Powered by increased production at all its operating complexes, Randgold Resources’ profit soared by 259% to US$433.4 million for 2011. Profit for the fourth quarter of US$136.2 million was up 323% on the corresponding quarter in 2010 and was also higher than the company’s annual profit in any preceding year. The board has proposed a US$0.40 annual dividend, up 100% on 2010 on the back of the substantial increase in earnings.
Production for the year rose by 58% to 696 023 ounces, reflecting increased contributions from the Loulo complex in Mali (which includes the new Gounkoto mine), Tongon in Côte d’Ivoire and the Morila joint venture, also in Mali. Morila, now a dump treatment operation, passed the 6 million ounce total production mark during the fourth quarter. Group cash operating costs for the year of US$641 per ounce were in line with those of the previous year.
Chief executive Mark Bristow said the record results represented a significant achievement, particularly when seen against the background of the major developmental projects and issues the company had to handle during the year. These included the expansion programmes at Loulo and Tongon, the commissioning of Gounkoto and the rapid advance of the giant Kibali project in the Democratic Republic of Congo.
“Randgold’s long-term strategy of building sustainably profitable gold mining businesses through discovery and development continues to pay off,” he said. “In 2011 we benefited from our investment in growth in previous years, just as the development work we are doing now will reward our stakeholders in years to come.”
Bristow said the company was forecasting production growth in each of the next five years, with group production for 2012 estimated to be 825 000 to 865 000 ounces – a 19% increase over 2011 at the lower end of the range. This growth is projected to be driven by better throughput and grade at the Loulo/Gounkoto complex. Management is targeting total cash costs per ounce, after royalties, of under US$650/oz for 2012, while costs are forecast to reduce to between US$500/oz and US$550/oz over the next five years.
Total capital expenditure for 2012 will remain high at approximately US$660 million, which will be invested in the anticipated start-up of construction at Kibali, the programmes to unlock more capacity at Loulo and Tongon and in exploration across the group. Despite 2011’s substantial investment in capital projects, cash in hand increased by 33% to US$487.6 million year on year.
#2 BOARD PROPOSES 100% INCREASE IN DIVIDEND
Randgold Resources’ board of directors has recommended an annual dividend for the period ended 31 December 2011 of US$0.40 per share, up 100% on the US$0.20 per share for the previous year. The board agreed that the resolution for the dividend would be submitted to shareholders for approval at the company’s annual general meeting scheduled for Monday, 30 April 2012. If the dividend is approved by shareholders it is anticipated that payment would be made by the end of May 2012.
Although subject to shareholders approving the resolution to pay a dividend, shareholders who have elected to receive sterling dividends can mandate payments directly to their UK bank or building society by visiting the Investor Centre website at www.investorcentre.co.uk/je or by completing the dividend mandate form which is available on the company’s website at www.randgoldresources.com and posting it back to the transfer secretaries, to be received by Monday 14 May 2012.
#3 DRIVING POWER COST DOWN
As Randgold Resources grows its business, it constantly seeks to enhance the size and quality of its asset base. At the same time, it is actively hunting for ways to reduce costs and emissions at all its operations.
Apart from Tongon, the operations currently have to generate their own power, using millions of litres of diesel a month - a substantial component of their cost structure. Strategies are now in place, however, to cut this consumption:
• Tongon was commissioned on diesel generators but its connection to Côte d’Ivoire’s national power grid has now been completed and the mine is already reaping the benefits of the cheaper electricity. • At Loulo, medium-speed generators capable of running on the cheaper heavy fuels (HFO) have been installed, and the complex is expected to switch from diesel to HFO in the course of this year, cutting its fuel costs by an estimated 30%. Gounkoto gets its power from Loulo. • Kibali’s main power supply will come from run-of-river hydro generation, with top-up diesel generation in the dry season. The first of four hydro stations is scheduled for commissioning next year. • The complex ore of the Massawa project means that its process will be power-intensive. Investigations into the possibility of tying it into the Sambangalou hydro project in Senegal are underway. “Randgold is committed to reducing its reliance on fossil fuels, moving down the cost curve in power generation and at the same time becoming greener,” says CEO Mark Bristow. “Tongon has given us the experience of working with Côte d’Ivoire’s multi-country power utility and hydro generation at Kibali will be the next step in the development of our energy platform. We also intend to work with other governments and utilities in West Africa so that we can plan together for the region’s future power requirements.”
#4 GOUNKOTO BOOSTS LOULO COMPLEX AS DEVELOPMENT CONTINUES
A robust contribution from the new Gounkoto mine enhanced the capacity and flexibility of Randgold Resources’ Loulo complex in 2011 despite the substantial challenges presented by the development of two underground mines and the plant expansion.
Gounkoto accounted for 137 755 ounces of the complex’s annual production of 346 179 ounces, giving Loulo the capacity to grow overall output while getting its Yalea underground mine on track and pressing ahead with the Gara underground development. Because it accesses the Loulo infrastructure on a toll basis, Gounkoto is expected to recoup its relatively low capital cost by the end of the first quarter of 2012. This means among other things that the State of Mali, a 20% shareholder, will get the benefit of an early dividend as well as full ownership of its stake. The Mali government has agreed to split the Loulo mining permit, making Gounkoto a standalone operation. Chief executive Mark Bristow said this was a further instance of the importance of Randgold’s philosophy of fostering mutually beneficial partnerships with its host countries.
Bristow also said the Loulo complex represented a textbook illustration of the effectiveness of Randgold’s strategy of creating value through discovery and development, as well as its commitment to building sustainably profitable businesses. “The complex has grown from an 800 000 ounce resource to a fully integrated, long-life opencast and underground operation, targeting production of 500 000 ounces this year. With 9 million ounces of reserves, significant grades and a huge upside, it will be profitable at any realistically conceivable gold price,” he said.
Meanwhile, Gounkoto’s contribution has enabled Randgold to implement the drastic remedial measures it promised last year to get the stuttering Yalea underground development on track. A new team led by mining general manager Ted de Villiers, underground manager Mamou Toure and operations manager George Lawrie, has completed a complete redesign of the underground operations, addressed the geotechnical and ventilation issues, upgraded the infrastructure and produced a solid two-year plan to achieve all targets.
“Our aim is to build up the Yalea and Gara underground ore tonnage from the current 100 000tpm to 190 000tpm by the end of the year. Once we’ve reached steady state in 2013, we’ll be able to optimise the development to reduce costs,” says de Villiers.
“As we pointed out last year, the comprehensive review of all aspects of Yalea inevitably brought with it some short-term inflexibility which impacted on its 2011 performance, but we’re now rapidly catching up through a much-improved development rate and the build-up of the mining reserve. Over at Gara, meanwhile, the lessons we learned at Yalea have helped us to keep this development on track from the start. Gara has already accessed first ore and is well set to achieve its 2012 tonnage target.”
Bristow adds that underground mining is clearly going to be an important leg of Randgold’s business in future, and at Yalea it is not only establishing a strong Malian team but building a core underground skills base for the company.
“We believe that to operate sustainably in an emerging country one should develop the local people rather than rely on expatriate skills,” he said.
#5 TONGON HELPING HAND
At a donation ceremony chief executive Mark Bristow presented the local women’s collectives of the eight villages near Randgold’s Tongon gold mine in Côte d’Ivoire, with seeds, fertiliser and insecticide for their market garden initiatives. At the same ceremony, he handed over the key to the Mbengue secondary school’s laboratory, upgraded by Randgold, to the village’s sub-prefect. The Saint Camille mental asylum at nearby Korhogo received medicines, food, cleaning materials, beds, mattresses and a television. A disabled resident also took delivery of a special bike. The donations, to the value of more than US$64 000, form part of the company’s extensive social responsibility programme designed to ensure that local communities benefit tangibly from its operations.
#6 KIBALI PROJECT IN THE STARTING BLOCKS
Preparatory work has been completed at the Kibali gold project in the Democratic Republic of Congo, where first gold production is scheduled for the end of 2013. Randgold Resources, the project manager and operator, and AngloGold Ashanti each has a 45% stake in Kibali with the DRC parastatal Sokimo owning the balance.
The construction crew has started mobilising on site and should be materially staffed up by the end of February. Long-lead plant and equipment items have been secured, key contractors have been selected and a development management team is being assembled. The relocation programme – a critical component of the predevelopment phase – is progressing smoothly, with two of the 14 affected villages already resettled in the new model village of Kokiza, where five local contractors are building houses at the rate of 300 per month.
Randgold chief executive Mark Bristow says the initial objectives for the development of Kibali have now been achieved. The project is progressing well and the Randgold board has signed off on the development plan, which will be presented for approval to AngloGold Ashanti at the earliest opportunity. In the interim, the Kibali board has approved the next three months’ budget of approximately US$80 million to continue the project’s impressive momentum.
“Excellent work done to date is evident by the progress achieved on site and this impetus will be maintained while we tie up the remaining detail required for board approval,” says AngloGold Ashanti CEO Mark Cutifani. “Kibali represents a model for partnership in the DRC, with Randgold’s field-tested exploration and project development skills complemented by our depth of technical and mine-planning capabilities.”
As guided by Randgold this time last year, it is currently envisaged that the Kibali mine will comprise an integrated open pit and underground mining operation, feeding a larger 6Mtpa processing plant which will include a full flotation section for treating sulphide ore. The complex will ultimately be supplied by four hydropower stations supported by a thermal power station for low rainfall periods and back-up. The core capital programme is scheduled to run over the next four years.
Phase 1, required to deliver first gold production, will cover the metallurgical facility, one hydropower station and the back-up thermal power facility, construction of the tailings storage facility, relocation of villages, open pit mining and all shared infrastructure. This will run over a two year period. The Phase 2 programme, which will run concurrently with Phase 1 but will extend over four years, is focused primarily on the underground development and includes a twin decline and vertical shaft system as well as three hydropower stations. This is expected to bring the underground into first production by the end of 2014, with steady state production targeted for the end of 2015. The current Life of Mine plan envisages average annual production of approximately 600 000 ounces for the first 12 years, with an average grade of 4.1g/t.
“Since we acquired Kibali, then known as Moto, just over two years ago, we’ve moved rapidly to optimise and advance the project. Among other things, we’ve doubled the reserve to more than 10 million ounces, obtained the community’s buy-in for the relocation programme, created a road network which includes a link with international ports, acquired four hydropower licences which will form the basis of an affordable electricity supply and finalised the operational strategies,” said Bristow.
“With the groundwork now done, thanks to the support and cooperation of all stakeholders, including the central and regional governments, the local community and our partners, everything is in place for us to start building what is expected to be one of the largest gold mines in Africa.”
#7 MAJOR MILESTONE FOR MORILA
The Morila joint venture notched up another significant achievement in its proud history during the fourth quarter of 2011 when it passed the 6 million mark in ounces of gold produced. The mine, which began production in 2000 and has since been converted into a dump treatment operation, still remains highly profitable. To date, Morila has paid out US$1.13 billion in dividends to its shareholders.
Morila had an injury-free 2011 year and clocked more than 1.5 million lost-time injury-free hours.
#8 FOCUSING ON SUSTAINABILITY
Profitability is not the only requirement for a sustainable mining operation: a high standard of care for the environment and occupational health and safety is also essential, and this is an integral part of Randgold Resources’ management systems.
The Morila joint venture holds both the ISO 14001 (environment) and OHSAS 18001 (occupational health and safety) certifications. Loulo has an ISO 14001 certification and its occupational health and safety system will be audited for OHSAS 18001 certification in the first half of 2012. The environmental and occupational health and safety management systems at Gounkoto and Tongon will also be audited for certification in 2012. Kibali will be ISO 14001 certified only after construction has been completed but the earlier implementation of OHSAS 18001 is being considered in view of the safety risks involved in the construction work.
Underlining Randgold’s commitment to these issues, the company has recruited Charles Wells from its sustainability consultants Digby Wells Environmental to lead its sustainability management team. Charles has an MSc in environmental biotechnology and 14 years’ experience in environmental management. This experience has covered the Global Reporting Initiative, biodiversity, waste and water management, rehabilitation and closure planning as well as stakeholder engagement, resettlement and community development. Having previously worked for Randgold as the environmental officer during the Morila construction, he has more recently managed the environmental and social impact assessments (ESIA) for Tongon, Gounkoto and Kibali. He has also been involved in a number of other ESIAs throughout Africa, many of which have been compliant with the Equator Principles and IFC Performance Standards.
#9 PARTNERSHIPS CONQUER CHALLENGES AT TONGON
Randgold’s new gold mine at Tongon in Côte d’Ivoire – nurtured as a project through a civil war and then successfully commissioned in the final quarter of 2010 during the post-election disturbances – represents a triumph of the company’s philosophy of partnering with its host countries, says CEO Mark Bristow.
The volatile environment, the challenge of ramping up production while transitioning from oxide to sulphide ore treatment and complexities which arose in the changeover from diesel to grid power affected production. Additionally, a failure of the barring gear on the No1 mill in November led the company to revise its 2011 production guidance and the mine ended its first full year as a fully stabilised operation on track to achieve the planned average of 270 000 ounces per year going forward. Developed at a cost of some US$400 million, it is the biggest mine in Côte d’Ivoire as well as one of the largest private-sector investments in that country. It has 90 tonnes of gold reserves and an estimated 10-year life.
Delivering a progress report at a special meeting of senior government officials, local business partners and members of the media in Abidjan recently, Bristow said: “When we invest in a new mine, we are also investing in the country where it is located and in that country’s people. The value we demonstrably deliver to these stakeholders builds strong and mutually beneficial relationships. It is these relationships that enabled us to develop and commission Tongon in the face of many obstacles.”
He noted that approximately 93% of the people employed at Tongon by Randgold were Ivorian, many of them recruited from nearby villages, while the contractors’ complement included a similar complement of national personnel.
“As a matter of principle we employ a very high proportion of local nationals wherever we operate, and we insist that our contractors do the same. This not only creates employment in remote and often deprived areas, but also transfers valuable skills which will open up future opportunities for these people,” he said. Bristow cited the cooperation between Randgold and the Ivorian power utility as another example of partnership in action. Tongon has now been plugged into the national power grid, making it the first Randgold mine which does not have to rely on self-generated electricity. Access to this power is a significant cost advantage to the mine, but the roll-out of the grid into the north of the country also benefits the local communities.
“Mining in Africa should be about sustainability and not short-term gain. That’s why Randgold’s growth strategy is a long-term one, focused on creating lasting value for all its stakeholders.”
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934, and applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to the future price of gold, the estimation of mineral reserves and resources, the realisation of mineral reserve estimates, the timing and amount of estimated future production, costs of production, reserve determination and reserve conversion rates. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as ‘will’, ‘plans’, ‘expects’ or ‘does not expect’, ‘is expected’, ‘budget’, ‘scheduled’, ‘estimates’, ‘forecasts’, ‘intends’, ‘anticipates’ or ‘does not anticipate’, or ‘believes’, or variations of such words and phrases or state that certain actions, events or results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will be taken’, ‘occur’ or ‘be achieved’. Assumptions upon which such forward-looking statements are based are in turn based on factors and events that are not within the control of Randgold and there is no assurance they will prove to be correct. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Randgold to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to the integration of Randgold and Moto, risks related to mining operations, including political risks and instability and risks related to international operations, actual results of current exploration activities, conclusions of economic evaluations, changes in project parameters as plans continue to be refined, as well as those factors discussed in the section entitled ‘Risk Factors’ in Randgold’s annual report on Form 20-F for the year ended 31 December 2010 which was filed with the US Securities and Exchange Commission (the ‘SEC’) on 31 March 2011. Although Randgold has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Randgold does not undertake to update any forward-looking statements herein, except in accordance with applicable securities laws. CAUTIONARY NOTE TO US INVESTORS: The SEC permits companies, in their filings with the SEC, to disclose only proven and probable ore reserves. We use certain terms in this release, such as ‘resources’, that the SEC does not recognise and strictly prohibits us from including in our filings with the SEC. Investors are cautioned not to assume that all or any parts of our resources will ever be converted into reserves which qualify as ‘proven and probable reserves’ for the purposes of the SEC’s Industry Guide number 7.