of operations
    
    
    765
    
    
    
    
    
    
    
    3,115Foreign exchange
    
    
    880
    
    
    
    1,180
    
    
    
    (75
    )Closing balance
    
    
    5,865
    
    
    
    4,220
    
    
    
    3,040
 F-30




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##### Table of Contents



8. RECEIVABLES(continued) June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002$000
    
    $000
    
    $000Reconciliation of allowances for
doubtful debts  trade accounts receivableOpening balance
    
    
    353
    
    
    
    122
    
    
    
    26(Credit)/charge to statement of operations
    
    
    (298
    )
    
    
    151
    
    
    
    104Foreign exchange
    
    
    38
    
    
    
    80
    
    
    
    (8
    )Closing balance
    
    
    93
    
    
    
    353
    
    
    
    122
 a) Amounts owing by related parties comprise amounts due from CAM for the
option over the Sale Shares, which have been fully provided for (refer Note 3). b) Amounts owing by KBH arising from the sale of 60% of CGR (refer Note 3).
These loans have been fully provided for in fiscal 2004. 9. INVENTORIES June 30,
    
    June 30,2004
    
    2003$000
    
    $000Gold-in-progress
    
    
    3,258
    
    
    
    1,816Supplies
    
    
    13,235
    
    
    
    6,096Ore stock pile
    
    
    32,006
    
    
    
    48,499
    
    
    
    7,912Less: non-current inventories (Ore stock pile)
    
    
    (32,006
    )
    
    
    16,493
    
    
    
    7,912
 F-31




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##### Table of Contents



10. MINING ASSETS June 30,
    
    June 30,2004
    
    2003$000
    
    $000Mining properties, mine development costs and mine
plant facilities and equipmentCost
    
    
    327,115
    
    
    
    219,969Opening balance
    
    
    219,969
    
    
    
    182,700Impairment
    
    
    (1,549
    )
    
    
    Additions
    
    
    26,917
    
    
    
    13,414Asset retirement obligation raised in the current year
    
    
    2,538
    
    
    
    Adoption of SFAS 143 - Asset Retirement Obligations
    
    
    
    
    
    
    548Disposals
    
    
    (3,480
    )
    
    
    (1,865
    )Acquired through business combinations
    
    
    63,812
    
    
    
    Disposed through sale of subsidiary
    
    
    
    
    
    
    (31,885
    )Foreign exchange
    
    
    18,908
    
    
    
    57,057Accumulated depreciation and amortization
    
    
    (170,172
    )
    
    
    (136,712
    )Opening balance
    
    
    (136,712
    )
    
    
    (110,516
    )Impairment
    
    
    176
    
    
    
    Depreciation and amortization
    
    
    (30,135
    )
    
    
    (10,602
    )Disposed through sale of subsidiary
    
    
    
    
    
    
    17,999Foreign exchange
    
    
    (3,501
    )
    
    
    (33,593
    )Net book value
    
    
    156,943
    
    
    
    83,257
 Certain assets, with a net book value of $29.0 million, have been pledged as
security for long-term borrowings. Refer Note 18. Included in mining assets are deferred stripping costs as follows: June 30,
    
    June 30,2004
    
    2003$000
    
    $000Deferred stripping costsCost
    
    
    4,075
    
    
    
    Opening balance
    
    
    
    
    
    
    Additions
    
    
    4,075
    
    
    
    Accumulated depreciation and amortization
    
    
    (548
    )
    
    
    Opening balance
    
    
    
    
    
    
    Depreciation and amortization
    
    
    (548
    )
    
    
    Net book value
    
    
    3,527
    
    
    
    
 F-32




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##### Table of Contents



11. NON-CURRENT ASSETS June 30,
    
    June 30,2004
    
    2003$000
    
    $000Listed investments (a)
    
    
    12,333
    
    
    
    7,927Cape Tel Limited
    
    
    2
    
    
    
    1Drillsearch Energy Limited
    
    
    69
    
    
    
    67Emperor Mines Limited
    
    
    12,255
    
    
    
    7,852Startrack Communications Limited
    
    
    7
    
    
    
    7Unlisted investments (b)
    
    
    2,392
    
    
    
    1,725Rand Refinery Limited
    
    
    1,888
    
    
    
    1,586The Employment Bureau of Africa
    
    
    501
    
    
    
    112Other
    
    
    3
    
    
    
    27Amounts contributed to environmental trust funds (c)
    
    
    22,841
    
    
    
    17,90337,566
    
    
    
    27,555
 (a) These investments are classified as available for sale, and are accounted
for at fair value. Unrealized gains and losses related to investments that are included in
accumulated other comprehensive loss are summarized below: June 30,
    
    June 30,2004
    
    2003$000
    
    $000Gross unrealized holding gains
    
    
    4,403
    
    
    
    Gross unrealized holding losses
    
    
    
    
    
    
    (1,759
    )
 A realized gain of $0.1 million was recorded in fiscal 2004, a gain of $0.2
million was recorded in fiscal 2003 and a loss of $0.9 million was recorded in
fiscal 2002. (b) Unlisted investments comprise investments in various unlisted companies in
South Africa, the fair value of which is not directly available from market
quotations. The directors of the Company perform valuations of the investments
on an annual basis to ensure that an other than temporary decline in the value
of the investments has not occurred. (c) Amounts have been contributed to irrevocable trusts under the Companys
control. The monies in the trust are invested primarily in interest bearing
debt securities and may be used only for environmental rehabilitation purposes. 12. JOINT VENTURE The unincorporated mining joint venture for which the statement of operations
and balance sheet has been proportionately consolidated is as follows: 2004
    
    2003percentage held
    
    percentage heldPorgera Joint Venture
    
    
    20
    %
    
    
    0
    %
 Together with Placer Dome Inc. and Mineral Resources Enga, DRD (Porgera)
Limited, is a participant in the Porgera Joint Venture. Each joint venture
partner has an undivided holding in the mineral tenements forming part of the
mine, and in a proportionate share of the mines production and costs, through
a joint venture agreement. Each joint venture partner is responsible for the
sale of their proportionate share of production. F-33




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##### Table of Contents



12. JOINT VENTURE(continued) The summarized financial statements of DRD (Porgera) Limited reflect the
revenue received for their 20% share of production at the mine, as well as
administrative costs, including depreciation and amortization, and taxation
incurred by DRD (Porgera) Limited, in addition to their proportionate share of
the costs incurred by the joint venture. The Group acquired its 20% interest in the Porgera Joint Venture in Papua New
Guinea on October 14, 2003. Accordingly no comparative information is
disclosed. Summarized financial statements of DRD (Porgera) Limited, including the joint
venture which has been proportionately consolidated, are as follows (from date
of acquisition): June30,2004$000Statement of income for the periodRevenues
    
    
    60,445Costs and expenses
    
    
    30,311Production costs
    
    
    31,650Movement in gold in process
    
    
    (1,499
    )Movement in rehabilitation provision, reclamation and closure costs
    
    
    160Other operating expensesDepreciation
and amortization
    
    
    9,260Selling, administration and general charges
    
    
    2,243Net operating income
    
    
    18,631Interest and dividends
    
    
    9Interest expense
    
    
    (1,103
    )Profit before tax
    
    
    17,537Income and mining tax expense
    
    
    (8,475
    )Net profit
    
    
    9,062Balance sheet at June 30Current assets
    
    
    17,498Cash and cash equivalents
    
    
    6,333Receivables
    
    
    1,768Receivables owing by Group companies
    
    
    1,897Inventories
    
    
    7,500Mining Assets
    
    
    61,741Other Assets
    
    
    32,006Non-current inventories
    
    
    32,006Total Assets
    
    
    111,245Current liabilities
    
    
    (39,740
    )Accounts payable and accrued liabilities
    
    
    (7,528
    )Payables owing to Group companies
    
    
    (29,384
    )Income and mining taxes payable
    
    
    (2,828
    )Non-current liabilities
    
    
    (27,508
    )Deferred income and mining tax
    
    
    (21,108
    )Provisions for environmental rehabilitation, reclamation and closure costs
    
    
    (6,400
    )Net assets
    
    
    43,997
 F-34




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##### Table of Contents



13. INVESTMENTS IN UNLISTED ASSOCIATES The principal associate is Crown Gold Recoveries (Pty) Limited, a company
incorporated in South Africa. The Group holds a 40% interest in this
associate, which it equity accounts. June 30,
    
    June 30,2004
    
    2003$000
    
    $000Opening carrying amount
    
    
    
    
    
    
    Acquired during year through the sale of a subsidiary company
    
    
    
    
    
    
    4,234Advances to associates
    
    
    8,827
    
    
    
    5,218Impairment of advances to associates
    
    
    
    
    
    
    (5,218
    )Net share of results in associates
    
    
    (8,827
    )
    
    
    (4,234
    )Share of results before tax
    
    
    (8,827
    )
    
    
    (4,208
    )Share of tax
    
    
    
    
    
    
    (26
    )Closing carrying amount
    
    
    
    
    
    
    The
following has been recognized in the Statement of Operations:Equity in loss from associates
    
    
    
    
    
    
    (4,234
    )Losses applied to advances to associates
    
    
    (8,827
    )
    
    
    Impairment of advances to associates
    
    
    
    
    
    
    (5,218
    )(8,827
    )
    
    
    (9,452
    )
 On July 1, 2002, the Company sold 60% of its wholly owned subsidiary company,
Crown Gold Recoveries (Pty) Limited to Khumo Bathong Holdings (Pty) Limited in
a transaction consistent with the Companys black economic empowerment strategy
(refer Note 3). In the prior year, the results of this company had been
consolidated into the results of the Group. Effective July 1, 2002, the
Companys remaining 40% interest has been treated as an investment in an
associate and equity accounted. 14. GOODWILL June 30,
    
    June 30,2004
    
    2003$000
    
    $000Goodwill on acquisition of Net-Gold Services Limited (refer Note 3)
    
    
    1,095
    
    
    
    Impairment of goodwill (refer Note 6)
    
    
    (1,025
    )
    
    
    Foreign exchange
    
    
    (70
    )
    
    
    
    
 F-35




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##### Table of Contents



15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES June 30,
    
    June 30,2004
    
    2003$000
    
    $000Trade accounts payable
    
    
    34,506
    
    
    
    16,116Accrual for leave pay provisions
    
    
    13,410
    
    
    
    19,522Payroll and other compensation payable
    
    
    13,206
    
    
    
    13,987Other
    
    
    31
    
    
    
    33961,153
    
    
    
    49,964
 16. DERIVATIVE INSTRUMENTS June 30,
    
    June 30,2004
    
    2003$000
    
    $000Gold for electricity contract (a)
    
    
    (3,090
    )
    
    
    (30,903
    )Call positions bought (b)
    
    
    
    
    
    
    6,563Interest rate swap agreement (c)
    
    
    (1,984
    )
    
    
    (1,818
    )(5,074
    )
    
    
    (26,158
    )Disclosed under non-current liabilities
    
    
    (4,765
    )
    
    
    (17,169
    )Disclosed under current liabilities
    
    
    (309
    )
    
    
    (15,552
    )Disclosed under current assets
    
    
    
    
    
    
    6,563(5,074
    )
    
    
    (26,158
    )
 (a) This amount comprises the fair value of the gold for electricity contract
entered into by the Company. Changes in fair value have been recorded as
loss/(profit) on derivative instruments in the statement of operations. The
fair value represents the difference between the contract price that was agreed
on the date of the transaction and the forward price on June 30, 2004, (refer
to Note 22 for further details of quantities and the timing of settlement). The
liability of $3.1 million reflects the fair value as at June 30, 2004 when the
gold price was R2,451 per ounce against an average contract price of R2,256 per
ounce. The gold price adjustment is based on the notional amount of 15,000
ounces of gold multiplied by the difference between the contracted gold price,
which is the price that was agreed on the date of the transaction for a
determined period, and the arithmetic average of London PM fix for each
business day in the calculation period. During fiscals 2004, 2003 and 2002 the
realized and unrealized gain/(loss) included in loss/(profit) on derivative
instrument for this instrument amounted to a loss of $1.4 million, a gain of
$43.8 million and a loss of $56.2 million, respectively. b) This amount reflects the fair value of call positions bought during fiscal
2003 by the Company. These contracts were closed out during fiscal 2004. No new
positions have been entered into. During fiscal 2004, fiscal 2003 and fiscal
2002 the realized and unrealized gain/(loss) included in loss/(profit) on
derivative instrument for this instrument amounted to a loss of $0.1 million, a
gain of $2.1 million and $nil million, respectively. F-36




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##### Table of Contents



16. DERIVATIVE INSTRUMENTS(continued) c) This amount reflects the fair value of the interest rate swap agreement that
was entered into to manage the interest rate and currency risk on the bi-annual
interest payments of the convertible notes which were issued in fiscal 2003.
The interest rate swap has not been accounted for as a hedge. Changes in fair
value have been recorded as loss/(profit) on derivative instruments in the
statement of operations. The fair value represents the difference between the
fixed coupon rate of 6% per annum and the forward Johannesburg Interbank
Acceptance Rate, or JIBAR, plus 20 interest basis points together with the spot
and forward US$ exchange rate with reference to the coupon amount payable
bi-annually. At June 30, 2004, the six month JIBAR rate was 8.313%. During
fiscal 2004 and fiscal 2003 the realized and unrealized gain/(loss) included in
loss/(profit) on the interest rate swap amounted to a loss of $1.7 million and
a loss of $1.5 million, respectively. 17. PROVISION FOR ENVIRONMENTAL REHABILITATION, RECLAMATION AND CLOSURE COSTS While the ultimate amount of rehabilitation costs to be incurred in the future
is uncertain, the Group has estimated that the total future costs for the
mines, in current monetary terms, will be $39.1 million at June 30, 2004 (2003:
$24.6 million). The costs associated with sealing off all potential water
ingress points at the Durban Deep and West Wits Sections have been included in
the provisions for environmental rehabilitation. The estimates are prepared on
an annual basis by the Groups Environmental Manager in accordance with the
Companys rehabilitation plans. The relevant rehabilitation plan is submitted
to local authorities for approval and the provision is adjusted accordingly to
reflect changes therein. Amounts have been contributed to irrevocable trusts (refer Note 11) under the
Groups control. The monies in the trusts are invested primarily in interest
bearing debt securities and may be used only for environmental rehabilitation
purposes. The Group intends to finance the ultimate rehabilitation costs from
the money invested with the trust funds, as well as, at the time of mine
closure, the proceeds on sale of remaining assets and gold from plant clean-up. June 30,
    
    June 30,2004
    
    2003$000
    
    $000Provision for asset retirement obligationsBalance at the beginning of the year
    
    
    16,951
    
    
    
    11,658Adoption of SFAS 143 - Asset Retirement Obligations
    
    
    
    
    
    
    720Foreign exchange
    
    
    3,466
    
    
    
    4,628Disposed of through sale of subsidiaries
    
    
    
    
    
    
    (684
    )Asset retirement obligation arising during period
    
    
    2,538
    
    
    
    Accretion
    
    
    1,974
    
    
    
    629Closing balance
    
    
    24,929
    
    
    
    16,951
 F-37




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##### Table of Contents



17. PROVISION FOR ENVIRONMENTAL REHABILITATION, RECLAMATION AND CLOSURE
COSTS(continued) June 30,
    
    June 30,2004
    
    2003$000
    
    $000Provision for environmental rehabilitation costsOpening balance
    
    
    7,676
    
    
    
    6,270Foreign exchange
    
    
    1,339
    
    
    
    2,254Acquired through purchase/(disposed of through
sale) of Joint Venture and subsidiaries
    
    
    3,682
    
    
    
    (1,633
    )Accretion
    
    
    1,481
    
    
    
    785Closing balance
    
    
    14,178
    
    
    
    7,676Provision for environmental rehabilitation
    
    
    39,107
    
    
    
    24,627
 The provision for asset retirement obligations relates to expected costs
associated with the demolition of gold plants, shaft headgear and shaft
infrastructure. The provision for environmental rehabilitation costs relates to the expected
costs associated with the revegetation of tailings dams, revegetation of rock
dumps and the rehabilitation of open cast areas. Included in the net book value of the mining asset balance are asset retirement
costs, relating to the following mines: June 30,
    
    June 30,2004
    
    2003$000
    
    $000Blyvoor
    
    
    318
    
    
    
    267North West
    
    
    389
    
    
    
    327Porgera
    
    
    5,498
    
    
    
    Tolukuma
    
    
    21
    
    
    
    486,226
    
    
    
    642
 F-38




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##### Table of Contents



18. LONG-TERM LOANS June 30,
    
    June 30,2004
    
    2003$000
    
    $000These comprise loans from:SecuredIndustrial Development Corporation, or IDC (a)
    
    
    5,281
    
    
    
    5,738Mineral Resources Development Company (Proprietary) Limited (b)
    
    
    
    
    
    
    659First National Bank Limited (c)
    
    
    
    
    
    
    84Hire purchase creditors (d)
    
    
    
    
    
    
    35Bank of South Pacific Limited (e)
    
    
    
    
    
    
    1,603UnsecuredSenior Convertible Notes (f)
    
    
    61,134
    
    
    
    61,422Investec Bank Limited (g)
    
    
    2,765
    
    
    
    CAWMS Post Retirement Medical Liability (h)
    
    
    
    
    
    
    1,479J Aron and Company (i)
    
    
    
    
    
    
    6,412UBS AG (j)
    
    
    
    
    
    
    4,78569,180
    
    
    
    82,217Less: Payable within one year shown under current liabilities
    
    
    (9,315
    )
    
    
    (19,068
    )Total long-term liabilities
    
    
    59,865
    
    
    
    63,149
 The terms and conditions, including interest rates, attaching to the above
loans are given in the narrative below: (a) On July 18, 2002, Blyvooruitzicht Gold Mining Company Limited, or Blyvoor,
entered into a loan agreement with the Industrial Development Corporation, or
IDC, for R65.0 million ($10.4 million) specifically for financing capital
expenditures incurred by Blyvoor in completing the Blyvoor expansion project.
The loan bears interest at 1% below the prime rate of First National Bank of
Southern Africa Limited on overdraft. As of June 30, 2004, the interest rate
on this loan stood at 10.5% per annum and $5.3 million had been drawn down. The
loan is repayable in 48 monthly installments starting from September 2003. The loan was secured over the Blyvoor metallurgical plant and gold lock-up,
with a net book value of $29.0 million at June 30, 2004. The loan agreement
prohibits the Company from disposing of or further encumbering the assets
covered by the special notarial bond and places restrictions over its ability
to change the business of Blyvoor. (b) On November 20, 1997, Dome Resources NL entered into a loan agreement with
the Mineral Resources Development Company (Proprietary) Limited, or MRDC, by
which MRDC provided a loan to Tolukuma Gold Mine, or Tolukuma, denominated in
Australian Dollars. The loan was repayable in 4 equal semi-annual installments,
with the first payable June 30, 2002 and the last payable December 31, 2003.
Interest was payable at 9% per annum. The loan was secured by a fixed and
floating charge over the assets of Tolukuma. This loan was settled during
fiscal 2004. (c) The mortgage loan bore interest at 0.75% below prime lending rate offered
by First National Bank of South Africa Limited on overdraft. The loan was
repayable over 60 months, which commenced on July 1, 1999 and was
collateralized by a first covering mortgage bond over Stand 752, Parktown
Extension 1 and a deed of suretyship signed by the Company. This loan was
settled during fiscal 2004. F-39




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##### Table of Contents



18. LONG-TERM LOANS(continued) (d) In November 2000, Dome entered into a master finance lease agreement with
Volvo Truck Finance Australia (Pty) Limited, or Volvo, for the lease of two
articulated dump trucks to transport ore from the mine in Tolukuma to the
metallurgical plant. The initial value of the lease was A$1 million. The
principal was paid in 35 equal monthly installments. Interest on the lease was
payable at a rate of 12% per annum. This lease agreement was settled during
fiscal 2004. At the termination of the lease, the equipment was returned to
Volvo. (e) On August 22, 2001, the Company entered into an agreement with Bank of
South Pacific Limited by which Bank of South Pacific Limited provided a loan to
Tolukuma denominated in Australian Dollars. The loan was repayable in equal
monthly payments of principal and interest over a period of three years.
Interest was payable at the Indicator Lending Rate in Papua New Guinea plus 4%
per annum. The loan was secured by a fixed and floating charge over the assets
of Tolukuma, Dome Resources (PNG) Limited and Dome Resources NL. This loan was
settled during fiscal 2004. (f) On November 12, 2002, the Company issued $66,000,000 of 6% Senior
Convertible Notes due 2006, in a private placement. The interest payments of 6%
per annum are payable semi-annually on May 12 and November 12 of each year. The
Company issued the notes at a purchase price of 100% of the principal amount
thereof. If not converted, or previously redeemed, the notes will be repaid at
102.5% of their principal amount plus accrued interest on the fifth business
day following their maturity date in November 2006. The notes are convertible at any time at the option of the holder into the
Companys ordinary shares, or American Depositary Shares, or ADSs, at a
conversion price of $3.75 per share or ADS, subject to adjustment in certain
events if the cumulative adjustments amount to 1% or more of the conversion
rate. The Company may redeem the notes, in whole or in part, at any time after
November 12, 2005, at a redemption price equal to 100% of the principal amount
of the notes to the redeemed, plus accrued original issue discount, plus
accrued and unpaid interest, if any, to but excluding, the date of redemption
on giving not less than 30 nor more than 60 days notice if (1) the closing
price of its ADSs on the Nasdaq SmallCap Market or substitute national
securities exchange has exceeded 150% of the conversion price then in effect
for at least 20 trading days within a period of 30 consecutive trading days
ending on the trading day immediately before the date of mailing of the
provisional redemption notice and (2) the shelf registration statement covering
the resale of the notes and the ordinary shares and ordinary shares underlying
the ADSs issuable upon conversion of the notes is effective and available for
use and is expected to remain effective and available for use for 30 days
following the provisional redemption date, unless registration in no longer
required. If there is a change in control of the Company, holders of the notes have the
right to require it to repurchase their notes, at 102.5% of the principal
amount of the notes. In connection with the offering of the notes, the Company entered into a
registration rights agreement with the initial purchaser of the notes. This
agreement obligated the Company to file with the SEC a shelf registration
statement with respect to the offer and sale of the notes and the ordinary
shares or the ordinary shares underlying the ADSs issuable upon conversion of
the notes. On September 30, 2003 the SEC declared effective the Companys
registration statement of Form F-3 pertaining to the notes. To date, no notes
have been converted. In connection with the delay in the registration of the notes, the Company
incurred liquidated damages payable to the note holders in the amount of $1.2
million, which have been included in interest expense in the statement of
operations for fiscal 2003. F-40




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##### Table of Contents



18. LONG-TERM LOANS(continued) The notes are presented in the consolidated balance sheet as follows: June 30,
    
    June 30,2004
    
    2003$000
    
    $000Opening balance
    
    
    61,422
    
    
    
    66,000Liability portion
    
    
    47,750
    
    
    
    49,382Derivative portion (1)
    
    
    13,672
    
    
    
    16,618Amortization of capitalized issuance costs, net of additional expenses incurred (2)
    
    
    897
    
    
    
    (3,044
    )Interest accrued (3)
    
    
    5,932
    
    
    
    4,669Interest payment
    
    
    (3,960
    )
    
    
    (1,980
    )Change in fair value of derivative portion (1)
    
    
    (2,270
    )
    
    
    (2,946
    )Foreign exchange
    
    
    (887
    )
    
    
    (1,277
    )Closing balance
    
    
    61,134
    
    
    
    61,422Liability portion
    
    
    49,732
    
    
    
    47,750Derivative portion (1)
    
    
    11,402
    
    
    
    13,672
 (1) The conversion option embedded in the notes is accounted for as an
embedded derivative instrument under SFAS133. The option does not qualify for
hedge accounting. The embedded derivative instrument is carried at fair value,
such fair value being determined on the residual cash flow method, with changes
in fair value included in the statement of operations in the period in which
the change occurs and classified as loss/(profit) on derivative instruments. (2) The issuance costs relating to the convertible loan note have been
capitalized, and are being amortized over the life of the instrument. (3) Interest on the notes is calculated on the effective yield basis, at an
effective rate of 7.05% per annum. Included in unrealized foreign exchange gains, is a gain of $10.6 million and
$11.2 million in fiscals 2004 and 2003, relating to foreign exchange movements
on the convertible note. (g) On June 24, 2004, Investec Bank Limited, or Investec, granted the Company
a R100.0 million (June 30, 2004: $15.9 million) loan facility. Draw downs are
to be made in the prescribed form and are at Investecs discretion. The
facility bears interest at the three-month Johannesburg Interbank Acceptance
Rate, or JIBAR, plus 300 basis points. As at June 30, 2004, the interest rate
was 10.95%. The Company may elect to repay the facility in cash or by the issue
of Durban Roodepoort Deep, Limited ordinary shares, valued at the market price
of the shares on the date of settlement. The balance owing at June 30, 2004,
was settled on August 3, 2004 through the issue of shares (refer Note 25). (h) In September 2001, the Group voluntarily accepted liability for certain
post retirement medical benefits of employees who were members of various
medical schemes arranged by the Group. The liability was payable over five
years, with no interest and was unsecured. This liability was settled during
fiscal 2004. (i) During the fourth quarter of fiscal 2002, the Company closed out its hedge
position with J Aron & Company recording a loss on the close out of the
positions. The liability was payable over the next 12 months, without interest
and was unsecured. This obligation was settled during fiscal 2004. F-41




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##### Table of Contents



18. LONG-TERM LOANS(continued) (j) During the fourth quarter of fiscal 2002, the Company closed out its hedge
position with UBS AG recording a loss on the close out of the positions. The
liability was payable over the next 12 months, was unsecured and was payable
without interest. This liability was settled during fiscal 2004. Long-term loans are scheduled for repayment in the 12 months to: June 30,2004$00030 June 2005
    
    
    
    
    
    
    9,31530 June 2006
    
    
    
    
    
    
    6,55130 June 2007
    
    
    
    
    
    
    53,31430 June 2008 onwards
    
    
    
    
    
    
    69,180
 June 30,
    
    June 30,2004
    
    2003$000
    
    $000Currencies in which long-term loans are denominated are as follows:United States Dollars
    
    
    61,134
    
    
    
    72,619South African Rands
    
    
    8,046
    
    
    
    7,303Australian Dollars
    
    
    
    
    
    
    2,29569,180
    
    
    
    82,217
 The Group has undrawn committed borrowing facilities of $2.9 million (June 30,
2003: $3.0 million) from the Industrial Development Corporation and bank
overdraft facilities of $1.8 million (June 30, 2003: $4.0 million) of which
$1.8 million (June 30, 2003: $3.9 million) had been utilized at year-end. On
June 24, 2004, the Company agreed a $15.9 million loan facility with Investec.
As at June 30, 2004, $2.8 million had been utilized and has been included in
short-term portion of long-term liabilities payable. 19. STOCKHOLDERS EQUITY Ordinary shares: June 30, 2004 During the year ended June 30, 2004, the Company issued 41,463,639 no par value
shares at market value to certain institutional investors, in exchange for
gross cash proceeds of $107.4 million. In addition 6,643,902 no par value
shares, with a value of $16.7 million, were issued to Oil Search Limited in
final settlement of the Porgera Joint Venture acquisition price (refer Note 3). June 30, 2003 During the year ended June 30, 2003, the Company issued 4,794,889 shares at
market value to Khumo Bathong Holdings (Pty) Limited in exchange for gross cash
proceeds of $6.8 million. F-42




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19. STOCKHOLDERS EQUITY(continued) June 30, 2002 During the year ended June 30, 2002, the Company issued 12,000,000 shares at
market value to certain institutional investors in exchange for gross cash
proceeds of $43.5 million. Cumulative preference shares: The terms of issue of the cumulative preference shares are that they carry the
right, in priority to the Companys ordinary shares, to receive a dividend
equal to 3% of the gross future revenue generated by the exploration or the
disposal of the Argonaut mineral rights acquired from Randgold & Exploration
Company Limited in September 1997. If the preference dividend described above in respect of any prescribed period
(is in arrears for more than six months at the date on which the notice
convening a general meeting is posted to the Companys members, the holder of
the cumulative preference share shall be entitled to vote on all the
resolutions which are to be proposed at the general meeting. The holders are also entitled to vote if a resolution is to be proposed at the
general meeting which adversely affects the rights attached to the cumulative
preference shares, or the disposal of the whole or substantially the whole of
the undertaking of the Company or the whole or the greater part of the assets
of the Company or for the disposal of the whole or greater part of the mineral
rights. Additionally, holders of the cumulative preference shares will obtain
voting rights once the Argonaut Project becomes an operational gold mine. To
date, no revenues have been derived from the Argonaut Project mineral rights
and it has yet to be developed into an operational gold mine. Durban Deep C options: The Company has authorized but not issued 10,000,000 Durban Deep C options on
ordinary shares at an exercise price of R15 per ordinary share which are
exercisable at any time during the period from the date on which the option is
issued to a date not later than five years from the date of issue. These
options are to be used as consideration for acquisitions by the Company. 20. (LOSS)/PROFIT PER SHARE (Loss)/profit per share is calculated based on the (loss)/profit divided by the
weighted average number of shares in issue during the year. Fully diluted
(loss)/profit per share is based upon the inclusion of potential common shares
with a dilutive effect on (loss)/profit per share. For the year ended June 30, 2004Loss
    
    
    
    
    
    Per-share$ 000
    
    Shares
    
    amount(Numerator)
    
    (Denominator)
    
    $ centsBasic and fully diluted loss per shareShares outstanding July, 1, 2003
    
    
    
    
    
    
    184,222,073Weighted average number of shares issued - 2004
    
    
    
    
    
    
    32,287,770Net loss applicable to common stockholders
    
    
    (55,750
    )
    
    
    216,509,843
    
    
    
    (26
    )Anti-dilutive shares (shares underlying Convertible Notes)
    
    
    
    
    
    
    17,600,000Anti-dilutive shares (shares underlying staff options allocated)
    
    
    
    
    
    
    621,713
 F-43




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20. (LOSS)/PROFIT PER SHARE(continued) There is no dilution in loss per share for the fiscal year ended June 30, 2004
as the effect of dilutive securities in issue would have been anti-dilutive as
the Company recorded a loss for the year. For the year ended June 30, 2003Profit
    
    
    
    
    
    Per-share$ 000
    
    Shares
    
    amount(Numerator)
    
    (Denominator)
    
    $ centsBasic profit per shareShares outstanding July, 1, 2002
    
    
    
    
    
    
    177,173,485Weighted average number of shares issued - 2003
    
    
    
    
    
    
    6,127,180Net profit before cumulative effect of accounting change
    
    
    11,547
    
    
    
    183,300,665
    
    
    
    6Cumulative effect of accounting change
    
    
    (173
    )
    
    
    
    
    
    
    Net profit applicable to common stockholders
    
    
    11,374
    
    
    
    
    
    
    
    6Fully diluted profit per shareWeighted average number of shares as per basic profit per share
    
    
    
    
    
    
    183,300,665Weighted average dilutive number of shares underlying
Convertible Notes
    
    
    (2,598
    )
    
    
    11,090,411Weighted average dilutive number of shares underlying staff
options allocated
    
    
    
    
    
    
    2,943,230Diluted net profit applicable to common stockholders
    
    
    8,776
    
    
    
    197,334,306
    
    
    
    4Cumulative effect of accounting change
    
    
    173
    
    
    
    
    
    
    
    Diluted net profit before cumulative effect of accounting change
    
    
    8,949
    
    
    
    
    
    
    
    4
 For the year ended June 30, 2002Loss
    
    
    
    
    
    Per-share$ 000
    
    Shares
    
    amount(Numerator)
    
    (Denominator)
    
    $ centsBasic and fully diluted loss per shareShares outstanding July, 1, 2001
    
    
    
    
    
    
    154,529,578Weighted average number of shares issued - 2002
    
    
    
    
    
    
    7,135,070Net loss applicable to common stockholders
    
    
    (51,709
    )
    
    
    161,664,648
    
    
    
    (32
    )Anti-dilutive shares (shares underlying staff options allocated)
    
    
    
    
    
    
    6,550,156
 There is no dilution in loss per share for the fiscal year ended June 30, 2002
as the effect of dilutive securities in issue would have been anti-dilutive as
the Company recorded a loss for the year. F-44




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21. EMPLOYEE BENEFIT PLANS Pension and provident funds In South Africa, the Group participates in a number of multi-employer
industry-based retirement plans. All plans are governed by the Pension Funds
Act, 1956. All the pension funds are actuarially valued at intervals of not
more than three years using the projected benefit valuation basis. All pension
funds have been valued during the last three years and were certified to be in
a sound financial position. The provident funds are funded on the money
accumulative basis with the members and Groups contributions having been
fixed in the constitutions of the funds. In Papua New Guinea retirement fund
contributions are regulated by the Superannuation Act. According to the Act,
the Group has to contribute 7% of the employees earnings to a local superfund
(NASFUND), whilst the employee contributes 5% of their gross salaries and
wages. Payments are made to the fund on a monthly basis. The majority of the Groups employees are covered by either of the
above-mentioned funds. Fund contributions by the Group for the year ended June
30, 2004 amounted to $8.7 million (year ended June 30, 2003: $6.4 million; year
ended June 30, 2002: $4.9 million). Post-retirement benefits other than pensions Prior to the Companys acquisition of Blyvooruitzicht Gold Mining Company
Limited, skilled workers (clerical workers and mine management) at that
operation participated in multi-employer health plans, which paid certain
medical costs. Employer contributions were determined on an annual basis by
these health funds. Qualifying dependants received the same benefits as active
employees. This benefit was no longer offered to employees joining subsequent
to the acquisition. Currently, no post-retirement benefits other than pensions are available to
workers who are not part of the above multi-employer plans. A subsidiary of the Company has voluntarily accepted liability for certain
post-retirement medical benefits of employees who were members of various
multi-employer medical schemes arranged by the Company. The fixed amount, which
was determined based on negotiations between the Company and the various
medical schemes, was payable with no interest over five years, was unsecured
and was settled during fiscal 2004 (see Note 18(h)). The full cost of $1.8
million was expensed in fiscal 2002 in the statement of operations. Long service awards The Group participates in the Chamber of Mines of South Africa Long Service
Awards Scheme, or the Scheme. The Scheme does not confer on any employee or
other persons any right of payment of any award. In terms of the scheme, bonus
payments may be made to certain employees, usually semi-skilled, upon reaching
the age of 55, who have completed 15 years of continuous service in South
African gold mining companies which are members of the Chamber of Mines of
South Africa and the Employment Bureau of Africa, provided such service is not
pensionable service. The Scheme lays down the rules under which an employee may
be eligible for the award. The award is paid by the company for which the
employee works upon becoming eligible for the award and electing to receive
payment. All awards must be confirmed by the Chamber of Mines of South Africa
before payment. The amount of the award is based on both the employees skill
level and years of service with qualified gold mining companies. The accumulated benefit obligation at June 30, 2004, is not significant. During
fiscal 2004, the Company expensed $0.2 million (fiscal 2003: $0.1 million;
fiscal 2002: $0.1 million) relating to the long service awards. F-45




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21. EMPLOYEE BENEFIT PLANS(continued) Share option plan The Company has an Employee Share Option Scheme, or ESOS, under which all
employees may be granted options to purchase shares in the Companys
authorized, but unissued common stock. Unissued shares that have been reserved
for the ESOS may not exceed 15% of the number of issued ordinary and preferred
ordinary shares. The number of issued and exercisable share options is approximately 3.6% of the
issued ordinary share capital. The participants in the ESOS are fully taxed on
any gains realized on the exercise of their options. On October 24, 1997, the terms of the ESOS were amended. The amended terms
applied to options outstanding at the date of the amendment and options to be
issued thereafter. The exercise price of options is the lowest seven day
trailing average of the closing market prices of an ordinary share on the
Johannesburg Securities Exchange South Africa, or JSE, as confirmed by the
Companys directors, during the three months proceeding the day on which the
employee is granted the option. Prior to the amendment, the exercise price was
the closing JSE market price on the day preceding the grant date of the option.
The vesting period for options is determined by the directors. All options expire ten years after grant date. During the fiscal years 1998 to 2004, the Company issued options, one quarter
of which were exercisable six months after grant date, a further quarter of
which are exercisable twelve months after grant date and a further quarter of
which are exercisable annually thereafter. Share options activity in respect of
these options was as follows: Outstanding
    
    ExercisableAverage
    
    
    
    
    
    Averageprice per
    
    
    
    
    
    price perNumber of
    
    share
    
    Number of
    
    shareShares
    
    (in Rand)
    
    Shares
    
    (in Rand)Balance at July 1, 2001
    
    
    11,812,253
    
    
    
    7.73
    
    
    
    4,712,250
    
    
    
    8.97Granted
    
    
    3,067,370
    
    
    
    13.28Exercised
    
    
    (8,599,321
    )
    
    
    7.95Forfeited/lapsed
    
    
    (679,938
    )
    
    
    8.88Balance at June 30, 2002
    
    
    5,600,364
    
    
    
    10.30
    
    
    
    199,000
    
    
    
    9.54Granted
    
    
    3,113,500
    
    
    
    23.04Exercised
    
    
    (2,055,944
    )
    
    
    8.26Forfeited/lapsed
    
    
    (1,012,863
    )
    
    
    11.85Balance at June 30, 2003
    
    
    5,645,057
    
    
    
    17.62
    
    
    
    931,205
    
    
    
    19.43Granted
    
    
    3,452,117
    
    
    
    18.37Exercised
    
    
    (940,269
    )
    
    
    8.56Forfeited/lapsed
    
    
    (388,167
    )
    
    
    17.98Balance at June 30, 2004
    
    
    7,768,738
    
    
    
    19.03
    
    
    
    2,964,354
    
    
    
    18.67
 Average price per share is disclosed in South African Rand as the options are
on ordinary shares and the option price is stated in South African Rand. As of
June 30, 2004, the average price per share for outstanding options is $3.03 and
average price per share for exercisable options is $2.98. F-46




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21. EMPLOYEE BENEFIT PLANS(continued) For the purposes of the pro-forma disclosures in terms of SFAS 123, the
weighted average grant date fair value of the above options granted in fiscal
2004 at exercise prices which exceeded the market price of the stock on grant
date was Rnil (2003: Rnil; 2002: Rnil). The weighted average grant date fair
value of the above options granted in fiscal 2004 at exercise prices, which
were less than the market price of the stock on grant date, was R18.37 (2003:
R8.07; 2002: R15.43). The grant date fair value of these options was determined using a Black-Scholes
pricing option model, applying the following weighted average assumptions: June 30,
    
    June 30,
    
    June 30,2004
    
    2003
    
    2002Expected life (in years)
    
    
    4
    
    
    
    4
    
    
    
    4Risk free interest rate
    
    
    9.24
    %
    
    
    10.74
    %
    
    
    11.19
    %Volatility
    
    
    31
    %
    
    
    47
    %
    
    
    46
    %Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
 During fiscal 1998, the Company also issued certain options which were
exercisable immediately, but which vested over a period of twelve months. Share
options activity in respect of these options was as follows: Outstanding
    
    ExercisableAverage
    
    
    
    
    
    Averageprice per
    
    
    
    
    
    price perNumber of
    
    share
    
    Number of
    
    shareShares
    
    (in Rand)
    
    Shares
    
    (in Rand)Balance at July 1, 2001
    
    
    24,250
    
    
    
    7.00
    
    
    
    24,250
    
    
    
    7.00Exercised
    
    
    (20,000
    )
    
    
    7.00Forfeited/lapsed
    
    
    (1,250
    )
    
    
    7.00Balance at June 30, 2002
    
    
    3,000
    
    
    
    7.00
    
    
    
    3,000
    
    
    
    7.00Forfeited/lapsed
    
    
    (3,000
    )
    
    
    7.00Balance at June 30, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 For the purposes of the pro-forma disclosures in terms of SFAS 123, the
weighted average grant date fair value of the above options granted in 1998 was
R2.67. These options had an exercise price equal to the market price of the
stock on grant date. The grant date fair value of these options was determined using a Black-Scholes
pricing option model, applying the following assumptions: 1998Expected life (in years)
    
    
    1Risk free interest rate
    
    
    15.25
    %Volatility
    
    
    85
    %Dividend yield
    
    
    0
    %
 F-47




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##### Table of Contents



21. EMPLOYEE BENEFIT PLANS(continued) During 2001, the Company also issued certain options, 51% which were
exercisable immediately and the remainder after 6 months. Share options
activity in respect of these options was as follows: Outstanding
    
    ExercisableAverage
    
    
    
    
    
    Averageprice per
    
    
    
    
    
    price perNumber of
    
    share
    
    Number of
    
    shareShares
    
    (in Rand)
    
    Shares
    
    (in Rand)Balance at July 1, 2001
    
    
    1,145,000
    
    
    
    4.52
    
    
    
    
    
    
    
    Exercised
    
    
    (1,145,000
    )
    
    
    4.52Balance at June 30, 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 For the purposes of the pro-forma disclosures in terms of SFAS 123, the
weighted average grant date fair value of the above options granted in 2001 at
exercise prices, which were less than the market price of the stock on grant
date, was R2.98. The grant date fair value of these options was determined using a Black-Scholes
pricing option model, applying the following weighted average assumptions: 2001Expected life (in years)
    
    
    0.5Risk free interest rate
    
    
    11.23
    %Volatility
    
    
    72
    %Dividend yield
    
    
    0
    %
 During 2002, the Company issued certain options, 25% which were exercisable
immediately and the remaining 75% in equal tranches after 6, 12, 24 and 36
months. Share options activity in respect of these options was as follows: Outstanding
    
    ExercisableAverage
    
    
    
    
    
    Averageprice per
    
    
    
    
    
    price perNumber of
    
    share
    
    Number of
    
    shareShares
    
    (in Rand)
    
    Shares
    
    (in Rand)Balance at July 1, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    1,000,000
    
    
    
    15.81Exercised
    
    
    (62,500
    )
    
    
    15.81Balance at June 30, 2002
    
    
    937,500
    
    
    
    15.81
    
    
    
    187,500
    
    
    
    15.81Exercised
    
    
    (227,125
    )
    
    
    15.81Forfeited/lapsed
    
    
    (78,750
    )
    
    
    15.81Balance at June 30, 2003
    
    
    631,625
    
    
    
    15.81
    
    
    
    305,375
    
    
    
    15.81Exercised
    
    
    (43,750
    )
    
    
    15.81Forfeited/lapsed
    
    
    (11,250
    )
    
    
    15.81Balance at June 30, 2004
    
    
    576,625
    
    
    
    15.81
    
    
    
    419,125
    
    
    
    15.81
 F-48




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21. EMPLOYEE BENEFIT PLANS(continued) Average price per share is disclosed in South African Rand as the options are
on ordinary shares and the option price is stated in South African Rand. As of
June 30, 2004, the average price per share for outstanding options is $2.52 and
average price per share for exercisable options is $2.52. For the purposes of the pro-forma disclosures in terms of SFAS 123, the
weighted average grant date fair value of the above options granted in 2002 at
exercise prices, all of which were less than the market price of the stock on
grant date, was R19.08. The grant date fair value of these options was determined using a Black-Scholes
pricing option model, applying the following weighted average assumptions: 2002Expected life (in years)
    
    
    3Risk free interest rate
    
    
    12.58
    %Volatility
    
    
    49.7
    %Dividend yield
    
    
    0
    %
 During 2002, the Company issued certain options, which were exercisable
immediately. Share options activity in respect of these options was as follows: Outstanding
    
    ExercisableAverage
    
    
    
    
    
    Averageprice per
    
    
    
    
    
    price perNumber of
    
    share
    
    Number of
    
    shareShares
    
    (in Rand)
    
    Shares
    
    (in Rand)Balance at July 1, 2001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    611,000
    
    
    
    8.37Exercised
    
    
    (591,708
    )
    
    
    8.37Forfeited/lapsed
    
    
    (10,000
    )
    
    
    8.37Balance at June 30, 2002
    
    
    9,292
    
    
    
    8.37
    
    
    
    9,292
    
    
    
    8.37Exercised
    
    
    (9,292
    )
    
    
    8.37Balance at June 30, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 For the purposes of the pro-forma disclosures in terms of SFAS 123, the
weighted average grant date fair value of the above options granted in 2002 at
exercise prices, all of which were less than the market price of the stock on
grant date, was R6.20. The grant date fair value of these options was determined using a Black-Scholes
pricing option model, applying the following weighted average assumptions: 2002Expected life (in years)
    
    
    0Risk free interest rate
    
    
    12.79
    %Volatility
    
    
    23.4
    %Dividend yield
    
    
    0
    %
 F-49




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##### Table of Contents



21. EMPLOYEE BENEFIT PLANS(continued) The following tables summarize information relating to all employee stock
options outstanding as June 30, 2004: Outstanding
    
    ExercisableWeightedaverage
    
    Weighted
    
    
    
    
    
    Weightedcontractual
    
    average
    
    
    
    
    
    averageNumber of
    
    life (in
    
    exercise
    
    Number of
    
    exerciseShares
    
    years)
    
    price
    
    Shares
    
    price(in Rand)
    
    
    
    
    
    (in Rand)Range of
exercise prices (R)R3.11 to R4.68
    
    
    45,000
    
    
    
    6.96
    
    
    
    4.52
    
    
    
    12,500
    
    
    
    4.52R4.69 to R6.99
    
    
    238,500
    
    
    
    6.34
    
    
    
    6.37
    
    
    
    238,500
    
    
    
    6.45R7.00 to R10.50
    
    
    334,125
    
    
    
    6.98
    
    
    
    7.45
    
    
    
    142,250
    
    
    
    7.67R10.51 to R14.35
    
    
    15,000
    
    
    
    5.32
    
    
    
    10.81
    
    
    
    10,000
    
    
    
    10.95R14.36 to R27.55
    
    
    6,689,438
    
    
    
    8.94
    
    
    
    18.31
    
    
    
    2,427,579
    
    
    
    17.97R27.56 to R36.08
    
    
    1,023,300
    
    
    
    8.31
    
    
    
    29.35
    
    
    
    511,650
    
    
    
    29.368,345,363
    
    
    
    8.69
    
    
    
    18.82
    
    
    
    3,342,479
    
    
    
    18.38
 22. FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and cash equivalents The carrying value of cash and cash equivalents approximates their fair value
due to the short-term maturity of these deposits. The Group attempts to
minimize its credit risk by placing cash and cash equivalents with major banks
and financial institutions located in South Africa, Australia and Papua New
Guinea, after evaluating the credit ratings of the respective financial
institutions. The Group believes that no concentration of credit risk exists in
respect of cash and cash equivalents. Derivative instruments In the normal course of its operations, the Group is exposed to market risks,
including commodity price, foreign currency, interest, liquidity and credit
risks. The Company entered into transactions, which make use of derivative
instruments, to economically hedge certain exposures. These instruments include
interest rate swaps and gold lease rate swaps. The decision to use these types
of transactions is based on the Companys hedging policy, which precludes the
forward selling of gold. Although most of these instruments are used as
economic hedges, none of them qualify for hedge accounting and, consequently,
are marked-to-market through statement of operations in accordance SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. The Group does
not hold or issue derivative financial instruments for speculative purposes. F-50




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##### Table of Contents



22. FAIR VALUE OF FINANCIAL INSTRUMENTS(continued) Eskom gold for electricity contract In October 2000, the Company entered into a contract to buy electricity from
Eskom. Under the terms of the Companys agreement, the Company pays Eskom the
standard electricity tariff for all energy it consumes, including the 75 GWh
per month specified in the contract. This contract expires in September 2005.
In addition, every 12 month-period starting in October the Company adjusts the
amounts paid in that period in accordance with an established formula based on
the gold price. The gold price adjustment is based on the notional amount of 15,000 ounces of
gold multiplied by the difference between the contracted gold price, which is
the price that was agreed on the date of the transaction for a determined
period, and the arithmetic average of London PM fix for each business day in
the calculation period. The Company concluded that (1) the contract in its entirety does not meet the
definition of a derivative instrument and therefore it does not have to be
carried on the balance sheet at fair value; (2) the embedded gold for
electricity forward contract possesses economic characteristics that are not
clearly and closely related to the economic characteristics of the host
contract; and (3) a separate, stand-alone instrument with the same terms would
qualify as a derivative instrument. Accordingly, the embedded derivative was
separated from the host contract and carried at fair value. As discussed in Note 16, the fair value of the gold for electricity contract
was a liability of $3.1 million as at June 30, 2004 (June 30, 2003: a liability
of $30.9 million). The fair value reflects the difference between the price
that was agreed on the date of the transaction and the forward price on June
30, 2004. Therefore, the negative $3.1 million reflects the loss as at June 30,
2004 when the gold price was R2,451 per ounce against an average contract price
of R2,256 per ounce. If the spot rand gold price is trading above the strike
price of the gold for electricity contract, the instrument has a negative value
and will result in the Company paying Eskom. Similarly, if the spot rand gold
price is trading below the strike price of the gold for electricity contract,
Eskom would pay the Company. During fiscal 2004, the Company took advantage of the lower rand gold price and
closed out 355,000 ounces of the Eskom gold for electricity contract in line
with its policy of not hedging gold production, at a cost of $25.1 million. A
total of 50,000 ounces remain outstanding at June 30, 2004 (405,000 ounces at
June 30, 2003). To fund the closing out of 85,000 ounces of the Eskom hedge,
the Company entered into a R100 million ($15.9 million) short-term loan
facility with Investec Bank Limited, a South African bank. For the year endingJune 30,2005
    
    2006Gold for electricity contract (by maturity)Ounces (notional)
    
    
    5,000
    
    
    
    45,000Average price (R/ounce)
    
    
    2,256
    
    
    
    2,256
 The above table reflects the number of ounces committed and the average
contract price over the remaining period of the contract. F-51




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##### Table of Contents



22. FAIR VALUE OF FINANCIAL INSTRUMENTS(continued) Put options bought Put options bought refer to the right, but not the obligation to sell a
predetermined amount of gold at a predetermined price on a predetermined date.
During fiscal 2003, the remaining put options were closed out. This resulted
in a cash inflow of $7.1 million. Included in profit/(loss) on derivative
instruments is $nil for fiscal 2004 and fiscal 2002, and a profit of $9.5
million for fiscal 2003, relating to this instrument. Other positions The Company had entered into a gold rate lease swap and call position
transactions which had been accounted for in the financial statements on a
mark-to-market basis in prior fiscal years, and which matured or were closed
out in fiscal 2004. During fiscal 2004, a gold lease rate swap for 109,875 ounces, at a rate of
0.20% matured. A gold lease rate swap is a contract whereby the Company and a counterparty
select a notional amount of gold, and thereafter over the life of the contract
one party pays a fixed lease rate based on that amount of gold and the other
party pays a floating lease rate based on the same amount of gold. The Company
had exposure to increases in the three-month lease rate up to June 2004. The
volume the swap was based on decreases every quarter until it reached zero (by
June 2004). Every quarter the Company received a fixed cash flow equal to 0.2%
per annum of the volume and $280/oz, and paid the three-month floating lease
rate converted at the then market spot rate. During fiscal 2003, the Company bought call options as a risk management tool
to protect the maximum exposure on the gold for electricity contract. Options
covering a total of 272,110 ounces were purchased for $14.9 million. These
contracts expire by September 2005. During fiscal 2004 the Company took
advantage of the lower rand gold price and closed out 265,000 ounces of the
Eskom gold for electricity contract in line with its policy of not hedging gold
production. Accordingly the exposure for which the call options were bought as
a risk management tool had been significantly reduced and the call options were
closed out during fiscal 2004, recording a gain of $0.1 million. The fair value
of the call positions bought was an asset of $6.6 million as at June 30, 2003. Included in profit/(loss) on derivative instruments is a loss of $3.2 million
for fiscal 2004, a profit of $40.9 million for fiscal 2003 and a loss of $91.0
million for fiscal 2002, respectively, relating to these instruments. Concentration of credit risk The Company believes that its financial instruments do not represent a
concentration of credit risk, because the Group deals with a variety of major
banks and financial institutions located in South Africa and Australia, after
evaluating the credit ratings of the representative financial institutions.
Furthermore, its debtors and loans are regularly monitored and assessed for
recoverability. Where it is appropriate to raise a provision, an adequate level
of provision is maintained. In addition, the Groups South African operations all deliver their gold to
Rand Refinery Limited which refines the gold to saleable purity levels and then
sells the gold, on behalf of the Group, on the bullion market. The gold is sold
by Rand Refinery on the same day as it is delivered and settlement is made
within two days. Once the gold has been delivered to Rand Refinery, the risks
and rewards of ownership have passed. The Tolukuma mining operation delivers its gold to one customer, N M Rothschild
(Australia) and receives proceeds within two days. The concentration of credit
risk in Australia is mitigated by the reputable nature of the customer and the
settlement of the proceeds within two days. F-52




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##### Table of Contents



22. FAIR VALUE OF FINANCIAL INSTRUMENTS(continued) The Porgera mining operation delivers its gold to AGR Matthey (Papua New
Guinea) who refines the gold and then delivers it to the Bank of Western
Australia Limited at a price negotiated by the Company. The concentration of
credit risk in Papua New Guinea is mitigated by the reputable nature of the
customer and the settlement of the proceeds within two days. Foreign currency risk The Groups functional currency for the South African operations is the South
African Rand and for the Papua New Guinea operations it is the Papua New Guinea
Kina. Although gold is sold in US Dollars, the Company is obliged to convert
these into Rands for its South African operations in terms of South African
Reserve Bank, or SARB, regulations. The Company is thus exposed to
fluctuations in the Dollar / South African Rand exchange rate. The Company
conducts its operations in South Africa and Papua New Guinea. Currently,
foreign exchange fluctuations affect the cash flow that it will realize from
its operations as gold is sold in US Dollars while production costs are
incurred primarily in Rands and Papua New Guinean Kina. The Companys results are positively affected when the Dollar strengthens
against these foreign currencies and adversely affected when the Dollar weakens
against the foreign currencies. The Companys cash and cash equivalent
balances are held in US Dollars, Rands and Australian Dollars; holdings
denominated in other currencies are relatively insignificant. Certain of the
Companys financial liabilities are denominated in a currency other than the
Rand (refer Note 18). The Company is thus exposed to fluctuations in the Rand
with the relevant currency. The Company has not entered into any foreign
exchange hedging contracts to attempt to mitigate its foreign currency risk. Interest rate and liquidity risk Fluctuations in interest rates impact the value of short-term cash investments
and financing activities, giving rise to interest rate risks. Interest rate swap agreement An interest rate swap agreement was entered into in November 2002 to manage the
exposure to changes in interest rates with regard to the interest payable on
the convertible notes (refer Note 18). The fixed interest rate (in US Dollars)
was swapped for a floating South African interest rate, calculated at the
Johannesburg Inter Bank Acceptance Rate, or JIBAR, plus 200 basis points per
annum. An amount of 60% of the coupon rate is subject to this swap agreement,
based on the requirements of the SARB, as this represents the amount of the
funds raised in South Africa. The maturity date of this agreement is November
2006. The Company believes that the counterparty to this agreement, being The
Standard Bank of South Africa Limited, is a financially sound institution and
the credit risk for non-performance is not significant. As discussed in Note 16, the fair value of the interest rate swap agreement was
a liability of $2.0 million as at June 30, 2004. Labor risk Approximately 70% of the labor force at our South African Operations are
members of labor unions. The majority of the union members are blue-collar
employees. The unions negotiate two year wage agreements which are binding on
employees in the respective bargaining units, the largest of which consists of
occupational groupings of mainly blue collar workers in the organization. These
agreements are valid from July 1, 2003 to June 30, 2005. The levels of
unionization for operations outside South Africa varies. It is mostly contained
amongst blue-collar workers and membership is below 50%. F-53




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##### Table of Contents



22. FAIR VALUE OF FINANCIAL INSTRUMENTS(continued) Fair value of financial instruments The following table represents the carrying amounts and fair values of the
Groups financial instruments outstanding at June 30. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. June 30,
    
    June 30,
    
    June 30,
    
    June 30,2004
    
    2004
    
    2003
    
    2003$000
    
    $000
    
    $000
    
    $000Carrying
    
    Fair
    
    Carrying
    
    Fairamount
    
    value
    
    amount
    
    valueFinancial assetsCash and cash equivalents
    
    
    22,453
    
    
    
    22,453
    
    
    
    44,423
    
    
    
    44,423Derivative instruments
    
    
    
    
    
    
    
    
    
    
    6,563
    
    
    
    6,563Receivables
    
    
    19,514
    
    
    
    19,514
    
    
    
    23,805
    
    
    
    23,805Listed investments
    
    
    12,333
    
    
    
    12,333
    
    
    
    7,927
    
    
    
    7,927Unlisted investments
    
    
    2,392
    
    
    
    2,392
    
    
    
    1,725
    
    
    
    1,725Investment in environmental trusts
    
    
    22,841
    
    
    
    22,841
    
    
    
    17,903
    
    
    
    17,903Financial liabilitiesBank overdrafts
    
    
    1,828
    
    
    
    1,828
    
    
    
    3,897
    
    
    
    3,897Accounts payable and accrued liabilities
    
    
    61,153
    
    
    
    61,153
    
    
    
    49,964
    
    
    
    49,964Derivative instruments
    
    
    5,074
    
    
    
    5,074
    
    
    
    32,721
    
    
    
    32,721Long-term loans- long-term portion
    
    
    59,865
    
    
    
    53,512
    
    
    
    63,149
    
    
    
    63,149- short-term portion
    
    
    9,315
    
    
    
    9,315
    
    
    
    19,068
    
    
    
    19,068
 The carrying values of cash and cash equivalents, receivables, accounts payable
and accrued liabilities and short-term loans approximates their fair values due
to the short-term maturities of these assets and liabilities. The fair value of listed investments has been determined by reference to the
market value of the underlying investments. The investment in the environmental
trusts is invested primarily in interest bearing securities, the cost of which
approximate their fair value. The fair value of the fixed interest rate long-term debt instruments is subject
to changes in market interest rates. The fair values are calculated based on a
credit adjusted US Treasury rate, with comparable terms of maturity. 23. COMMITMENTS AND CONTINGENT LIABILITIES June 30,
    
    June 30,2004
    
    2003$000
    
    $000Capital expenditure commitments:Contracted but not provided for in the financial statements
    
    
    1,671
    
    
    
    13,299Authorized by the directors but not contracted for
    
    
    12,167
    
    
    
    9,72413,838
    
    
    
    23,023
 Litigation The Group is subject to litigation in the normal course of business. The
Group believes that any adverse outcome from litigation would not have a
material effect on its financial position or results of operations. F-54




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##### Table of Contents



24. GEOGRAPHIC AND SEGMENT INFORMATION Based on risks and returns the Directors consider that the primary reporting
format is by business segment. The Group operates in one industry segment,
being the extraction and production of gold and related by products. Therefore
the disclosures for the primary segment have already been given in these
financial statements. The chief operating decision-maker is the Board of Directors, who evaluates the
business based on the following geographical operational segments, based on
revenue generated from the location of the seller: Year ended June 30, 2004$000
    
    $000
    
    $000
    
    
    
    
    
    $000Total SouthBlyvoor
    
    North West
    
    West Wits
    
    $000
    
    AfricanMine
    
    Mine
    
    Mine
    
    Other
    
    operationsRevenues
    
    
    90,066
    
    
    
    130,036
    
    
    
    
    
    
    
    
    
    
    
    220,102Depreciation and amortization
    
    
    (2,643
    )
    
    
    (2,263
    )
    
    
    
    
    
    
    (698
    )
    
    
    (5,604
    )Production costs
    
    
    (90,366
    )
    
    
    (134,465
    )
    
    
    
    
    
    
    (1,189
    )
    
    
    (226,020
    )ResultsNet operating income/(loss)
    
    
    (8,867
    )
    
    
    (21,636
    )
    
    
    (1,539
    )
    
    
    (26,890
    )
    
    
    (58,932
    )Income/(loss) after tax
    
    
    (15,337
    )
    
    
    (20,917
    )
    
    
    (1,403
    )
    
    
    (20,157
    )
    
    
    (57,814
    )Balance sheetMining assets
    
    
    48,518
    
    
    
    27,689
    
    
    
    
    
    
    
    6,164
    
    
    
    82,371Total assets
    
    
    31,572
    
    
    
    79,368
    
    
    
    4,245
    
    
    
    103,681
    
    
    
    218,866Net current assets/(liabilities)
    
    
    (59,902
    )
    
    
    (157,709
    )
    
    
    (19,036
    )
    
    
    298,902
    
    
    
    62,255Other informationCapital expenditures
    
    
    9,151
    
    
    
    5,511
    
    
    
    
    
    
    
    89
    
    
    
    14,751Impairment of assets
    
    
    
    
    
    
    1,900
    
    
    
    
    
    
    
    2,366
    
    
    
    4,266Total number of employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,986
   [Continued from above table, first column(s) repeated] Year ended June 30, 2004$000
    
    $000
    

    $000

    
    $000Total
    
    $000Porgera
    
    Tolukuma
    
    
    
    AustralasianMine
    
    Mine
    
    Other
    
    operations
    
    TotalRevenues
    
    
    60,445
    
    
    
    32,743
    
    
    
    
    
    
    
    93,188
    
    
    
    313,290Depreciation and amortization
    
    
    (9,260
    )
    
    
    (7,340
    )
    
    
    (7,931
    )
    
    
    (24,531
    )
    
    
    (30,135
    )Production costs
    
    
    (31,650
    )
    
    
    (19,821
    )
    
    
    
    
    
    
    (51,471
    )
    
    
    (277,491
    )ResultsNet operating income/(loss)
    
    

    18,631
    
    
    
    2,402
    
    
    
    266
    
    
    
    21,299
    
    
    
    (37,633
    )Income/(loss) after tax
    
    
    9,062
    
    
    
    2,294
    
    
    
    (9,285
    )
    
    
    2,071
    
    
    
    (55,743
    )Balance sheet
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Mining assets
    
    
    61,741
    
    
    
    7,000
    
    
    
    5,831
    
    
    
    74,572
    
    
    
    156,943Total assets
    
    
    19,204
    
    
    
    9,571
    
    
    
    37,334
    
    
    
    66,109
    
    
    
    284,975Net current assets/(liabilities)
    
    
    (25,102
    )
    
    
    (1,651
    )
    
    
    (60,495
    )
    
    
    (87,248
    )
    
    
    (24,993
    )Other informationCapital expenditures
    
    
    8,723
    
    
    
    3,442
    
    
    
    1
    
    
    
    12,166
    
    
    
    26,917Impairment of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,266Total number of employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    751
    
    
    
    13,737
 F-55




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##### Table of Contents



24. GEOGRAPHIC AND SEGMENT INFORMATION(continued) The South African operations deliver their gold to Rand Refinery Limited, which
acts as their agent in the sale of gold bullion. The Tolukuma mining operation
and Porgera mining operation also has one customer for their gold bullion,
namely N M Rothschild and AGR Matthey respectively. Year ended June 30, 2003$000
    
    $000
    
    $000
    

    $000

    
    $000Total South
    
    $000
    
    $000Blyvoor
    
    North West
    
    West Wits
    
    
    
    African
    
    AustralasianMine
    
    Mine
    
    Mine
    
    Other
    
    operations
    
    operations
    
    TotalRevenues
    
    
    81,753
    
    
    
    151,923
    
    
    
    4,796
    
    
    
    
    
    
    
    238,472
    
    
    
    22,870
    
    
    
    261,342Depreciation and amortization
    
    
    (1,509
    )
    
    
    (2,047
    )
    
    
    (402
    )
    
    
    (83
    )
    
    
    (4,041
    )
    
    
    (6,561
    )
    
    
    (10,602
    )Production costs
    
    
    (65,240
    )
    
    
    (144,568
    )
    
    
    (4,859
    )
    
    
    (1,587
    )
    
    
    (216,254
    )
    
    
    (19,105
    )
    
    
    (235,359
    )ResultsNet operating income/(loss)
    
    
    54,713
    
    
    
    2,178
    
    
    
    (80
    )
    
    
    (2,229
    )
    
    
    54,582
    
    
    
    (4,993
    )
    
    
    49,589Income/(loss) after tax
    
    
    39,074
    
    
    
    (22,752
    )
    
    
    161
    
    
    
    2,348
    
    
    
    18,831
    
    
    
    (7,457
    )
    
    
    11,374Balance sheetMining assets
    
    
    38,089
    
    
    
    31,920
    
    
    
    
    
    
    
    602
    
    
    
    70,611
    
    
    
    12,646
    
    
    
    83,257Total assets
    
    
    56,088
    
    
    
    63,530
    
    
    
    20,217
    
    
    
    31,350
    
    
    
    171,185
    
    
    
    57,233
    
    
    
    228,418Net current assets/(liabilities)
    
    
    (13,788
    )
    
    
    (24,356
    )
    
    
    1,306
    
    
    
    55,913
    
    
    
    19,075
    
    
    
    (16,656
    )
    
    
    2,419Other informationCapital expenditures
    
    
    4,176
    
    
    
    6,375
    
    
    
    
    
    
    
    170
    
    
    
    10,721
    
    
    
    2,693
    
    
    
    13,414Impairment of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total number of employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,766
    
    
    
    472
    
    
    
    19,238
 F-56




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##### Table of Contents



24. GEOGRAPHIC AND SEGMENT INFORMATION(continued) The South African operations deliver their gold to Rand Refinery Limited, which
acts as their agent in the sale of gold bullion. The Australasian operations
also have one customer for their gold bullion, namely N M Rothschild. The Australasian operations comprise Tolukuma gold mine and its related
corporate structures. Year ended June 30, 2002$000
    
    
    
    $000
    
    
    
    $000
    
    
    
    $000
    
    
    
    $000
    
    
    $000
    
    $000
    
    $000Total SouthBlyvoor
    
    North West
    
    West Wits
    
    
    
    
    
    African
    
    AustralasianMine
    
    Mine
    
    Mine
    
    Crown Mine
    
    Other
    
    operations
    
    operations
    
    TotalRevenues
    
    
    73,705
    
    
    
    160,596
    
    
    
    6,897
    
    
    
    40,606
    
    
    
    4
    
    
    
    281,808
    
    
    
    22,050
    
    
    
    303,858Depreciation and amortization
    
    
    (933
    )
    
    
    (2,068
    )
    
    
    (43
    )
    
    
    (2,162
    )
    
    
    (1,668
    )
    
    
    (6,874
    )
    
    
    (7,059
    )
    
    
    (13,933
    )Production costs
    
    
    (46,579
    )
    
    
    (118,265
    )
    
    
    (6,136
    )
    
    
    (28,254
    )
    
    
    (980
    )
    
    
    (200,214
    )
    
    
    (17,842
    )
    
    
    (218,056
    )ResultsNet operating profit/(loss)
    
    
    (9,169
    )
    
    
    (70,055
    )
    
    
    (1,387
    )
    
    
    2,837
    
    
    
    (12,332
    )
    
    
    (90,106
    )
    
    
    (4,868
    )
    
    
    (94,974
    )Income/(loss) after tax
    
    
    11,698
    
    
    
    (47,962
    )
    
    
    (1,349
    )
    
    
    2,102
    
    
    
    (11,646
    )
    
    
    (47,157
    )
    
    
    (4,552
    )
    
    
    (51,709
    )Balance sheetMining assets
    
    
    25,159
    
    
    
    19,277
    
    
    
    
    
    
    
    12,128
    
    
    
    1,714
    
    
    
    58,278
    
    
    
    13,906
    
    
    
    72,184Total assets
    
    
    44,024
    
    
    
    46,744
    
    
    
    16,645
    
    
    
    25,232
    
    
    
    39,900
    
    
    
    172,545
    
    
    
    24,761
    
    
    
    197,306Net current assets/(liabilities)
    
    
    (18,032
    )
    
    
    (74,944
    )
    
    
    (12,281
    )
    
    
    9,520
    
    
    
    55,462
    
    
    
    (40,275
    )
    
    
    5,964
    
    
    
    (34,311
    )Other informationCapital expenditures
    
    
    1,793
    
    
    
    3,305
    
    
    
    43
    
    
    
    1,064
    
    
    
    163
    
    
    
    6,368
    
    
    
    1,820
    
    
    
    8,188Impairment of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,167
    
    
    
    2,167
    
    
    
    
    
    
    
    2,167Total number of employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,405
    
    
    
    529
    
    
    
    20,934
 The South African operations deliver their gold to Rand Refinery Limited, which
acts as their agent in the sale of gold bullion. The Australasian operations
also have one customer for their gold bullion, namely N M Rothschild. The Australasian operations comprise Tolukuma gold mine and its related
corporate structures. F-57




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##### Table of Contents



25. SUBSEQUENT EVENTS Investec Bank Limited facilities On June 28, 2004, the Company announced that it had closed out another 85,000
ounces of the Eskom gold for electricity contract in line with the Companys
policy of not hedging gold production (refer Note 22 for the remaining
position). To fund the closing out of the 85,000 ounces on the Eskom gold for electricity
contract, the Company agreed a R100.0 million ($15.9 million) short-term loan
facility with Investec Bank Limited, a South African bank. The loan is based
on commercial terms and conditions and is repayable at the Companys election,
either in cash, in Durban Roodepoort Deep, Limited shares or in a combination
of both. On August 3, 2004, 1,370,886 shares to the value of R20.0 million ($3.2
million) were issued to Investec Bank Limited in settlement of part of the draw
downs that had been made. On September 15, 2004, the Company entered into the second facility of R100.0
million ($15.9 million) with Investec. The facility bears interest at the
three-month JIBAR plus 300 basis points. The Company may elect to repay the
facility in cash or by the issue of our ordinary shares, valued at market value
on the date of issue. As at November 1, 2004, R80.0 million ($13.0 million) had
been utilized under this facility and R60.0 million ($9.8 million) had been
settled by the Company issuing 5,033,911 ordinary shares, based on the market
value at the date of issue. This facility is a general funding facility and is
not renewable. On October 14, 2004, the
Companys subsidiary, DRD (Isle of Man) entered into the third
facility of $15.0 million with Investec Bank (Mauritius) Limited, or
Investec (Mauritius). Subject to the terms of the agreement the
facility may be used to finance future acquisition or rights offers
by companies in which DRD (Isle of Man) wishes to acquire shares, or
it may be used for any other purpose with prior written consent of
Investec (Mauritius). The facility bears interest at the three-month
London Interbank Offered Rate, or LIBOR, plus 300 basis points. Funds
advanced and interest on this facility shall be repaid in cash in
equal installments every three months from the date of that advance
so that the amount of the advance is paid in full to Investec
(Mauritius) within 36 months. The facility is secured by DRD (Isle of
Man)s shares in Emperor Mines Limited, DRD (Porgera) Limited
and Tolukuma Gold Mines Limited. The loan agreement prohibits DRD
(Isle of Man) from disposing of or further encumbering the secured
assets. The facility restricts the flow of payments from DRD (Isle of
Man) to the Company through requiring that all net operating
cash or cash distributions received by DRD (Isle of Man) in respect
of the secured assets must be used to first service the interest and
principle payment obligations under the facility in accordance with
the terms of the facility agreement. The agreement requires that DRD
(Isle of Man) hold, in a debt servicing account, sufficient cash to
cover the quarterly principal payments. Any funds in excess of these
repayment requirements may be utilized by the Company. In addition,
if DRD (Isle of Man) intends to make any payment, which is a
distribution, by or on behalf of it to or for the Company, Investec
(Mauritius) has the option to require DRD (Isle of Man) to pay 50% of
the distributed funds as a prepayment of the facility. The facility
agreement contains a number of additional customary restrictive
covenants. On November 12, 2004, $7.0 million was drawn under this
facility to fund the Companys portion of the Emperor rights
offering. Emperor Mines Limited Subsequent to June 30, 2004, 6,612,676 Durban Roodepoort Deep, Limited shares
to the value of $16.6 million were issued in exchange for the 29,097,269
Emperor shares now owned by the Group with share issue and transaction costs
amounting to R8.7 million ($1.3 million) bringing the effective shareholding of
the Group to 45.33%. On August 3, 2004, the Companys Executive Chairman, Mr. M.M. Wellesley-Wood
was appointed as the Managing Director of Emperor Mines Limited and the
Companys Divisional Director: Australasian Operations, Mr. R. Johnson was
appointed as a non-executive director. On November 12, 2004, the
Companys wholly-owned subsidiary, DRD (Isle of Man), subscribed
for its entitlement under Emperors A$20.4 million ($14.6
million) non-renounceable rights offering, of 20,522,122 Emperor
shares, which at A$0.45 per share, amounted to A$9.2 million ($7.0
million). DRD (Isle of Man) did not participate in any of the
shortfall to the rights offer. DRD (Isle of Man) funded its participation in this rights
offering out of a debt facility of $15 million negotiated with
Investec (Mauritius). Interest and principal payments will be funded
from the Companys net cash generated from offshore operations.
The repayment terms and restriction of funds under this facility are
discussed in detail under Item 5B.: Liquidity and Capital
Resources. F-58




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25. SUBSEQUENT EVENTS
(continued) Review of Operations On June 26, 2004 and June 28, 2004, respectively, the Company entered into a
further 60-day review period at the Buffels Section at our North West
Operations and at our Blyvoor Section designed to restore the operations to
profitability. Proposals were received into a consultative forum in which both
management and organized labor participated, and was distributed to the
Department of Labour and the Department of Minerals and Energy, for their
input. At the Buffels Section agreement was reached with all the relevant
parties early in August 2004, to close the Number 9 Shaft, but to keep the
Number 11 and 12 Shafts in operation on condition that certain defined
sustainability thresholds are met. This agreement resulted in the retrenchment
of 120 employees at this mining operation during fiscal 2005 at a cost of
approximately R4.0 million ($0.6 million). At the Blyvoor Section the 60-day
review was extended by two weeks to conclude on September 13, 2004. On October
5, 2004, it was announced that 1,619 employees have been retrenched at a cost
of approximately R32.0 million ($5.1 million). F-59




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ITEM 19. EXHIBITS The following exhibits are filed as a part of this Annual Report: 1.1(1)
    
    Memorandum of Association of Durban Roodepoort Deep, Limited.1.2(7)
    
    Articles of Association of Durban Roodepoort Deep, Limited, as amended
on November 8, 2002.1.3(1)
    
    Excerpts of relevant provisions of the South African Companies Act.1.4(2)
    
    Durban Roodepoort Deep (1996) Share Option Scheme as amended.2.1(1)
    
    Excerpts of relevant provisions of the Johannesburg Stock Exchange
Listings Requirements.2.2(7)
    
    Indenture between Durban Roodepoort Deep, Limited, as Issuer, and The
Bank of New York, as Trustee, dated November 12, 2002.2.3(7)
    
    Purchase Agreement between Durban Roodepoort Deep, Limited and CIBC
World Markets Corp., dated November 4, 2002.2.4(7)
    
    Registration Rights Agreement between Durban Roodepoort Deep, Limited
and CIBC World Markets Corp., dated November 4, 2002.2.5(7)
    
    Durban Roodepoort Deep, Limited 6% Senior Convertible Note Due 2006 in
the amount of $61,500,000 issued pursuant to Rule 144A of the
Securities Act of 1933, as amended.2.6(7)
    
    Durban Roodepoort Deep, Limited 6% Senior Convertible Note Due 2006 in
the amount of $4,500,000 issued pursuant to Regulation S under the
Securities Act of 1933, as amended.4.1(1)
    
    Tribute Agreement, dated October 9, 1992 between Durban Roodepoort
Deep, Limited and Rand Leases.4.2(1)
    
    Service Agreement, dated July 27, 1995, between Durban Roodepoort
Deep, Limited and Randgold.4.3(1)
    
    Agreement, dated September 28, 1995, among First Wesgold Mining
(Proprietary) Limited, Durban Roodepoort Deep, Limited and Rand Leases
in respect of purchase of assets of First Wesgold by Rand Leases.4.4(2)
    
    Pumping Assistance, dated October 14, 1997, for the 1997/1998 fiscal
year from the Minister of Mineral and Energy Affairs  Republic of
South Africa to Durban Roodepoort Deep, Limited.4.5(3)
    
    Deposit Agreement among Durban Roodepoort Deep, Limited, The Bank of
New York as Depositary, and owners and holders of American Depositary
Receipts, dated as of August 12, 1996, as amended and restated as of
October 2, 1996, as further amended and restated as of August 11,
1998.4.6(4)
    
    Security Agreement, dated November 5, 1998, between The Chase
Manhattan Bank, Durban Roodepoort Deep, Limited, Blyvoor, Buffels and
West Wits.4.7(4)
    
    Loan Agreement, dated June 8, 1999, between Industrial Development
Corporation of South Africa Limited, Crown and Durban Roodepoort Deep,
Limited.4.8(4)
    
    Lender Substitution Deed, dated August 18, 1999, between Durban
Roodepoort Deep, Limited, DRD Australasia, NM Rothschild & Sons
(Singapore) Limited, NM Rothschild & Sons (Australia) Limited, as
agent in its own capacity, and Rothschild Nominees (Pty) Limited.4.9(4)
    
    A $10m Facility Agreement, dated September 10, 1999, between Durban
Roodepoort Deep, Limited, DRD Australasia and NM Rothschild & Sons
(Australia) Limited.4.10(4)
    
    Facility Agreement, dated August 9, 1996, between PT Barisan Tropical
Mining, Rothschild Australia Limited and the Participants.4.11(4)
    
    Deposit Agreement, dated September 30, 1999, between Buffels and BOE
Merchant Bank, a division of BOE Bank Limited.4.12(4)
    
    Undertaking and Security Agreement, dated November 17, 1999, between
BOE Bank Limited, through its division BOE Merchant Bank, and Buffels.4.13(4)
    
    Guarantee and Indemnity Agreement, dated November 17, 1999, between
Durban Roodepoort Deep, Limited, Blyvoor, Argonaut Financial Services
(Proprietary) Limited, West Wits, Crown and BOE Bank Limited, through
its division BOE Merchant Bank.4.14(4)
    
    Loan Security Agreement, dated November 17, 1999, between FBCF
Equipment Finance (Proprietary) Limited and Buffels.4.15(4)
    
    Sale of Business Agreement in respect of Harties, dated August 16,
1999, between Avgold Limited, Buffels and Durban Roodepoort Deep,
Limited.4.16(4)
    
    Form of Restraint Agreement.4.17(4)
    
    Sale of Shares Agreement, dated September 29, 1997, between RMP
Properties Limited, Randgold, Crown, City Deep Limited, Consolidated
Main Reef Mines and Estate Limited, Crown Mines Limited, RMP
Properties SA Limited and Industrial Zone Limited.4.18(5)
    
    Form of Non-Executive Employment Agreement.
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4.19(5)
    
    Form of Executive Employment Agreement.4.20(5)
    
    Share Sale Option Agreement, dated March 12, 1993, between Newmont
Proprietary Limited, Ballimore No. 56 Proprietary Limited, Clayfield
Proprietary Limited and Dome Resources N.L.4.21(5)
    
    Convertible Loan Agreement, dated November 19, 1997, between Tolukuma
Gold Mines Proprietary Limited, Dome Resources N.L. and Mineral
Resources Development Company Proprietary Limited.4.22(5)
    
    First Deed of Variation of Loan Agreement, between Mineral Resources
Development Company Pty Limited, Dome Resources N.L. and Tolukuma Gold
Mines Pty Limited.4.23(5)
    
    Agreement, dated February 21, 2000, between Durban Roodepoort Deep,
Limited and Western Areas Limited.4.24(5)
    
    Independent Auditors Report from PricewaterhouseCoopers to the Board
of Directors and Shareholders of Crown Consolidated Gold Recoveries
Limited, dated August 28, 2000.4.25(5)
    
    Shareholders Agreement, dated September 29, 2000, between Durban
Roodepoort Deep, Limited, Fraser Alexander Tailings (Proprietary)
Limited and Mine Waste Solutions (Proprietary) Limited.4.26(5)
    
    First Addendum to the Agreement, dated November 15, 2000, between
Durban Roodepoort Deep, Limited and Western Areas Limited.4.27(5)
    
    Second Addendum to the Agreement, dated December 21, 2000, between
Durban Roodepoort Deep, Limited and Western Areas Limited.4.28(6)
    
    Agreement between Durban Roodepoort Deep, Limited, Western Areas,
Limited, Consolidated African Mines Limited and JCI Gold Limited,
dated April 25, 2001.4.29(6)
    
    Addendum to the Agreement between Durban Roodepoort Deep, Limited,
Western Areas Limited, Consolidated African Mines Limited and JCI Gold
Limited, dated August 31, 2001.4.30(6)
    
    Addendum to the Agreement between Durban Roodepoort Deep, Limited,
Western Areas Limited, Consolidated African Mines Limited and JCI Gold
Limited, dated September 26, 2001.4.31(6)
    
    Guarantee and Cession in Securitatem Debiti Agreement between DRDGOLD
Limited and Investec Bank Limited, dated October 9, 2001.4.32(6)
    
    Second Deed of Variation of Loan Agreement between Tolukuma Gold Mines
Limited, Dome Resources NL and Mineral Resources Development Company
Limited, dated June 28, 2001.4.33(6)
    
    Principal Terms and Conditions for Waiving Right to Declare Default
and Enforce Security Deed under 1993 Purchase Agreement between
Newmont Second Capital Corporation, Tolukuma Gold Mines (Pty.)
Limited, Dome Resources (PNG) Pty. Limited, Dome Resources NL and
Durban Roodepoort Deep, Limited, dated July 16, 2001.4.34(6)
    
    Loan Agreement between Bank of South Pacific Limited and Tolukuma Gold
Mines Limited, dated November 8, 2001.4.35(7)
    
    Master Finance Lease between Volvo Truck Finance Australia (Pty) Ltd
and Dome Resources N.L., dated October 31, 2000.4.36(7)
    
    Agreement between Durban Roodepoort Deep, Limited and Rand Refinery
Ltd, dated October 12, 2001.4.37(7)
    
    Share Purchase Agreement between Crown Consolidated Gold Recoveries
Ltd, The Industrial Development Corporation of South Africa Ltd, Khumo
Bathong Holdings (Pty) Ltd and Durban Roodepoort Deep, Limited, dated
June 12, 2002.4.38(7)
    
    Shareholders Agreement between The Industrial Development Corporation
of South Africa Limited, Khumo Bathong Holdings (Pty) Ltd, Crown
Consolidated Gold Recoveries Ltd, Crown Gold Recoveries (Pty) Ltd. and
Durban Roodepoort Deep, Limited, dated June 12, 2002.4.39(7)
    
    Addendum to Shareholders Agreement between The Industrial Development
Corporation of South Africa Limited, Khumo Bathong Holdings (Pty) Ltd,
Crown Consolidated Gold Recoveries Ltd, Crown Gold Recoveries (Pty)
Ltd. and Durban Roodepoort Deep, Limited, dated June 14, 2002.4.40(7)
    
    Subscription Agreement between Khumo Bathong Holdings (Pty) Limited
and Durban Roodepoort Deep, Limited, dated June 12, 2002.4.41(7)
    
    Loan Agreement between Durban Roodepoort Deep, Limited and Khumo
Bathong Holdings (Pty) Ltd, dated June 12, 2002.4.42(7)
    
    Memorandum of Loan Agreement No. 1 between Durban Roodepoort Deep, and
Crown Gold Recoveries (Pty) Ltd, dated June 12, 2002.
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4.43(7)
    
    Memorandum of Loan Agreement No. 2 between Durban Roodepoort Deep,
Limited and Crown Gold Recoveries (Pty) Ltd, dated June 12, 2002.4.44(7)
    
    Memorandum of Loan Agreement No. 3 between Crown Consolidated Gold
Recoveries Ltd and Crown Gold Recoveries (Pty) Ltd, dated June 12,
2002.4.45(7)
    
    Loan Agreement between Industrial Development Corporation of South
Africa Ltd. and Blyvooruitzicht Gold Mining Company Ltd, dated July
18, 2002.4.46(7)
    
    Agreement of Loan and Pledge between Durban Roodepoort Deep, Limited
and East Rand Proprietary Mines Ltd, dated September 18, 2002.4.47(7)
    
    Management Services Agreement between Durban Roodepoort Deep, Limited,
Khumo Bathong Holdings (Pty) Ltd and Crown Gold Recoveries (Pty)Ltd,
dated October 1, 2002.4.48(7)
    
    Agreement amongst Durban Roodepoort Deep, Limited, West Witwatersrand
Gold Mines Limited and Bophelo Trading (Pty) Ltd, dated October 1,
2002.4.49(7)
    
    Letter Agreement between Durban Roodepoort Deep, Limited and The
Standard Bank of South Africa, represented by its Standard Corporate
and Merchant Bank Division, dated October 7, 2002.4.50(7)
    
    Memorandum of Agreement between Daun Et Cie A.G., Courthiel Holdings
(Pty) Ltd, Khumo Bathong Holdings (Pty) Ltd, Claas Edmond Daun, Paul
Cornelis Thomas Schouten, Moltin Paseka Ncholo, Michelle Patience
Baird, Derek Sean Webbstock, as sellers, and Crown Gold Recoveries
(Pty) Ltd, as purchaser, dated October 10, 2002.4.51(7)
    
    Memorandum of Loan Agreement between Durban Roodepoort Deep, Limited
and Crown Gold Recoveries (Pty) Ltd, dated October 10, 2002.4.52(7)
    
    Letter Agreement Relating to Consultancy Arrangement between Durban
Roodepoort Deep, Limited and Nicolas Goodwin.4.53(7)
    
    Management Services Agreement between Durban Roodepoort Deep, Limited
and East Rand Proprietary Mines Ltd, dated October 10, 2002.4.54(7)
    
    Agreement for sale of shares in Emperor Mines Limited, between DRD
(Isle of Man) Limited and Kola Ventures Limited, dated December 13,
2002.4.55(8)
    
    Confirmation, dated August 14, 2003, between Durban Roodepoort Deep,
Limited and Investec Bank (Mauritius) Limited.4.56(8)
    
    Amendment to Confirmation, dated September 4, 2003, between Durban
Roodepoort Deep, Limited and Investec Bank (Mauritius) Limited.4.57(9)
    
    Deed of Amalgamation for the Corporate Restructuring of Orogen
Minerals (Porgera) Limited, Mineral Resources Porgera Limited and Dome
Resources (PNG) Limited, dated October 14, 2003.4.58(9)
    
    Undertaking, between Oil Search Limited and DRD (Isle of Man) Limited,
dated October 14, 2003.4.59(9)
    
    Loan Assignment Agreement between Orogen Minerals Limited, DRD (Isle
of Man) and Orogen Minerals (Porgera) Limited, dated October 14, 2003.4.60(9)
    
    Agreement between Orogen Minerals Limited and DRD (Isle of Man)
Limited, dated October 14, 2003.4.61(9)
    
    Loan Assignment Agreement, between Dome Resources (PNG) Limited, Dome
Resources Pty Limited, DRD (Isle of Man) Limited and Tolukuma Gold
Mines Limited, dated November 21, 2003.4.62(9)
    
    Memorandum of Agreement made and entered into between Durban
Roodepoort Deep, Limited, West Witwatersrand Gold Mines Limited,
Mogale Gold (Proprietary) Limited and Luipaards Vlei Estates
(Proprietary) Limited dated June 6, 2003.4.63(10)
    
    Porgera Joint Venture Operating Agreement between Placer (P.N.G.) Pty
Limited and Highlands Gold Properties Pty. Limited and PGC (Papua New
Guinea) Pty Limited, dated November 2, 1988.4.64(10)
    
    Agreement of Employment between Durban Roodepoort Deep, Limited and
Mr. D.J.M. Blackmur, dated as of October 21, 2003.4.65(10)
    
    Banking facilities Agreement made and entered between Durban
Roodepoort Deep, Limited and Standard Bank of South Africa, Limited,
dated November 14, 2003.4.66(10)
    
    Agreement of Employment between DRDGOLD Limited and Mr. M.M.
Wellesley-Wood, dated as of December 1, 2003.4.67(10)
    
    Service Agreement between DRD (Isle of Man) Limited and Mr. M.M.
Wellesley-Wood, dated as of December 1, 2003.4.68(10)
    
    Agreement of Employment between Durban Roodepoort Deep, Limited and
Mr. I.L. Murray, dated as of December 1, 2003.4.69(10)
    
    Service Agreement between DRD (Isle of Man) Limited and Mr. I.L.
Murray, dated as of December 1, 2003.
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4.70(10)
    
    Subscription and Option Agreement made and entered between DRD (Isle
of Man) Limited, Net-Gold Services Limited and G.M. Network Limited,
dated January 26, 2004.4.71(10)
    
    Forward Bullion Transaction Agreements made and entered between Durban
Roodepoort Deep, Limited and Investec Bank Limited, dated February 4,
2004, February 6, 2004, February 11, 2004 and February 12, 2004.4.72(10)
    
    Loan Agreement made and entered between Durban Roodepoort Deep,
Limited and Investec Bank Limited, dated June 24, 2004.4.73(10)
    
    Termination Agreement made and entered between Durban Roodepoort Deep,
Limited, Eskom Holdings Limited and Investec Bank Limited, dated June
24, 2004.4.74(10)
    
    Novation Agreement made and entered between J Aron & Company, Eskom
Holdings Limited and Investec Bank Limited, dated June 24, 2004.4.75(10)
    
    Memorandum of Understanding made and entered between Buffelsfontein
Gold Mines Limited, Buffels Division and The National Union of
Mineworkers, The United Association of South Africa, The Mine Workers
Union (Solidarity) and The South African Electrical Workers
Association regarding retrenchments associated with Number 9, 10 and
12 Shafts of Buffelsfontein Division, dated August 6, 2004.4.76(10)
    
    CCMA Settlement Agreement made and entered between Blyvooruitzicht
Gold Mining Company Limited and The United Association of South
Africa, South African Equity Workers Association, Solidarity and The
National Union of Mineworkers regarding the retrenchment of up to
2,000 employees of the Blyvooruitzicht Gold Mining Company, dated
September 2, 2004.4.77(10)
    
    Loan Agreement made and entered between Durban Roodepoort Deep,
Limited and Investec Bank Limited, dated September 15, 2004.4.78(10)
    
    Subscription Agreement made and entered between DRD (Isle of Man)
Limited and DRDGOLD Limited, dated September 21, 2004.4.79(10)
    
    Common Terms Agreement of Loan made and entered between DRD (Isle of
Man) Limited and Investec Bank (Mauritius) Limited, dated October 14,
2004.4.80(10)
    
    Facility A Loan Agreement made and entered between DRD (Isle of Man)
Limited and Investec Bank (Mauritius) Limited, dated October 14, 2004.8.1(10)
    
    List of Subsidiaries.12.1#
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.12.2#
    
    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.13.1#
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.13.2#
    
    Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.14.1#
    
    Consent of KPMG Inc.14.2#
    
    Consent of Deloitte & Touche.15.1(10)
    
    Crown Gold Recoveries (Pty) Limited Consolidated Financial Statements
for the years ended June 30, 2004 and 2003.99.1(11)
    
    Press release dated February 18, 2005, entitled Trading Statement.99.2(12)
    
    Press release dated March 17, 2005, entitled DRDGOLD Suspends
Operations at its North West Operations No. 2 Shaft Following Further
Earth Tremors.99.3(12)
    
    Press release dated March 22, 2005, entitled Provisional Liquidation
of Buffelsfontein Gold Mines Limited.99.4(13)
    
    Announcement dated April 5, 2005, regarding subscription.99.5(14)
    
    Announcement dated April 5, 2005 regarding claw back offer.
   (1)
    
    Incorporated by reference to our Registration Statement (File No. 0-28800) on Form 20-F.(2)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 1997.(3)
    
    Incorporated by reference to our Registration Statement (File No. 333-9242) on Form F-6.(4)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 1999.(5)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2000.(6)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2001.(7)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2002.(8)
    
    Incorporated by reference to Amendment No. 4 our Annual Report on Form 20-F for the fiscal year ended June 30, 2002.(9)
    
    Incorporated by reference to our Annual Report on Form 20-F for the fiscal year ended June 30, 2003.(10)
    
    Filed herewith(11)
    
    Incorporated by reference to the Companys Form 6-K (File No. 0-28800) filed with the SEC on February 18, 2005.(12)
    
    Incorporated by reference to the Companys Form 6-K (File No. 0-28800) filed with the SEC on March 22, 2005.(13)
    
    Incorporated by reference to the Companys Form 6-K (File No. 0-28800) filed with the SEC on April 5, 2005.(14)
    
    Incorporated by reference to the Companys Form 6-K (File No. 0-28800) filed with the Sec on April 5, 2005.#
    
    Filed herewith. 182




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SIGNATURES The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf. DRDGOLD LIMITEDBy:
    /s/ M.M. Wellesley-WoodM.M. Wellesley-WoodChief Executive Officer By:
    /s/ I.L. MurrayI.L. MurrayChief Financial Officer Date: April 29, 2005