2nd Nov 2006 07:01
Randgold Resources Ld02 November 2006 RANDGOLD RESOURCES LIMITEDIncorporated in Jersey, Channel IslandsReg. No. 62686LSE Trading Symbol: RRSNasdaq Trading Symbol: GOLD REPORT FOR THE QUARTER ENDED 30 SEPTEMBER 2006 * Profit from mining up by 90% for the nine months year on year* Production increases at Loulo by 11% but down by 8% at Morila* Underground drilling expands the resource base at Loulo to more than 10 million ounces* Loulo underground mine development formally underway* Tongon drilling results support decision to proceed with feasibility programme* Exploration team gears up ahead of new field season* New opportunities beyond our current country portfolio to be evaluated Randgold Resources Limited has 68.6 million shares in issue as at 30 September2006 SUMMARISED FINANCIAL INFORMATION AND OPERATING RESULTS Quarter ended Quarter Quarter 30 Sept ended ended 2005 30 Sept 30 June (Re-US$000 2006 2006 stated)+Gold sales revenue* 63 178 63 441 31 000Total cash costs* 32 504 28 448 13 211+Profit from mining activity* 30 674 34 993 17 789+Profit from operations* 17 520 23 093 9 955+Net profit 12 746 14 573 9 949+Net profit (as previouslyreported) n/a n/a 9 219+Net profit attributable toequity shareholders 12 285 13 754 9 949+Net cash generated fromoperations 17 818 21 418 5 360Bank and cash 155 320 151 531 45 022Attributable production**(ounces) 107 002 105 388 69 160Group total cash costsper ounce** * (US$) 304 270 191+Group cash operatingcosts per ounce* (US$) 265 231 160+ SUMMARISED FINANCIAL INFORMATION AND OPERATING RESULTS(continued) 9 months ended 9 months 30 Sept ended 2005 30 Sept (Re-US$000 2006 stated)+Gold sales revenue* 193 860 90 949Total cash costs* 94 415 38 556+Profit from mining activity* 99 445 52 393+Profit from operations* 61 740 28 450+Net profit 40 086 28 761+Net profit (as previously reported) n/a 28 461Net profit attributable toequity shareholders 37 584 28 761+Net cash generated from operations 61 765 16 251Bank and cash 155 320 45 022Attributable production** (ounces) 331 379 202 024Group total cash costs perounce** * (US$) 285 191+Group cash operating costs perounce* (US$) 247 160+ * Refer to explanation of non-GAAP measures provided.** Randgold Resources consolidates 40% of Morila and 100% of Loulo.+ Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies.n/a Not applicable. COMMENTS* The doubling of revenue compared to the corresponding period in 2005 reflectsthe inclusion of the Loulo operation from November 2005 plus the impact of ahigher received gold price. Gold sales revenue for the quarter ended 30September 2006 at US$63.2 million, was in line with the previous quarter despitea less favourable received gold price. This was due to a 3 percent increase inounces of gold sold.* Costs are higher than the corresponding period in 2005 since this quarterincludes US$19.9 million from the inclusion of the Loulo operation whichcommenced production in November 2005. Total cash costs of US$32.5 million forthe quarter ended 30 September 2006 increased by US$4.1 million compared to theprevious quarter as a result of increased costs as explained under Operations.The costs were in line with the first quarter of the year.* The increase in profit from mining activity of US$12.9 million over thecorresponding quarter in 2005, is attributable to the inclusion of US$11.2million from Loulo plus the effect of higher received gold prices. The decreasein the current quarter by US$4.3 million compared to the quarter ended 30 June2006, is as a result of increased unit costs as well as a change in the mix ofproduction. More ounces were produced at the higher cost Loulo operation andless ounces were produced at the lower cost Morila operation quarter on quarter.* When compared to the corresponding period in 2005, net profit from theinclusion of the Loulo operation is offset by income tax at the Morila operationand interest payments on the Loulo project loan. A decrease in net profit toUS$12.7 million, compared to the previous quarter, is as a result of the reducedprofit from mining as well as a US$2 million increase in the depreciation chargefor the quarter at Loulo.* The bank and cash balance increased by US$110.3 million compared to thecorresponding period in 2005 which reflects the cash generated by the operationsafter capital investment and the equity of US$103 million raised in October 2005and by US$3.8 million for the quarter ended 30 September 2006,when compared tothe previous quarter. OPERATIONSLOULOConfusion caused by the name of Loulo being assigned to both a single pit aswell as the entire gold mine facility led to the decision to rename the Loulo 0pit, the Gara pit. The name is sourced from the nearby Gara stream. The throughput at Loulo was hampered by the delay in commissioning the hard rockcrusher. This resulted in the operation having to process transitional oreduring the rainy season which caused occasional blockages in the crushingcircuit. Higher grades and improved recoveries as mining shifted to the Garaorebody in the latter part of the quarter, resulted in an increase in goldproduced. Cash operating costs of US$317 per ounce after adjusting for the accountingtreatment for production inventories for the quarter ended 30 September 2006,reflect an increase of US$40 per ounce over the previous quarter. This wasmainly due to increased waste prestripping in the current quarter as well asadditional costs incurred in hiring mobile crushers to handle the transitionalore required because of the delay in commissioning the hard rock crusher. Theadditional costs associated with the hire of mobile crushers are expected tocease in October 2006. Revenue increased by US$0.7 million compared to the quarter ended 30 June 2006,mainly as a result of an increase in ounces sold, partly offset by a lowerachieved gold price of US$548 per ounce compared to US$577 per ounce. Theaverage gold price reported for the current quarter includes 22 752 ouncesdelivered into the hedge at US$437. The above impacted on the profit from mining activity which decreased by US$3.3million compared to the previous quarter. Production statistics:LOULO RESULTS Quarter Quarter Quarter ended ended ended 30 Sept 30 June 30 Sept 2006 2006 2005MiningTonnes mined (000) 4 830 3 934 -Ore tonnes mined (000) 784 724 -MillingTonnes processed (000) 588 630 -Head grade milled (g/t) 3.2 2.8 -Recovery (%) 95.2 91.9 -Ounces produced 57 123 51 233 -Average pricereceived + (US$/oz) 548 577 -Cash operating costs*(US$/oz) 317 277 -Total cash costs* (US$/oz) 350 313 -Profit from miningactivity* (US$000) 11 125 14 416 -Gold revenue (US$000) 31 110 30 445 - LOULO RESULTS (continued) 9 months 9 months ended ended 30 Sept 30 Sept 2006 2005MiningTonnes mined (000) 12 805 -Ore tonnes mined (000) 1 887 -MillingTonnes processed (000) 1 940 -Head grade milled (g/t) 3.0 -Recovery (%) 93.3 -Ounces produced 173 033 -Average price received + (US$/oz) 560 -Cash operating costs* (US$/oz) 294 -Total cash costs* (US$/oz) 329 -Profit from mining activity* (US$000) 42 266 -Gold revenue (US$000) 99 173 - Randgold Resources owns 80% of Loulo with the Government of Mali owning 20%.Randgold Resources consolidates 100% of Loulo and then shows the minorityinterest separately.* Refer to explanation of non-GAAP measures provided.+ Includes the impact of 22 752 ounces delivered into the hedge at US$437 perounce. Despite difficulties experienced with rain-induced stickiness of the ore,secondary and tertiary crusher throughputs improved through the quarter. Most areas still related to the original development project are in their finalcompletion stages, with no further critical areas outstanding. The completion ofthe straddling conveyor on the stockpile, the permanent water pumpinginstallations at the Faleme river and Gara reservoir supply stations and themining fuel storage area will further improve and facilitate greater ease ofrunning the operation. Loulo continues to evolve into a world class mining complex encompassing a broadset of operations. MORILAMorila produced 124 698 ounces in the third quarter at a total cash cost ofUS$251 per ounce, down from the 135 387 ounces produced in the previous quarter.The lower production was a result of operational problems which resulted in alower head grade as well as lower plant throughput. A review team comprisingRandgold, Loulo and AngloGold Ashanti personnel spent time on site working withMorila staff to identify the problems and institute corrective action. Morila is still expected to produce in excess of 500 000 ounces for the year, inline with earlier forecasts. Exploration of both near pit targets as well as the regional drilling programmecontinued during the quarter. Further resources have been committed to aresearch programme aimed at developing an integrated structural andmineralogical model to determine the genesis of the Morila orebody. MORILA RESULTS (100%) Quarter Quarter Quarter ended ended ended 30 Sept 30 June 30 Sept 2006 2006 2005MiningTonnes mined (000) 4 862 6 006 2 976Ore tonnes mined (000) 1 261 1 591 1 194MillingTonnes processed (000) 1 007 998 1 010Head grade milled (g/t) 4.2 4.6 5.8Recovery (%) 90.8 92.3 91.4Ounces produced 124 698 135 387 172 901Average price received(US$/oz) 622 628 443Cash operating costs *(US$/oz) 206 187 160+Total cash costs *(US$/oz) 251 229 191+Profit from miningactivity (US$000) 48 872 51 443 44 473+Attributable (40% pro-proportionately consolidated)Gold revenue(US$000) 32 068 32 996 31 000Ounces produced 49 879 54 155 69 160Profit from miningactivity (US$000) 19 549 20 577 17 789+ MORILA RESULTS (100%) (continued) 9 months 9 months ended ended 30 Sept 30 Sept 2006 2005MiningTonnes mined (000) 16 927 17 755Ore tonnes mined (000) 4 331 4 807MillingTonnes processed (000) 3 052 2 817Head grade milled (g/t) 4.4 6.1Recovery (%) 91.8 91.9Ounces produced 395 864 505 061Average price received (US$/oz) 603 437Cash operating costs * (US$/oz) 195 160+Total cash costs * (US$/oz) 237 191+Profit from mining activity (US$000)142 947 130 983+Attributable (40% pro-proportionately consolidated)Gold revenue (US$000) 94 687 90 949Ounces produced 158 346 202 024Profit from mining activity (US$000) 57 179 52 393+ * Refer to explanation of non-GAAP measures provided.+ Restated due to change in accounting policy related to deferred stripping.See note on accounting policies. PROJECTS AND EVALUATIONLOULO GOLD MINE: UNDERGROUND DEVELOPMENTYaleaExcavation and construction of the boxcut for the Yalea underground developmentstarted during August 2006. The mining contractor, Shaft Sinkers arrived on siteto assist with the boxcut construction and the labour complement includes Maliannationals, who are being trained to replace the expatriates. The delivery schedule for the underground vehicle fleet ordered from JA Delmasis on track with the first equipment already on site. To date two R1300GLoaders, two Multi Task Loaders and an Atlas Copco Rocket Boomer drill rig havebeen delivered to site. Further deliveries including the CAT AD30 dump trucksare expected and commissioning of the equipment should take place duringNovember 2006. GaraDuring this quarter conceptual mine re-design has been completed for the Garaunderground mine, based on an increased resource base. Scheduling of thisunderground design and optimisation with the current open pit plan is currentlyunderway. Eleven diamond drill holes were completed on the deep drilling of the Garadeposit for a total of 6 940 metres this quarter. Results confirmed the presenceof good grades at depth in the central portion of the orebody. The new resultswere used to remodel the geological and resource models, resulting in anincrease of the total resource to 25 million tonnes at 4.11g/t for 3.3 millionounces. The updated resource is tabled below and reflects an 800 000 ounceincrease from the previous declaration. The block model indicates a broad southwesterly plunge to the high-grade mineralisation which is coincident with theplunge angle and direction of fold lineations measured in the pit. Furtherdrilling is underway to infill some gap areas within the deep drilling as wellas to test the grade trend of the central high-grade portion of the deposit to600 metres below surface. DIAMOND DRILLING - MINERALISED INTERSECTIONS AT THE GARA DEPOSIT (formerly Loulo 0) Ore Intersection Width GradeHole Id From To (m) (g/t)L0CP95 582.10 595.05 12.95 0.68L0CP97 361.25 382.75 21.50 7.15L0CP102 643.86 645.38 1.52 12.09L0CP109 707.32 711.98 4.66 5.40L0CP86 221.70 223.50 1.80 4.18L0CP92 333.35 338.10 4.75 0.11L0CP93 317.10 335.48 18.38 0.65L0CP105 483.25 490.53 7.28 2.67L0CP108 715.05 722.00 6.95 0.92L0CP96 590.40 594.10 3.70 0.97L0CP98 324.80 333.00 8.20 3.36L0CP99 356.00 364.60 8.60 1.95L0CP101 476.00 478.23 2.23 2.27L0CP103 558.70 564.45 5.75 9.66L0CP103 579.00 604.37 25.37 1.33L0CP103 673.90 682.40 8.50 1.82L0CP105 483.25 490.53 7.28 2.67L0CP106 767.05 774.80 7.75 0.85L0CP108 715.05 722.00 6.95 0.92L0CP110 678.82 682.60 3.78 2.58L0CP110 705.15 713.40 8.25 0.34L0CP111 712.35 720.95 8.60 4.23L0CP107 734.90 748.20 13.30 5.07 DIAMOND DRILLING - MINERALISED INTERSECTIONS AT THE GARA DEPOSIT (formerly Loulo 0) (continued) Including Width GradeHole Id From To (m) (g/t)L0CP95L0CP97 375.82 382.75 6.93 13.95L0CP102L0CP109L0CP86L0CP92L0CP93L0CP105L0CP108L0CP96L0CP98 325.90 328.30 2.40 4.63L0CP99L0CP101L0CP103L0CP103 599.80 603.17 3.37 4.99L0CP103L0CP105 485.10 490.5 35.43 3.40L0CP106L0CP108L0CP110L0CP110L0CP111 719.90 720.95 1.05 20.70L0CP107 735.73 741.17 5.44 9.50 UPDATED RESOURCE ESTIMATE AT THE GARA DEPOSIT (formerly Loulo 0) Tonnes Grade Ounces (Mt) (g/t) (Moz) Dec Aug Dec Aug Dec AugClassification 2005 2006 2005 2006 2005 2006Measured 9.4 9.7 3.84 3.91 1.20 1.2Indicated 9.6 14.4 4.29 4.19 1.30 1.9Measured andindicated 18.9 24.1 4.07 4.08 2.50 3.2Inferred 0.3 0.9 6.28 4.83 0.06 0.1Total 19.3 25.0 4.10 4.11 2.50 3.3 Tongon ProjectAs discussed later in the exploration section a successful drilling programmewas carried out at Tongon and the results from this are being used to plan thefeasibility drilling programme. Dependent on the local political situation, this30 000 metre programme will commence in January 2007. EXPLORATION ACTIVITIESIn West Africa, the third quarter of the year traditionally sees a drop inexploration activity due to difficulty of access caused by heavy rains. Theprevious season's programmes were wrapped up and efforts focused on reportingand interpretation. Conversely in East Africa field activities were acceleratedduring the dry season, with drilling completed at Kiabakari. In the Cote d'Ivoire, we successfully completed an 8 hole, 1 992 metre tacticaldiamond coring programme at the Tongon prospect, situated within the Niellepermit, in the north of the country. Five holes were completed to further test a 1.5 kilometre segment of the mainNorthern Zone shear zone, which trends 250degrees to 260degrees and dips 80degrees to 70degrees northwest. It is represented by wide zones of pervasivelyfoliated and altered mafic volcaniclastics. The mineralisation locates on theimmediate hanging wall of the main graphitic shear. The mineralised zone isassociated with increased silicification, sulphidation and fine brecciation; theresults are presented below from west to east. * TND054: 10 metres at 3.70g/t (from 149 metres)* TND053: 3 metres at 8.03g/t (from 144 metres) and 31 metres at 2.99g/t (from157 metres)* TND051: 9 metres at 1.55g/t (from 38 metres) and 10 metres at 2.40g/t (from124 metres)* TND055: (No significant results)* TND050: 1 metre at 12.70g/t (from 146 metres) and 13 metres at 1.25g/t (from154 metres) Three holes were completed in the Southern Zone to provide a framework for thefuture feasibility drilling. This zone is more geologically complex, withmultiple mineralised zones trending 40degrees to 50degrees with variable dipsfrom 60degrees to 70degrees northwest. The ore zones are hosted within quartzand shear bounded, brecciated volcaniclastics and appear lensoid in shape; theirstrike and depth continuity are variable. The silicate alteration is complicatedwith biotite, silica, sericite, tremolite, diopside and calcite; the results arepresented below. * TND052: 6 metres at 1.04g/t (from 116 metres), 44 metres at 1.68g/t (from 185metres) including 5 metres at 5.06g/t, 6 metres at 3.60g/t and 7 metres at 2.9g/tand a deeper intersect of 10 metres at 3.95g/t (from 342 metres)* TND056: 4 metres at 1.77g/t (from 143 metres) and 9 metres at 2.29g/t (from194 metres)* TND057: 3 metres at 1.18g/t (from 46 metres) and 4 metres at 1.07g/t (from 84metres) Plans are now underway to gear up for the start of the feasibility drilling (30000 metres diamond core) in January 2007, pending safe working conditions and astabilised political situation. At Loulo, new information from the mining of the Gara deposit and relogging ofthe diamond core has now enabled the development of a three dimensionalgeological model. The model reveals high-grade mineralisation is associated withthe 30/40degrees trending axial planes of quartz tourmaline folds and isconcentrated in the hinge zone of a large overturned antiform. The previousdrilling at Gara South only tested the eastern limb of a synform and did nottest the blind antiformal closure; this will be the target of drilling in thefourth quarter. At Faraba, 13 out of a planned 36 RC holes were completed for a total of 804metres. The most significant intersections from FARC044 (21 metres at 1.35g/tincluding 8 metres at 2.88g/t), FARC062 (9 metres at 2.77g/t), FARC065 (32metres at 1.64g/t including 10 metres at 2.91g/t) and FARC066 (14 metres at3.70g/t) are hosted in strongly oxidised to gossanous saprolite. To date,trenching and drilling have identified two pods of mineralisation within the 2.6kilometre Faraba main shear; a northern zone of 500 metres and a main zone of 1kilometre. Drilling programmes, both RC and diamond core, are planned forFaraba, P64 and Baboto South during the final quarter of 2006. At Morila, drilling continued as part of the 40 000 metre regional drillingprogramme, although failing to intersect further high grades, the resultscontinue to define the low-grade footprint. In South Mali, Randgold has been exploring on its permits immediately adjacentto its Morila mine for several years. The techniques used to date have beensuccessful in locating mineralised structures such as Ntiola and Kona. However,so far no economic mineralisation resembling the Morila deposit has beenlocated. A 3 000 metre diamond drilling programme was completed before the wetseason and has highlighted areas with geological, structural and metamorphicsimilarities to the Morila enclave. To complement the data from this drillingprogramme, a ground gravity survey across the Morila area permits will becarried out in the final quarter of the year. In Senegal, we are currently prioritising 15 targets for RAB drilling andmodelling the advanced targets of Bambaraya, Sofia and Delya for further diamonddrilling. In Ghana, we have almost completed the first phase of exploration across all ourpermits which have already started to reveal a number of targets, for fieldvalidation and follow-up programmes. In Burkina Faso, a 549 hole 9 040 metre RAB programme was completed, testingthree targets within the Kiaka permit. A 1 125 metre, 11 hole RC drillingprogramme was also completed, testing the Kiaka target, which defined broadzones of low-grade mineralisation over a 3 kilometre strike length. In addition,first pass regional exploration has been completed over the complete portfolioof nine permits. In Tanzania, recent drilling at Kiabakari has not so far identified a largemineralised system meeting Randgold's investment criteria and the project statusis currently being re-evaluated. However a number of new opportunities and ideasare being followed-up to further develop the Tanzanian business. CONSOLIDATED INCOME STATEMENT Quarter ended Quarter Quarter 30 Sept ended ended 2005 30 Sept 30 June (Restat-US$000 2006 2006 ed)+REVENUESGold sales on spot 67 205 66 684 31 000Realised loss onclosing out of hedges (4 027) (3 243) -Non-cash realisedprofit/(loss) on rollforward of hedges 577 (2 050) -Total 63 755 61 391 31 000OTHER INCOMEInterest income 1 889 1 754 308Exchange gains 169 1 552 179Other income 550 164 159Total other income 2 608 3 470 646Total revenue 66 363 64 861 31 646COSTS AND EXPENSESMine production costs 29 673 29 066 11 608Movement in productioninventory and orestockpiles (3 528) (7 697) (2 258)+Transfer from/(to)deferred stripping - - -+Depreciation andamortisation 6 386 4 962 2 275General and admin-istration expenses 2 079 2 824 1 635Mining and processingcosts 34 610 29 155 13 260+Transport and refinerycosts 179 126 68Royalties 4 101 4 129 2 158Exploration and corporateexpenditure 6 768 6 938 5 559Other losses/(gains) -net 323 - (54)Exchange losses 465 1 406 370Unwind of discount onprovisions for rehab-ilitation 84 84 117Interest expense 1 531 1 537 219Profit before income tax 18 302 21 486 9 949+Income tax expense (5 556) (6 913) -Net profit 12 746 14 573 9 949+Attributable to:Equity shareholders 12 285 13 754 9 949Minority Shareholders 461 819 - 12 746 14 573 9 949+Basic earnings pershare (US$) 0.18 0.20 0.17+Fully diluted earningsper share (US$) 0.18 0.20 0.16+Average shares inissue (000) 68 474 68 266 59 723 CONSOLIDATED INCOME STATEMENT (continued) 9 months ended 9 months 30 Sept ended 2005 30 Sept (Restat-US$000 2006 ed)+REVENUESGold sales on spot 201 130 90 949Realised loss on closing outof hedges (7 270) -Non-cash realised profit/(loss)on roll forward of hedges (4 700) -Total 189 160 90 949OTHER INCOMEInterest income 5 692 997Exchange gains 3 777 544Other income 730 1 761Total other income 10 199 3 302Total revenue 199 359 94 251COSTS AND EXPENSESMine production costs 86 150 40 142Movement in production inventoryand ore stockpiles (12 521) (12 776)Transfer from/(to) deferredstripping - -+Depreciation and amortisation 16 312 7 177General and administration expenses 7 777 4 714Mining and processing costs 97 718 39 257Transport and refinery costs 458 197Royalties 12 551 6 279Exploration and corporateexpenditure 21 393 16 766Other losses/(gains) - net 323 (54)Ex change losses 3 767 1 830Unwind of discount on provisionsfor rehabilitation 252 351Interest expense 4 687 864Profit before income tax 58 210 28 761+Income tax expense (18 124) -Net profit 40 086 28 761+Attributable to:Equity shareholders 37 584 28 761+Minority shareholders 2 502 - 40 086 28 761+Basic earnings per share (US$) 0.55 0.48+Fully diluted earnings pershare (US$) 0.54 0.47+Average shares in issue (000) 68 291 59 578 The results have been prepared in accordance with International FinancialReporting Standards (IFRS).+ Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies. CONSOLIDATED BALANCE SHEET At At 31 Dec 30 Sept At 2005 2005 30 Sept (Restat- (Restat-US$000 2006 ed)+ ed)+AssetsNon-current assetsProperty, plant andequipment 237 168 202 636 188 392Cost 287 175 236 331 217 354Accumulateddepreciation andamortisation (50 007) (33 695) (28 962)Deferred stripping costs - -+ -+Deferred taxation 2 696 2 957+ -Long-term ore stockpiles 29 522 22 176+ 22 599+Total non-currentassets 269 386 227 769+ 210 991+Current assetsDeferred stripping costs - -+ -+Inventories andstockpiles 40 473 34 210+ 10 340Receivables 52 169 47 918 50 491Cash and cashequivalents 155 320 152 452 45 022Total current assets 247 962 234 580+ 105 853+Total assets 517 348 462 349+ 316 844+Shareholders' equity 328 911 301 822+ 197 557+Minority interest 3 897 1 395 (954)Total equity 332 808 303 217+ 196 603+Non-current liabilitiesLong-term borrowings 36 777 49 538 58 848Loans from minorityshareholders insubsidiaries 2 663 2 483 2 448Financial liabilities- forward gold sales 40 128 34 151 22 796Provision forrehabilitation 9 751 9 480 8 997Total non-currentliabilities 89 319 95 652 93 089Current liabilitiesFinancial liabilities- forward gold sales 22 982 8 939 3 683Current portion oflong-term borrowings 24 730 22 991 10 716Accounts payableand accrued liabilities 42 575 28 813 12 753Taxation payable 4 934 2 737 -Total current liabilities95 221 63 480 27 152Total equity andliabilities 517 348 462 349+ 316 844+ + Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies. Main balance sheet movements for the nine months ended 30 September 2006 were asfollows:* The increase in property, plant and equipment for the 9 months endedSeptember 2006 mainly reflects the expenditure to complete Phase 2 of the Louloplant as well as the commencement of construction and purchase of equipment forthe Loulo underground mine at Yalea.* Inventories and stockpiles increased due to an increase in ore stockpiles atMorila in line with the life of mine plan as well as the planned build up ofwarehouse inventories at Loulo.* The increase in receivables is mainly a result of the timing of goldshipments at the end of the current quarter. Furthermore, the company hasinstituted a Section 417 Companies Act enquiry into the financial dealing of MDMFerroman (Pty) Limited in liquidation and its associated companies as the firststep in recovering outstanding debts. The forensic audit is currently underwaywith the hearing scheduled for November 2006.* Cash and cash equivalents increased in line with the cash generated byoperations offset by funds expended on property, plant and equipment.* The decrease in long-term borrowings reflects the first repayment of US$8.4million on the Loulo project loan in June 2006 plus scheduled repayments on theCAT finance lease at Loulo and the attributable portion of the Morila powerplant finance lease.* The increase in financial liabilities of forward gold sales is due to anincrease in the negative marked-to-market valuation of contracts held at 30September 2006. The gold price was US$599.25 at 30 September 2006.* Accounts payable and accrued liabilities increased in line with theprocurement of equipment for the Loulo underground project.* The increase in taxation payable is in line with the end of the taxexoneration period at Morila in November 2005. CONSOLIDATED CASHFLOW STATEMENT 9 months ended 9 months 30 Sept ended 2005 30 Sept (Restat-US$000 2006 ed)+Profit before income tax 58 210 28 761+Adjustment for non-cash items 23 425 14 129+Working capital changes (19 870) (26 639)Net cash generated from operations 61 765 16 251Additions to property, plant andequipment (50 844) (60 798)Financing of contractors 105 (17 930)Net cash utilised in investingactivities (50 739) (78 728)Ordinary shares issued 2 685 1 696(Decrease)/increase inlong-term borrowings (10 843) 27 563Net cash generated by financingactivities (8 158) 29 259Net increase/(decrease) in cashand cash equivalents 2 868 (33 218)Cash and cash equivalents atbeginning of period 152 452 78 240Cash and cash equivalents atend of period 155 320 45 022 + Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Number of Share Share ordin- capit- pre- Other ary al mium reserves shares US$000 US$000 US$000Balance - 31 Dec 2005(as previouslyreported) 68 072 864 3 404 208 582 (41 000)Change inaccounting policy- deferredstripping cost - - - -Balance -31 Dec 2005 68 072 864 3 404 208 582 (41 000)Net income - - - -Movement on cashflow hedges- Realised(non cash) - - - 5 023- Unrealised - - - (20 020)Total recognised(loss)/income - - - (14 997)Share-based payments - - - 1 817Share optionsexercised 486 867 24 2 661 -Exercise of optionspreviously expensedunder IFRS 2 - - 502 (502)Shares vested# 6 830 - 108 (108)Balance -30 Sept 2006 68 566 561 3 428 211 853 (54 790) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) Total attri- butable Accu- to mulated equity Minority Total Profits share- interest equity US$000 holders US$000 US$000Balance - 31 Dec 2005(as previouslyreported) 138 751 309 737 1 395 311 132Change in accountingpolicy - deferredstripping cost (7 915)+ (7 915)+ - (7 915)+Balance -1 Dec 2005 130 836+ 301 822+ 1 395 303 217+Net income 37 584 37 584 2 502 40 086Movement on cashlow hedges- Realised (non cash) - 5 023 - 5 023- Unrealised - (20 020) - (20 020)Total recognised(loss)/income 37 854 22 587 2 502 25 089Share-based payments - 1 817 - 1 817Share optionsexercised - 2 685 - 2 685Exercise of optionspreviously expensedunder IFRS 2 - - - -Shares vested# - - - -Balance -30 Sept 2006 168 420 328 911 3 897 332 808 # Restricted shares were issued to directors as remuneration. The transferbetween "other reserves" and "share premium" in respect of the shares vestedrepresents the cost calculated in accordance with IFRS 2.+ Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies. NON-GAAP MEASURESTotal cash costs and cash cost per ounce are non-GAAP measures. Total cash costsand total cash costs per ounce are calculated using guidance issued by the GoldInstitute. The Gold Institute was a non profit industry association comprised ofleading gold producers, refiners, bullion suppliers and manufacturers. Thisinstitute has now been incorporated into the National Mining Association. Theguidance was first issued in 1996 and revised in November 1999. Total cashcosts, as defined in the Gold Institute's guidance, include mine production,transport and refinery costs, general and administrative costs, movement inproduction inventories and ore stockpiles, transfers to and from deferredstripping where relevant, and royalties. Under the company's revised accountingpolicies, there are no transfers to and from deferred stripping. Total cash costs per ounce are calculated by dividing total cash costs, asdetermined using the Gold Institute guidance, by gold ounces produced for theperiods presented. Total cash costs and total cash costs per ounce arecalculated on a consistent basis for the periods presented. Total cash costs andtotal cash costs per ounce should not be considered by investors as analternative to operating profit or net profit attributable to shareholders, asan alternative to other IFRS or US GAAP measures or an indicator of ourperformance. The data does not have a meaning prescribed by IFRS or US GAAP andtherefore amounts presented may not be comparable to data presented by goldproducers who do not follow the guidance provided by the Gold Institute. Inparticular depreciation, amortisation and share-based payments would be includedin a measure of total costs of producing gold under IFRS and US GAAP, but arenot included in total cash costs under the guidance provided by the GoldInstitute. Furthermore, while the Gold Institute has provided a definition forthe calculation of total cash costs and total cash costs per ounce, thecalculation of these numbers may vary from company to company and may not becomparable to other similarly titled measures of other companies. However,Randgold Resources believes that total cash costs per ounce are usefulindicators to investors and management of a mining company's performance as itprovides an indication of a company's profitability and efficiency, the trendsin cash costs as the company's operations mature, and a benchmark of performanceto allow for comparison against other companies. Cash operating costs and cash operating cost per ounce are calculated bydeducting royalties from total cash costs. Cash operating costs per ounce arecalculated by dividing cash operating costs by gold ounces produced for theperiods presented. Profit from mining activity is calculated by subtracting total cash costs fromgold sales revenue for all periods presented. Profit from operations is calculated by subtracting depreciation andamortisation charges and exploration and corporate expenditure, as well asshare-based payment from profit from mining activity. The following table reconciles total cash costs, profit from mining activity andprofit from operations as non-GAAP measures, to the information provided in theincome statement, determined in accordance with IFRS, for each of the periodsset out below: Quarter ended Quarter Quarter 30 Sept ended ended 2005 30 Sept 30 June (Restat-US$000 2006 2006 ed)+Gold sales on spot 67 205 66 684 31 000Realised loss on closingout of hedges (4 027) (3 243) -Gold sales revenue 63 178 63 441 31 000Mine production costs 29 673 29 066 11 608Movement in productioninventory and orestockpiles (3 528) (7 697) (2 258)+Transfer from deferredstripping - - -Transport and refinerycosts 179 126 68Royalties 4 101 4 129 2 158General and administrationexpenses 2 079 2 824 1 635Total cash costs 32 504 28 448 13 211+Profit from miningactivity 30 674 34 993 17 789+Depreciation andamortisation 6 386 4 962 2 275Exploration andcorporate expenditure 6 768 6 938 5 559Profit from 0perations 17 520 23 093 9 955+ (continued) 9 months ended 9 months 30 Sept ended 2005 30 Sept (Restat-US$000 2006 ed)+Gold sales on spot 201 130 90 949Realised loss on closing out ofhedges (7 270) -Gold sales revenue 193 860 90 949Mine production costs 86 150 40 142Movement in production inventoryand ore stockpiles (12 521) (12 776)+Transfer from deferred stripping - -+Transport and refinery costs 458 197Royalties 12 551 6 279General and administration expenses 7 777 4 714Total cash costs 94 415 38 556+Profit from mining activity 99 445 52 393+Depreciation and amortisation 16 312 7 177Exploration and corporate expenditure 21 393 16 766Profit from operations 61 740 28 450 + Restated due to change in accounting policy relating to deferred stripping.See note on accounting policies. ACCOUNTING POLICIES The financial information in this report has been prepared in accordance withthe group's accounting policies, which comply with IFRS and are consistent withthe prior period, except as noted below. Joint ventures are those investments in which the group has joint control andare accounted for under the proportional consolidation method. Under thismethod, the proportion of assets, liabilities, income and expenses and cashflows of each joint venture attributable to the group are incorporated in theconsolidated financial statements under appropriate headings. Inter-companyaccounts and transactions are eliminated on consolidation. The directors have changed the group's accounting policy on deferred strippingcosts, under both IFRS and US GAAP in the current period. Previously, costs ofproduction stage waste stripping in excess of the expected pit life averagestripping ratio were deferred and then charged to production when the actualstripping ratio was below the expected pit life average stripping ratio. Underthe revised accounting policy, all stripping costs incurred during theproduction phase of a mine are treated as variable production costs and as aresult are included in the cost of the inventory produced during the period thatthe stripping costs are incurred. Under US GAAP, EITF 04-06 'Accounting for Stripping Costs Incurred duringProduction in the Mining Industry' is effective for reporting periods beginningafter 15 December 2005. The consensus does not permit the deferral of any wastestripping costs during the production phase of a mine, but requires instead thatthey should be treated as variable production costs. The directors have decidedto adopt the same treatment under IFRS which will ensure that the accountingpolicies applied under IFRS and US GAAP remain in line. With regard to theconclusions reached by the EITF, the directors believe the revised policy willmean that the financial statements provide reliable and more relevantinformation about the group's financial position and its financial performance.In accordance with the requirements of IAS 8 "Accounting Policies, Changes inAccounting Estimates and Errors", the change in the IFRS policy has been appliedretrospectively and hence the 2004 comparatives have been restated. The change in the IFRS accounting policy has resulted in the followingadjustments to the amounts reported under IFRS: 30 Sept 31 Dec 30 SeptUS$000 2006 2005 2005Decrease in deferredstripping costs - 3 687 9 637Decrease in ore stockpiles 9 150 8 342 5 244Decrease/(increase) ingold in process (11) 51 (297)Decrease in deferredtaxation liability - 1 227 -(Decrease)/increase indeferred taxation asset 311 2 938 -Decrease in openingretained earnings - 14 884 15 314 Quarter Quarter Quarter ended ended ended 30 Sept 30 June 30 SeptUS$000 2006 2006 2005Increase/(decrease) innet profit 580 1 405 730Increase/(decrease) inbasic earnings per share(cents per share) 1 2 2Increase in fully dilutedearnings per share(cents per share) 1 2 1 (continued) 9 months 9 months ended ended 30 Sept 30 SeptUS$000 2006 2005Increase/(decrease) in net profit 3 019 300Increase/(decrease) in basicearnings per share (cents per share) 5 -Increase in fully diluted earningsper share (cents per share) 4 1 FORWARD COMMODITY CONTRACTS The group's hedging position which all relates to the Loulo project financing,was as follows at 30 September 2006: Forward Forward sales Sales averageMaturity date ounces US$/ozYear ended 2006 37 737 434Year ended 2007 122 003 438Year ended 2008 80 496 431Year ended 2009 84 996 437Total 325 232 435 The remaining portion of the hedge book represents approximately 34% of plannedopen pit production at Loulo for the period that the project finance is in placeand 22% of the group's attributable production. In the current gold priceenvironment, it is the company's intention to take advantage of current spotprices and roll out longer dated forward sales contracts at the appropriatetimes. Morila's production is completely exposed to spot gold prices. During the quarter, the company delivered into 22 752 ounces of its hedge bookat an average price of US$437 per ounce. GENERALThe company continues to evaluate various opportunities both at the corporateand project level. We are focused on value creation through exploration,discovery and development, as well as strategic leverage in merger andacquisition opportunities. D M Bristow R A WilliamsChief executive Financial director2 November 2006 This report is available in .pdf format on the companies website at :www.randgoldresources.com or email your request to :[email protected]. REGISTERED OFFICE: La Motte Chambers, La Motte Street, St Helier, Jersey JE11BJ, Channel IslandsREGISTRARS: Computershare Investor Services (Channel Islands) Limited, PO Box83, Ordnance House, 31 Pier Road, St Helier, Jersey JE4 8PW, Channel IslandsTRANSFER AGENTS: Computershare Services PLC, PO Box 663, 7th Floor, JupiterHouse, Triton Court, 14 Finsbury Square, London EC2A 1BRINVESTOR AND MEDIA RELATIONS: For further information contact Kathy du Plessison Tel +27 (11) 728-4701, Mobile +27 83 266 5847, Fax +27 (11) 728-2547E-MAIL: [email protected] DISCLAIMER: Statements made in this document with respect to Randgold Resources'current plans, estimates, strategies and beliefs and other statements that arenot historical facts are forward-looking statements about the future performanceof Randgold Resources. These statements are based on management's assumptionsand beliefs in light of the information currently available to it. RandgoldResources cautions you that a number of important risks and uncertainties couldcause actual results to differ materially from those discussed in theforward-looking statements, and therefore you should not place undue reliance onthem. The 2005 annual report notes that the financial statements do not reflectany provisions or other adjustments that might arise from the claims and legalprocess initiated by Loulo against MDM. Other potential risks and uncertaintiesinclude risks associated with: fluctuations in the market price of gold, goldproduction at Morila, the development of Loulo and estimates of resources,reserves and mine life. For a discussion on such other risk factors refer to theannual report on Form 20-F for the year ended 31 December 2005 which was filedwith the United States Securities and Exchange Commission (the 'SEC') on 29 June2006. Randgold Resources assumes no obligation to update information in thisrelease. Cautionary note to US investors: the 'SEC' permits companies, in theirfilings with the 'SEC', to disclose only proven and probable ore reserves. Weuse certain terms in this release, such as 'resources', that the 'SEC' does notrecognise and strictly prohibits us from including in our filings with the 'SEC'. Investors are cautioned not to assume that all or any parts of ourresources will ever be converted into reserves which qualify as 'proven andprobable reserves' for the purposes of the SEC's Industry Guide number 7. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Randgold Resources