8th May 2006 07:01
Randgold Resources Ld08 May 2006 RANDGOLD RESOURCES LIMITEDIncorporated in Jersey, Channel IslandsReg. No. 62686LSE Trading Symbol: RRSNasdaq Trading Symbol: GOLD London, UK, 8 May 2006 LOULO REGION: ONE OF AFRICA'S PREMIER EMERGING GOLDFIELDS The Loulo district is one of the premier emerging goldfields on the Africancontinent, with the potential to produce additional multimillion ounce mines,says exploration manager Paul Harbidge. "This belt has two things in abundance, proven production and untestedpotential. Our belief in the potential of the extensive Senegal-Mali regionalstructure, which incorporates the Loulo mining lease, gave us the confidence totake risk and drill deep at Yalea which so far has continued to deliver moreresources and reserves. While we've been drilling deeper we have also beenhunting for more targets along the same as well as secondary and tertiarystructures along strike. The strike of the Yalea orebody today, isapproximately two kilometres and so far the mineralisation has been confirmed toextend to 885 metres below surface," he says. "Two years ago the Yalea structure was mapped for another two kilometres to thesouth - today we have traced it for an additional 15 kilometres south to Farabawhere recent RC drilling has just returned some of the best results outside ofthe immediate Loulo area. Combining this with recent work north of Yalea whichhas found evidence of the same structure several kilometres to the north undercover, one starts to build an appreciation of the scale of this mineralisedstructure. "Randgold controls over 45 kilometres of strike in what is arguably some of themost prospective ground on the continent. In an environment where multimillionounce blind ore shoots sit close to the surface it is knowledge and perseverancethat will guide us to the next discovery. "At Loulo we have an integrated, multi-national team of eight explorationgeologists from Mali, Burkina Faso, Cote d'Ivoire, South Africa and Zimbabwe.They are busy evaluating a portfolio of 45 targets, which includes reservedefinition on five deposits. The targets are managed in line with the company'sstrategic objectives, within a well-balanced resource triangle. In addition weare developing a regional A Team to improve our understanding of theKedougou-Kenieba Inlier, which we see as a big growth area for the future." CAPITAL PROJECTS TEAM MOVES UNDERGROUND Capital projects general manager John Steele has teamed up with undergroundmanager Thinus Strydom and general manager exploration and evaluation AdrianReynolds to effect a seamless transition from the imminent completion of theLoulo plant's second phase to the underground development at Yalea. The Yalea underground orebody will be developed by means of a twin declinesystem, one equipped with a conveyor and the other for heavy vehicle access. Acapital expenditure programme of US$20 million has been budgeted for 2006 andwill cover the portal construction for the conveyor decline due to begin in thethird quarter and the start of the main decline development, in the last quarterof this year. A number of leading contractors have been invited to tender and the developmentcontract is likely to be awarded during June. In the meantime, the possibilityof fast-tracking the project through the sinking of a vertical shaft at the sametime as the development of the declines, allowing bi-directional access to theorebody, is being investigated. RESERVE-TO-RESOURCE RATIO MORE THAN DOUBLES AS DRILLING SUCCESSES AND NEW MINEDEVELOPMENT PLAN KICK IN Randgold Resources' total attributable reserves now stand at 5.42 millionounces, a 115% increase on the 2004 figure of 2.51 million ounces. "Ourstrategy has always been to create value through discovery but while discoveryof new resource ounces in the ground is important, it's the conversion of theseresources to reserves that is really critical in adding value. We have beenvery successful this past year in the conversion of Yalea resources to reservesas a result of our deep drilling programme and the completion of a detailedunderground mine plan, and reserve replacement also took place at Morila,confirming our belief in the further prospectivity of this area," says AdrianReynolds, general manager exploration and evaluation. "We believe that when building a business in the resource industry, adding valuethrough discovery must form the basis of the strategy, followed by conversion ofthe discovered resources to mineable reserves. This requires the integration oftechnical and financial factors pertaining to the business; the development ofgeological prospectivity models to guide the search; the selection of countrieswith good geological potential and enabling political and fiscal regimes; and,the identification of geological belts with a favourable gold endowment and theestablishment of significant footprints on those areas. "We use the resource triangle to guide our exploration and development,constantly reviewing the potential value added by moving projects up thetriangle but being cognisant of the investment risks in doing so. We alsobelieve in committing to substantial investment in people, exploration anddevelopment ahead of the cycle. That is why we decided to develop the Morilamine when the gold price was less than US$300/oz and the total reserve thendefined was only 3.3 million ounces. Continuing investment in exploration atMorila has led to a further definition of reserves and despite depletion to dateof 3.78 million ounces, an additional 3.49 million ounces of resources remainmaking the orebody 7 million ounces plus. "We aim to add to our reserve base in the coming year with drilling at Loulo andYalea expected to yield significant results. Given a satisfactory outcome toelections in Cote d'Ivoire, we believe we could rapidly convert a major part ofTongon's three million ounce resource to reserve. With the rapid increase inthe gold price, additional resource can be converted to mineable reserves thoughour policy is to be conservative in our gold price assumptions going forward." INVESTING FOR THE FUTURE: THE NUMBERS TELL OUR STORY When Randgold Resources listed on Nasdaq in 2002, its share price stood atUS$3.25. Today, less than four years later, it is trading above the US$20 level. Between 2000 and 2005 Randgold Resources made profits of more than US$200million, much of which has been reinvested in growth opportunities. The balancesheet in its latest annual report shows total assets of US$471 million at theend of 2005, representing the capital that has been invested in the developmentof the Morila and Loulo mines. The Loulo underground project currently underwaywill cost a further US$100 million over the next five years and the Tongonfeasibility project will have an estimated initial capital cost of US$111million. Exploration is the engine that has driven Randgold Resources' growth, and it hasbeen fuelled by the expenditure of some US$140 million since the company'sestablishment, over a period when the rest of the gold mining industry cut backon or halted the search for new ounces. The company's foresight in continuingto invest in exploration, even during the hard times, has been rewarded by itsmajor discoveries. The company and its shareholders have not been the only beneficiaries of itspolicy of reinvestment. Randgold Resources has contributed more than US$1billion to the economies of the African countries in which it operates throughtaxes, payrolls and payments to local suppliers. This has enabled it to forgeproductive partnerships with the governments and people of those countries - thekey to sustainability in this industry. TONGON TEAM STARTS WORK ON DRILLING PROJECT Randgold Resources estimates that it could start developing its third mine atTongon in the Cote d'Ivoire around 2008/9, provided that country achievespolitical stability through its upcoming general elections, which will enablethe company to complete the feasibility study. Chief executive Mark Bristow says the prefeasibility-stage Tongon project islocated in Africa's most prospective underexplored Birimian terrain, underlainby the same geological structures that have produced significant golddiscoveries in Ghana, Guinea and Mali. In addition, Cote d'Ivoire has one ofthe best infrastructures in Africa, with good roads, reliable power supplies andplenty of water. In anticipation of the country's return to normality, the company has moved ateam into Tongon to work on plans for a 10-borehole project, scheduled forcompletion before the start of the rainy season in July. This will create abroad framework for the final feasibility drilling programme, due to start afterscheduled elections in October, which will take about 24 months to complete. NEW CHALLENGES REQUIRE FRESH APPROACH FROM GOLD INDUSTRY The gold industry is becoming a challengingly intricate business, wheretraditional cost and production issues are being complicated by the emergence ofnew risk and technology factors, and this trend demands a fresh approach fromgold companies, says Randgold Resources chief executive Dr Mark Bristow. In a keynote address at the annual convention of the Prospectors & DevelopersAssociation of Canada (PDAC) in Toronto, Bristow told delegates that factorssuch as the declining gold supply; the shrinking of the industry through mergersand acquisitions; the shift of production to remote regions with higher costsand greater risks; and the swing back to underground mining were all having asubstantial impact. "Less gold is being mined by fewer producers," he said. "In fact, a significantproportion of current production is coming from mines that didn't even exist 10years ago. Mines are now not only being found in new regions, they also havemuch shorter lives. New developments therefore have to be considered in acompletely different perspective to those great mines of the past that paid offtheir capital in their infancy and then continued to provide what was virtuallyan annuity income to generations of shareholders," he said. "We need new technology and thinking - and, most importantly, smart people - tofind more ounces in the mature goldfields as well as new projects in theemerging regions. And with the major gold companies wanting to get even bigger,they are going to have to bank more of their new projects upfront to demonstratetheir materiality." Bristow noted that despite the spectacular gold price rise, the industry'sprofit margins remained relatively modest, reflecting the damage done by theslump in the Nineties and inflationary pressures intensified by the higher costsof operating in emerging regions with their severe limitations on infrastructureand skills. "Is the industry actually even profitable at present? A calculation done by amajor bank shows that if the value of equity raisings is excluded, cash outflowsactually exceeded cash generated over the period from 2001 to the third quarterof 2005. In spite of the high dollar gold price, the industry is not makingmoney from its operations. In fact, it is barely in balance," he said. "Where do we go from here? For gold mining, it's a new world out there in everysense of that expression, and a new world requires not just a new but anew-world approach. That approach should be well-balanced and holistic,concentrated not solely on the operational aspect on the business but givingequal weight to commercial and social considerations. We as an industry alsoneed to invest more in our intellectual base to attract highly skilledtechnicians to help us discover new deposits and process the more complex oresmore reliably and with less risk to the environment. Above all, we should bestriving for sustainability, which I believe calls for a stronger partnershipbetween the industry and its host countries. "The big challenge at this point is for both investors and managements to makethe correct choices. Investors need to make a clear distinction betweenshort-term trading opportunities and long-term growth and value prospects. Thegold companies need to understand that there's a difference between a good ideaand a carefully considered plan, that the good times never last and that theywill eventually be expected to deliver on their promises." 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+27 82 800 4293 +27 83 308 9989 Fax: +27 11 728 2547*+223 675 0122 +223 675 0109 Cell: +27 (0) 83 266 5847 Email: [email protected] Website: www.randgoldresources.com 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 and a purported counterclaim by MDM.Other potential risks and uncertainties include risks associated with:fluctuations in the market price of gold, gold production at Morila, thedevelopment of Loulo and estimates of resources, reserves and mine life. For adiscussion on such other risk factors refer to the annual report on Form 20-Ffor the year ended 31 December 2004 which was filed in amended form with theUnited States Securities and Exchange Commission (the 'SEC') on 27 October 2005.Randgold Resources assumes no obligation to update information in this release.Cautionary note to US investors: the 'SEC' permits companies, in their filingswith the 'SEC', to disclose only proven and probable ore reserves. We usecertain 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