DRDGold Limited DROOY

Pruning Underground, Growing Surface

[tavistock]

Todays comments from RBC - good long term Buy if you think gold is consolidiating at these levels


Impact
Positive - good for future health.

First Impression
DRDGOLD (JSE: DRD) announced that it was to initiate a 60-day formal
consultation process with unions on the possible termination of 400 jobs (out of
1600) at its 74%-owned East Rand Proprietary Mines ("ERPM") operation.

• ERPM Down-Scaling - ERPM is a deep, relatively high-cost operation.
DRD Financial Manager Kobus Dissel was quoted in the media as saying that
DRD was planning to close "unprofitable parts" (i.e. deeper areas where
volumes mined were insufficient to cover costs) of ERPM.

• Management Rationalization - General Manager Manny da Silva has
reportedly been made redundant.

• First Meeting with Unions in Early May - The first formal consultation
meeting could apparently occur as early as 6th May, 2008.

• More Restructuring Details Expected in May - We expect management to
provide more information on restructuring plans at the company's Q3 Results
on May 9th.

Restructuring Should Leave Company Healthier
DRD is slowly being resurrected from the bare bones of what was left of the
original company following the sale of international assets. Management is set
on making sure that the existing asset base is rationalized, properly-capitalized
and developed to the extent that production can be delivered on a sustainable,
profitable basis.
Today's announcement, while painful in the short-term, is in line with that
longer goal. We believe this to be the right way to re-establish DRD as a true
gold price play, particularly given South Africa's inflationary environment and
on-going electricity crisis. As such, we maintain our positive view and Sector
Perform recommendation on the shares.