Media releases

NUM claims regarding ERPM profits, assistance from government rejected

DRDGOLD Limited has rejected claims by the National Union of Mineworkers (NUM) that ERPM mine, has received more than R100 million in government assistance and recorded a profit of over R320 million in the current financial year.

Johannesburg, South Africa, 13 November, 2008. DRDGOLD Limited (JSE: DRD; NASDAQ: DROO) has rejected claims by the National Union of Mineworkers (NUM) that the ERPM mine of its 74%-owned operating subsidiary, DRDGOLD South African Operations (Pty) Limited, has received more than R100 million in government assistance and recorded a profit of over R320 million in the current financial year.

The claims were contained in an NUM media release titled “NUM calls on DME to intervene in ERPM” dated yesterday, 12 November.

DRDGOLD Chief Executive Officer Designate Niël Pretorius said: “At a time when ERPM management is engaging all stakeholders, including the NUM, in earnest and committed consultation on the future of the mine, it is disappointing that the union feels it necessary to deliberately disseminate inaccurate and misleading information into the public domain.”

Pretorius said that, during the last four years, the cost of pumping water from underground at ERPM to manage the level of the Central Witwatersrand Basin in the national interest has exceeded R40 million a year.

“We have received, on average, during this period government pumping assistance of R8 million a year, the balance of an average of R32 million a year being borne by ERPM’s shareholders.”

During 2008, Pretorius said, ERPM had completed a necessary plugging project to seal its only producing shaft, Far East Vertical Shaft, from rising underground water at a total cost of R34 million.

“Government’s contribution towards the project was some R22 million, the balance being borne by the company.”

An accurate estimate, therefore, of Government’s total financial assistance to ERPM was R54 million.

Refuting the NUM’s claim of profit exceeding R320 million, Pretorius said: “In the current financial year to 30 September 2008, ERPM recorded a loss of R128.1 million after accounting for impairment of assets and in the previous financial year ended 30 June 2008, a loss of R102.7 million before tax. During the same periods it invested approximately R34.4 million in capital improvements.”

ERPM management was represented today at a protest meeting in central Boksburg attended by some 300 protesters and received a memorandum relating to ERPM from organized labour. The company has undertaken to provide a written response within seven days.

For background:

Representatives of ERPM management, unions, and the Departments of Minerals and Energy, Water Affairs and Forestry, and Labour have met several times to discuss the situation at the ERPM mine.

Pumping of underground water at the mine’s South West Vertical (SWV) Shaft had to be stopped on 6 October for safety reasons following the deaths of two of employees who were overcome by carbon dioxide gas underground at SWV Shaft on 19 September.

Since then, the underground water level has been rising due to water decanting into the mine from workings further west, as well as water from the ice sent underground every day at the mine’s only producing shaft, Far East Vertical (FEV) Shaft to cool the working places.

On Friday, 31 October, the pumps at the mine’s South East Vertical (SEV) Shaft used to pump water from FEV Shaft could no longer cope with all of this water.

As a result, the supplying of ice underground at FEV Shaft to cool the working places had to be stopped. This means the working places became too hot for production crews to go underground at FEV Shaft to work on normal drilling and blasting operations.

Management is looking to see if it will be possible to put in pumps at FEV Shaft to pump out the extra water. It hopes to have an answer from consultants on this shortly. Early estimates, however, indicate that this solution will be costly and could take up to 18 months to install.

Should these estimates be confirmed, management expects that it will have to start consultations with the unions in terms of Section 189A of the Labour Relations Act, on the medium-term future of ERPM’s employees.

The National Union of Mineworkers (NUM) and UASA have asked management to consider putting up for sale the upper underground levels of the old portion of the mine. The unions believe there may be other mining companies that would be interested in buying these.

The Unions have also made several other proposals, including the temporary redeployment of some employees to other operations. Management has undertaken to consider all proposals made by stakeholders in the interest of finding sustainable solutions.

ERPM currently employs some 1 700 people.

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