DRDGOLD (DRDGF) Risk Analysis

Our flotation and fine-grind project, implemented in fiscal year 2014, is designed to improve extraction efficiencies. Certain components of the FFG were temporarily halted in the first quarter of fiscal year 2020 to perform an evaluation and compare the additional revenues earned from additional gold extracted from the most recently integrated reclamation sites compared to the cost incurred to operate the FFG circuit. The remaining components of the FFG continue to operate. Testing on the newly integrated material has suggested that some of these halted components will only operate in subsequent years once the related reclamation sites have been brought online in accordance with the current life of mine plan for ERGO. These halted components are classified as idle assets until they are brought back into operation as described. The success of the FFG is directly dependent on the material type and material mix processed through it. Therefore, the halted components will remain idle pending the continuation and conclusion of various test work regarding the material type and material mix of future reclamation sites. Firm decisions have also not yet been made by the executive committee and the Board of Directors on the future of the FFG. We remain subject to operations risks relating to the FFG project.

We have two mining operations generating cash flows, namely Ergo and FWGR. Ergo's reclamation sites, processing plants, pump stations and the Brakpan/Withok TSF are linked through pipeline infrastructure. The Ergo plant is currently our major processing plant. FWGR's reclamation sites, DP2 processing plant, pump stations and the Driefontein 4 Tailings Storage Facility are linked through pipeline infrastructure. Our reclamation sites, plants, pipelines infrastructure and the tailings storage facilities are exposed to numerous risks, including operational down time due to planned or unplanned maintenance and possible load shedding or power dips, adverse weather, destruction of infrastructure, spillages, higher than expected operating costs, or lower than expected production as a result of decreases in extraction efficiencies due to imbalances in the metallurgical process as well as inconsistent volume throughput or other factors. Our FWGR operations are reliant on the use and access to Sibanye-Stillwater Limited's ("Sibanye-Stillwater") mining infrastructure, related services including the smelting and recovery of gold from gold loaded carbon produced at FWGR (FWGR has the option to transfer gold loaded carbon to Ergo's Knights plant as an alternative to Sibanye-Stillwater) as well as the use of various rights, permits and licenses held by Sibanye Gold Proprietary Limited (wholly owned subsidiary of Sibanye-Stillwater) pursuant to which FWGR operates, pending the transfer to FWGR of those that are transferable. Any disruption in the supply of, or our ability to use and access the Sibanye-Stillwater mining infrastructure, related services and rights, permits and licenses, could have an adverse impact on our operations. Any of the risks above or other interruptions could adversely impact our operations which could have a material adverse effect on our business, operating results and financial condition.

The development of our projects are capital intensive processes carried out over long durations and requires us to commit significant capital expenditure and allocate considerable management resources in utilizing our existing experience and know-how. Projects like the development of Phase 2 of the FWGR assets acquired from Sibanye-Stillwater, the Solar Plant and the recommissioning of the Withok TSF are subject to the risk of delays, regulatory approvals and cost overruns which are inherent in any large construction project including, inter alia: -     unforeseen increases in the cost of equipment, labor and raw materials;-     delays or disruptions in the supply of equipment and raw materials -     unforeseen design and engineering problems;-     changes in construction plans that may require new or amended planning permissions;-     unforeseen construction problems;-     unforeseen delays commissioning sections of the project;-     inadequate phasing of activities;-     labor disputes and social challenges;- security issues -     inadequate workforce planning or productivity of workforce;-     inadequate management practices;-     natural disasters and adverse weather conditions;-     failure or delay of third-party service providers; and -     changes to regulations, such as environmental regulations. We also face the risk that expected benefits of our projects are not achieved. The construction of the RTSF commenced towards the end of fiscal year 2024 and the early works for Driefontein Plant 2 ("DP2") expansion commenced during the first quarter of fiscal year 2025, both related to Phase 2. A delay in the construction of the RTSF may result in deposition capacity to be reduced as the Driefontein 4 TSF is expected to reach capacity at the end of fiscal year 2026 at the current deposition rate, where after the deposition rate would have to decrease materially. A delay in the DP2 expansion project may result in the under utilisation of the RTSF resulting in lower returns being generated. Ergo is currently developing a Solar Power Project to reduce its reliance on Eskom and to reduce its future cost of electricity. The Solar Plant definitive feasibility study was completed during fiscal year 2022 and is currently under development. A significant capital investment was needed for the project and the purchase of imported solar panels and battery energy storage system subject to fluctuations in the USD and euros to the rand exchange rate. The solar panels are all installed and have been progressively started to generate and supply power towards the end of current fiscal year. It is estimated that the full benefit from the project, in reduced electricity costs and reduced carbon footprint, will materialise during the second quarter of fiscal year 2025. Regulatory approvals for the recommissioning of the Withok TSF are yet to be obtained. The implementation of the design is expected to be crucial to sustain and increase the life of mine of Ergo as it will accommodate material toward the east of the Ergo plant. In addition, if the assumptions we make in assessing the viability of our projects, including those relating to commodity prices, exchange rates, interest rates, inflation rates and discount rates, prove to be incorrect or need to be significantly revised, this may adversely affect the profitability or even the viability of our projects. The uncertainty and volatility in the gold market makes it more difficult to accurately evaluate the project economics and increases the risk that the assumptions underlying our assessment of the viability of the project may prove incorrect. As the development of FWGR, the Solar Power Project and the recommissioning of the Withok TSF are particularly material to DRDGOLD, significant cost overruns or adverse changes in assumptions affecting the viability of these projects could have a material adverse effect on our business, cash flows, financial condition and prospects. Our operating cash flow, available banking facilities and ability to raise funds from banks or the capital markets may be insufficient to meet our capital expenditure plans and requirements, depending on the timing and cost of development of our existing projects and any further projects we may pursue. As a result, new sources of capital may be needed to meet the funding requirements of these projects and to fund ongoing business activities. Our ability to raise and service significant new sources of capital will be a function of, inter alia, macroeconomic conditions, rising cost of debt, our credit rating, our gearing and other risk metrics, the condition of the financial markets, future gold prices, the prospects for our industry, our operational performance and operating cash flow and debt position. Inability to raise these funds may place a burden on the Group cash reserves. In the event of operating or financial challenges, any dislocation in financial markets or new funding limitations, our ability to pursue new business opportunities, invest in existing and new projects, fund our ongoing business activities and pay dividends, could be constrained, any of which could have a material adverse effect on our business, operating results, cash flows and financial condition.

Our operations are based on ultra-volume and almost nano-gold extraction. The volume of reclaimed material delivered has one of the most profound impacts on the gold output of our metallurgical plants. The large volumes of material that are processed at our operations are deposited on tailings facilities which have a finite capacity. The Brakpan/Withok TSF is a Category 3 dam, described as "Large" and carrying a Hazard Rating of "Significant", which renders it subject to a strict safety monitoring and reporting regime and that imposes the obligation on the operator to periodically compile and submit independent Dam Safety Audit Reports. Whilst Ergo has not received any directive that restricts or inhibits its current and future deposition regime, the Brakpan/Withok TSF is a mature facility subject to a strict compliance regime, and it may attract more onerous conditions from the regulator. Additionally, Ergo plans to eventually move onto the adjacent Withok TSF, and has filed an application with Department of Water and Sanitation to have it recommissioned. Alternative facilities will be required to ensure adequate deposition capacity for the current life of mine and for the future. Key projects to increase such a deposition capacity include the development of the RTSF as part of Phase 2 FWGR project, as well as obtaining regulatory approvals for the recommissioning of the Withok TSF at Ergo to expand its deposition capacity. The timing to have the new facilities on line is critical as a delay may result in reduced deposition rates or a halt in deposition which will have an adverse financial impact on the business if interim alternative deposition facilities cannot be obtained.

Our tailings storage facilities are exposed to numerous risks and events, the occurrence of which may result in the failure, breach or damage of such a facility. These may include sabotage, piping or seepage failures, failure by our employees to adhere to the codes of practice and natural disasters such as excessive rainfall and seismic events, any of which could force us to stop or limit operations. This is further impacted and expected to intensify with the effects of climate change. In addition, the facilities could overflow or a side wall could collapse jeopardizing the health and safety of our employees and communities living around these facilities and potentially resulting in extensive property and environmental damage. In the event of damage to, or any failure of, our tailings facilities, we could face legal proceedings (including criminal proceedings and public civil actions) and investigations for significant amounts of damages. Such actions would also likely entail significant costs and potentially involve the need for large expenditures to help regions and people affected to recover. The occurrence of any of these risks could adversely affect our operations and this in turn could have a material adverse effect on our business, operating results and financial condition. The potential elimination of conventional wet tailings could also lead to large additional expenditures on research and development of new technologies. Changes in law and regulation, to impose more stringent standards, may also lead to increased capital expenditure to update our facilities, be able to expand our facilities in the future or continue to meet existing or more stringent legal (including permit) requirements.

Crime statistics in South Africa indicate an increase in theft. This together with price increases for copper and steel has resulted in theft of copper cables and pipelines. Our operations experience high incidents of copper cable theft and pipelines despite the implementation of enhanced security measures which have increased our security spend. At times, the incidences have resulted in serious injuries of our security personnel. In addition to the general risk to employees' lives in an area where theft occurs, we may suffer production losses and incur additional costs as a result of power interruptions caused by cable theft and theft of bolts used for the pipeline.

The business of gold mining is 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 and reclamation 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: - environmental hazards and pollution, including dust generation, toxic chemicals, discharge of metals, pollutants, radioactive materials and other hazardous material into the air and water;- flooding, landslides, sinkhole formation, ground subsidence, ground and surface water pollution and waterway contamination;- a decrease in labor productivity due to labor disruptions, work stoppages, disease, slowdowns or labor strikes;- unexpected decline of ore grade;- metallurgical conditions or lower than expected gold recovery;- failure of unproven or evolving technologies;- mechanical failure or breakdowns and ageing infrastructure;- energy and electrical power supply interruptions;- availability of water;- injuries to employees or fatalities due to falls from heights and accidents relating to mobile machinery or electrocution or other causes;- activities of illegal or artisanal miners;- material and equipment availability;- legal and regulatory restrictions and changes to such restrictions;- social or community disputes or interventions;- accidents caused from the collapse of tailings facilities;- pipeline failures and spillages;- safety-related stoppages; and - corruption, fraud and theft including gold bullion theft. The occurrence of any of these hazards could delay production, result in losses, or increase production costs or decrease earnings and may result in significant legal claims and adversely impact our business results of operations and financial condition.