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 ANOTHER PROFITABLE QUARTER AS LOULO UNDERGROUND DEVELOPMENT STARTS AND TONGONPROGRESSES TO FEASIBILITY London, 2 November 2006 - Randgold Resources (LSE:RRS) (Nasdaq:GOLD) posted aprofit from mining of US$30.7 million for the September quarter, taking itstotal for the nine months to date to US$99.4 million - up 90% on thecorresponding period in 2005 thanks to the contribution from its new Loulo mineand the higher gold price. Gold sales revenue for the quarter was US$63.2 million, in line with that of theprevious quarter in spite of a lower received gold price. Production at Louloincreased by 11% to 57 123 ounces but was down 8% to 124 698 ounces (49 879ounces attributable) at the company's Morila joint venture. Total cash costs atboth operations were slightly up but on a group basis, are still in line withthe overall target for the year. At Loulo, the difficulties caused by the delay in the commissioning of the hardrock crusher spilled over into this quarter but throughputs increased steadilyin August and September, with higher grades and improved recoveries boostingproduction. At Morila, operational problems resulted in a lower head grade andreduced plant throughput. These are being addressed and the mine is still ontrack to exceed 500 000 ounces for the year as planned. In the meantime, excavation and construction of the boxcut for the Yaleaunderground mine at Loulo are well underway. The design and schedule for thesecond underground mine - Gara (formerly known as Loulo 0) - are currently beingcompleted. Continued underground drilling has expanded the total Loulo resourcebase to more than 10 million ounces. In the Cote d'Ivoire, the company is gearing up for a 30 000 metre diamond corefeasibility drilling programme on the back of favourable results from therecently completed tactical drilling exercise there. The feasibility programmeis due to start in January 2007, assuming political stability and safe workingconditions in the region. Elsewhere in West Africa, Randgold Resources' exploration teams are heading backinto the field after the rainy season. In Mali, exploration continues to befocused on and around Loulo and Morila, while in Senegal, 15 targets have beenprioritised for RAB drilling while three advanced targets have been modelled forfurther diamond drilling. In Ghana, completion of the first phase ofexploration across all the company's permits will generate follow-up targets.In Burkina Faso, a first-pass exploration programme has been completed on allnine permits and targets in the Kiaka permit have been tested through RAB and RCdrilling. In East Africa, the status of the Kiabakari project in Tanzania is currentlybeing re-evaluated. Other opportunities are currently being pursued in thatcountry. Chief executive Mark Bristow said the company's sustained sound performancereflected the benefits of balance and integration in the business and of itsstrong emphasis on organic growth. "Loulo has effectively settled some start-up problems that were not of ourmaking and, considering the circumstances, had a very solid quarter. Even moreimportant, it is steadily evolving into a world-class mining complexencompassing open-pit and underground operations. Morila had a bit of a wobblebut is still delivering the goods and Tongon is heading into the feasibilityphase," he said. "Our exploration teams are starting the new field season with plenty ofprospects on their plate. We will also be looking at opportunities beyond ourcurrent six-country portfolio." RANDGOLD RESOURCES ENQUIRIES: Chief Executive Financial Director Investor & Media RelationsDr Mark Bristow Roger Williams Kathy du Plessis+44 779 775 2288 +44 791 709 8939 +27 11 728 4701+223 675 0122 +223 675 0109 Fax: +27 11 728 2547 Cell: +27 83 266 5847 Email: [email protected] Website: www.randgoldresources.com RANDGOLD RESOURCES REPORT DEVELOPMENT OF NEW UNDERGROUND MINE FORMALLY UNDERWAY The development of Randgold Resources' new Yalea underground mine at its Louloproject in Mali was officially launched on 17 October with the turning of thefirst sod by the Minister of Mines, Energy and Water, his Excellency Hamed DSemega. The two open-cast mines at Loulo went into production late last year and toSeptember 2006 had already poured 241 017 ounces of gold. The Yalea undergrounddevelopment is expected to raise the project's production from 250 000 ouncesper year to in excess of 400 000 ounces per year and reduce its cost profileover the next five years. It is expected to remain in production beyond 2020.The boxcut and portal construction at Yalea is now well advanced and excavationof the declines is scheduled to begin before the end of the year. RandgoldResources expects to access the first development ore in late 2007. A second underground mine - Loulo 0 - is currently at the final planning stage.To distinguish it clearly from the overall project, Loulo 0 has been renamedGara after a nearby stream. Speaking at the launch of the Yalea underground mine, Randgold Resources chiefexecutive Mark Bristow said Loulo's systematic transformation into a four-minecomplex underlined the project's enormous brownfields potential. "Randgold Resources is known for its commitment to organic growth driven byexploration and it was our discovery of the Yalea deposit that made Loulo aviable project in the first place. Further exploration showed that undergroundmines could be developed to complement the open-cast operations on which theproject was initially based. These will significantly extend the life andenhance the value of the project and have elevated it to true world-classstatus," he said. Eleven diamond drillholes were completed on the deep drilling of the Garadeposit for a total of 6 940 metres this quarter. Results confirmed thepresence of good grades at depth in the central portion of the orebody. All newresults were used to revise the geological and resource models, resulting in anincrease of the total resource to 25Mt at 4.11g/t for 3.3Moz. The updatedresource is tabled below and reflects an 800 000 ounce increase from theprevious declaration. The cross-section of the resource shows a broadsouth-westerly plunge to the high-grade mineralisation which is coincident withthe plunge direction and angle of fold lineations measured in the pit. Furtherdrilling is underway to infill some gaps within the deep drilling as well as totest the high-grade trend of the central high-grade portion of the deposit to600 metres below surface. MALI GOLD INDUSTRY REQUIRES REINVESTMENT TO SECURE ITS FUTURE Mali's currently burgeoning gold mining industry requires reinvestment from themining companies as well as the Mali government if it is still to thrive in 10years' time, says Randgold Resources chief executive Mark Bristow. Speaking at an open day at the company's Morila joint venture, Bristow notedthat mining constantly needed to replenish the sources of the gold it producedand also had to expand its intellectual base to cope with the challengespresented by an increasingly complex business. "Randgold Resources believes the best way for the industry to create value forall stakeholders, including its host countries, is through discovery anddevelopment. It was our discovery of the Morila deposit that created a mine thatsince 2000 has produced more than four million ounces of gold, generated totalcash profits of more than US$900 million and contributed FCFA334 billion (US$636million) to the Malian economy. While Morila is now entering the last stage ofits life, it still has a number of profitable years ahead of it, and we arestill exploring with some success around the fringes of the deposit and beyond,"Bristow said. "It was our belief in Mali's prospectivity, coupled with the productivepartnership we have forged with its government and people, that gave us theconfidence to reinvest substantially in this country. Last year, we opened anew mine at Loulo and the Minister of Mines, Energy and Water, the hisExcellency Hamed D. Semega, has now launched the development of an undergroundmine to complement the two existing open-cast operations there. Loulo willeventually be four mines in one, and a true world-class gold project." Bristow noted that Randgold Resources was continuing to explore extensively atand around Morila and Loulo. "We are also committed to nurturing and empowering local management. Ourgeneral manager for Mali, our financial controller and the general manager atLoulo are all Malian nationals. In addition, we have taken the lead in suchinitiatives as the establishment of the KankouMoussa gold bank to provide aservice to artisanal producers and local jewellers," Bristow said. "During the last couple of years Randgold Resources directly reinvested morethan US$150 million in Mali. It's an investment we believe will not onlybenefit ourselves but also our partners, the government and people of Mali.While we are happy to show the way, we believe it is important for all concernedto understand that securing a sustainable future for Mali's gold industry willrequire a commensurate commitment from the other gold companies here, as well asfrom government." THE TONGON PROJECT - NEXT IN LINE FOR DEVELOPMENT? Randgold Resources acquired the Nielle permit in 1997 and after a period ofregional geological mapping, geochemical sampling and airborne geophysics,focused on the Tongon target. An initial diamond drilling programme, carriedout in 2000, led to the discovery of the Southern Zone and an inferred resourceof 1.7 million ounces. After two further drilling programmes, the total resourcefor the Southern Zone as well as the lesser drilled Northern Zone increased to2.89 million ounces, indicating that Tongon was a key asset in our portfolio. A prefeasibility Type 2 study was completed in June 2002 which demonstrated thatthe Tongon project could meet the company's criteria for investment and a Type 3feasibility study was initiated. After an initial 16 drillhole programme,further drilling and on-site feasibility study work was put on hold as a resultof the political conflict in the Cote d'Ivoire. However, we retained confidenceboth in the ability of the people of the country to sort out the political andsocial problems as well as in the value of the project. We maintained an officein the country and have engaged and co-operated with the stakeholders from bothsides. A state of 'force majeure' was declared with respect to the period ofvalidity of the permits. As the peace process, with strong African and international support, led toincreased political accommodation between the governing party and theopposition, we have been encouraged by all to resume our feasibility activities.In 2005 we reviewed all aspects of the Tongon project, updating the financialparameters to reflect current market conditions. The total resource base wasconfirmed as exceeding 3 million ounces and a 30 000 metre drilling programmewas designed to allow the completion of a final feasibility study and productiondecision within two years of full recommencement of drilling activities. We recognise as do the other players in the country, the value of Tongon as anational asset, and are working hard, with full co-operation from both sides toturn this project to account. We have visited the project with officials fromboth the government ministries and the opposition and have been bowled over bythe commitment of all concerned to make this work. An 8 drillhole, 1 992 metre diamond drilling programme has been successfullycompleted ahead of the rains; results from this programme are being used to planthe feasibility drilling programme. All mining projects in all countries world-wide come with risks. We are preparedto spend some of our exploration and corporate budget in further adding value tothe Tongon project. The next phase of drilling will help us better understandthe relatively complex geology of the Southern Zone as well as add additionalresources to the Northern Zone. The biggest risk we see in the project istiming - we're confident the people and governing structures of Cote d'Ivoireare committed to peace. The completion of a successful final feasibility studywould allow a production decision and financing arrangements to be made. As tocountry risk, when compared to other countries that are recently becomingtargets for the development of gold mines, Cote d'Ivoire stands out as being oneof the better ones n not the least because of its excellent infrastructure aswell as the commitment of the people to reach an amicable solution. THE GOLD INDUSTRY: THE CASE FOR A NEW VALUE MODEL The current bull run in the gold market is camouflaging crucial structural flawsin the mining industry, notably its inability to deliver real value toinvestors, says Randgold Resources chief executive Mark Bristow. Speaking at the Gold & Precious Metals Investment Conference in Hong Kong,Bristow said that while there were blue-chip gold companies, the industry itselfwas not a blue-chip one. He pointed out that over the past five years - some ofthe best the gold market has ever known - the industry as a whole made no moneyother than through equity raisings. "It doesn't create great wealth or make substantial returns: in fact, it barelysurvives. There's a simple explanation for this: obsessed by size, the industryconfuses growth in ounces with profitable growth. In other words, its valuecreation model, in so far as it has one at all, is essentially flawed," he said. "True value is created by discovery and development, which requires asubstantial and continuing investment in exploration, and a disciplined processthat identifies appropriate prospects and drives them up the value curve, thusrealising shareholder wealth on a sustainable basis." The criteria by which the industry has traditionally evaluated itself - size andcosts, rather than profitability - are not helpful to the value investor, hesaid. Nor is its track record encouraging, because that shows a history ofinvesting prodigally in the good times and stumbling when the going gets tough. While industry expenditure on exploration had apparently increased in recentyears, this was not delivering the goods in terms of increased production, henoted. The new gold supply is continuing to decline, and between 2004 and 2005,when the gold price increased by 25%, reserves grew by only 2%. The reason forthe discrepancy between exploration expenditure and delivery was that much ofwhat was being flagged as exploration was not breaking new ground but dustingoff old projects. Sustainable success as a gold miner required the capacity to do well not only atthe current US$500 to US$600 an ounce but also at more realistic price levels -such as the US$380 30-year average. This in turn required substantial andconsistent investment in organic growth, generated by discovery and development. "Considering that most new discoveries are being made in emerging economies, itis also important that these projects and their managers should have thecapacity to contribute to the socio-political development of the host countries," he said. "Mining is a risky business at the best of times and the risk inevitablyincreases in an emerging country. Assessing that risk is not a matter of coldscientific calculation - it's about knowledge, understanding and the ability tomanage." CONTINUED PROGRESS IN BURKINA FASO In Burkina Faso a generative study has highlighted the Markoye Fault, asignificant transcrustal structure, and its associated splays, as veryprospective for gold mineralisation. It already hosts a complement of 8 millionounces of gold in six deposits. We have since consolidated a plus 2 000 kilometre square permit portfolio in thesouth of the country, covering the southern extension of this fault system. Thefirst phase of regional exploration across all the permits has been completedand this has generated a number of targets and the development of a strong baseto the resource triangle. In addition, the Kiaka target is showing promisewith drilling outlining broad zones of mineralisation over a 3 kilometre strikelength. Randgold's Burkina operations are managed by an all-Burkinabe exploration teamwhich is headed by Felix Kiemde, a geologist who has been with Randgold for 10years and worked at Morila and Loulo in Mali, Tongon in Cote d'Ivoire andTanzania. 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:
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