6th Feb 2006 08:51
Randgold Resources Ld06 February 2006 RANDGOLD RESOURCES LIMITED Incorporated in Jersey, Channel Islands Reg. No. 62686 LSE Trading Symbol: RRS Nasdaq Trading Symbol: GOLD REPORT FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2005 * Net profit more than doubles year on year to US$41 million * Attributable gold production up 54% year on year at a total cash cost of US$211/oz * Randgold Resources opens Loulo, its second new mine in 5 years * Loulo Underground Development scheduled to start this year * Morila ends year with strong performance * Resources added at both operations * Exploration expands opportunities across Africa * Balance sheet strengthened following successful equity raising Randgold Resources Limited has 68.1 million shares in issue as at 31 December2005 SUMMARISED FINANCIAL INFORMATION Unaudited Unaudited Unaudited quarter quarter quarter ended ended ended 31 Dec 30 Sep 31 DecUS$000 2005 2005 2004 Gold sales revenue 60 553 31 000 33 675 Total cash costs* 30 238 13 941 12 356 Profit from mining activity* 30 315 17 059 21 319 Profit from operations* 18 299 9 225 14 222 Profit on ordinary activities before taxation 16 761 9 219 15 185 Net profit 12 426 9 219 15 185 Net profit attributable to equity shareholders 10 077 9 219 15 185 Net cash generated from operations 13 486 5 360 14 310 Bank and cash 152 452 45 022 78 240 Unaudited Unaudited 12 months 12 months ended ended 31 Dec 31 Dec 2005 2004US$000 (restated) Gold sales revenue 151 502 73 330 Total cash costs* 68 743 37 480 Profit from mining activity* 82 759 35 850 Profit from operations* 46 800 10 262 Profit on ordinary activities before taxation 45 222 18 793 Net profit 40 887 18 793 Net profit attributable to equity shareholders 38 538 18 793 Net cash generated from operations 29 736 4 291 Bank and cash 152 452 78 240 COMMENTS Net profit for the year ended 31 December 2005 of US$40.9 million is more thandouble that of the previous year ended 31 December 2004 (US$18.79 million),mainly as a result of the improved profit from mining offset by an increase inexploration and corporate expenditure, increased depreciation charges and thefirst income tax charge for Morila. Net profit for the quarter ended December2005 of US$12.4 million is down by US$2.7 million compared to the correspondingquarter in 2004 mainly as a result of Morila's tax holiday coming to an end andonce off charges totalling US$4.7 million in respect of accounting provisions atMorila against slow moving stock and receivables and the settlement of a disputeof indirect taxes. Net profit is up US$3.2 million compared to the Septemberquarter due to the start up of Loulo which commenced production on 1 November2005. Comparing the profit from mining activities for the year ended 31 December 2005to the corresponding year ended 31 December 2004, shows an improvement ofUS$46.9 million, which is attributable to Loulo commencing commercialoperations, as well as the improved gold prices received in 2005. Similarlygold sales revenue increased by 106% in 2005 compared to 2004 mainly as a resultof the 314 831 attributable ounces from Loulo and Morila compared to 204 194ounces in 2004 plus the effect of the higher gold prices experienced in 2005. Profit from mining activities for the quarter ended December 2005 compared tothe corresponding period ended December 2004 increased by US$9 million mainly asa result of Loulo coming into production in November 2005. Profit from miningin the quarter increased from US$17 million in the third quarter of 2005 toUS$30 million due to a contribution of US$19.5 million from Loulo. This waspartially offset by increased unit costs at Morila due to lower grade processedas per the mine plan in the fourth quarter as well as the once off charges atMorila referred to above. While the attributable ounces sold quarter on quarterwere down 8 002 ounces at Morila the 67 984 ounces from Loulo plus the impact ofthe average gold price of US$489 per ounce compared to US$410 per ounce for thequarter ended December 2004, resulted in an 80% improvement in gold revenue. Main balance sheet movements for the year ended 31 December 2005 include thefollowing: * Increases in property, plant and equipment relates mainly to costs associated with the development of the Loulo mine; * The increase in stockpiles included in non-current assets relates to Morila and is in line with the Morila life of mine plan. Stockpiles included in current assets reflect the Loulo stockpile of US$9 million which was raised in November 2005 when the production phase commenced; * The US$11.2 million reduction in the deferred stripping balance reflects the low stripping ratio at Morila compared to the long-term average; * The increase in receivables includes US$12.2 million of advances made to the main contractor at Loulo, MDM Ferroman (Pty) Ltd ("MDM"). MDM was the contractor responsible for construction of the Loulo mine until the main construction contract was taken back on 30 December 2005. Significant uncertainties exist relating to the value of securities supporting US$5.2 million of the US$12.2 million, the outcome of a claim against MDM for sums advanced over and above the lump sum contract and the outcome of a purported counterclaim by MDM to support the additional sums advanced. More detail is given in the note to the balance sheet. The increase in receivables is also due to fuel duties at Loulo amounting to US$3.4 million at 31 December 2005, indirect tax receivables at Morila of US$3.3 million, as well as a trade receivable at Loulo of US$4.2 million relating to the last gold sale for the year; * The increase in cash and cash equivalents results from funds received as part of the equity raising which was completed in November 2005; * The increase in financial liabilities relating to forward gold sales reflects an increase in the negative marked-to-market valuation of contracts held at 31 December 2005. The negative impact relates to the significant rise in the gold price, which was US$513/ounce at 31 December 2005; * The increase in the provision for rehabilitation reflects a provision for the Loulo closure cost obligation of US$5.5 million which has been recognised. The related charge has been recognised as part of the development cost; * The increase in current liabilities is primarily due to the short-term portion of the Somilo project finance loan of US$19.2 million repayable within one year. OPERATIONS Morila Morila produced 651 110 ounces of gold for the year, outstripping 2004'sproduction by some 140 000 ounces. Slightly higher grade than budgeted as wellas increased recoveries combined with an increased milling rate led to earlierforecasts being exceeded. The plant is still not operating at full expandedcapacity as maintenance and throughput issues relating to the expansion arestill being dealt with. Monthly throughput in the second half of the yearincreased by almost 10% over the first half indicating that the remedial actionwas taking effect. Costs were reasonably well contained given prevailingincreases in input costs and cash operating costs before adjusting forexceptional costs relating to provisions and indirect taxes were US$189/ounce,slightly up from last year's costs of US$158/ounce. Total cash costs wereUS$326/oz for the quarter and US$221/ounce for the year, after the adjustmentsdiscussed above. Mill throughput for the fourth quarter was negatively affected by millre-linings and power disruptions. Good mining performance in the last quarterallowed the mine to catch up the production lost in the third quarter as aresult of an unprocedural strike by the mining contractor's employees. Quarter Quarter Quarter Ended ended endedMorila results 31 Dec 30 Sept 31 DecUS$000 2005 2005 2004 Mining Tonnes mined (000) 6 798 2 976 7 820 Ore tonnes mined (000) 2 199 1 194 2 209 Milling Tonnes processed (000) 946 1 010 1 012 Head grade milled (g/t) 5.2 5.8 7.5 Recovery (%) 90.8 91.4 92.6 Ounces produced 146 049 172 901 226 679 Average price received (US$/oz) 485 443 410 Cash operating costs* (US$/oz) 290 166 109 Total cash costs* (US$/oz) 326 197 136 Cash profit (US$000) 27 418 42 648 53 298 Attributable (40%proportionately consolidated) Gold revenue 29 865 31 000 33 675 Ounces produced 58 420 69 160 90 672 Cash profit (US$000) 10 967 17 059 21 31 12 months 12 months ended endedMorila results 31 Dec 31 DecUS$000 2005 2004 Mining Tonnes mined (000) 24 554 26 596 Ore tonnes mined (000) 7 041 5 335 Milling Tonnes processed (000) 3 763 3 512 Head grade milled (g/t) 5.9 5.2 Recovery (%) 91.7 87.9 Ounces produced 651 110 510 485 Average price received (US$/oz) 449 382 Cash operating costs* (US$/oz) 189 158 Total cash costs* (US$/oz) 221 184 Cash profit (US$000) 158 528 89 625 Attributable (40% proportionately consolidated) Gold revenue 120 814 73 330 Ounces produced 260 444 204 194 Cash profit (US$000) 63 411 35 850 * Refer to explanation of non-GAAP measures provided. Results from resource extension drilling in the south of the pit and in the pitwall were incorporated into the orebody model and have contributed significantlyto the increase in mineral resources during the year. The mineralisation isstill open to the south and is currently being drilled out. The resource base for Morila at end 2005 is tabulated below with a comparison tofigures as at end 2004. The resource depletion as a result of mining activitiesduring the year was all but replaced by the delineation of additional resources. An updated reserve statement will be published as part of the group's annualresource/reserve tabulation at the end of the current quarter. Morila Resources - 31 December 2005 Measured, indicated Tonnes Tonnes Gradeand inferred (Mt) (Mt) (g/t)mineral resources 2005 2004 2005 Morila Measured 20.06 17.32 2.73 Indicated 14.01 11.96 3.00 Sub-total Measured and indicated 34.07 29.28 2.84 Inferred 3.78 4.47 3.19 Attribu- tableMeasured, indicated Grade Gold Gold goldand inferred (g/t) (Mozs) (Mozs) (40%)mineral resources 2004 2005 2004 (Mozs) Morila Measured 2.95 1.76 1.64 Indicated 3.56 1.35 1.37 Sub-total Measured and indicated 3.20 3.11 3.01 1.24 Inferred 3.79 0.39 0.54 0.16 A 40 000 metre plus regional exploration programme is currently underway whichaims to find another Morila within the 200km2 lease area. Only a few resultshave been obtained to date, the most interesting being SED002 which was drilledon the edge of the possible extension of the high grade axis identified in thepit. While economic mineralisation was not encountered, a broad anomalous halowith 10 metres at grades greater than 1g/t has given encouragement to pursuethis target further. Loulo Mining operations continued to focus on the Yalea pit during the quarter tomaintain a supply of softer ore for the plant. Stockpiles at 31 December 2005comprised 661 833 tonnes at 2.94g/t. Production statistics are: Quarter 12 months Ended endedLoulo results 31 Dec 31 DecUS$000 2005 2005 Mining Tonnes mined (000) 4 149 12 096 Ore tonnes mined (000) 537 1 213 Milling Tonnes processed (000) 551 551 Head grade milled (g/t) 4.5 4.5 Recovery (%) 94.3 94.3 Ounces produced 67 984 67 984 Average price received (US$/oz) 499 499 Cash operating costs* (US$/oz) 137 137 Total cash costs* (US$/oz) 165 165 Cash profit (US$000) 19 485 19 485 Gold revenue 30 688 30 688 Randgold Resources owns 80% of Loulo with the Government of Mali owning 20%.Attributable production for the year is 54 387 ounces. * Refer to explanation of non-GAAP measures provided. The Phase 1 plant operation has been satisfactory, despite the lack ofcompletion of certain areas of the facility. Throughput, recovery and reagentutilisation have all met forecast levels. The operational team continues to meetits objectives, while the construction team picks up the pieces of the remainingconstruction work on Phase 1 and the challenge to put the Phase 2 hard orecrushing plant back on track. The operation of the softer ore Phase 1 circuit will be extended through: * Utilisation of current soft ore stockpiles plus ore to be mined; * The use of mobile crushing facilities, which we have already established on site, to break down the harder material fraction, which increases as the mining horizon deepens in the Yalea pit. This will allow transitional ore to be fed through the soft ore crusher; * Further infill drilling to facilitate grade control mapping at the P129 pit will allow this softer ore resource to be brought into the production mix next quarter. Manpower build-up is nearing its peak following Loulo's first commercial sale ofgold. Although the construction workforce is reducing on the Phase 1 plant, thisresource is being re-deployed on the Phase 2 construction work. We continue toprovide further on-the-job training to local employees in the plant area toimprove their skill levels. At Yalea, 21 diamond drill holes were completed for a total of 13 038 metresthis quarter. Holes concentrated on extending the "purple patch" high gradezone with depth, infilling and better delineating the southern sub vertical highgrade shoot. Results received for the quarter are shown below. Inter- section Grade SelectedHole ID From To width (m) (g/t) unit* YDH233w 530.30 534.15 3.85 6.99 YDH232 459.70 471.10 11.40 7.43 2.5m @ 10.92g/t YDH231 463.00 468.90 5.90 6.56 YDH246 701.30 711.30 10.00 7.29 4.30m @ 10.11g/t YDH191 676.00 698.38 22.38 7.79 4.70m @ 13.91g/t YDH243 286.30 298.70 12.40 2.36 YDH221 174.20 192.00 17.80 4.39 2.83m @ 7.36g/t YDH222 118.06 123.94 5.88 3.04 YDH248 487.25 493.10 5.85 8.36 YDH236 261.00 261.43 0.43 14.01 Partially faulted YDH223 766.50 800.35 33.85 8.31 19.26m @ 12.24g/t YDH217 780.26 801.75 21.49 8.53 6.73m @ 12.74g/t YDH247 464.13 504.98 40.85 6.93 7.00m @ 8.89g/t YDH230 829.39 838.40 9.01 3.67 4.11m @ 5.46g/t YDH190 773.00 780.00 7.00 10.11 YDH190 813.32 825.36 12.04 4.6 9.26m @ 5.47g/t YDH190W 742.05 774.05 32.00 5.50 5.6m @ 15.8g/t YDH170 732.60 745.70 13.10 3.50 6.50m @ 5.20g/t YDH245 478.70 490.34 11.64 6.26 YDH225 764.66 766.26 1.60 3.93 Partially faulted YDH237 740.58 745.35 4.77 23.48 * Selection based on geology and grade Updated Resources Based on all drilling completed to November 2005 which does not include some ofthe drill results in the table above, and mining to end of December 2005, theresources have been updated and are presented below: Loulo Resources - 31 December 2005 Measured, indicated Attri-and inferred Tonnes Tonnes Grade Grade Gold Gold butable Mineral (Mt) (Mt) (g/t) (g/t) (Mozs) (Mozs) goldresources 2005 2004 2005 2004 2005 2004 (Mozs) Loulo 0,Yalea,satellitesandstock-piles Measured 16.81 16.50 3.89 3.96 2.10 2.10 Indicated 41.74 16.67 4.49 3.93 6.02 2.11 Sub-total Measured and indicated 58.55 23.34 4.31 3.95 8.12 4.21 6.50 Inferred 9.61 26.31 2.83 4.53 0.88 3.83 0.70 Total resources have therefore increased from 8.04 Mozs at the end of 2004 to 9Mozs, a 12% increase despite the depletion of 73 500 ounces from ore fed to theplant. The big increase has occurred in the quantity of Measured and Indicatedresources from 4.21 Mozs to 8.12 Mozs mainly as a result of the infill drillingprogramme in the Yalea and Loulo underground projects. An updated reserve, which will include the latest drilling results, will bepublished as part of the group's annual resource/reserve tabulation at the endof the current quarter. Construction Construction of the Phase 1 circuit is sufficiently advanced to allow us toproduce gold steadily from the circuit on a soft ore feed. The overall Phase 1circuit has not yet achieved completion, however throughput on continuousoperations has now stabilised around 7 000 tonnes per day. Both ball mills arerunning along with the bulk of the gold recovery circuit. The carbonregeneration circuit will be commissioned in January 2006. The first commercial shipment of bullion took place on 7 November 2005,initiating the start of a five-year tax holiday for the mine as prescribed byMali's mining code. All 15 generator sets in the power plant are available and there is sufficientstable and consistent power for operational requirements. Due to a failure on the part of MDM to meet its commitments on the Louloproject, the main construction contract was taken back from MDM on 30 December2005. Randgold Resources project management team is now handling the day to daymanagement of the construction activities. Civil works on the Phase 2 development are progressing with the completion ofthe crushing circuit expected in the second quarter of 2006. The primarycrusher is on site and the secondary and tertiary crushers are being shipped fordelivery to site in February 2006. Additional manpower and mobile cranes arebeing mobilised to site to ensure sufficient resources are available to completethe construction of the crushing plant timeously. PROJECTS AND EVALUATION Loulo Gold Mine Project Loulo Underground Development Study Good progress has been made with the underground project at Loulo. A detailedinternal review has been completed on all aspects of the feasibility study. Several modifications to the original design have been approved: * The use of a conveyor belt for transporting both waste and ore from the underground section to surface. This configuration offers numerous benefits, the most prominent being the ability to increase production rates beyond what is possible by underground fleet transport; * Decline design incorporating long straight sections at an inclination of -9 degrees; * The size of the decline has been changed to a 6.5 metre wide and 4.5 metre high decline which allows a larger cross sectional ventilation intake area and accommodates the proposed conveyor system; * Indications at this stage are that while we will develop the Loulo 0 boxcut and initial portion of the decline simultaneously with the Yalea boxcut and decline, we would focus on the development of the Yalea mine and schedule the Loulo 0 development based on ore feed requirements later; * Current mine scheduling indicates LOM production that goes beyond 2020 and averages more than 250 000 ounces per annum; * A site visit by the prospective contractors has taken place and award of the contract is expected towards the end of March 2006. The capital programme for 2006 of some US$20 million has been approved and willallow for site establishment, purchase of mining equipment and establishment ofthe portal and declines. Portal construction will start in the third quarterand the main decline development should access first development ore in 2007. Tongon Project We have continued our preparations for a return to the Cote d'Ivoire.Notwithstanding recent events, there is evidence of a new optimism that, withthe appointment of a new Prime Minister, the requisite conditions would be inplace to proceed to elections towards the end of the year. We recently visitedthe project site and ascertained that while infrastructure had deteriorated itwould be relatively simple to restore our project office and site accommodationso we can complete the bankable feasibility study as planned. We plan to meetwith the relevant parties as soon as conditions allow in order to obtainapproval to start some preliminary work before the wet season in advance of theplanned general election after which we would mobilise a comprehensive programmeto complete the definitive feasibility study. EXPLORATION ACTIVITIES At Loulo, we continue to build the resource base which is now nine millionounces. Exploration confirms the prospectivity of the permit following drillingat Faraba and P64. At Faraba, 12 out of a planned 34 RC drillholes have beencompleted for a total of 1 844 metres. This drilling has so far tested 800metres of the four kilometre strike length of the target. Results include:FARC004 - a broad intersection of 78 metres at 1.60g/t with 57 metres at 2.05g/tand higher-grade inclusions of seven metres at 6.43g/t and five metres at 4.87g/t. FARC006 - a broad intersection of 52 metres at 2.41g/t with 28 metres at3.49g/t and higher grade inclusions of 6 metres at 11.3g/t. FARC021 - 27 metresat 4.14g/t and FARC022 - 92 metres at 1.69g/t with higher grade inclusions of 11metres at 5.55g/t and 6 metres at 3.22g/t. At P64 seven holes for 1097 metreswere completed testing a 300 metre strike. Results include; P64RC05 - a broadintersection of 81 metres at 1.75g/t including four metres at 12.60g/t and fivemetres at 6.86g/t and P64RC06 - a broad intersection of 71 metres at 1.67g/tincluding 14 metres at 5.45g/t and 16 metres at 2.07g/t. Drilling continues onboth targets. At Sitakily, 21 kilometres east of Loulo, first phase reconnaissance diamonddrilling started just prior to the Christmas shut-down. One hole was completedand intersected a 30 metre zone of altered felsic porphyry. At Morila, an exploration strategy has been developed with the primary aim ofproviding an assessment of the full global upside resource potential within thegreater Morila lease area which will in turn drive future mine planning. A 40000 metre regional drilling tender has been awarded to Boart Longyear and willstart in 2006. In South Mali, we have started a hyperspectral study over Morila and surroundingarea with the aim of identifying spectral and structural signatures associatedwith the mineralisation as well as remodelling of our geophysical data todevelop a three dimensional model and the identification of conceptual targetsfor drilling by the second quarter of 2006. In Senegal, we are busy evaluating a portfolio of 31 targets, after rejecting atotal of seven targets last quarter. Of these, Bambaraya has over 800 metres ofsurface mineralisation defined and further infill drilling is required on theplus three kilometre Sofia target. In Burkina Faso, exploration work has started on our expanded portfolio whichincludes eight new permits, giving a total land position of 2 070km(2). Thisnow consolidates our ground holding along the southern half of the Markoye Faultsystem which already hosts eight million ounces in six deposits. We are ready to recommence exploration work in Ghana where an agreement has beenreached with Central Goldfields on a permit in the Sefwi belt along strike fromNewmont's Ahafo project. A further three applications totalling 7 067km(2) havebeen approved by the Minerals Commission and Inter-Ministerial Committee. Our strategy in Tanzania has paid off with the awarding of the Kiabakariexploration license and the conclusion of the joint venture with Tangold. Wenow dominate the land position in the Musoma Greenstone Belt. Drill rigs arebooked to start a preliminary reconnaissance phase of drilling at Kiabakari andcontinue testing conceptual models beneath complex regolith cover. CONSOLIDATED INCOME STATEMENT Unaudited Unaudited Unaudited Unaudited Unaudited quarter quarter quarter 12 months 12 months ended ended ended ended ended 31 Dec 30 Sept 31 Dec 31 Dec 31 Dec 2005 2005 2004 2005 2004US$000 (restated) REVENUE Gold sales 60 553 31 000 33 675 151 502 73 330 OTHER INCOME Interest income 1 067 308 269 2 064 1 033 Exchange gains 25 179 734 413 808 Other income 194 159 215 1 303 1 502 Profit on sale ofSyama - - - - 7 070 Total other income 1 286 646 1 218 3 780 10 413 Total revenue 61 839 31 646 34 893 155 282 83 743 COSTS AND EXPENSES Mine productioncosts 26 822 11 608 11 140 66 611 37 468 Movement inproductioninventory andore stockpiles (9 415) (3 902) (3 957) (27 137) (8 512) Transfer from/(to)deferred stripping 5 951 2 374 307 11 198 (3 999) Depreciation andamortisation 4 733 2 275 1 871 11 910 8 738 Transport andrefinery costs 162 68 93 360 233 Royalties 3 994 2 158 2 499 10 273 5 304 General andadministrationexpenses 2 724 1 635 2 359 7 438 6 809 Exploration andcorporateexpenditure 6 715 4 993 4 739 21 802 15 529 Provision forrehabilitation (125) 117 (85) 254 177 Interest expense 997 219 349 1 861 1 623 (Gain)/loss onforward gold sales - (54) (680) (54) (2 232) Share-based payment+ 568 566 487 2 247 1 321 Exchange losses 416 332 - 2 487 1 422 Other expenses 1 536 38 586 810 1 069 45 078 22 427 19 708 110 060 64 950 Profit on ordinaryactivities beforetaxes 16 761 9 219 15 185 45 222 18 793 Income tax (4 335) - - (4 335) - Net profit 12 426 9 219 15 185 40 887 18 793 Attributable to: Equityshareholders 10 077 9 219 15 185 38 538 18 793 Minorityshareholders 2 349 - - 2 349 - Basic earningsper share (US$) 0.15 0.15 0.26 0.62 0.32 Fully dilutedearnings per share (US$) 0.15 0.15 0.25 0.60 0.32 Average shares inissue (000) 65 311 59 723 59 212 61 702 58 871 The results have been prepared in accordance with International FinancialReporting Standards (IFRS). + Reflects adoption of IFRS 2: Share-based payments. CONSOLIDATED BALANCE SHEET Unaudited Unaudited Unaudited at at at 31 Dec 30 Sept 31 Dec 2005 2005 2004US$000 (restated) Assets Non-current assets Property, plant and equipment 202 636 188 392 129 854 Cost 235 592 217 354 151 639 Accumulated depreciation andamortisation (32 956) (28 962) (21 785) Deferred stripping costs 2 560 5 513 8 514 Long-term ore stockpiles 27 868 27 516 12 054 Total non-current assets 233 064 221 421 150 422 Current assets Deferred stripping costs 1 127 4 124 6 370 Inventories and stockpiles 33 330 10 370 9 762 Receivables 47 937 50 491 23 667 Cash and cash equivalents 152 452 45 022 78 240 Total current assets 234 846 110 007 118 039 Total assets 467 910 331 428 268 461 Shareholders' equity 309 737 212 141 191 169 Minority interest equity 1 395 (954) (954) Total shareholders' equity 311 132 211 187 190 215 Non-current liabilities Long-term borrowings 49 538 58 848 40 718 Loans from minority shareholdersin subsidiaries 2 483 2 448 2 575 Financial liabilities - forwardgold sales 34 151 22 796 15 448 Deferred income tax liabilities 1 227 - - Provision for environmentalrehabilitation 9 480 8 997 3 701 Total non-current liabilities 96 879 93 089 62 442 Current liabilities Financial liabilities - forwardgold sales 8 939 3 683 220 Current portion of long-termborrowings 22 991 10 716 1 156 Accounts payable and accruedliabilities 27 969 12 753 14 428 Total current liabilities 59 899 27 152 15 804 Total equity and liabilities 467 910 331 428 268 461 Note: Significant uncertainties relating to transactions with a contractor The directors believe that the group is entitled to recover US$30 million fromMDM Ferroman (Pty) Ltd ("MDM"), the contractor responsible for construction ofthe Loulo mine ("the Project") until the main construction contract was takenback on 30 December 2005. This comprises payments totalling US$17.8 millionwhich have been capitalised as part of the cost of the Project and advances ofUS$12.2 million included in Receivables. Of this latter amount, US$5.2 millionis secured by various fixed assets, debtors, bank accounts and personalguarantees, and US$7 million is secured by performance bonds. In addition to legal action being instituted against MDM and related entities torecover these funds from MDM, the company has obtained a provisional liquidationorder against MDM based on an initial claim of US$26 million, and an attempt byMDM to have the provisional winding up order rescinded was dismissed on 3February 2006. Recovery of the full amount from MDM is dependent on theliquidation process and the successful conclusion of the legal action referredto above. The directors believe that the company has sufficient security torecover the full amount of US$12.2 million, but the ultimate value of thesecurity cannot presently be determined. The consolidated financial statementsdo not reflect any additional provision that may be required if the security isfound to be worth less than the receivable. On 22 January 2006, MDM purported to submit a claim amounting to US$29 millionin respect of variations, extension of time and additional costs incurred inrespect of the Project. This claim has not been submitted in terms of theprovisions of the contract, which is a fixed lump sum turnkey project, and thedirectors believe that, apart from variations already agreed, no additionalamounts are due to MDM. However, the ultimate outcome of this matter cannotpresently be determined. In the unlikely circumstance that the resolution ofthis dispute is in MDM's favour, this could have a negative impact on theamounts recorded in the consolidated financial statements. CONSOLIDATED CASHFLOW STATEMENT Unaudited Unaudited 12 months 12 months ended ended 31 Dec 31 Dec 2005 2004US$000 (restated) Profit on ordinary activities beforetaxation and minority interest 45 222 18 793 Adjustment for non-cash items 25 564 (1 918)+ Working capital changes (41 050) (12 584) Net cash generated from operations 29 736 4 291 Additions to property, plant and equipment(79 167) (69 438) Financing of contractors (12 169) - Movement in restricted cash - 3 882 Disposal of Syama - net of cash disposed - 8 571 Net cash utilised in investing activities (91 336) (56 985) Ordinary shares issued 105 248 2 133 Increase/(decrease) in long-termborrowings 30 564 23 326 Net cash generated by financingactivities 135 812 25 459 Net increase/(decrease) in cash and cashequivalents 74 212 (27 235) Cash and cash equivalents at beginningof period 78 240 105 475 Cash and cash equivalents at end ofperiod 152 452 78 240 + Reflects adoption of IFRS 2: Share-based payment. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Number Accum-of Share Share Other ulated Minorityordinary capital premium reserves profits interest Totalshares US$000 US$000 US$000 US$000 US$000 equity Balance- 31 Dec 2004 (as previously reported) 59 226 694 2 961 102 342 (15 668) 101 534 (954) 190 215 Adoption of IFRS2 share-based payments - - - 1 321 (1 321) - - Balance- 31 Dec 2004 59 226 694 2 961 102 342 (14 347)+ 100 213+ (954) 190 215 Mar 2005 Net profit - - - - 12 120 - 12 120 Share-based payments - - - 288 - - 288 Movement on cash flow hedges - - - 1 690 - - 1 690 Share options exercised 176 800 9 538 - - - 547 June 2005 Net profit - - - - 7 122 - 7 122 Share-based payments - - - 823 - - 823 Movement on cash flow hedges - - - (52) - - (52) Share options exercised 35 400 2 88 - - - 90 Restricted shares issued as remuneration # 161 735 8 - - - - 8 Treasury shares held by company # (107 825) (5) - - - - (5) Shares vested # - - 735 (735) - - - Balance - 30 June 2005 59 492 804 2 975 103 703 (12 333) 119 455 (954) 212 846 Sept 2005 Net profit - - - - 9 219 - 9 219 Share-based payments - - - 566 - - 566 Movement on cash flow hedges - - - (12 503) - - (12 503) Share options exercised 345 160 17 1 042 - - - 1 059 Balance - 30 Sept 2005 59 837 964 2 992 104 745 (24 270) 128 674 (954) 211 187 Dec 2005 Net profit - - - - 10 077 2 349 12 426 Share-based payments - - - 566 - - 566 Movement on cash flow hedges - - - (16 602) - - (16 602) Share options exercised 59 900 3 170 - - - 173 Shares vested # 50 000 3 694 (694) - - 3 Capital raising 8 125 000 406 109 281 - - - 109 687 Costs associated with capital raising - - (6 308) - - - (6 308) Balance - 31 Dec 2005 68 072 864 3 404 208 582 (41 000) 138 751 1 395 311 132 # Restricted shares were issued to directors as remuneration. Of these shares,103 910 have vested, while the remainder of the shares are still held by thecompany as treasury shares. The transfer between "other reserves" and "sharepremium" in respect of the shares vested represents the cost calculated inaccordance with IFRS 2. + Reflects adoption of IFRS 2: Share-based payment. NON-GAAP MEASURES Total cash costs and cash cost per ounce are non-GAAP measures. We havecalculated total cash costs and total cash costs per ounce using guidance issuedby the Gold Institute. The Gold Institute was a non profit industry associationcomprised of leading gold producers, refiners, bullion suppliers andmanufacturers. This institute has now been incorporated into the NationalMining Association. The guidance was first issued in 1996 and revised inNovember 1999. Total cash costs, as defined in the Gold Institute's guidance,include mine production, transport and refinery costs, general andadministrative costs, movement in production inventories and ore stockpiles,transfers to and from deferred stripping, and royalties. The transfer to andfrom deferred stripping is calculated based on the actual historical wastestripping costs, as applied to a life of mine estimated stripping ratio. Thecosts of waste stripping in excess of the life of mine estimated strippingratio, are deferred, and charged to production, at the average historical costof mining the deferred waste, when the actual stripping ratio is below the lifeof mine stripping ratio. The net effect is to include a proportional share oftotal estimated stripping costs for the life of the mine, based on the currentperiod ore mined. 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. We have calculated total cash costs and total cash costs perounce 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, webelieve that total cash costs per ounce are useful indicators to investors andmanagement of a mining company's performance as it provides an indication of acompany's profitability and efficiency, the trends in cash costs as thecompany's operations mature, and a benchmark of performance to allow forcomparison against other companies. 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, as a non-GAAP measure, to theinformation provided in the income statement,determined in accordance with IFRS,for each of the periods set forth below: Unaudited Unaudited Unaudited Unaudited Unaudited quarter quarter quarter 12 months 12 months ended ended ended ended ended 31 Dec 30 Sept 31 Dec 31 Dec 31 Dec 2005 2005 2004 2005 2004US$000 (restated) Gold sales Revenue 60 553 31 000 33 675 151 502 73 330 Mineproductioncosts 26 822 11 608 11 140 66 611 37 468 Movement inproductioninventory andore stockpiles(9 415) (3 902) (3 957) (27 137) (8 512) Transfer from/(to) deferredstripping 5 951 2 374 307 11 198 (3 999) Transport andrefinery costs 162 68 93 360 233 Royalties 3 994 2 158 2 499 10 273 5 304 General andadministrationexpenses 2 724 1 635 2 274 7 438 6 986 Total cashcosts 30 238 13 941 12 356 68 743 37 480 Profit fromminingactivity 30 315 17 059 21 319 82 759 35 850 Depreciationandamortisation 4 733 2 275 1 871 11 910 8 738 Explorationand corporateexpenditure 6 715 4 993 4 739 21 802 15 529 Share-basedpayment 568 566 487 2 247 1 321 Profit fromoperations 18 299 9 225 14 222 46 800 10 262 RECONCILIATION TO US GAAP The preliminary condensed financial statements presented in this report havebeen prepared in accordance with International Financial Reporting Standards(IFRS), which differ in certain significant respects from Generally AcceptedAccounting Principles in the United States (US GAAP). The effect of applying USGAAP to net income and shareholders' equity is set out in the following table: 12 months 12 months 31 Dec 31 DecReconciliation of net income (US$000) 2005 2004 Net income attributable to equityshareholders under IFRS 38 538 18 793 Share-based payment compensation# 1 060 2 011 Exploration and evaluation costs* (3 179) (3 916) Net income under US GAAP 36 419 16 888 Movement in cash flow hedges duringthe period (27 465) (8 265) Comprehensive income under US GAAP 8 954 8 623 Basic earnings per share under USGAAP (US$) 0.59 0.15 Fully diluted earnings per share underUS GAAP (US$) 0.57 0.15 Reconciliation of shareholders' equity(US$000) Shareholders' equity under IFRS 309 737 191 169 Exploration and evaluation costs* (7 095) (3 916) Shareholders' equity under US GAAP 302 642 187 253 * Drilling costs of US$3.2 million relating to the underground development studyat Loulo have been capitalised under IFRS in the first half of 2005 (2004 fullyear: US$3.9 million). Under US GAAP, these costs have not been capitalisedsince they did not relate to the addition of reserves as defined in SEC IndustryGuide 7. A final feasibility study was completed in July 2005 which resulted inthe creation of additional reserves. In the period subsequent to the finalfeasibility study, the accounting treatment of costs on this project under IFRSand US GAAP has been the same. # These adjustments include differences between accounting for share-basedcompensation under IFRS and US GAAP. Prior to 1 January 2005, there was norequirement to recognise share option compensation expenses under IFRS, althoughthere was such a requirement under US GAAP and APB 25. The group adopted IFRS2, accounting for share-based payment from 1 January 2005, in accordance withthe Standard's transitional provisions. The method of calculation of theexpenses is different under IFRS and US GAAP, and an adjustment for US GAAP hasaccordingly been made. 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 for the adoption of IFRS 2. 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 group adopted IFRS 2, accounting for share-based payment from 1 January2005. The Standard requires an entity to recognise share-based paymenttransactions in its financial statements. The comparatives have been adjustedaccordingly. The effect of the change is a charge of US$2.2 million for theyear ended 31 December 2005 and a charge of US$1.3 million for the year ended 31December 2004. There is no impact on equity. This report does not constitute the company's full consolidated financialstatements for the year ended 31 December 2005, which will be approved by theboard and reported on by the auditors on or around 10 March 2006. FORWARD COMMODITY CONTRACTS The group's hedging position which all relates to the Loulo project financing,was as follows at 31 December 2005: Maturity date Forward Forward sales sales ounces average US$/oz Year ended 2006 93 498 431 Year ended 2007 116 004 438 Year ended 2008 80 498 431 Year ended 2009 75 000 430 Total 365 000 433 This represents approximately 37% of planned open pit production at Loulo forthe period that the project finance is in place. 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. PROSPECTS Life of mine scheduling at Morila anticipates gold production to be in excess of500 000 ounces for 2006. Plans are in place to complete the hard rock crushingcircuit at Loulo in the second quarter and the forecast gold production for theyear of 250 000 ounces is still considered achievable. Randgold Resources istargeting a 25% increase over 2005's attributable gold production at anestimated total cash cost of approximately US$270/ounce, depending on successfulcrusher commissioning and gold price assumptions which impact on royalties.Work is underway on the Loulo underground project and US$20 million capital hasbeen budgeted for development and equipment in 2006. A busy exploration programme is planned for 2006 with work being undertaken insix African countries (Mali, Senegal, Burkina Faso, Ghana, Cote d'Ivoire andTanzania). At Loulo, in addition to the underground project exploration willconcentrate on follow-up programmes on new targets and satellite ore bodies. The company has significant cash resources of US$150 million to fund the Loulounderground project as well as to pursue other growth opportunities. DM Bristow RA Williams Chief executive Financial director 6 February 2006 Registered office: La Motte Chambers, La Motte Street, St Helier, Jersey JE11BJ, Channel Islands Web-site: www.randgoldresources.com Registrars: Computershare Investor Services (Channel Islands) Limited, PO Box83, Ordnance House, 31 Pier Road, St Helier, Jersey JE4 8PW, Channel Islands Transfer agents: Computershare Services PLC, PO Box 663, 7th Floor, JupiterHouse, Triton Court, 14 Finsbury Square, London EC2A 1BR Investor and media relations: For further information contact Kathy du Plessison Telephone +27 (11) 728-4701, Fax +27 (11) 728-2547, e-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 potential risks and uncertainties include, among others, risksassociated with: fluctuations in the market price of gold, gold production atMorila, the development of Loulo and estimates of resources, reserves and minelife. For a discussion on such risk factors refer to the annual report on Form20-F for the year ended 31 December 2004 which was filed in amended form withthe United States Securities and Exchange Commission (the 'SEC') on 27 October2005. 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