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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007
OR
OR
Date of event requiring this shell company report....
For the transition period from to
Commission file number: 000-49888
RANDGOLD RESOURCES LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
JERSEY, CHANNEL ISLANDS
(Jurisdiction of incorporation or organization)
La Motte Chambers, La Motte Street, St. Helier, Jersey JE1 1BJ, Channel Islands
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
represented by one Ordinary ShareSecurities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.
As of December 31, 2007, the Registrant had outstanding 76,148,034 ordinary shares, par value $0.05 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If the report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of ‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
by the International Accounting Standards BoardIf ‘‘Other’’ has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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Table of ContentsGLOSSARY OF MINING TECHNICAL TERMS
The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding some of the terms as used in this Annual Report.
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Table of ContentsStatements in this Annual Report concerning our business outlook or future economic performance; anticipated revenues, expenses or other financial items; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are ‘‘forward-looking statements’’ as that term is defined under the United States federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those stated in such statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under ‘‘Item 3. Key Information — D. Risk Factors’’ in this Annual Report as well as those discussed elsewhere in this Annual Report and in our other filings with the Securities and Exchange Commission.
We are incorporated under the laws of Jersey, Channel Islands with the majority of our operations located in West Africa. Our books of account are maintained in US dollars and our annual and interim financial statements are prepared on a historical cost basis in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS. IFRS differs in significant respects from generally accepted accounting principles in the United States, or US GAAP. This Annual Report includes our audited consolidated financial statements prepared in accordance with IFRS. We have also included in this Annual Report the audited financial information for the years ended December 31, 2007, 2006 and 2005 of Société des Mines de Morila SA, or Morila SA. The financial information included in this Annual Report has been prepared in accordance with IFRS and, except where otherwise indicated, is presented in US dollars. For a definition of cash costs, please see ‘‘Item 3. Key Information — A. Selected Financial Data’’.
Unless the context otherwise requires, ‘‘us’’, ‘‘we’’, ‘‘our’’, or words of similar import, refer to Randgold Resources Limited and its subsidiaries and affiliated companies.
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
The following selected historical consolidated financial data have been derived from, and should be read in conjunction with, the more detailed information and financial statements, including our audited consolidated financial statements for the years ended December 31, 2007, 2006, and 2005 and as at December 31, 2007 and 2006, which appear elsewhere in this Annual Report. The historical consolidated financial data as at December 31, 2005, 2004 and 2003, and for the years ended December 31, 2004 and 2003 have been derived from our audited consolidated financial statements not included in this Annual Report, as adjusted for the accounting changes relating to stripping costs under IFRS.
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Table of ContentsThe financial data have been prepared in accordance with IFRS, unless otherwise noted.
# Profit from operations is calculated as profit before income tax under IFRS, excluding finance income, finance costs and profit on sale of Syama. * Reflects adjustments resulting from the sub-division of shares.
December 31,
2007
December 31,
2006
December 31,
2005
December 31,
2004
December 31,
2003
per share (2)
December 31,
2007
December 31,
2006
December 31,
2005
December 31,
2004
December 31,
2003 BALANCE SHEET AMOUNTS IN ACCORDANCE WITH IFRS1. Total cash cost and total cash cost per ounce are non-GAAP measures. We have calculated total cash costs and total cash costs per ounce using guidance issued by the Gold Institute. The Gold Institute was a non profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs, as defined in the Gold Institute’s guidance, include mine production, transport and refinery costs, general and administrative costs, movement in production inventories and ore stockpiles, transfers to and from deferred stripping where relevant, and royalties. Under the company’s accounting policies, there are no transfers to and from deferred stripping. Total cash costs per ounce are calculated by dividing total cash costs, as determined using the Gold Institute guidance, by gold ounces produced for the periods presented. We have calculated total cash costs and total cash costs per ounce on a consistent basis for all periods presented. Total cash costs and total cash costs per ounce should not be considered by investors as an alternative to net profit attributable to shareholders, as an alternative to other IFRS measures or an indicator of our performance. The data does not have a meaning prescribed by IFRS and therefore amounts presented may not be comparable to data presented by gold producers who do not follow the guidance provided by the Gold Institute. In particular depreciation and amortization would be included in a measure of total costs of producing gold under IFRS , but are not included in total cash costs under the guidance provided by the Gold Institute. Furthermore, while the Gold Institute has provided a definition for the calculation of total cash costs and total cash costs per ounce, the calculation of these numbers may vary from company to company and may not be comparable to other similarly titled measures of other companies. However, we believe that total cash costs per ounce is a useful indicator to investors and management of a mining company’s performance as it provides an indication of a company’s profitability and efficiency, the trends in cash costs as the
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Table of Contentscompany’s operations mature, and a benchmark of performance to allow for comparison against other companies. Within this Annual Report our discussion and analysis is focused on the ‘‘total cash cost’’ measure as defined by the Gold Institute.
The following table lists the costs of producing gold, determined in accordance with IFRS, and reconciles this GAAP measure to total cash costs as defined by the Gold Institute’s guidance, as a non-GAAP measure, for each of the periods set forth below:
* 40% share of Morila and 100% share of Loulo.
December 31,
2007
December 31,
2006
December 31,
2005
December 31,
2004
December 31,
2003 Mine production costs2. Effective June 11, 2004, we undertook a split of our ordinary shares, which increased our issued share capital from 29,273,685 to 58,547,370 ordinary shares. In connection with this share split our ordinary shareholders of record on June 11, 2004 received two ordinary shares, par value $0.05 per share, for every one ordinary share, par value $0.10 per share, they held. See ‘‘Item 4. Information on the Company — A. History and Development of the Company’’.
B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
In addition to the other information included in this Annual Report, you should carefully consider the following factors, which individually or in combination could have a material adverse effect on our business, financial condition and results of operations. There may be additional risks and uncertainties not presently known to us, or that we currently see as immaterial, which may also harm our business. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected. In this case, the trading price of our ordinary shares and American Depositary Shares could decline and you might lose all or part of your investment.
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Table of ContentsRisks Relating to Our Operations
The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely.
Substantially all of our revenues and cash flows have come from the sale of gold. Historically, the market price for gold has fluctuated widely and has been affected by numerous factors, over which we have no control, including:
The volatility of gold prices is illustrated in the following table, which shows the annual high, low and average of the afternoon London Bullion Market fixing price of gold in US dollars for the past ten years.
In addition, the current demand for, and supply of, gold affects the price of gold, but not necessarily in the same manner as current demand and supply affect the prices of other commodities. Historically, gold has tended to retain its value in relative terms against basic goods in times of inflation and monetary crisis. As a result, central banks, financial institutions, and individuals hold large amounts of gold as a store of value, and production in any given year constitutes a very small portion of the total potential supply of gold. Since the potential supply of gold is large relative to mine production in any given year, normal variations in current production will not necessarily have a significant effect on the supply of gold or its price.
If gold prices should fall below and remain below our cost of production for any sustained period we may experience losses, and if gold prices should fall below our cash costs of production we may be forced to curtail or suspend some or all of our mining operations. In addition, we would also have to
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Table of Contentsassess the economic impact of low gold prices on our ability to recover from any losses we may incur during that period and on our ability to maintain adequate reserves. Our total cash cost of production per ounce of gold sold was $356 in the year ended December 31, 2007, $296 in the year ended December 31, 2006, and $201 in the year ended December 31, 2005. We expect that Morila’s cash costs per ounce will rise as the life of the mine advances as a result of expected declining grade, which will adversely affect our profitability in the absence of any mitigating factors. The high grades expected from the underground mining will, in the absence of any other cost increases, have a positive impact on unit costs.
Our mining operations may yield less gold under actual production conditions than indicated by our gold reserve figures, which are estimates based on a number of assumptions, including assumptions as to mining and recovery factors, production costs and the price of gold.
The ore reserve estimates contained in this Annual Report are estimates of the mill delivered quantity and grade of gold in our deposits and stockpiles. They represent the amount of gold that we believe can be mined, processed and sold at prices sufficient to recover our estimated total cash costs of production, remaining investment and anticipated additional capital expenditures. Our ore reserves are estimated based upon many factors, including:
Because our ore reserve estimates are calculated based on current estimates of future production costs and gold prices, they should not be interpreted as assurances of the economic life of our gold deposits or the profitability of our future operations.
Reserve estimates may require revisions based on actual production experience. Further, a sustained decline in the market price of gold may render the recovery of ore reserves containing relatively lower grades of gold mineralization uneconomical and ultimately result in a restatement of reserves. The failure of the reserves to meet our recovery expectations may have a materially adverse effect on our business, financial condition and results of operations.
The profitability of operations and the cash flows generated by these operations are significantly affected by the fluctuations in the price, cost and supply of inputs.
Fuel, power and consumables, including diesel, steel, chemical reagents, explosives and tires, form a relatively large part of the operating costs of any mining company. The cost of these consumables is impacted, to a greater or lesser extent, by fluctuations in the price of oil, exchange rates and a shortage of supplies.
Such fluctuations have a significant impact upon the operating costs and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for mining projects, new and existing, and could even render certain projects non-viable. In addition, while our revenue is derived from the sale of gold in US dollars, a significant portion of our input costs are incurred in currencies other than the dollar. Accordingly, any appreciation in such other currencies could adversely affect our results of operations.
Our business may be harmed if the Government of Mali fails to repay Value Added Tax, or TVA, owing to Morila.
Our mining companies operating in Mali are exonerated by their Establishment Conventions from paying TVA for the three years following first commercial production. After that, TVA is payable and reimbursable. TVA is only reclaimable insofar as it is expended in the production of income.
A key aspect in TVA recovery is managing the completion of the Government of Mali’s audit of the taxpayer’s payments, at which time the Government of Mali recognizes a liability. To date, the Government of Mali has not completed its audit of Morila for the second and third quarters of 2007 and the first quarter of 2008.
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Table of ContentsMorila has concluded a reimbursement protocol with the Government of Mali for all TVA owing to June 2005 and is in negotiation to conclude a further protocol to bring this up to date. At December 31, 2007, the TVA owed by the Government of Mali to Morila stood at $37.8 million, which amount has increased by $5.3 million to $43.1 million at April 30, 2008.
If Morila is unable to recover these funds, then its results of operations and financial position would be adversely affected, as would its ability to pay dividends to its shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends are not paid.
Our business may be harmed if the Government of Mali fails to repay fuel duties owing to Morila and Loulo.
Up to November 2005, Morila was responsible for paying to diesel suppliers the customs duties which are then paid to the Government of Mali. Our operations at Morila and Loulo can claim reimbursement of these duties from the Government of Mali on presentation of a certificate from Société Générale de Surveillance. During the third quarter 2003, the Government of Mali began to reduce payments to all the mines in Mali due to irregularities involving certain small exploration companies. The Government of Mali has since given full exoneration from fuel duties to the mining industry so that fuel duties are no longer payable. However, significant amounts of previously paid duties remain outstanding. Our share of the amounts owing to Morila was $4 million on December 31, 2007 and $5.6 million on December 31, 2006. Amounts owing to Loulo were $0.7 million on December 31, 2007 and $4.1 million on December 31, 2006.
If Morila is unable to recover these amounts, then its results of operations and financial position would be adversely affected, as would its ability to pay dividends to its shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends are not paid.
We have invested in debt instruments for which the market has become substantially illiquid.
As of December 31, 2007, we had approximately $294 million of cash and cash equivalents. In addition, we had approximately $49 million of available for sale financial assets. The available for sale financial assets consists of auction rate securities, or ARS. ARS are securities that are structured with short-term interest rate reset dates of generally less than 35 days, but with contractual maturities that can be well in excess of ten years. At the end of each reset period, which occurs every seven to thirty-five days, investors can sell or continue to hold the securities at par. In the third quarter of fiscal year 2007, certain auction rate securities with a cost value of $49 million failed at an auction due to the sudden and unusual deterioration in the global credit and capital markets, and have since experienced multiple failed auctions. Consequently, the funds associated with these investments will not be accessible until a successful auction occurs, a buyer is found outside of the auction process or the underlying securities have matured.
The ARS investments held by the company all had AAA credit ratings from at least two rating agencies at the time of purchase and as at December 31, 2007. In April, 2008, and subsequent to that date, certain ARS investments were downgraded below AAA by different ratings agencies. Currently, $33 million of ARS investments maintain an AAA rating by at least one ratings agency, and all remain ‘investment grade’ rated by at least one ratings agency. To date, we continue to receive interest on all of the investments.
Historically, given the liquidity created by the auctions, ARS were presented as cash and cash equivalents on our balance sheet. Given the failed auctions, the company’s ARS are illiquid until there is a successful auction for them. Accordingly, the entire amount of such remaining ARS has been reclassified as available-for-sale financial assets. Although we believe that the negative conditions in the credit markets is temporary, and consequently we have not impaired these investments, continued uncertainties in the credit and capital markets may result in the ARS being impaired, which could adversely impact our financial condition, current asset position and reported earnings.
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Table of ContentsWe may not be able to recover certain funds from MDM Ferroman (Pty) Limited.
In August 2004, we entered into a fixed lump sum turnkey contract for $63 million for the design, supply, construction and commissioning of the Loulo processing plant and infrastructure with MDM Ferroman (Pty) Ltd, or MDM. At the end of 2005, after making advances and additional payments to MDM totaling $26 million in excess of the contract, we determined that MDM was unable to perform its obligations under the MDM Contract, at which time we enforced a contractual remedy which allowed us to act as our own general contractor and to complete the remaining work on the Loulo project that was required under the MDM Contract.
We believe that we are entitled to recover certain amounts from MDM, including advances of $12.1 million (December 31, 2006: $12.1 million) included in receivables. Of this latter amount, $7 million is secured by performance bonds and the remainder is secured by various personal guarantees and other assets.
As part of our efforts to recoup the monies owed to us, MDM was put into liquidation on February 1, 2006. This resulted in a South African Companies Act Section 417 investigation into the business and financial activities of MDM, its affiliated companies and their directors. The investigation was completed and summons has been issued against those MDM creditors deemed as preferential creditors. These legal proceedings are continuing with pleadings having been closed and court dates been set in the South African courts.
Our ability to recover in full the $12.1 million included in receivables is dependent on the amounts which can be recovered from the performance bonds, personal guarantees and other assets provided as security. Any shortfall is expected to be recovered from any free residue accruing to the insolvent estate. The aggregate amount which will ultimately be recovered cannot presently be determined. The financial statements do not reflect any additional provision that may be required if the $12.1 million cannot be recovered in full. Our results of operations may be adversely affected if we are unable to recover the amounts advanced by us to MDM. Any part of the $12.1 million included in accounts receivable which cannot in fact be recovered will need to be charged as an expense.
The ultimate outcome of this claim cannot presently be determined and there is significant uncertainty surrounding the amount that will ultimately be recovered.
We may incur losses or lose opportunities for gains as a result of our use of our derivative instruments to protect us against low gold prices.
We use derivative instruments to protect the selling price of some of our anticipated gold production at Loulo. The intended effect of our derivative transactions is to lock in a fixed sale price for some of our future gold production to provide some protection against a subsequent fall in gold prices. No such protection is in place for our production at Morila.
Derivative transactions can result in a reduction in revenue if the instrument price is less than the market price at the time the hedged sales are recognized. Moreover, our decision to enter into a given instrument is based upon market assumptions. If these assumptions are not met, significant losses or lost opportunities for significant gains may result. In all, the use of these instruments may result in significant losses which will prevent us from realizing the positive impact of any subsequent increase in the price of gold on the portion of production covered by the instrument.
Our underground project at Loulo, developing two mines at Yalea and Gara, is subject to all of the risks associated with underground mining.
Development of the underground mine at Yalea commenced in December 2006 and first ore was mined in April 2008. Full production is expected at the end of 2008. At Gara, development is expected to start in January 2009 and first production is expected at the end of 2009. These planned mines represent our entry into the business of underground mining. In connection with the development of the underground mines, we must build the necessary infrastructure, the costs of which are substantial. The underground mines may experience unexpected problems and delays during their
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Table of Contentsdevelopment and construction. Delays in the commencement of gold production could occur and the development costs could be larger than expected, which could affect our results of operations and profitability.
The business of underground mining by its nature involves significant risks and hazards. In particular, as the development commences the operation could be subject to:
We are at risk of experiencing any and all of these hazards. The occurrence of any of these hazards could delay the development of the mine, production, increase cash operating costs and result in additional financial liability for us.
Our Success May Depend on Our Social and Environmental Performance
Our ability to operate successfully in communities will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the health and safety of our employees, the protection of the environment, and the creation of long-term economic and social opportunities in the communities in which we operate. We seek to promote improvements in health and safety, environmental performance and community relations. However, our ability to operate could be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health and safety of our employees, the environment or the communities in which we operate.
Actual cash costs of production, production results and economic returns may differ significantly from those anticipated by our feasibility studies for new development projects, including Tongon.
It can take a number of years from initial feasibility studies until development is completed and, during that time, the economic feasibility of production may change. In addition, there are a number of uncertainties inherent in the development and construction of any new mine, including:
At our Tongon project in Côte d’Ivoire, our board has approved the development of the new mine based on the strength of a feasibility study. An initial draft of the proposed mining convention has been submitted to the Côte d’Ivoire’s Ministry of Mines and Energy and we expected to sign the convention during the course of 2008. Construction of the mine is scheduled to start at the end of 2008 with first gold production scheduled for the fourth quarter of 2010. We cannot provide any assurance that the project will ultimately result in a new commercial mining operation, or that a new commercial mining operation will be successful.
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Table of ContentsWe conduct mining, development and exploration activities in countries with developing economies and are subject to the risks of political and economic instability associated with these countries.
We currently conduct mining, development and exploration activities in countries with developing economies. These countries and other emerging markets in which we may conduct operations have, from time to time, experienced economic or political instability. It is difficult to predict the future political, social and economic direction of the countries in which we operate, and the impact government decisions may have on our business. Any political or economic instability in the countries in which we currently operate could have a material and adverse effect on our business and results of operations.
The countries of Mali, Senegal, Burkina Faso and Côte d’Ivoire have, since independence, experienced some form of political upheaval with varying forms of changes of government taking place. Côte d’Ivoire has experienced several years of political chaos, including an attempted coup d’etat. The political situation in that country is normalizing and national elections have been set for November 2008.
Goods are supplied to our operations in Mali through Ghana, Burkina Faso and Senegal, which routings have to date, functioned satisfactorily. Our operations at Morila have been adversely affected by the higher transportation costs for diesel that now has to be delivered via Senegal. Any present or future policy changes in the countries in which we operate may in some way have a significant effect on our operations and interests.
The mining laws of Mali, Côte d’Ivoire, Senegal, Burkina Faso, Ghana and Tanzania stipulate that should an economic orebody be discovered on a property subject to an exploration permit, a permit that allows processing operations to be undertaken must be issued to the holder. Except for Tanzania, legislation in these countries currently provides for the relevant government to acquire a free ownership interest, normally of at least 10%, in any mining project. For example, the Malian government holds a 20% interest in Morila SA and Somilo SA, and cannot be diluted below 10%, as a result of this type of legislation. The requirements of the various governments as to the foreign ownership and control of mining companies may change in a manner which adversely affects us.
Under our joint venture agreement with AngloGold Ashanti Limited, or AngloGold Ashanti, we jointly manage Morila Limited, and any disputes with AngloGold Ashanti over the management of Morila Limited could adversely affect our business.
We jointly control Morila Limited with AngloGold Ashanti under a joint venture agreement. Since February 15, 2008, we have been responsible for the day-to-day operations of Morila, subject to the overall management control of the Morila Limited board. Substantially all major management decisions, including approval of a budget for Morila, must be approved by the Morila Limited board. We and AngloGold Ashanti retain equal control over the board, with neither party holding a deciding vote. If a dispute arises between us and AngloGold Ashanti with respect to the management of Morila Limited and we are unable to amicably resolve the dispute, we may have to participate in arbitration or other proceeding to resolve the dispute, which could materially and adversely affect our business.
Our results of operations are being adversely affected by increases in fuel prices, and we would be adversely affected by disruptions in the supply of fuel.
Our results are significantly affected by the price and availability of fuel, which are in turn affected by a number of factors beyond our control. Fuel prices are volatile and increased significantly in 2007, and remain very high by historical standards. In 2007, the cost of fuel comprised approximately 27% of our operating costs and the annual price increase of our landed fuel was 34%.
Historically, fuel costs have been subject to wide price fluctuations based on geopolitical factors and supply and demand. While we do not currently anticipate a significant reduction in fuel availability, factors beyond our control make it impossible to predict the future availability of fuel. If there are additional outbreaks of hostilities or other conflicts in oil producing areas or elsewhere, or a reduction in refining capacity (due to weather events, for example), or governmental limits on the
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Table of Contentsproduction or sale of fuel, or restrictions on the transport of fuel, there could be reductions in the supply of fuel and significant increases in the cost of fuel.
We are not parties to any agreements that protect us against price increases or guarantee the availability of fuel. Major reductions in the availability of fuel or significant increases in its cost, or a continuation of current high prices for a significant period of time, would have a material adverse impact on us.
The use of mining contractors at certain of our operations may expose it to delays or suspensions in mining activities.
Mining contractors are used at Loulo and Morila to mine and deliver ore to processing plants. Consequently, at these mines, we do not own all of the mining equipment and may face disruption of operations and incur costs and liabilities in the event that any of the mining contractors at these mines has financial difficulties, or should there be a dispute in renegotiating a mining contract, or a delay in replacing an existing contractor.
We may be required to seek funding from third parties or enter into joint development arrangements to finance the development of our properties and the timely exploration of our mineral rights, which funding or development arrangements may not be available on acceptable terms, or at all.
In some countries, if we do not conduct any mineral exploration on our mineral holdings or make the required payments in lieu of completing mineral exploration, these mineral holdings will lapse and we will lose all interest that we have in these mineral rights.
We may not pay dividends to shareholders in the near future.
We paid our second dividend to ordinary shareholders in March 2008. It is our policy to pay dividends if profits and funds are available for that purpose. Whether or not funds are available depends on a variety of factors. We cannot guarantee that dividends will be paid in the future.
If we are unable to attract and retain key personnel our business may be harmed.
Our ability to bring additional mineral properties into production and explore our extensive portfolio of mineral rights will depend, in large part, upon the skills and efforts of a small group of management and technical personnel, including D. Mark Bristow, our Chief Executive Officer. If we are not successful in retaining or attracting highly qualified individuals in key management positions our business may be harmed. The loss of any of our key personnel could adversely impact our ability to execute our business plan.
Our insurance coverage may prove inadequate to satisfy future claims against us.
We may become subject to liabilities, including liabilities for pollution or other hazards, against which we have not insured adequately or at all or cannot insure. Our insurance policies contain exclusions and limitations on coverage. Our current insurance policies provide worldwide indemnity of £50 million in relation to legal liability incurred as a result of death, injury, disease of persons and/or loss of or damage to property. Main exclusions under this insurance policy, which relates to our industry, include war, nuclear risks, silicosis, asbestosis or other fibrosis of the lungs or diseases of the respiratory system with regard to employees, and gradual pollution. In addition, our insurance policies may not continue to be available at economically acceptable premiums. As a result, in the future our insurance coverage may not cover the extent of claims against us.
It may be difficult for you to affect service of process and enforce legal judgments against us or our affiliates.
We are incorporated in Jersey, Channel Islands and a majority of our directors and senior executives are not residents of the United States. Virtually all of our assets and the assets of those persons are located outside the United States. As a result, it may not be possible for you to effect
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Table of Contentsservice of process within the United States upon those persons or us. Furthermore, the United States and Jersey currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, it may not be possible for you to enforce a final judgment for payment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon United States Federal securities laws against those persons or us.
In order to enforce any judgment rendered by any Federal or state court in the United States in Jersey, proceedings must be initiated by way of common law action before a court of competent jurisdiction in Jersey. The entry of an enforcement order by a court in Jersey is conditional upon the following:
Furthermore, it is doubtful whether you could bring an original action based on United States Federal securities laws in a Jersey court.
We are subject to significant corporate regulation as a public company and failure to comply with all applicable regulations could subject us to liability or negatively affect our share price.
As a publicly traded company, we are subject to a significant body of regulation. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance and continue to update this program in response to newly implemented or changing regulatory requirements, we cannot provide assurance that we are or will be in compliance with all potentially applicable corporate regulations. For example, we cannot provide assurance that in the future our management will not find a material weakness in connection with its annual review of our internal control over financial reporting pursuant to Section 404 of the US Sarbanes-Oxley Act of 2002. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. If we must disclose any material weakness in our internal control over financial reporting, our share price could decline.
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Table of ContentsRisks Relating to Our Industry
The exploration of mineral properties is highly speculative in nature, involves substantial expenditures, and is frequently unproductive.
Exploration for gold is highly speculative in nature. Our future growth and profitability will depend, in part, on our ability to identify and acquire additional mineral rights, and on the costs and results of our continued exploration and development programs. Many exploration programs, including some of ours, do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Our mineral exploration rights may not contain commercially exploitable reserves of gold. Uncertainties as to the metallurgical recovery of any gold discovered may not warrant mining on the basis of available technology. Our operations are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as:
If we discover a viable deposit, it usually takes several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change.
Moreover, we will use the evaluation work of professional geologists, geophysicists, and engineers for estimates in determining whether to commence or continue mining. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether or not the deposit contains economically recoverable mineralization. As a result of these uncertainties, we may not successfully acquire additional mineral rights, or identify new proven and probable reserves in sufficient quantities to justify commercial operations in any of our properties.
If management determines that capitalized costs associated with any of our gold interests are not likely to be recovered, we would recognize an impairment provision against the amounts capitalized for that interest. All of these factors may result in losses in relation to amounts spent which are found not to be recoverable.
Title to our mineral properties may be challenged which may prevent or severely curtail our use of the affected properties.
Title to our properties may be challenged or impugned, and title insurance is generally not available. Each sovereign state is the sole authority able to grant mineral property rights, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties.
Our ability to obtain desirable mineral exploration projects in the future may be adversely affected by competition from other exploration companies.
In conducting our exploration activities, we compete with other mining companies in connection with the search for and acquisition of properties producing or possessing the potential to produce gold. Existing or future competition in the mining industry could materially and adversely affect our prospects for mineral exploration and success in the future.
Our operations are subject to extensive governmental and environmental regulations, which could cause us to incur costs that adversely affect our results of operations.
Our mining facilities and operations are subject to substantial government laws and regulations, concerning mine safety, land use and environmental protection. We must comply with requirements
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Table of Contentsregarding exploration operations, public safety, employee health and safety, use of explosives, air quality, water pollution, noxious odor, noise and dust controls, reclamation, solid waste, hazardous waste and wildlife as well as laws protecting the rights of other property owners and the public.
Any failure on our part to be in compliance with these laws, regulations, and requirements with respect to our properties could result in us being subject to substantial penalties, fees and expenses, significant delays in our operations or even the complete shutdown of our operations. We provide for estimated environmental rehabilitation costs when the related environmental disturbance takes place. Estimates of rehabilitation costs are subject to revision as a result of future changes in regulations and cost estimates. The costs associated with compliance with government regulations may ultimately be material and adversely affect our results of operations and financial condition.
If our environmental and other governmental permits are not renewed or additional conditions are imposed on our permits, our financial condition and results of operations may be adversely affected.
Generally, compliance with environmental and other government regulations requires us to obtain permits issued by governmental agencies. Some permits require periodic renewal or review of their conditions. We cannot predict whether we will be able to renew these permits or whether material changes in permit conditions will be imposed. Non-renewal of a permit may cause us to discontinue the operations requiring the permit, and the imposition of additional conditions on a permit may cause us to incur additional compliance costs, either of which could have a material adverse effect on our financial condition and results of operations.
Labor disruptions could have an adverse effect on our operating results and financial condition.
Our operations in West Africa are highly unionized, and strikes are legal in the countries in which we operate. Therefore, our operations are at risk of having work interrupted for indefinite periods due to industrial action by employee collectives, such as strikes. Should long disruptions take place on our operations, the results from our operations and their financial condition could be materially and adversely affected.
AIDS poses risks to us in terms of productivity and costs.
The incidence of AIDS in Mali and Côte d’Ivoire, which has been forecasted to increase over the next decade, poses risks to us in terms of potentially reduced productivity and increased medical and insurance costs. The exact extent to which our workforce is infected is not known at present. The prevalence of AIDS could become significant. Significant increases in the incidence of AIDS infection and AIDS-related diseases among members of our workforce in the future could adversely impact our operations and financial condition.
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Table of ContentsItem 4. Information on the Company
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Randgold Resources Limited was incorporated under the laws of Jersey, Channel Islands in August 1995, to engage in the exploration and development of gold deposits in Sub-Saharan Africa. Our principal executive offices are located at La Motte Chambers, La Motte Street, St. Helier, Jersey, JE1 1BJ, Channel Islands and our telephone number is (011 44) 1534 735-333. Our agent in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.
We discovered the Morila deposit during December 1996 and we subsequently financed, built and commissioned the Morila mine.
During July 2000, we concluded the sale of 50% of our interest in Morila Limited (and also a shareholder loan made by us to Morila Limited) to AngloGold Ashanti for $132 million in cash.
We have an 80% controlling interest in Société des Mines de Loulo S.A., or Somilo, through a series of transactions culminating in April 2001. The Loulo mine commenced operations in October 2005 and mines the Gara (formerly Loulo 0) and Yalea deposits. We discovered the Yalea deposit in 1997.
We conduct our mining operations through:
In July 2002, we completed a public offering of 5,000,000 of our ordinary shares, including American Depositary Shares, or ADSs, resulting in gross proceeds to us of $32.5 million. These proceeds were used to repay a syndicated term loan and revolving credit facility in November 2002 and for feasibility studies and development activities. In connection with this offering, we listed our ADSs on the Nasdaq National Market (Our ADSs are now listed on the Nasdaq Global Select Market).
In April 2003, we entered into a heads of agreement with Resolute Mining Limited, or Resolute. Under this agreement we gave Resolute a 12 month option to acquire our entire interest in our wholly-owned subsidiary, Randgold Resources (Somisy) Limited, or RRL Somisy, for $6 million, plus a quarterly royalty payment based on the gold price, and the assumption of certain liabilities. RRL Somisy owned 80% of Somisy which owned the Syama mine.
As of June 13, 2003, Randgold & Exploration owned approximately 43% of our outstanding share capital. Since that time, a number of transactions have taken place resulting in all of our shares which were held by Randgold & Exploration being sold. Currently Randgold & Exploration has no interest in us.
In February 2004, we announced that we would develop a new mine at Loulo in western Mali. Construction continued through 2005 and the new open pit mine went into production in October 2005. In addition, our board agreed to proceed with the development of the underground mine and, after the award of the development contract, work commenced with the construction of the boxcut at the Yalea mine in August 2006. This boxcut has been completed and the first blast into hard rock took place on December 22, 2006. First ore was mined in the second quarter of 2008 and full production is scheduled for 2009. Development at Loulo’s second underground mine, Gara, is due to start at the beginning of 2009 with first ore being delivered to the plant by the end of that year.
In April 2004, Resolute exercised its option to acquire the Syama mine. Resolute has subsequently paid us $6 million in cash and has assumed liabilities of $7 million, of which $4 million owing to ourselves has been settled. The agreement entered into in June 2004 between the parties makes provision for the payment of a royalty by Resolute. At a gold price of more than $350 per ounce, we would receive a royalty on Syama’s production of $10 per ounce on the first million of ounces attributable to Resolute and $5 per ounce on the next three million of attributable ounces
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Table of Contentsentered. This royalty payment is capped at $25 million. In April 2007, Resolute officially reopened the mine and announced that it would commence a recommissioning. We did not receive any royalties in respect of the years ended December 31, 2007, 2006 or 2005.
Effective on June 11, 2004, we undertook a split of our ordinary shares, which increased our issued share capital from 29,263,385 to 58,526,770 ordinary shares. In connection with this share split our ordinary shareholders of record on June 11, 2004 received two $0.05 ordinary shares for every one $0.10 ordinary share they held. Following the share split, each shareholder held the same percentage interest in us; however, the trading price of each share was adjusted to reflect the share split. ADS holders were affected the same way as shareholders and the ADS ratio remains one ADS to one ordinary share.
On November 1, 2005, we completed a public offering of 8,125,000 of our ordinary shares, including ADSs, resulting in gross proceeds to us of $109.7 million. The new shares were allocated to institutional shareholders in the United Kingdom, the United States, Canada and the rest of the world. The proceeds from the offering were intended for the development of the underground project at Yalea, and then will be used for the Tongon feasibility study and the underground project at Gara, together with such other organic and corporate opportunities, including possible acquisitions, as might arise.
On December 6, 2007, we completed a public offering of 6,821,000 of our ordinary shares, including ADSs, resulting in gross proceeds to us of $240 million. The proceeds from the offering are being used for the development of the Tongon project, together with such organic and corporate opportunities, including possible acquisitions, as might arise.
Recent Developments
Following the decision to proceed with the development of the Loulo underground mines, at Yalea and Gara, the first hard rock blast at Yalea took place in December 2006. The first ore was accessed in April 2008 and full production is scheduled for fourth quarter of 2008. Development of Gara, Loulo’s second underground mine, is due to start in 2009.
During 2007, peace initiatives in Côte d’Ivoire continued and we completed a feasibility study which allowed our board to approve the development of the new mine subject to the approval of the mining convention by the Côte d’Ivoire Minister of Mines and Energy. It is anticipated that construction of the mine will start at the end of 2008 with first gold production scheduled for the fourth quarter of 2010.
During 2008, we concluded an addendum to our joint venture agreement in Côte d’Ivoire. As a result, we acquired a further 5% interest in the joint venture increasing our stake from 76% to 81%.
Developments during 2007 relating to MDM are discussed more fully in ‘‘Item 4. Information on the Company — B. Business Overview — Legal Proceedings’’.
Principal Capital Expenditures
Capital expenditures incurred for the year ended December 31, 2007 totaled $47.9 million compared to $61.5 million for the year ended December 31, 2006 and $73.2 million for the year ended December 31, 2005. As of December 31, 2007, our capital commitments amounted to $2 million, principally for the Loulo underground project. The capital expenditures will be financed out of internal funds. The capital cost for both Loulo underground mines is expected to amount to $128 million for the next three years. The capital cost for the Tongon mine is expected to amount to $250 million for the next three years.
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Table of ContentsB. BUSINESS OVERVIEW
Overview
We engage in gold mining, exploration and related activities. Our activities are focused on West and East Africa, some of the most promising areas for gold discovery in the world. In Mali, we have an 80% controlling interest in the Loulo mine through Somilo SA. The Loulo mine is currently mining from two open pits and is developing two underground mines. We also own 50% of Morila Limited, which in turn owns 80% of Morila SA, the owner of the Morila mine in Mali. In addition, we own an effective 81% controlling interest in the development stage Tongon project located in the neighboring country of Côte d’Ivoire. We also have exploration permits and licenses covering substantial areas in Mali, Côte d’Ivoire, Burkina Faso, Ghana, Senegal and Tanzania. At April 30, 2008, we declared proven and probable reserves of 8.53 million ounces attributable to our percentage ownership interests in Loulo, Morila, and Tongon.
Our strategy is to create value through the discovery, development and profitable exploitation of resource opportunities, focusing on gold. We seek to discover significant gold deposits, either from our own phased exploration programs or the acquisition of early stage to mature exploration programs. We actively manage both our portfolio of exploration and development properties and our risk exposure to any particular geographical area. We also routinely review opportunities to acquire development projects and existing mining operations and companies.
Loulo
In February 2004, we announced that we would develop a new mine at Loulo in western Mali. In 2005, we commenced open pit mining operations at the Gara and Yalea pits, as well as other smaller satellite pits. In 2007, its second year of production, the Loulo mine produced 264,467 ounces of gold at a total cash cost of $372 per ounce. We estimate that the mine will produce approximately 265,000 ounces in 2008. We currently anticipate that mining at Loulo will continue through 2024.
We commenced development of the Yalea underground mine in August 2006 and first ore was accessed in the April of 2008 with full production scheduled for 2009. We anticipate that we will commence development of Loulo’s second underground mine, Gara, in the first quarter of 2009 with first ore scheduled to be delivered to the plant at the end of that year.
The focus of exploration at Loulo is to continue to explore and discover additional orebodies within the 372 square kilometer permit. To date, we have succeeded in identifying numerous additional targets including two significant advanced stage targets, Faraba and Baboto, which are subject to further exploration and drilling.
Morila
In 1996, we discovered the Morila deposit, which we financed and developed and to date has been our major gold producing asset. Since production began in October 2000, Morila has produced more than 4.7 million ounces of gold at a total cash cost of $161 per ounce. We estimate that Morila’s total production for 2008 will be approximately 30,000 ounces, with mining continuing through 2009 and processing of lower grade stockpiles continuing through 2013.
Morila focuses its exploration activities on extending the existing orebody and discovering new deposits that can be processed using the Morila plant. We continually seek to extend the life of mine at Morila, and have targeted areas within the Morila joint venture for further drilling. Outside of the Morila joint venture, we hold exploration permits covering 476 square kilometers in the Morila region, where we are engaged in early stage exploration work.
Tongon
At our Tongon project located in Côte d’Ivoire, we completed a 30,000 meter drilling program and a feasibility study and the board gave approval for the mine development to proceed in January 2008 and construction will start at the end of 2008 with first gold production scheduled for the fourth quarter of 2010.
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Table of ContentsExploration
We have a quality portfolio of exploration projects in both West and East Africa. In 2007, we have concentrated our exploration activities on the extension of known orebodies and on the discovery of new orebodies both at producing mines and exploration sites. In addition, we continued with our strategy to expand our footprint in Africa, including newly emerging countries. We are actively exploring in six African countries with a portfolio of 171 targets on 12,623 square kilometers of groundholding. Our business strategy of organic growth through exploration has been validated by our discovery and development track record, including the Morila and Loulo mines and the Tongon project.
Ownership of Mines and Subsidiaries
The Morila mine is owned by a Malian company, Morila SA. The mine is controlled by a 50/50 joint venture management committee, created pursuant to a joint venture agreement between AngloGold Ashanti and us. Effective on February 15, 2008, responsibility for day-to-day operations of the mine passed to us.
Under the joint venture agreement, we and Anglogold Ashanti are each entitled to appoint four directors to the board of directors of Morila Limited, which owns 80% of Morila SA. Pursuant to terms of an addendum to the joint venture agreement concluded in April 2008, we are entitled to appoint one of our four directors as chairman, which position does not possess an additional vote. A quorum of the board for any meeting may only be achieved if at least two directors appointed by each of us are present. We have further agreed that all major decisions involving Morila Limited must be decided upon at the board level on a consensus basis, though following the conclusion of an addendum to the operating agreement, responsibility for and authority regarding the day-to-day operation of Morila has been transferred to us. Under the joint venture agreement, if either party wishes to sell its interest in Morila Limited, the other has a right of first refusal regarding that interest.
From the start of production in October 2000 through December 2007, Morila has produced approximately 4.7 million ounces of gold at a total cash cost of $161 per ounce.
The Loulo mine is owned by a Malian company, Somilo, which in turn is owned 80% by Randgold Resources (Somilo) Limited, our wholly-owned subsidiary, and 20% by the State of Mali. Randgold Resources is the operator of the Loulo mine. In 2007, Loulo’s production was 264,467 ounces at a total cash cost of $372 per ounce.
Upon finalization of the Mining Convention with the Government of Côte d’Ivoire, we will form a new Ivorian company in which ownership of the Tongon Project will vest. Our interest of 81% in this company will be held through our wholly-owned subsidiary Randgold Resources (Côte d’Ivoire) Limited. The Government of Côte d’Ivoire has a 10% free-carried interest and the right to acquire additional shares at market prices.
Geology
We target profitable gold deposits that have the potential to host mineable gold reserves of two million ounces or more.
West Africa is one of the more geologically prospective regions for gold deposits in the world. Lower Proterozoic rocks are known to contain significant gold occurrences and occur in West Africa in abundance. The Birrimian greenstone belts, part of the Lower Proterozoic, which are younger than the Archaean greenstones of Canada, Australia and South Africa, contain similar types of ore deposits and are located in Ghana, Côte d’Ivoire, Burkina Faso, Guinea, Mali, Senegal and Niger. Although a significant amount of geological information has been collected by government and quasi-government agencies in West Africa, the region has largely been under-explored by mining and exploration companies using modern day technology. Most of our exploration properties are situated within the Birrimian Formation, a series of Lower Proterozoic volcanic and sedimentary rocks. The West African Birrimian sequences host a number of world class gold deposits and producing gold mines.
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Table of ContentsOur strategy was initiated before the current entry of our competitors into West Africa and we believe that this enabled us to secure promising exploration permits in the countries of Côte d’Ivoire, Mali, Burkina Faso, and Senegal at relatively low entry costs.
Reserves
Only those reserves which qualify as proven and probable reserves for purposes of the Securities and Exchange Commission’s industry guide number 7 are presented in this Annual Report. Pit optimization is carried out at a gold price of $550 per ounce, except for Morila which was run at $525 per ounce. Underground reserves are also based on a gold price of $550 per ounce.
Morila reserves have been estimated by our joint venture partner, AngloGold Ashanti. The Loulo mine and Tongon project reserves were estimated by ourselves.
Total reserves as of December 31, 2007, amounted to 99.36 million tonnes at an average grade of 3.31 g/t, giving 10.59 million ounces of gold of which 7.78 million ounces are attributable to us. In calculating proven and probable reserves, current industry standard estimation methods are used. The reserves were calculated using classical geostatistical techniques, following geological modeling of the borehole information. The sampling and assaying is done to internationally acceptable standards and routine quality control procedures are in place.
All reserves are based on feasibility level studies. Factors such as grade distribution of the orebody, planned production rates, forecast working costs and metallurgical factors as well as current forecast gold price are all used to determine a cut-off grade from which a life of mine plan is developed in order to optimize the profitability of the operation.
The following table summarizes the declared reserves at our mines and project as of December 31, 2007:
* Includes Loulo underground. + Our attributable share of Morila is 40%, of Loulo 80% and Tongon 76.5%.
(Mt)
(G/T)
(Moz)
(Mt)
(G/T)
(Moz)
(Mt)
(G/T)
(Moz) Morila +The following table summarizes the updated Tongon project reserves as at April 30, 2008, together with the declared reserves for our operations as at December 31, 2008:
* Includes Loulo underground. + Our attributable share of Morila is 40%, of Loulo 80% and Tongon 81%.
(Mt)
(G/T)
(Moz)
(Mt)
(G/T)
(Moz)
(Mt)
(G/T)
(Moz) Morila +A 10% mining dilution at zero grade and a gold loss of 5% has been incorporated into the estimates of reserves and are reported as mill delivered tonnes and head grades. Metallurgical recovery factors have not been applied to the reserve figures. The approximate metallurgical recovery factors are 91.5% for the Morila mine and 89.6% for the Loulo mine.
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Table of ContentsMining Operations — Loulo
Loulo is situated in western Mali, bordering Senegal and adjacent to the Faleme River. It is located 350 kilometers west of Bamako and 220 kilometers south of Kayes. The mine is located within the Kedougou-Kenieba inlier of Birimian rocks, which hosts several principal gold deposits in Mali, in particular Gara, Yalea, Sadiola, Ségala, Tabakoto, as well as Sabodala across the border in Senegal. Loulo is located approximately 96 kilometers south of Sadiola and 25 kilometers to the west of Ségala and Tabakoto.
The Gara orebody, previously known as Loulo 0, was discovered by Syndicat Or (a joint venture between BRGM and DNGM) in 1981. In June 1992, BHP acquired the shares of BRGM (in Syndicat Or). We acquired BHP Minerals Mali Inc in October 1996. We then initiated an intensive exploration program which resulted in the discovery of the Yalea deposit. After the acceptance of a feasibility study in 1999, we earned additional shares to increase its participation in the project to 51%. Shortly thereafter, we acquired the 29% share of Normandy LaSource in Somilo, the company which owns Loulo, thus increasing its share to 80%, with the government of Mali holding the remaining 20%.
We re-established our exploration program in 2003 and undertook a revision of the feasibility study. That year, once the project met its investment criteria, our board approved the development of the mine. The Loulo mine was officially opened on November 12, 2005.
In 2007, Loulo produced 264,647 ounces of gold at a total cash cost of $372 per ounce. The increase in cash costs, compared to 2006, is attributable to an increase in fuel and other consumable prices as well as an increase in logistic costs. This was partially offset by a higher received gold price.
The following statistics detail the operating and production results from operations for the years ended December 31, 2007 and 2006:
December 31, Summary of ResultsMine Facilities
The Loulo mine currently consists of two main open pits (Yalea and Gara), two smaller satellite pits and the Yalea decline, which is the first section of its underground project. The second underground mine will start at Gara in 2009.
The plant is designed to process an average of 2.5 million tonnes per year using the following circuits: (1) crushing — a three stage crushing circuit for the hard rock sulfide ores and a single stage roll-toothed crusher for the soft weathered oxide ores, (2) milling — the milling circuit comprises two parallel single stage ball mills in closed circuit with a dedicated cluster of hydro-cyclones, (3) gravity — two XD48 Knelson centrifugal primary concentrators followed by a shaking table for re-dressing of primary concentrates, (4) CIL recovery process, and (5) Zadra elution process and gold recovery.
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Table of ContentsLoulo Exploration
Loulo exploration is reported on in the group exploration review.
Ore Reserves
After adjusting for mining depletion in 2007, the overall reserve increased by 0.6 million ounces to 7.4 million ounces. This was mostly due to the increase in reserves at the Gara underground mine.
During 2007, the interface between open pit and underground operations was re-evaluated based on updated costs and projected gold price. In particular, the potential to mine deep ore from the southern part of the Yalea pit was re-evaluated. In the 2006 declaration, this ore was classified as ‘Yalea Deep Pit’. Since then, a redesign has been completed where it is planned that this ore will be mined from underground using the ramp-in-stope method. This has caused the overall grade of the underground reserve to drop from 4.99g/t to 4.82g/t as a result of the incorporation of extra dilution into the reserve modelling.
For the 2007 annual reserves, a gold price of $550 per ounce was used as the basis for pit optimization. The actual cost profile for Loulo was implemented in this study.
The indication that the southern part of the Gara orebody could have high grade mineralization has been confirmed with further drilling, bringing additional reserves for the Gara underground operation.
Based on the current orebody models the following ore reserves were estimated for Loulo, depleted for mining, to December 31, 2007:
(Mt)
2007
(Mt)
2006
(g/t)
2007
(g/t)
2006
(Moz)
2007
(Moz)
2006
(80%)
(Moz) Stockpiles20
Table of ContentsMining
Mining operations at Loulo are carried out under contract by BCM Mali SA, a subsidiary of BCM International Limited. BCM operates a fleet of two Liebherr 994B excavators and twenty Caterpillar 777D trucks, assisted by two 125 tonne excavators and various ancillary equipment. BCM is also responsible for the drill and blast operations and operates five L7 rigs and two L8 Atlas Copco rigs. MAXAM Mali SARL, a subsidiary of MAXAM International, supplies the bulk explosive and accessories for blasting. Mining occurred in Gara, Yalea and P125 pits during the year. The average production volume for the mining fleet during 2007 was 750,000 bcm per month. Fleet availability was impacted by the various equipment breakdowns, but by year end this had largely been addressed.
Ore Processing
Production
Steady production has been achieved throughout the year. The second quarter saw a record gold ounce production of 70,660 ounces. End of the year final production key performance indicators were above plan in both mill throughput and gold recovery. The challenges associated with the third quarter wet season, although anticipated, could have been better addressed. Measures were, however, put in place to ensure a continued supply and feed of quality ore from the pit and into the process plant respectively. In the latter half of the year, the underperformance of the mining contractor’s digger fleet necessitated ore being mined predominantly from Gara pit. This had an adverse effect on downstream crusher/mill throughput and frequency of wear component change-out. The last quarter saw monthly mill throughputs back to the 220,000 tonnes planned as the total process plant, inclusive of the crusher plant, achieved steady state once again.
A total of 2.65 million tonnes of ore was milled at a reconciled head grade of 3.30 g/t. and 264,647 gold ounces were produced and shipped. Of this, 14,367 ounces were sold for the first time to a local Malian company, KankouMoussa SARL, as part of our initiative to allow Malian nationals access to Malian gold. The overall gold recovery was 93.14% (5.13% gravity and 88.01% CIL). The overall annual mill availability and hard rock crusher throughput were 91.56% and 2,773,470 tonnes, respectively.
Tailings storage facility
The partnership between the tailings storage facility operator, Fraser Alexander Tailings, mine residue and environmental engineering consultant, Epoch Resources and Loulo mine worked well throughout 2007. The main starter wall was raised to the 151.5 meter level in the year by mechanical means and will be raised further by cycloning and day-walling methods, a method for which trials are looking encouraging.
Underground
Mine Design
The Loulo underground project is still relatively new and we plan to further enhance and optimize in 2008. The underground extraction strategy has been focused on accessing the orebodies in a safe and considered manner, bearing in mind production rates, grades and development requirements.
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Table of ContentsProduction is initially focused on the Yalea orebody, where a high grade bonanza zone of 1.5 million ounces at 10.5g/t exists between 350 and 500 meters below surface. The Gara mine, with its more consistent, albeit slightly lower grade orebody, will be brought on line later in 2009 to provide a steady feed to the plant.
Yalea underground mine
A re-optimization of the Yalea underground design was undertaken during the year in an attempt to smooth out design inefficiencies. The main changes included moving the first switchback position further down to a point on the other side of the ‘‘purple patch’’, a high grade ore zone. This means a long straight run directly towards the high grade. The conveyor changeover points were optimized to increase capacity. Changes to the stoping design were made to reduce stope length from 60 meter to 20 meter lengths, improving the selectivity and grade control.
Yalea south extension
The ore below the southern portion of the revised Yalea pit could be economically mined from open cut but would incur a high strip ratio. Because of this, an underground mine design was created that utilizes the ramp-in-stope method to mine this mineralization more economically. This leads to an increase in underground reserves, but a decrease in open cut reserves.
Gara underground mine
Additional holes were drilled at Gara during the fourth quarter of 2007 and a redesign completed to incorporate the additional resources into the plan. This design is based on the Yalea design and will include the improvements made to the current Yalea design with regards to ventilation passes, rock passes, decline layout and stoping geometry.
Operational progress
At the end of the fourth quarter 2007 the twin declines at Yalea underground mine were advanced for a distance of 520 meters from surface and a vertical depth of 100 meters below surface. A total of 1,030 meters of development was completed at this stage. The advance of the declines was hampered by an intersection of poor ground conditions. However, both declines are now through the worst of these conditions and normal development continued at the end of the fourth quarter.
The first development ore was delivered in the second quarter of 2008 and first stoping ore is scheduled for midyear 2008. It is expected that the section will build up to full production of 90,000 tonnes per month from 2009.
Gara underground mine is scheduled to start development in January 2009. The orders for the underground heavy vehicle fleet have been placed and the first units are expected on site towards the end of 2008. Gara is expected to be delivering first ore towards the end of 2009 and build up to full production in 2014.
Environmental and Community Development
Monthly monitoring programs continued through the year, incorporating dust fallout levels, physiochemical, cyanide, oil, grease and bacteriological levels of surface and groundwater across the mine site and TSF facilities as well as surrounding water courses. No contamination of the outside environment was identified.
An annual environmental audit was conducted by independent consultants and no critical issues identified. The environmental management program was revised taking into consideration the extended mine life. Post construction rehabilitation continued with unused borrow pits, construction lay down sites and roads being rehabilitated as part of the planned ongoing rehabilitation program. As part of this program a total of 27,766 square meters has been rehabilitated including the planting of 1,212 indigenous trees and various indigenous grasses.
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Table of ContentsOn site recycling of waste continued with proceeds being channeled back into the community.
Major inroads have been made with malaria prevention through indoor spraying programs in all houses, offices as well as surrounding villages. This has resulted in a decrease of 33% in malaria consultations year on year.
Monthly community liaison meetings continued during the year between representatives of the mine and the surrounding villages. It is our policy to address basic health, education and potable water requirements of the surrounding community. Loulo undertook the following community projects during 2007:
Education:
Health:
Agriculture:
Capital Projects and Construction Report
A number of projects were completed in 2007. The most significant were the completion of additional CIL circuit tankage, as well as the CIL leach tanks, with the oxygen pump being relocated to the second leach tank. The stockpile feed conveyors and the ‘A’ frame installation was finished. The tailings dam wall was raised during the period to the 151.5 meter level. A new flocculent plant was built which would form part of the thickener project. Additional small projects completed were the wash bay, lube bay and garage, the underground boiler shop and the fuel farm overhead diesel storage tanks.
There are a number of projects currently under construction. The most significant are the underground vehicle and conveyor concrete tunnels at Yalea, the thickener and clarifier civil and mechanical installation work at the plant and the cold Caro’s acid cyanide destruction system, where the construction and installation is scheduled for completion by the third quarter of 2008. In addition, the fabrication and installation of the reactor, hydrogen peroxide and sulfuric acid reagent storage tanks is ongoing. The power plant expansion and commissioning has been completed in the first quarter of 2008.
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Table of ContentsHuman Resources
Manpower
The mine’s manpower compliment increased by 871 to 1,881 during 2007 due to the underground project gaining momentum.
Training
A strategic planning and team effectiveness workshop was held in the first quarter of 2007. This was attended by the chief executive, the general manager and all his departmental managers and superintendents. In addition, a workshop was held on site in December by Dr. Arnold Mol, to enhance the management skills of 28 supervisory staff.
Two on-site training courses on social partnership, occupational safety, Malian labor law and management, were organized in April and July 2007. These were attended by Loulo mine’s staff representatives and our senior staff.
Industrial relations
Industrial relations were positive overall throughout the year. However, there is still considerable capacity and relationship building work to be done by management with the union committee. This committee, consisting of 10 members, was elected in January 2007. Regular meetings were held between the union committee and management throughout the year. The negotiation of a mine level agreement, based on a draft prepared by management, was initiated with the aim of clarifying the industry elective agreement. This major negotiation process, as expected, engendered some conflict, resulting in a strike notice being given to management by the union. The strike notice was suspended when management explained that the union demands regarding the job grade, remuneration and transport issues would form part of the mine level agreement discussion.
The innovative transport allowance scheme of a hire purchase arrangement to support the self purchase of motorbikes between the employees and Somilo has been successful. The first batch of 160 motorbikes has been shipped to the mine site and allocated to employees. A second batch of motorbikes has been ordered.
Mining Operations — Morila
Operations and Projects
Our major gold producing asset since October 2000 has been the Morila Gold mine. Morila was discovered by us in 1996 and is owned by a Malian company, Morila SA, which in turn is owned 80% by Morila Limited and 20% by the State of Mali. Morila Limited is jointly owned by AngloGold Ashanti and us.
Morila Mine
The mine is controlled by a 50:50 joint venture management committee. Pursuant to an addendum to the joint venture agreement, responsibility for day to day operations was transferred from AngloGold Ashanti to us effective February 15, 2008.
From the start of production in October 2000 through to December 2007, Morila has produced approximately 4.75 million ounces of gold at a total cash cost of $161 per ounce.
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Table of ContentsIn 2007, Morila failed to meet its targeted production of 500,000 ounces. The total ounces produced was 449,815 ounces at a total cash cost of $332 per ounce. Operational challenges resulted in lower than expected grades, poor mining performance in the first part of the year and erratic recoveries from the plant at times. Costs remained under pressure due to continued world-wide inflation in the key inputs of fuel, steel and transport.
The following statistics detail the operating and production results from operations for the years ending December 31, 2007 and 2006:
* Refer to explanation of non-GAAP measures provided.Ore Reserves
Based on the current orebody model, the following ore reserve was estimated for Morila, depleted for mining, to December 31, 2007:
(Mt)
2007
(Mt)
2006
(g/t)
2007
(g/t)
2006
(Moz)
2007
(Moz)
2006
(40%)
(Moz) MorilaIt is currently estimated that mining activities will cease during 2009 with processing of stockpiles continuing until 2013.
Remaining reserves were slightly lower than last year after depletion has been taken into account as a result of changes in the orebody model. This decrease has been balanced by an increase in tonnes as a result of lower cut-off grades due to the higher gold price assumptions.
Mining
Mining operations were carried out under contract by Somadex, a subsidiary of DTP Terrassement, the mining arm of the French construction company, Bouygues. A partnership agreement which incorporates the principle of sharing the potential savings achieved by the contractor, using agreed productivity assumptions and allowing for an agreed return, has returned successes particularly in the improvement in productivities.
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Table of ContentsProduction was poor in the early part of the year as a result of low availability of equipment due to inadequate maintenance of the fleet. Somadex recognized the problem and brought in additional maintenance resources. A comprehensive plan of action in terms of the contract for work in arrears was supplemented by an additional list of actions required to be done by Somadex. The plan of action was in the form of a ‘‘contractual instruction to act’’ and was closely supported and audited by Morila. Additional mining equipment was also mobilized and by the end of the year much of the backlog had been caught up.
Ore Processing
Milled throughput for the year was satisfactory and the plant expansion to 350,000 tonnes per month can be judged a success. However, at times the plant performance and recovery was erratic, mainly because of problems caused by operational oversight and maintenance related losses, both of which need to be addressed to ensure future targets are achieved.
Exploration
Morila continued to focus its exploration activities on extending the existing orebody and discovering new deposits which can be processed using the Morila plant.
Drilling concentrated on extensions to the known orebody, chiefly in the south (Tonalite extension) and in the west (Morila Shear Zone west extension) as well as in the eastern margin.
The 40,000 meter regional exploration program of the 200 square kilometer mine lease area was completed in the early part of the year. Results from the program have been compiled and while these have not yet defined another ‘‘Morila’’ they have indicated a low grade anomalous footprint around the deposit. During the year the team continued integrating the geological, structural and mineralogical components of the deposit. Using structural and metallogenic consultants, considerable progress has been made in constructing a generic model to help generate a three dimensional exploration model in order to vector further exploration.
Human Resources
Manpower
Manning levels related to permanent and temporary Morila and contractor employees on the mine were as follows:
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Table of ContentsTraining and development
During 2007 there was a heavy emphasis at Morila on the implementation of OHSAS 18001, an occupational health and safety management system used to minimize risks to employees, following a double fatality in February, and the requisite training of the workforce to ensure effective implementation. This training included the conducting of continuous safety audits, induction training, cyanide handling, hazardous chemical handling and the identification of hazards and first aid courses.
There are four Malian undergraduates (two electrical, one geology and one mining student) sponsored by Morila SA who are currently studying on Malian mining industry bursaries at the University of Pretoria in South Africa. All have passed with distinction to progress to their final year of study.
Industrial relations
The industrial relations climate during 2007 at Morila was complicated by calls for national strikes by the two union confederations in the country and by conflict between the union committee and the personnel delegates.
Although the mine managed to avoid its employees supporting national strike action, the inter-union dispute among employees, led to the UNTM and SECNAMI representatives on the mine being replaced by CSTM aligned employees, following elections on the mine that were supervised by the regional labor inspector. The conflict and competition for employees’ votes resulted in the two factions making competing demands to management to obtain popularity.
Management succeeded in remaining neutral and has managed the situation in a patient and democratic way with assistance from the regional labor inspector.
Despite the above factors, Morila had an industrial action free 2007 for the second year in a row, as did the contractors on site.
Community development
Community development initiatives, combining the tripartite partnership operational plan and projects agreed upon with the Community Development Committee, included:
Agricultural projects set up by the mine in co-operation with the local communities did well during the year, and following harvesting, profits were distributed after reinvestment in seeds and equipment had been agreed between participants.
The tripartite alliance between USAID, Commune de Sanso and Morila SA continued its work during the year which included democratic governance, health, education, communication, environment, and economic growth.
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Table of ContentsThe financial contributions made by the members in 2007 were:
Closure
We currently forecast that the mine will cease operations in 2013, but mining activities will end in the first half of 2009. In line with the commitment to explore options that might ensure the economic sustainability of the mine infrastructure, a study to investigate the viability of developing a large scale agri-business in the area has commenced. This business could use some of the facilities and infrastructure that would be redundant when the mine closes as well as employ some of the staff that would be retrenched.
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Table of ContentsThe following map indicates the locations of Morila and Loulo within Mali:
Locality of the Loulo and Morila Mines in Mali
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Table of ContentsDevelopment Project — Tongon
Operations and Projects
The Tongon project is located in northern Côte d’Ivoire, 628 kilometers north of Abidjan within the Nielle permit. Improvement in the political situation in the country and completion of the feasibility Type 3 study, led the board to approve the development of the mine.
A 30,000 meter drilling program designed to advance the project to a feasibility study started at Tongon in the first quarter of 2007. By the onset of the wet season in July, more than 20,000 meters of drilling had been completed and it was decided to revise the scope of the project. A feasibility Type 3 study was completed based on updated orebody models and project information as of September 2007, and subsequently in January 2008, the board approved the development of the mine subject to the approval of the mining convention by the Côte d’Ivoire Minister of Mines and Energy.
Geology
The Tongon deposits are located within the Lower Proterozoic Senoufo Belt, a 200 kilometer long, volcano-sedimentary belt of greenschist grade metamorphizm bounded on either side by variably tectonized granitoid gneiss terranes.
The mineralization at Tongon consists of two zones, the northern and southern. The main mineralization in the northern zone locates between two carbonaceous shale units which act as the hanging wall and footwall structures and have taken up the highest strain of shearing. The mineralized zone varies in thickness from 3 to 35 meters and averages 25 meters in zones of dilation. The mineralization is associated with increased silicification, sulfidation and fine brecciation.
The southern zone comprises multiple mineralized zones which appear lensoid in shape resulting in their strike and depth continuity being variable. They are hosted within shear bounded, north-west dipping, brecciated volcaniclastic zones. The silicate alteration is complicated with biotite, silica, sericite, tremolite, diopside and calcite being observed under thin section.
Detailed petrographic examination of samples representative of the two zones indicates that gold is preferentially associated with silicates with a small secondary association with arsenopyrite thus confirming the current metallurgical test results that show relatively easy gold recovery by CIL.
Mining
Mining of the Tongon orebodies is planned to be achieved by orthodox open pit methods by which a mining contractor is employed to carry out all the mining activities except for mine planning and management. We anticipate that we will be responsible for purchasing of the mining equipment.
Pit optimization studies have been undertaken using Whittle 4X with a range of gold price and cost parameters. Design of the pits has been carried out on pits optimized at $525 per ounce gold price. Dilution and gold loss for the northern zone were set at 10% and 3% respectively and for the southern zone at 15% and 2%.
Ore reserves at December 31, 2007 are tabulated below:
(Mt)
(g/t)
(Moz)
(76.5%)
(Moz) Southern Zone30
Table of ContentsScheduling has been achieved using a multi-source optimization which has indicated an economic advantage for the southern zone to be mined first.
The strip ratio for the southern zone is 3.4:1 and for the northern zone 6.5:1, resulting in a combined ratio of 3.8:1.
The remaining 10,000 meters of the original 30,000 meter drilling program concentrated on infill drilling within the pit. This drilling is complete and has successfully confirmed our confidence in the geological continuity. Results are being incorporated into a revised reserve estimate was published with our 2008 first quarter results in May 2008. The increased attributable stake in the Tongon project is due to our acquisition of 5% of New Mining C.I.’s interest in the joint venture.
Ore reserves at April 30, 2008 are tabulated below:
(Mt)
(g/t)
(Moz)
(81%)
(Moz) Southern ZoneMetallurgy and Plant Design
A plant throughput of 300,000 tonnes per month has now been designed, as compared to the previous design of 200,000 tonnes per month. The life of the mine is currently estimated at 10.5 years.
Additional metallurgical test work has been completed on a range of ore materials from the Tongon orebodies with a view to sampling variability both at depth and along strike. Straight cyanidation of fresh material allows gold recoveries of 70% to 80%, while the introduction of a gravity step enables recoveries to be increased to 80% to 85%. Flash flotation will be used to increase recoveries beyond 85%.
SENET, an engineering and project management company with considerable experience of gold projects in West Africa, has been commissioned to undertake the feasibility study design and engineering in cooperation with our capital projects team.
Plant design currently incorporates a combination of crushing and grinding circuits, comprising primary, secondary and tertiary crushing and SAG and ball mills. Gravity and flash flotation will also be employed.
Environmental and Social Impact Study
External consultants Digby Wells & Associates compiled a scoping level environmental and social impact assessment of the proposed Tongon mine site. No impacts which could present a fatal flaw to the successful execution of the project were identified, but as is common with mining projects in West Africa, a number of potentially significant impacts were identified which will have to be mitigated during the project life.
An environmental management plan (EMP) to ensure that these impacts are systematically and correctly managed is being developed and will be adhered to.
Human Resource and Social Responsibility
Policies and procedures based on the company’s experience in other projects in Africa are being formulated. These will include the pre-construction phase, the construction phase and the operational phase. Community liaison will form an important aspect throughout each of the phases.
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Table of ContentsFinancial Analysis
A feasibility Type 3 study based on the 2007 year end results of 1.61 million ounces of reserves and 1.17 million ounces of potentially mineable mineralized material has been completed.
Key Parameters
The parameters are summarized below:
Cash operating cost (including 3% state royalty) ranges from $259 per ounce to $394 per ounce and averages $359 per ounce over the life of mine.
The financial assessment will be further refined as additional information becomes available from ongoing infill drilling and other test work.
Apart from the indirect benefits of the development of the project, such as the creation of infrastructure, employment of the country’s citizens, transfer of expertise and a growth in Ivorian small and medium size enterprises, it has been estimated that the State’s share of the economic rent from the project, at a gold price of $600 per ounce and under the financial regime as modeled, will amount to 51% of the total, being made up of dividends, royalties, income tax and other taxes and duties.
An economic assessment based on the exploitation of both reserves and potentially mineable material, shows that an operation designed for a throughput of 300,000 tonnes per month would yield an internal rate of return of 21% at a $600 per ounce gold price.
By the end of the year the 30,000 meter drilling program had been completed, plant design had been further advanced and the preliminary mine infrastructure had been laid out. As the project met our hurdle rates, on January 31, 2008 the board approved the development of the Tongon mine and subject to the final conclusion of a mining convention with the State of Côte d’Ivoire.
Upgrading of basic site infrastructure and detailed designs is being progressed along with the initial detailed infill drilling program, construction start-up is planned towards the end of the year with first gold production estimated for the fourth quarter of 2010.
Acquisition of Additional Interest in Tongon Project
On April 4, 2008, we increased our stake in the Tongon project in Côte d’Ivoire from 76% to 81% through the acquisition of 5% of New Mining C.I.’s interest in our joint venture. New Mining C.I. now owns 9% of the project and the Governement of Côte d’Ivoire holds the remaining 10%.
The purchase consideration for the New Mining C.I. interest was a cash payment of $2 million plus a funding option. Should New Mining C.I. elect not to fund its portion of the Tongon development, we will provide the funding on its behalf in exchange for an additional 3% of the project, such funding to be repaid from the project’s future cash flows. In this event, our stake in the project will increase to 84%.
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Table of ContentsExploration Projects
Exploration Review
We have a portfolio of projects within some of the most prospective gold belts of both West and East Africa and have operations in six African countries, with 171 targets on 12,623 square kilometers of ground holding, supported by a team of 70 geologists.
In 2007, exploration activities concentrated on the extension of known orebodies and the discovery of new orebodies at producing mines and exploration sites.
Exploration Highlights
In summary, we have a quality portfolio of exploration projects in both West and East Africa. This reflects our strategic focus on organic growth through exploration success.
Mali
Loulo
In addition to the conversion work at both the Yalea and Gara orebodies, exploration has concentrated on evaluating targets within the 372 square kilometer permit area.
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Table of ContentsAt the Gara deposit, deep drilling tested the continuation of high grade gold mineralization associated with the plunge of the folded quartz tourmaline unit. This drilling has outlined additional underground mineralized material. The orebody has now been confirmed to vertical depths of almost 700 meters below the surface and is still open.
Faraba is part of a 10 kilometer anomalous structural corridor which also includes the target known as P64. Drilling has so far confirmed the bedrock footprint of mineralization to 3 kilometers and mineralized material of 567,000 ounces at 2.60 g/t has been defined for a 350 meter strike length in the main zone. In addition, 1.5 kilometers to the north a zone of mineralization has been outlined over 600 meters long with an average width of 12 meters and an average grade of 2.2g/t. Drilling in the gap area between the main and north zones has returned multiple mineralized intercepts, the best of which includes FADH015: 13.32 meters at 3.96g/t and 10.55 meters 8.68g/t, FADH019: 4.28 meters at 8.67g/t and FADH026: 13.10 meters at 3.08g/t and 4.55 meters at 9.11g/t. This drilling has confirmed the geological model with drill holes intersecting an approximately 100 meter (true width) zone of strong shearing, alteration and gold mineralization. Drill hole FADH018 drilled at Bandankoto, some 1.5 kilometers south of the main zone, on the same structure returned, amongst other intercepts: 24.12 meters at 2.16g/t. Work in 2008 will concentrate on connecting these zones, which are still separated due to the sheer size of the structure.
Further a field in the Faraba area, a regional RAB drilling program has targeted surface anomalizm and conceptual targets associated with prospective structures along the Faraba-P64 shear corridor. This program has so far returned anomalous intersections at nine different targets.
The Baboto structure is part of a more than 5 kilometer mineralized structure which hosts the known targets of Baboto South, Central and North. At Baboto South, previous RC drilling defined mineralization over a 1.3 kilometer strike length with an average width of 15.63 meters and grade of 1.82g/t, to vertical depths of 95 meters. Two diamond drill holes tested the continuation of the mineralized structure to vertical depths of 250 meters and returned the following results: BDH020: 9.20 meters at 5.28g/t and BDH021: 1.20 meters at 4.00g/t. A ground Induced Polarization (IP) geophysical survey has been completed, covering the entire 5 kilometer Baboto target area. The results define separate, sub-parallel structures hosting the Baboto South, Central and North targets. At Baboto Central, RAB drilling returned encouraging results with hole BARAB58 intersecting 30 meters at 2.15g/t and BARAB59: 21 meters at 2.93g/t. This together with previous results defines 500 meters of continuous mineralization for follow-up testing.
At Loulo 3, a newly identified north-south structure places previous results in better context and highlights a narrow but high grade target. Previous drilling, over a 500 meter strike length, is limited to one diamond hole, an RC hole and a number of RAB drill holes: diamond hole L3DH26: 6 meters at 8.66g/t from 53 meters, RC hole L3RC01: 13 meters at 11.87g/t and RAB holes RAB687: 27 meters at 5.98g/t, RAB692: 8 meters at 11.64g/t, RAB684: 12 meters at 3.65g/t. The latest drilling returned the following intersections: L3DH27: 6.80 meters at 0.72g/t, L3DH28: 14.70 meters at 5.95g/t, including 0.8 meters at 88.10g/t, L3DH29: 3 meters at 10.82g/t. All the data are currently being integrated, modeled and an economic study being completed.
Elsewhere in the Loulo permit, at Yalea South, conceptual diamond drilling intersected mineralization; YSDH06 returned 5 meters at 4.86 g/t associated with fractured quartzites.
Regional Work
Our Kedougou — Kenieba Inlier initiative, established in 2007 to consolidate the most prospective ground in the Loulo district, has been very successful with additional permits being acquired and ground obtained through the conclusion of joint ventures. We signed a joint venture with IAMGOLD, in July 2007, on their 343 square kilometers Bambadji permit, adjacent to Loulo. We have the option to earn a 51% stake in the project by funding and completing a prefeasibility study. Following the prefeasibility study, IAMGOLD can retain a 49% stake in the project by co-funding a full feasibility study or dilute to a 35% stake. The Bambadji permit straddles the Senegal-Malian shear zone and generative work reveals a coincident 25 by 5 kilometer gold in soil anomaly, containing 34 targets which have seen very little follow-up drilling. In addition we acquired the 413 square
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Table of Contentskilometers Dalama permit from the Senegal government and we have signed a joint venture agreement with CLIB, a local Malian company, on two permits directly north of Loulo. These permits together with the Loulo and Selou permits have consolidated a 1,400 square kilometers ground holding.
Following this successful ground consolidation in the Loulo district we have completed flying a VTEM airborne electromagnetic (AEM) survey over the area. The strategy behind this survey is that the AEM will provide a more detailed geological and structural framework of the area, especially in areas of low magnetic response and surface regolith cover. This will enable us to integrate our datasets and models to prioritize targets for follow-up investigation.
Morila Exploitation Lease
At Morila, further research has confirmed mineralization is the result of a multistage intrusion related gold system and a specific mafic volcanic lithological horizon hosts the orebody, marking a change from fine to coarse sedimentation. This unit has been extrapolated away from the mine and a four hole, 2,441 meter diamond drilling program (MEX1-4), was completed as an initial follow-up focusing on the northern and eastern margins of the orebody. Results for the two northern holes (MEX1-2) confirm the termination of the orebody, while MEX 3 intersected a broad zone of lowgrade gold mineralization along the eastern pit-margin (45 meters at 0.45g/t, including 8 meters at 1.27g/t from 565 meters) associated with a moderate to steeply dipping structure, which is in sharp contrast to the general flat lying nature of the orebody. The potential for this structure to flatten, creating zones of dilation, is considered to be a high priority target for follow-up work.
Morila Region and Southern Mali
The Southern Mali region is a highly prospective terrain as emphasized by the past discoveries of the Morila and Syama deposits. However, the entire region is heavily lateritized and rock outcrop is very limited. The most obvious regional soil geochemical anomalies have been investigated and no recent discoveries have been made in the region. We continue with generative programs and the development of conceptual ideas and as part of the regional program our teams have prioritized areas of interest and carried out a number of due diligence reviews. This program has led to a joint venture agreement with Canadian junior African Gold Group over two prospective permits in the Morila region. Teams are already on the ground. We have also continued to work on early stage exploration projects to identify targets for possible drill testing. This has resulted in the turnover of a number of permits in the search for new deposits.
Senegal
In Senegal, we have an increased permit portfolio of six permits covering 2,125 square kilometers over the prospective Sabodala volcano-sedimentary belt and the Senegal-Malian shear zone.
On the Kounemba permit, the Massawa target was first identified in 2007 and locates on the Main Transcurrent Shear Zone (MTZ). It was initially characterized by a 3.5 kilometer long by 100 to 400 meter wide plus 50ppb gold in soil anomaly. At surface mineralization is associated with gossanous shears and quartz stockworks hosted by volcanics and sediments.
Initial RAB drilling along 400 meter spaced lines confirmed bedrock mineralization over 2.8 kilometers including the following results: MWRAB13: 27 meters at 1.12g/t, MWRAB14: 6 meters at 5.42g/t, MWRAB15: 3 meters at 8.89g/t, MWRAB24: 12 meters at 1.12g/t, MWRAB28: 30 meters at 4.60g/t, MWRAB29: 9 meters at 1.56g/t, MWRAB61: 12 meters at 1.04g/t and MWRAB62: 36 meters at 1.12g/t. This in turn has been confirmed by 7 diamond holes for 1,645 meters drilled on 400 meter spaced lines.
Geologically the boreholes intersected a sequence of interbedded sediments and volcanics, which have been intruded by felsic dykes, gabbros and granitic bodies. The rock units have been affected by northeast shearing, associated with the MTZ which in turn has been reactivated dextrally by north-south belt discordant structures, resulting in dilation and mineralization.
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Table of ContentsMineralization locates in various lithologies but is structurally controlled with a prominent hanging wall and footwall structure, often graphitic. There are varying degrees to the intensity of alteration (silica-carbonate-sericite-pyrite-arsenopyrite) and locally brecciation and brittle fracturing are associated with the gold mineralization. The results from this first phase of drilling are presented in the table below.
2007 Hole Id
(m)
(m)
(m)
(g/t)
1.10m @ 32.30g/tAn additional 2,436 meters of infill RAB drilling, closing the line spacing to 200 meters, has been completed and returned high grade results from 3 meter composite samples, including MWRAB102: 24 meters at 8.58g/t, including 3 meters at 58.70g/t, MWRAB106: 39 meters at 10.60g/t including 3 meters at 36.40g/t and 9 meters at 30.95g/t, MWRAB109: 30 meters at 11.01g/t, including 3 meters at 44.60g/t, 3 meters at 26.90g/t and 3 meters at 33.30g/t, MWRAB111: 20 meters at 4.09g/t, MWRAB132: 15 meters at 2.60g/t and MWRAB156: 27 meters at 3.03g/t. Mineralization is open along strike to the northeast and southwest. A 7,000 meter plus diamond drilling program has been commissioned to delineate the mineralized zone and commence an evaluation of this target. Concurrent with this drilling additional soil sampling has extended the anomaly by a further 3.4 kilometers to 6.2 kilometers and RAB drilling is ongoing.
Delaya is defined by a 6 kilometer by 100 meter plus 20ppb gold anomaly. Bedrock mineralization was previously delineated over a 700 meter strike extent by trenching results which include DLT003: 11.15 meters at 9.60g/t, DLT004: 4 meters at 1.60g/t, DLT005: 4.5 meters at 7.54g/t, DLT006: 7.45 meters at 1.98g/t and 6.2 meters at 7.59g/t, DLT008: 18 meters at 0.68g/t and DLT009: 2 meters at 5.69g/t. This was confirmed by an initial five- hole, 1,000 meter diamond core program which returned results; DLD001: 9.83 meters at 1.80g/t (from 77 meters), DLD002: 12.44 meters at 5.07g/t (from 177 meters) including 7.00 meters at 8.19g/t, DLD003: 3.00 meters at 1.80g/t and DLD004: 3.8 meters at 4.80g/t. Mineralization is hosted within a package of schists, strongly sheared and altered by silica-sericite-iron and sulfides present are disseminated pyrite and arsenopyrite.
Additional RAB drilling returned positive results; firstly on a line 200 meters north of diamond drill hole DLD002: DLRB005: returned 6 meters at 2.49g/t, DLRB006: 6 meters at 1.98g/t and DLRB010: 3 meters at 3.00g/t. The second line was drilled approximately 2 kilometers to the south of the known mineralization testing a plus 250ppb gold in soil anomaly. RAB hole DLRB030 returned 21 meters at 4.87g/t. Further RAB drilling is planned to define borehole locations for the next round of diamond drilling in 2008.
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Table of ContentsSofia is part of a 7 kilometer anomalous north-south structural corridor which also hosts the Mikona, Majiva and Matiba targets within ground held by ourselves. This system continues to the north for an additional 10 kilometers and hosts the Niakafiri deposit owned by Oromin and the Sabodala deposit (MDL). Further RAB drilling has started to test this large corridor prior to diamond drilling.
The Bakan corridor groups together a number of anomalous gold in soil targets (Bakan, Tina, Tizia, Khosa, Tiwana and Tina) along a 10 kilometer segment of the northeast trending Kossanto structural corridor, which is sub-parallel to the MTZ, which host to the Massawa target. The geology of the corridor comprises of a northeast sequence of ultramafic units, felsic and intermediate volcanics (andesites, dacites and rhyodacites), cherts and intrusive suites ranging from diorite to monzonites.
Extensive lithosampling carried out across the corridor has revealed mineralization to be associated with deformed and altered felsic intrusives. Follow up trenching has confirmed bedrock mineralization: at Bakan BKTR002: 38.00 meters at 2.00g/t; BKTR005: 4.00 meters at 2.38g/t and 4 meters at 1.80g/t; BKTR006: 69.70 meters at 1.89g/t; and at Tina: TNTR002: 24.00 meters at 1.50g/t; TNTR003: 20.80 meters at 1.76g/t. Tiwana: one line of RAB holes, testing a 3500 meter by 200 meter plus 20ppb gold soil anomaly returned encouraging results, defining a 125 meter wide anomalous zone (plus 0.3g/t) including: TWRAB03 (18 meters at 1.40g/t) and TWRAB06 (36 meters at 0.63g/t including 6 meters at 2.60g/t). RAB drilling continues in order to prioritize the location of diamond drill holes for testing during 2008.
Burkina Faso
On the Kiaka target in Burkina Faso, a geological estimate of 2 million ounces at approximately 1g/t has been calculated confirming the large tonnage, low grade, bulk mineable nature of the target. Drilling has confirmed the continuity of the wide low grade mineralization over a strike length of 1.25 kilometers.
There are two styles of mineralization:
Preliminary metallurgical samples, sent to Loulo, have returned encouraging results using a basic bottle roll method. Recoveries from oxide ore returned 91.09%, transitional ore 86.94% to 95.28% and fresh rock 68.84% to 84.57%.
A review of all the geological and structural data indicates a 10 to 20 degree northeast plunging anticline hosts the Kiaka main zone, with the last diamond hole drilled to the north returning 166 meters at 1.26g/t and a syncline hosts hanging wall mineralization. An additional program of diamond drilling is being planned to test the down plunge extension of mineralization. Elsewhere in the permit portfolio the team is developing targets for drilling in the next field season.
Ghana
In Ghana, we have been turning ground over in the search for advanced targets and deposits. We currently have a portfolio of three permits covering 922 square kilometers.
On the Bole NE concession at the Zamsa target field mapping combined with logging of trenches and the interpretation of geological and structural data have defined a large scale anticline fold adjacent to the main Bole-Bolgatanga regional structure. It is apparent that when the gold results from the soil sampling are overlain on the fold, anomalous values correlate clearly with parasitic folds on the limbs of this large regional fold along a 14 kilometer strike length. RAB drilling proposals are currently being prepared as a first pass follow-up to this large regional target.
Côte d’Ivoire
One of the most important and successful highlights of the year was the resumption of full scale exploration at Tongon and the completion of the feasibility drilling. We completed 181 diamond drill holes for 33,973 meters, against a planned budget of 30,000 meters.
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Table of ContentsIn addition to the feasibility drilling, a review of 19 targets within the Nielle permit has been completed, highlighting 12 for follow-up work. Tongon South is the highest priority. This target is characterized by a strong surface gold geochemical anomaly, 1 kilometer long at plus 500ppb and has only been tested by two trenches so far: TST002: 16 meters at 8.37g/t and TST004: 6 meters at 2.06g/t, 2 meters at 12.86g/t and 4 meters at 2.10g/t. Additional trenching is underway to define drill programs for 2008.
In the Côte d’Ivoire we have a portfolio of six permits covering 4,880 square kilometers in both the north and south of the country. In the south, first pass reconnaissance exploration has been completed on the Apouasso and Dignago permits. On the Apouasso permit located in the southeast of the country close to the Ghana border, a 1,000 meter by 200 meter regional soil sampling program has returned a 10 kilometer, plus 10 ppb regional gold anomaly, including a maximum value of 925 ppb associated with the contact between a volcano-sedimentary belt and granite. On the Dignago permit, located in the southwest of the country, regional soil sampling has defined a 5 by 2 kilometer plus 10 ppb regional soil anomaly, reconnaissance work continues on both permits.
The Boundiali permits (1,314 square kilometers), located in the north of the country and approximately 100 kilometers west of Nielle, hosts the advanced target of Tiasso. Early stage exploration work comprising a soil survey, trenching and pitting, has defined a significant drill target with a strike length of 2 kilometers. Sub-surface mineralization in saprolite with a trench intersection of 25 meters at 4.39g/t highlights the prospectivity of this target and preparations are underway to drill test.
Tanzania
In Tanzania, generative work continues to drive the building of a new portfolio of projects. A joint venture agreement was signed with African Eagle Miyabi on their Miyabi project. A Phase 1 diamond drilling program has been completed with a total of 20 holes for 4,078 meters. Drilling was completed along two fence lines, named Shambani and Kilimani after the two deposits over which the drill lines cross, and two shorter lines targeting specific IP targets; IP070 and Kilimani SW lines. The strategy behind this drilling was to get a better understanding of the 7 kilometer by 2 kilometer Miyabi structural corridor in terms of geology, structure, alteration and mineralization. The results have not confirmed a larger mineralized system beyond that already defined by African Eagle. Mineralization is restricted to the intersection of folded iron rich sediments and volcanic and northeast trending shears. This results in short strike length and steep plunging pods of mineralization. Work has now focused on the evaluation of the 20 kilometer northwest trending corridor.
Also in Tanzania, we have shifted some of our exploration emphasis to the mobile belts surrounding the Archaean Cratons. Gold mineralization is hosted in highly deformed and silicified metamorphosed rock units above a major thrust. The units consist of thinly bedded impure marble (probably originated from mixed calcareous and argillaceous sediments, metamorphosed to garnet, graphite and biotite lenses) and biotite gneiss/granulite.Early stage exploration has commenced on reconnaissance permits in the Morogoro area.
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Table of ContentsMineral Rights and Permits
The following maps show the position of our current permits in West Africa and Tanzania:
Locality of Randgold Resources permits in West Africa
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Table of ContentsLocality of Randgold Resources permits in Tanzania
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Table of ContentsThe following table outlines the status of our permits as of April 30, 2008:
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Table of Contents
AE – Reconnaissance License
EP – Exploitation Permit
EEP – Exclusive Exploration Permit
PL – Prospecting License
RL – Reconnaissance License
RP – Reconnaissance Permit
* Joint venture in which the company is currently earning an interestAlthough we believe that our exploration permits will be renewed when they expire, based on the current applicable laws in the respective countries in which we have obtained permits, we cannot assure you that those permits will be renewed on the same or similar terms, or at all. In addition, although the mining laws of Mali, Côte d’Ivoire, Senegal, Burkina Faso, Ghana and Tanzania provide a right to mine should an economic orebody be discovered on a property held under an exploration permit, we cannot assure you that the relevant government will issue a permit that would allow us to mine. All mineral rights within the countries in which we are currently prospecting are state-owned. Our interests effectively grant us the right to develop and participate in any mine development on the permit areas.
New Business
We have continued to assess new business and merger and acquisition opportunities worldwide, while retaining our focus on organic growth within the African continent. We remain committed to exploring profitable merger and acquisition opportunities, rating them against our organic growth prospects.
During 2007, organic growth opportunities were evaluated in the six countries in which we are operational and we visited five additional countries and numerous gold projects.
Human Resources Report
We are committed to the integration of environmental and social impact management into our business activities. The optimum utilization of mineral and other resources encompasses the protection and conservation of the existing environment. Within this framework, we strive to assist the communities most affected by our operations to develop in a sustainable way and to give all our employees a high quality of work life, including a safe workplace.
Policy Statement
Our integrated social and environmental management process identifies potentially significant negative and positive impacts. The implementation of environmental and social responsibility strategies aims to minimize negative impacts and maximize the positive impacts of its activities, commensurate with our business strategy and within national and World Bank standards.
The strategies we use to achieve this include the following:
Encourage and reward the use of integrated environmental management to ensure that management decision making processes include a sensitive and holistic consideration of environmental issues. To facilitate this, all projects must include a comprehensive environmental and social impact assessment. Where appropriate, specialist consultants are employed.
Maintain positive relationships with neighboring communities, local and national government authorities, NGOs and aid agencies and the public.
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Table of ContentsRespect and consult with the communities in the areas affected by our operations so that these communities receive fair treatment and where possible benefit from our activities.
Budget a percentage of profit to be used for sustainable community development projects. The projects are selected and prioritized in consultation with communities and carried out in cooperation with community members.
Aim to forge a pact with employees through having respect for fundamental human rights, including workplace rights, employee development and the need for a healthy and safe workplace.
Strive for the highest quality of rehabilitation, waste management and environmental protection in the most cost effective manner.
Strive to optimize the consumption of energy, water and other natural resources.
Through the introduction of new alternative environmentally friendly products and processes, as they become available, avoid the use or release of substances which, by themselves or through their manufacturing process, may damage the environment.
Practice responsible environmental stewardship to meet the demands of local communities, host country government requirements and international standards and strive for continuous improvement of environmental performance.
Social Responsibility and Community Development
The sustainable development and social responsibility strategy forms an integral part of our overall business strategy and is implemented throughout all offices, projects and operations. This strategy recognizes that the effectiveness of our community development efforts can be increased through forming synergistic alliances with professionals in the field, such as NGOs and aid agencies that have solid track records.
Regulatory and Environmental Matters
Our business is subject to extensive government and environment-related controls and regulations, including the regulation of the discharge of pollutants into the environment, disturbance of and threats to endangered species and other environmental matters. Generally, compliance with these regulations requires us to obtain permits issued by government agencies. Some permits require periodic renewal or review of their conditions. We cannot predict whether we will be able to renew those permits or whether material changes in permit conditions will be imposed. To the extent that the countries in which we have exploration and mining permits have no established environmental laws, we are currently working to ensure that our operations are in compliance with environmental standards set by the World Bank in relation to air emissions and water discharges. In accordance with our stated policy, we provide for estimated environmental rehabilitation costs based on the net present value of future rehabilitation cost estimates for disturbance to date.
We carry out our operations within the guidelines outlined in our social responsibility policy and in accordance with World Bank standards.
The Morila Mine maintained its International Standard Organization (ISO14001) certification during 2007. In the second year of production at the Loulo mine, ISO14001 training procedures continued with the aim of moving towards compliance.
At Loulo, the cyanide detoxification process continued and it is scheduled for completion by the third quarter of 2008.
Marketing
We derive the majority of our income from the sale of gold produced by Morila and Loulo in the form of dore, which we sell under agreement to a refinery. Under these agreements, we receive the ruling gold price on the day after dispatch, less refining and freight costs, for the gold content of the dore gold. We have only one customer with whom we have an agreement to sell all of our gold
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Table of Contentsproduction. The ‘‘customer’’ is chosen annually on a tender basis from a selected pool of accredited refineries and international banks to ensure competitive refining and freight costs. Unlike other precious metal producers, gold mines do not compete to sell their product given that the price is not controlled by the producers.
Property
Our operational mining area is comprised of Morila operations of 200 square kilometers and the Loulo mining permit of 372 square kilometers. Our exploration permits are detailed above.
We also lease offices in London, Dakar, Abidjan, Bamako, Ouagadougou, Mwanza, Accra, Johannesburg and Jersey.
In order to source certain services from South Africa, Seven Bridges Trading 14 (Proprietary) Limited, or Seven Bridges, a wholly owned subsidiary of ours was created.
Randgold Resources Limited has entered into a service agreement with Seven Bridges whereby Seven Bridges will provide certain administrative services to us, such as administrative and secretarial services, accounting, geological consultancy, purchase and logistics administration, legal and other general administrative services. Seven Bridges charges a monthly fee based on the total employment cost plus 50%.
Legal Proceedings
In August 2004, we entered into a fixed lump sum turnkey contract for $63 million for the design, supply, construction and commissioning of the Loulo processing plant and infrastructure with MDM Ferroman (Pty) Ltd, or MDM. At the end of 2005, after making advances and additional payments to MDM totaling $26 million in excess of the contract, we determined that MDM was unable to perform its obligations under the MDM Contract, at which time we enforced a contractual remedy which allowed us to act as our own general contractor and to complete the remaining work on the Loulo project that was required under the MDM Contract.
We believe that we are entitled to recover $59.3 million from MDM. This comprises payments totaling $32 million which have been capitalized as part of the cost of the project, $15.2 million in respect of damages arising from the delayed completion of the project, and advances of $12.1 million (December 31, 2006: $12.1 million) included in receivables. Of this latter amount, $7 million is secured by performance bonds and the remainder is secured by various personal guarantees and other assets.
As part of our efforts to recoup the monies owed to us, MDM was put into liquidation on February 1, 2006. This resulted in a South African Companies Act Section 417 investigation into the business and financial activities of MDM, its affiliated companies and their directors. This investigation was completed in the last quarter of 2007 and legal proceedings have been instituted by the liquidators against numerous creditors who had received preferential payments in the six months prior to MDM’s liquidation. Proceedings are ongoing and it is expected that these claims will be heard by the South African courts in the last quarter of 2008 or the first quarter of 2009.
We believe that we will be able to recover in full the $12.1 million included in receivables. However, this is dependent on the amounts which can be recovered from the performance bonds, personal guarantees and other assets provided as security. Any shortfall is expected to be recovered from any free residue accruing to the insolvent estate. The aggregate amount which will ultimately be recovered cannot presently be determined. The financial statements do not reflect any additional provision that may be required if the $12.1 million cannot be recovered in full.
Recovery of the other $47.2 million is dependent on the extent to which there is any amount in the free residue. The ultimate outcome of this claim cannot presently be determined and there is significant uncertainty surrounding the amount that will ultimately be recovered. The financial statements do not reflect any adjustment to the cost of the Loulo development that may arise from this claim, or any additional income that may arise from the claim for damages, or any charge that may arise from MDM’s inability to settle amounts that are determined to be payable by MDM to us in respect of the Loulo development.
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Table of ContentsOther than as disclosed above we are not party to any material legal or arbitration proceedings, nor is any of our property the subject of pending material legal proceedings.
Health and Safety Regulations
Morila and Loulo have a Hygiene and Security Committee made up of elected labor and specialist management representatives, as outlined in the respective labor code. This committee designates, from its members, a consultative technical sub-committee charged with the elaboration and application of a concerted policy of improvement of health and security conditions at work. Its composition, attributions and operational modalities are determined by legal provisions and regulations.
The chairman of this committee coordinates monthly committee meetings, sets the agendas with his secretariat, monitors resolutions and signs off on committee determinations.
The committee’s secretariat ensures under the supervision of the chairman that:
Each mine’s medical officer sits on the Hygiene and Security Committee and advises on the following:
The Hygiene and Security Committee forms, from within its membership, two consultative commissions, the Commission of Inquiry and the Educational Commission. The Commission of Inquiry:
The Educational Commission:
All employees are covered by the state’s social security scheme and our medical reimbursement scheme, that reimburses a large portion of expenses related to medical treatment and medicines. Dental and optical expenses are also covered to 50%.
No post-employment medical aid liability exists for the group.
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Table of ContentsThe following chart identifies our subsidiaries and joint venture and our percentage ownership in each subsidiary:
For a discussion of our principal properties, including mining rights and permits, see ‘‘Item 4. Information on the Company — A. History and Development of the Company’’ and ‘‘Item 4. Information on the Company — B. Business Overview’’. We have all material legal rights necessary to entitle us to exploit such deposits in respect of the Morila mine in Mali to April 2022, and Loulo in Mali to 2029.
The exploration permits in Côte d’Ivoire, Mali, Senegal, Burkina Faso, Ghana and Tanzania give us the exclusive right for a fixed time period, which is open to renewal, to prospect on the permit area.
Once a discovery is made, we, as the permit holder, then commence negotiations with the respective governments as to the terms of the exploration or mining concession. Depending on the country, some of the terms are more open to negotiation than others, but the critical areas which can be agreed to are the government’s interest in the mine, taxation rates and taxation holidays, repatriation of profits and the employment of expatriates and local labor.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
Statements in this Annual Report concerning our business outlook or future economic performance; anticipated revenues, expenses or other financial items; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are ‘‘forward-looking statements’’ as that term is defined under the United States Federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those stated in such statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under ‘‘Item 3. Key Information — D. Risk Factors’’ in this Annual Report as well as those discussed elsewhere in this Annual Report and in our other filings with the Securities and Exchange Commission.
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Table of ContentsGeneral
We earn substantially all of our revenues in US dollars and a large proportion of our costs are denominated or based in US dollars, excluding the Morila mining contract which is partially denominated in Euros. We also have South African Rand, Communauté Financière Africaine franc and Pound Sterling denominated costs, which are primarily wages and material purchases.
Impact of Malian Economic and Political Environment
We are a Jersey incorporated company and are not subject to income taxes in Jersey. Our current significant operations are located in Mali and are therefore subject to various economic, fiscal, monetary and political policies and factors that affect companies operating in Mali, as discussed under ‘‘Item 3. Key Information — D. Risk Factors — Risks Relating to Our Operations’’.
Impact of Favorable Tax Treaties
Morila SA benefited from a five year tax holiday until November 14, 2005. Loulo SA also benefits from a five year tax holiday in Mali. The tax holiday commenced on November 8, 2005. The benefit of the tax holiday to the group was to increase its net income by $11 million, $9.1 million and $22.6 million for the years ended December 31, 2007, 2006 and 2005 respectively.
Under Malian tax law, income tax is based on the greater of 35% of taxable income or 0.75% of gross revenue.
The Morila and Loulo operations have no unused assessable capital expenditure carry forwards or assessable tax losses, as at December 31, 2007 and 2006 respectively, for deduction against future mining income.
Revenues
Substantially all of our revenues are derived from the sale of gold. As a result, our operating results are directly related to the price of gold. Historically, the price of gold has fluctuated widely. The gold price is affected by numerous factors over which we have no control. See ‘‘Item 3. Key Information — D. Risk Factors — Risks Relating to Our Operations — The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely’’.
We have followed a hedging strategy the aim of which is to secure a floor price which is sufficient to protect us in periods of significant capital expenditure and debt finance, while at the same time allowing significant exposure to the spot gold price. Accordingly, we have made use of hedging arrangements. Under the terms of the Morila project loan, we were required to hedge 50% of approximately 36% of Morila’s first 5 years of production. The last remaining hedges were closed out during 2004.
Our prior financing arrangements for the development of Loulo included provisions for gold price protection. Although the facility was fully repaid in December 2007, these instruments are still in place. At March 31, 2008, 189,741 ounces had been sold forward at an average price of $447 per ounce. This represents approximately 18% of planned production at Loulo for the period ending December 2010.
Significant changes in the price of gold over a sustained period of time may lead us to increase or decrease our production, which could have a material impact on our revenues.
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Table of ContentsOur Realized Gold Price
The following table sets out the average, the high and the low afternoon London Bullion Market fixing price of gold and our average US dollar realized gold price during the years ended December 31, 2007, 2006 and 2005.
(1) Our average realized gold price differs from the average gold price as a result of the timing of our gold deliveries and different realized prices achieved on the hedge book.Costs and Expenses
Our operations currently comprise two operations mined by contractors. Milling operations are undertaken by the group’s own employees. Total cash costs in the year ended December 31, 2007 as defined by guidance issued by the Gold Institute made up approximately 72% of total costs and expenses and comprised mainly mining and milling costs, including labor and consumable stores costs. Consumable stores costs include diesel and reagent costs. Contractor costs represented 44% of total cash costs, with diesel and reagent costs making up 37% of total cash costs. Direct labor costs accounted for approximately 7% of total cash costs. For a definition of total cash costs, please refer to ‘‘Item 3 — Key Information’’.
The price of diesel acquired for the Morila and Loulo operations increased during the year ended December 31, 2007 which impacted negatively on total cash costs. Should these prices increase further, this could impact significantly on total cash costs mainly as a result of the high volume of diesel consumed to generate power and to run the mining fleet. Mining contractor costs, which are Euro denominated at Morila, also increased during 2007. Higher oil prices and the effect of the weaker US dollar against the euro also impacted costs during the past year.
The remainder of our total costs and expenses consists primarily of amortization and depreciation, exploration costs, exchange losses, interest expense and general administration or corporate charges.
Loulo currently benefits from a three-year duty exemption period, which ends on November 8, 2008. Duties will become payable in accordance with the Malian duty regime on all imported goods. On average, it is anticipated that this has the effect of increasing the costs of imported goods by 7%, which equates to an overall increase of 1% on total costs.
Looking Forward
Loulo’s 2008 production is expected to be in line with the 2007 production. The underground development at Yalea is well underway and should access first ore during the first half of 2008 with full production due in 2009. Yalea is the first of the two Loulo underground mines and is currently a bigger orebody with higher grades than the Gara deposit. The underground mines are expected to not only add life to Loulo but to increase levels of annual production to in excess of 400,000 ounces in 2010.
The current mine plan at Morila anticipates production for 2008 to be approximately 430,000 ounces.
We assumed the operatorship of the mine effectively from February 15, 2008, following AngloGold Ashanti’s consideration of its intent of the disposal of its 40% share in Morila.
Total cash costs for the group are estimated to increase year on year between 10% and 15% depending on oil price and euro-dollar exchange rate assumptions, which have a material impact on operating costs.
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Table of ContentsSite establishment at the Tongon project has commenced. We are still confident that, absent any disruptions in Côte d’Ivoire, we will be in production by late 2010. Detailed design and engineering studies are expected to be completed by mid-year, which will form the basis for the tender process and provide an update on the project parameters.
In the coming year, exploration expenditure is expected to remain high, with significant drill programmes anticipated across the portfolio, especially in Senegal, Mali and the Côte d’Ivoire.
Critical Accounting Policies
Our significant accounting policies are more fully described in note 2 to our consolidated financial statements. Some of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty and are based on our historical experience, terms of existing contracts, management’s view on trends in the gold mining industry and information from outside sources.
Management believes the following critical accounting policies, among others, affect the more significant judgments and estimates used in the preparation of our consolidated financial statements and could potentially impact our financial results and future financial performance.
Joint Venture Accounting
We account for our investment in joint ventures by incorporating our proportionate share of the joint ventures’ assets, liabilities, income, expenses and cash flows in the consolidated financial statements under appropriate headings. Should this method of accounting not be permitted in the future, the results of each joint venture would need to be equity accounted. This would require the recognition in the income statement, on a separate line, of our share of the joint ventures’ profit or loss for the year. Our interest in the joint venture would be carried on the balance sheet at an amount which would reflect our share of the net assets of the joint venture.
This would result in a presentation of our balance sheet and income statement that differs significantly from the current presentation, but would have no impact on our net income or our net asset value.
Depreciation and Amortization of Mining Assets
Depreciation and amortization charges are calculated using the units of production method and are based on tonnes processed through the plant as a percentage of total expected tonnes to be processed over the lives of our mines. A unit is considered to be produced at the time it is physically removed from the mine. The lives of the mines are based on proven and probable reserves as determined in accordance with the Securities and Exchange Commission’s industry guide number 7. The estimates of the total expected future lives of our mines could be materially different from the actual amounts of gold mined in the future and the actual lives of the mines due to changes in the factors used in determining our mineral reserves. These factors could include: (i) an expansion of proven and probable reserves through exploration activities; (ii) differences between estimated and actual cash costs of mining, due to differences in grade, metal recovery rates and foreign currency exchange rates; and (iii) differences between actual gold prices and gold price assumptions used in the estimation of reserves. Such changes in reserves could similarly impact the useful lives of assets depreciated on a straight-line basis, where those lives are limited to the life of the mine, which in turn is limited to the life of the proven and probable reserves.
Valuation of Long-Lived Assets
Management compares the carrying amounts of property, plant and equipment to the recoverable amount of the assets whenever events or changes in circumstances indicate that the net book value may not be recoverable. In determining if the asset can be recovered, we compare the recoverable
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Table of Contentsamount to the carrying amount. If the carrying amount exceeds the recoverable amount, we will record an impairment charge in the income statement to write down the asset to the recoverable amount. To determine the value in use amount, management makes its best estimate of the future cash inflows that will be obtained each year over the life of the mine and discounts the cash flow by a rate that is based on the time value of money adjusted for the risk associated with the applicable project. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups. With the exception of mine-related exploration potential, all assets at a particular operation are considered together for purposes of estimating future cash flows.
These reviews are based on projections of anticipated future cash flows to be generated by utilizing the long-lived assets. While management believes that these estimates of future cash flows are reasonable, different assumptions regarding projected gold prices and production costs as discussed above under depreciation and amortization of mining assets could materially affect the anticipated cash flows to be generated by the long-lived assets. The ability to achieve the estimated quantities of recoverable minerals from exploration stage mineral interests involves further risks in addition to those factors applicable to mineral interests where proven and probable reserves have been identified, due to the lower level of confidence that the identified mineralized material can ultimately be mined economically.
Hedging and Financial Derivatives
We account for our hedging and financial derivatives in accordance with International Accounting Standard No. 39 Financial Instruments: Recognition and Measurement, or IAS 39. The determination of the fair value of hedging instruments and financial derivatives, when marked-to-market, takes into account estimates such as projected interest rates under prevailing market conditions, depending on the nature of the hedging and financial derivatives.
These estimates may differ materially from actual gold prices, interest rates and foreign currency exchange rates prevailing at the maturity dates of the hedging and financial derivatives and, therefore, may materially influence the values assigned to the hedging and financial derivatives, which may result in a charge to or an increase in our earnings at the maturity date of the hedging and financial derivatives. Certain hedging and financial derivatives are accounted for as cash flow hedges, whereby the effective portion of changes in fair market value of these instruments are deferred in other reserves and will be recognized in the consolidated income statement when the underlying production designated as the hedged item is sold. All derivative contracts qualifying for hedge accounting are designated against the applicable portion of future production from proven and probable reserves, where management believes the forecasted transaction is probable of occurring. To the extent that management determines that such future production is no longer probable of occurring due to changes in the factors impacting the determination of reserves, as discussed above under amortization of mining assets, gains and losses deferred in other reserves would be reclassified to the consolidated income statement immediately.
Environmental Rehabilitation Costs
We provide for environmental rehabilitation costs and related liabilities based on our interpretations of current environmental and regulatory standards with reference to World Bank guidelines. Final environmental rehabilitation obligations are estimated based on these interpretations and in line with responsible programs undertaken by similar operations elsewhere in the world. While management believes that the environmental rehabilitation provisions made are adequate and that the interpretations applied are appropriate, the amounts estimated may differ materially from the costs that will actually be incurred to rehabilitate our mine sites in the future.
Exploration and evaluation costs
We expense all exploration and evaluation expenditures until the directors conclude that a future economic benefit is more likely than not of being realized, i.e. ‘probable’. While the criteria for
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Table of Contentsconcluding that an expenditure should be capitalized are always probable, the information that the directors use to make that determination depends on the level of exploration.
Exploration and evaluation expenditure on greenfield sites, being those where we do not have any mineral deposits which are already being mined or developed, is expensed as incurred until a final feasibility study has been completed, after which the expenditure is capitalized within development costs if the final feasibility study demonstrates that future economic benefits are probable.
Exploration and evaluation expenditure on brownfield sites, being those adjacent to mineral deposits which are already being mined or developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits are probable through the completion of a prefeasibility study, after which the expenditure is capitalized as a mine development cost. A ‘prefeasibility study’ consists of a comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined, includes a financial analysis based on reasonable assumptions of technical, engineering, operating economic factors and the evaluation of other relevant factors. The prefeasibility study, when combined with existing knowledge of the mineral property that is adjacent to mineral deposits that are already being mined or developed, allow the directors to conclude that it is more likely than not that the group will obtain future economic benefit from the expenditures.
Exploration and evaluation expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralization of such mineral deposits, is capitalized as a mine development cost following the completion of an economic evaluation equivalent to a prefeasibility study. This economic evaluation is distinguished from a prefeasibility study in that some of the information that would normally be determined in a prefeasibility study is instead obtained from the existing mine or development. This information when combined with existing knowledge of the mineral property already being mined or developed allow the directors to conclude that more likely than not we will obtain future economic benefit from the expenditures. Costs relating to property acquisitions are also capitalized. These costs are capitalized within development costs.
Receivables
Receivables are recognized initially at fair value. There is a rebuttable presumption that the transaction price is fair value unless this could be refuted by reference to market indicators. Subsequently, receivables are measured at amortized cost using the effective interest method, less for provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that we will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognized in the income statement.
Share-based payments
The fair value of the employee services received in exchange for the grant of options or shares after November 7, 2002 is recognized as an expense. The total amount to be expensed rateably over the vesting period is determined by reference to the fair value of the options or shares determined at the grant date, excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable or the number of shares that the employee will ultimately receive. This estimate is revised at each balance sheet date and the difference is charged or credited to the income statement, with a corresponding adjustment to equity. The proceeds received on exercise of the options net of any directly attributable transaction costs are credited to equity.
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Table of ContentsRecent accounting pronouncements
IFRS 8 Operating Segments (effective for annual periods beginning on or after January 1, 2009)
The objective of this IFRS is to require entities to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. The company will apply IFRS 8 from January 1, 2009, but it is not expected to have any impact on the accounts of the company or group.
Amendment to IFRS 2 Share-based Payment: Vesting Conditions and Cancellations (effective for accounting periods beginning on or after January 1, 2009).
The Amendment to IFRS 2 is of particular relevance to companies that operate employee share savings plans. This is because it results in an immediate acceleration of the IFRS 2 expense that would otherwise have been recognized in future periods should an employee decide to stop contributing to the savings plan, as well as a potential revision to the fair value of the awards granted to factor in the probability of employees withdrawing from such a plan. We will apply this amendment from January 1, 2009 but it is not expected to have any impact on the accounts of the company.
Revised IFRS 3 Business Combinations and complementary Amendments to IAS 27 (effective for accounting periods beginning on or after July 1, 2009).
The revised IFRS 3 and amendments to IAS 27 arise from a joint project with the Financial Accounting Standards Board (FASB), the US standards setter, and result in IFRS being largely converged with the related, recently issued, US requirements. There are certain very significant changes to the requirements of IFRS, and options available, if accounting for business combinations. We will apply this amendment from January 1, 2010 but it is not expected to have any impact on the accounts of the company.
Amendments to IAS 1 Presentation of Financial Statements and to IAS 32 Financial Instruments: Presentation – Putable Financial Instruments and Obligations Arising on Liquidation (effective for accounting periods beginning on or after January 1, 2009).
Many financial instruments that would usually be considered equity allow the holder to ‘put’ the instrument (to require the issuer to redeem it for cash). Currently these financial instruments are considered liabilities, rather than equity. These amendments to IAS 32 address this issue and require entities to classify the following types of financial instruments as equity, provided they have particular features and meet specific conditions:
We will apply this amendment from January 1, 2009 but it is not expected to have any impact on the accounts of the company.
IAS 23 Borrowing Costs (revised) (effective for accounting periods beginning on or after January 1, 2009).
The main change from the previous version is the removal of the option of immediately recognizing as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The company will apply IAS 23 (revised) from January 1, 2009, but it is not expected to have any impact on the accounts of the company or group, as the policy applied by the company is in line with the revised IAS 23.
IFRIC Interpretation 11 IFRS 2 Share-based Payment – Group and Treasury Share Transactions (effective for annual periods beginning on or after March 1, 2007)
This interpretation addresses the classification of a share-based payment transaction (as equity- or cash-settled), in which equity instruments of the parent or another group entity are transferred, in the
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Table of Contentsfinancial statements of the entity receiving accounts of the company or group. The company applied IFRIC Interpretation 11 from March 1, 2007, but it is not expected to have any impact on the accounts of the company or group.
IFRIC Interpretation 12 Service Concession Arrangements (effective for annual periods beginning on or after January 1, 2008)
This interpretation provides guidance to private sector entities on certain recognition and measurement issues that arise in accounting for public to private service concession arrangements. The company applied IFRIC 12 from January 1, 2008, but it is not expected to have any impact on the accounts of the company or group.
IFRIC 13 Customer loyalty programs (for annual periods beginning on or after July 1, 2008).
This interpretation addresses sale transactions in which the entities grant customers aware credits that, subject to meeting any further qualifying conditions, the customers can redeem in future for free discounted goods or services. The company will apply IFRIC 13 from July 1, 2008, but it is not expected to have any impact on the accounts of the company or group.
IFRIC 14 and IAS 19 The limits on defined asset, minimum funding requirements and their interaction – (for annual periods beginning on or after January 1, 2008).
This interpretation clarifies when refunds or reductions in future contributions should be regarded as available in accordance with paragraph 58 of IAS19, how a minimum funding requirement might affect the availability of reductions in future contributions and when a funding requirement might give rise to a liability. The company will applied IFRIC 14 from January 1, 2008, but it is not expected to have any impact on the accounts of the company or group.
Our operating and financial review and prospects should be read in conjunction with our consolidated financial statements, accompanying notes thereto, and other financial information appearing elsewhere in this Annual Report.
Years Ended December 31, 2007 and 2006
Total revenue
From the year ended December 31, 2006 to the year ended December 31, 2007, total revenues from gold sales increased by $24.5 million, or 9%, from $258.3 million to $282.8 million. This is due to a year on year increase in the average gold price received of $652 from $586 in 2006 and an increase in the gold production of 23,072 ounces at Loulo, partially offset by a decrease in attributable production at Morila of 26,741 ounces.
Other Income
Other income totaled $1 million for the year ended December 31, 2007 compared to $1.2 million for the year ended December 31, 2006. It consists mainly of cost recoveries, which are fees recovered from exploration joint ventures.
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Table of ContentsCosts and Expenses
Total Cash Costs
The following table sets out our total ounces produced and total cash cost and production cost per ounce for the years ended December 31, 2007 and 2006:
* For a definition of cash costs, please see ‘‘Item 3. Key Information — A. Selected Financial Data’’. † Total production cost includes total cash costs and also the depreciation and amortization cost which is discussed below.Year on year the total cash costs increased by approximately 19%, attributable to higher mining contractor costs at both operations as well as the impact of higher diesel prices, the effect of the weak US dollar on the euro-based component of the operational costs, the increased royalties payable resulting from the higher average gold price received and general cost increases in other commodities and consumables. Consequently, the total cash cost per ounce of $356/oz increased by 20% year on year.
Royalties increased by $1.3 million, or 8%, to $18.3 million for the year ended December 31, 2007 from $17 million for the year ended December 31, 2006. The increased royalties reflect increased gold sales and a higher gold price received.
Other mining and processing costs comprise various expenses associated with providing on mine administration support services to the Morila and Loulo mine. These charges amounted to $13.6 million for the year ended December 31, 2007 and to $13 million for the year ended December 31, 2006.
Depreciation and Amortization
Depreciation and amortization of $21 million for the year ended December 31, 2007 compares to $22.8 million for the year ended December 31, 2006. This includes depreciation charged at both operations.
Exploration and Corporate Expenditure
Exploration and corporate expenditure was $35.9 million for the year ended December 31, 2007, and $28.8 million for the year ended December 31, 2006. The increase of $7.1 million from the previous year is a consequence of the increased expenditure on the Tongon project during the year, as well as bonus accruals which were increased in line with the company’s share price performance during the year.
Other expenses
Other expenses for the year ended December 31, 2007 of $5 million and of $3.7 million for the year ended December 31, 2006 primarily consist of exchange losses and relate primarily to Loulo and Morila and result from the weakening of the US dollar against other currencies in which goods and services are denominated, as well as a tax adjustment mainly related to payroll and withholding taxes at Morila of $3.2 million.
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Table of ContentsFinance Income
Finance income amounts consist primarily of interest received on cash held at banks, as well as exchange gains on financing activities. Finance income of $9.2 million for the year ended December 31, 2007 is in line with the $8.7 million for the year ended December 31, 2006. The effective interest rate for 2007 was 4.56% compared to 4.82% in 2006.
Finance costs
Finance costs for the year ended December 31, 2007 was $5.8 million and comprised mainly of the interest on the Loulo project loan, as well as interest on the Loulo Caterpillar finance lease. The interest expense for the year ended December 31, 2006 was $6.4 million and the decrease year on year is mainly the result of the full repayment of the corporate revolving credit facility of $40.8 million at the beginning of December 2007. The corporate facility remains in place should it be required.
Income Tax Expense
The income tax expense amounted to $21.3 million for the year ended December 31, 2007 and $23.1 million for the year ended December 31, 2006. The decrease in the tax expense is the result of a decrease in profit before tax from 2006 to 2007 at Morila. Morila SA benefited from a five year tax holiday until November 14, 2005. Loulo SA also benefits from a five year tax holiday in Mali. The tax holiday commenced on November 8, 2005. Under Malian tax law, income tax is based on the greater of 35% taxable income or 0.75% of gross revenue.
Minority Interests
The minority interests for the years ended December 31, 2007 and December 31, 2006 represent the 20% minority share of the profits at Loulo since production commenced in November 2005.
Years Ended December 31, 2006 and 2005
Total revenue
Total revenues from gold sales for the year ended December 31, 2006 was $258.3 million and was an increase of $106.8 million, or 70.5%, from $151.5 million for the year ended December 31, 2005. This was due to 119,814 more attributable ounces available for sale as a result of Loulo’s first full year of production and an improved average gold price per ounce of $576 for 2006 (which includes the impact of losses on hedges) compared to $449 for 2005. These elements were partially offset by lower head grade milled at both Loulo (29% decrease) and Morila (29% decrease). At Loulo the head grade milled decreased year on year due to only two months of oxide material that was milled during 2005, compared to a full year of oxide and sulfide materials milled during 2006.
Other Income
Other income totaled $1.2 million for the year ended December 31, 2006 compared to $1.3 million for the year ended December 31, 2005. It consists mainly of cost recoveries of $0.8 million, which are fees recovered from exploration joint ventures. No royalty pertaining to the Syama mine has been received in respect of the year ended December 31, 2006.
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Table of ContentsCosts and Expenses
Total Cash Costs
The following table sets out our total ounces produced and total cash cost and production cost per ounce for the years ended December 31, 2006 and 2005:
* For a definition of cash costs, please see ‘‘Item 3. Key Information — A. Selected Financial Data’’. † Total production cost includes total cash costs and also the depreciation and amortization cost which is discussed below.Our group total cash cost per ounce increased $95 per ounce, or 47%, to $296 per ounce for the year ended December 31, 2006 from $201 per ounce for the year ended December 31, 2005. Industry wide cost pressures have continued resulting from the weak dollar, which increases the US dollar value of costs in other currencies such as Euros, high diesel and steel prices and contract mining costs. Despite these cost pressures, costs have been well controlled at both Loulo and Morila and the lower grade processed is the main factor contributing to the increased cost per ounce. Grades have decreased from 5.9 g/t in 2005 at Morila to 4.2 g/t in 2006, and at Loulo from 4.5 g/t to 3.2 g/t as per the respective life of mine plans.
Royalties increased by $6.7 million, or 65%, to $17 million for the year ended December 31, 2006 from $10.3 million for the year ended December 31, 2005. The increased royalties reflect increased gold sales and a higher gold price received.
Other mining and processing costs comprise various expenses associated with providing on mine administration support services to the Morila and Loulo mine. These charges increased to $13 million for the year ended December 31, 2006 from $7.4 million for the year ended December 31, 2005 reflecting the first full year of production at Loulo.
Depreciation and Amortization
Depreciation and amortization charges increased to $22.8 million for the year ended December 31, 2006 from $11.9 million for the year ended December 31, 2005. This is mainly the result of Loulo’s first full year of production. Depreciation of $16.6 million was charged at Loulo during 2006.
Exploration and Corporate Expenditure
Exploration and corporate expenditure was $28.8 million for the year ended December 31, 2006, and $24 million for the year ended December 31, 2005. The increase of $4.8 million from the previous year is a reflection of increased exploration activity, in particular drilling. Extensive drilling programs were undertaken in all countries in which we operate except for Ghana.
Other expenses
The exchange losses for the year ended December 31, 2006 of $3.7 million and $1.5 million for the year ended December 31, 2005 relate primarily to Morila and Loulo and result from the weakening of the US dollar against other currencies in which goods and services are denominated.
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Table of ContentsFinance Income
Interest income amounts consist primarily of interest received on cash held at banks. Finance income of $8.7 million for the year ended December 31, 2006, increased by $6.6 million or 314% from $2.1 million for the year ended December 31, 2005. This is due to higher average cash balances held throughout 2006 compared to 2005 following the issue of shares in November 2005, as well as an increase in the effective interest rate on bank deposits. The effective interest rate for 2006 was 4.82% compared to 2.77% in 2005. Finance income for the year ended December 31, 2006 also included foreign exchange gains on financing activities amounting to $1.3 million.
Finance costs
Finance costs for the year ended December 31, 2006 was $6.4 million and comprised mainly of the interest on the Loulo project loan, as well as interest on the Loulo Caterpillar finance lease. The finance costs for the year ended December 31, 2005 was $3.5 million and the increase year on year is mainly the result of an increase in the weighted average Loulo project loan balance outstanding, the capitalization of interest in 2005 on the Loulo development and increased interest rates. The weighted average interest rate on the Loulo project loan increased from 5.14% in 2005 to 6.83% in 2006. Finance costs for the year ended December 31, 2005 also included foreign exchange losses on financing activities amounting to $1.4 million.
Income Tax Expense
The income tax expense amounted to $23.1 million for the year ended December 31, 2006 compared to $0.2 million for the year ended December, 31 2005. The increase in the tax expense is the result of the first full year of corporate tax at Morila. Morila SA benefited from a five year tax holiday until November 14, 2005. Loulo SA also benefits from a five year tax holiday in Mali. The tax holiday commenced on November 8, 2005. Under Malian tax law, income tax is based on the greater of 35% taxable income or 0.75% of gross revenue.
Minority Interests
The minority interests for the years ended December 31, 2006 and December 31, 2005 represent the 20% minority share of the profits at Loulo since production commenced in November 2005.
Cash Resources
The group had $294.2 million cash and cash equivalents for the year ended December 31, 2007 and $143.4 million for the year ended December 31, 2006.
Operating Activities
Net cash provided by operating activities was $62.2 million for the year ended December 31, 2007 and $70.4 million for the year ended December 31, 2006. The $8.2 million decrease was mainly the result of the decrease in profit after tax.
Receivables include $18.8 million net of a provision to reflect the time value of money for the year ended December 31, 2007 ($18.4 million for the year ended December 31, 2006) relating to indirect taxes owing to Morila SA and Loulo SA by the State of Mali. Receivables also include advances made to a contractor at Loulo totaling $12.1 million net of a provision to reflect the time value of money for the year ended December 31, 2007 ($11.8 million for the year ended December 31, 2006). Significant uncertainties exist relating to the recoverability of the advances to the contractor. More detail is given in note 23 of our audited consolidated financial statements.
Net cash provided by operating activities was $70.4 million for the year ended December 31, 2006 and $29.7 million for the year ended December 31, 2005. The $40.7 million increase was mainly the result of the first full year of production at Luolo and higher average gold prices received.
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Table of ContentsInvesting
Investing activities for the year ended December 31, 2007 utilized $96.9 million compared to $61.4 million utilized for the year ended December 31, 2006. Investing activities include the acquisition of investments in US auction rate securities amounting to $49 million. The trading market for these instruments has become substantially illiquid as a result of unusual conditions in the credit markets. The company continues to receive interest payable on these securities. Historically, these securities were presented as current assets on the company’s balance sheet. Given the current trading market, these securities, which were originally purchased in 2006, have been reclassified from cash and cash equivalents to financial assets on the company’s balance sheet in 2007.
We believe that based on our current cash and cash equivalents balance of approximately $294 million at December 31, 2007 and expected operating cash flows, the current lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, financial flexibility or our ability to fund our operations.
Investing activities for the year ended December 31, 2006 utilized $62.6 million compared to $84.5 million for the year ended December 31, 2005. This is due to less being spent in 2006 on the Loulo capital project compared to 2005. Only $31.7 million was spent in 2006 on the completion of the project. $17.6 million was also spent on underground equipment and the commencement of the decline shaft sinking at Loulo. The decrease in cash utilized in investing activities year on year is also the result of no advances made to Loulo contractors in 2006 ($11.3 million was advanced for the year ended December 31, 2005).
Financing
Financing activities for the year ended December 31, 2007 generated $185.4 million. An equity placing was concluded in December 2007 and raised $231.7 million net of expenses. The corporate revolving credit facility of $40.8 million was also repaid in December 2007 and dividends of $6.9 million relating to 2006 were paid in February 2007.
Financing activities for the year ended December 31, 2006 utilized net cash of $18.1 million compared to net cash generated of $129 million for the year ended December 31, 2005. The net cash generated in the year ended December 31, 2005 relates to the funds received as part of the public offering completed in November 2005, as well as the final draw down of $25 million on the Loulo project loan. The net cash utilized in the year ended December 31, 2006 related mainly to the repayment of $19.2 million on the Loulo project finance loan.
Credit and Loan Facilities
On April 7, 2000, we concluded a $90 million loan with a consortium of financial lenders led by NM Rothschild for the development of Morila. We referred to this loan as the Morila Project Loan. The loan was fully repaid in June 2004.
During the year ended December 31, 2000, Morila entered into a finance lease for five Rolls-Royce generators under the terms of a Deferred Terms Agreement between Morila and Rolls-Royce. The lease is repayable over ten years commencing April 1, 2001 and bears interest at a variable rate which at December 31, 2006 was approximately 21% per annum. Our attributable share of this finance lease obligation amounted to $3.8 million at December 31, 2006 and $4.8 million at December 31, 2005. We have guaranteed the repayment of the lease.
On August 28, 2002, the Syama hedge transactions were closed through a cancellation agreement with NM Rothschild. On that date, we agreed to buy gold call options to offset existing positions with NM Rothschild comprised of 148,500 ounces at $353/ounce at a cost of $1,805,760. In lieu of the existing premium, NM Rothschild agreed to lend us that amount on a pre-agreed payment schedule requiring us to repay the loan monthly through the 2004 fiscal year. The liability was fully paid by the end of 2004.
Morila also has a finance lease with Air Liquide relating to three oxygen generating units. The lease is payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which at December 31, 2006 stood at approximately 3.48%.
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Table of ContentsSomilo SA has a $0.6 million loan from the Government of Mali. This loan is uncollateralized and bears interest at the base rate of the Central Bank of West African States plus 2% per annum. The accrual of interest ceased in the last quarter of 2005 per mutual agreement between shareholders. This loan is repayable from cash flows of the Loulo mine after the repayment of all other loans.
The Loulo Project Finance Loan was arranged by NM Rothschild & Sons Limited and SG Corporate & Investment Banking, who were joined in the facility by Absa Bank and HVB Group, and was repayable between June 2006 and September 2009.
The Loulo project finance facility was replaced in May of 2007 with a US$60 million corporate revolving credit facility to Randgold Resources. The facility is with NM Rothschild, Société Générale, Fortis and Barclays. It carries interest at rates of between LIBOR + 1.4% and LIBOR + 1.6%. The facility was fully repaid in December 2007. The corporate facility remains in place should it be required. The maximum amounts outstanding under the facility are: prior to November 1, 2009 — US$60 million; up to May 1, 2010 — US$48 million; up to November 1, 2010 — US$36 million; up to May 1, 2011 — US$24 million.
The Euro denominated Caterpillar finance facility relates to fifteen 3512B HD generator sets and ancillary equipment purchased from JA Delmas and financed by a loan from Caterpillar Finance for Loulo. The lease is payable quarterly over 42 months commencing on August 1, 2005, and bears interest at a fixed rate of 6.03% per annum. Together with Randgold Resources (Somilo) Limited, we jointly guaranteed the repayment of this lease. The average lease payments of $0.5 million are payable in installments over the term of the lease.
Corporate, Exploration, Development and New Business Expenditures
Our expenditures on corporate, exploration, development and new business activities for the past three years are as follows:
The main focus of exploration work is on our advanced projects in Mali West, around Morila, and in Senegal, Tanzania, Burkina Faso, Côte d’Ivoire and Ghana.
A feasibility study and an extensive drilling programmes have been completed for the Tongon project in Côte d’Ivoire and the board of the company approved on January 31, 2008 the development of a new mine at Tongon subject to the approval of the mining convention by the Côte d’Ivoire Minister of Mines and Energy.
Working Capital
Management believes that our working capital resources, by way of internal sources and banking facilities, are sufficient to fund our currently foreseeable future business requirements.
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Table of ContentsWe are not involved in any research and development and have no registered patents or licenses.
Our financial results are subject to the movement in gold prices. In the past fiscal year, the general trend has been upwards and this has had an impact on revenues. However it should be noted that fluctuations in the price of gold remain a distinct risk to us.
Gold Market
The gold market is relatively liquid compared with many other commodity markets, with the price of gold generally quoted in US dollars. The physical demand for gold is primarily for fabrication purposes, and gold is traded on a world-wide basis. Fabricated gold has a variety of uses, including jewelry, electronics, dentistry, decorations, medals and official coins. In addition, central banks, financial institutions and private individuals buy, sell and hold gold bullion as an investment and as a store of value.
Historically, gold has been used as a store of value because it tends to retain its value in relative terms against basic goods in times of inflation and monetary crisis. Therefore, large quantities of gold in relation to annual mine production are held for this purpose. This has meant that, historically, the potential total supply of gold has been far greater than annual demand. Thus, while current supply and demand play some part in determining the price of gold, this does not occur to the same extent as for other commodities.
Instead, gold prices have been significantly affected, from time to time, by macro-economic factors such as expectations of inflation, interest rates, exchange rates, changes in reserve policy by central banks, and global or regional political and economic crises. In times of inflation, currency devaluation, and political and economic crises, gold has traditionally been seen as refuge, leading to increased purchases of gold and a support for the price of gold.
Interest rates affect the price of gold on several levels. High real interest rates increase the cost of holding gold, and discourage physical buying in developed economies. High US dollar interest rates also make hedging by forward selling attractive because of the higher contango premiums (differential between LIBOR and gold lease rates) obtained in the forward prices. Increased forward selling in turn has an impact on the spot price at the time of sale.
Changes in reserve policies of central banks have affected the gold market and gold price on two levels. On the physical level, a decision by a central bank to decrease or to increase the percentage of gold in bank reserves leads to either sales or purchases of gold, which in turn has a direct impact on the physical market for the metal. In practice, sales by central banks have often involved substantial tonnages within a short period of time and this selling can place strong downward pressure on the markets at the time they occur. As important as the physical impact to official sales, announcements of rumors of changes in central bank policies which might lead to the sale of gold reserves historically had a negative effect on market sentiment and encouraged large speculative positions against gold in the futures market for the metal.
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Table of ContentsThe volatility of gold prices is illustrated in the following table, which shows the annual high, low and average of the afternoon London Bullion Market fixing price of gold in US dollars for the past ten years.
None.
Our contractual obligations and commercial commitments consist primarily of credit facilities, as described above. The related obligations as at December 31, 2007 are set out below:
(1) Includes total interest of $1.7 million calculated at the interest rate existing at year end.
1 Year
5 Years61
Table of ContentsItem 6. Directors, Senior Management and Employees
Our Articles of Association provide that the board must consist of no less than two and no more than 20 directors at any time. During the year, Mr. R.A. Williams resigned and Mr. G.P. Shuttleworth was appointed as Financial Director. The board currently consists of 8 directors.
Our Articles of Association provide that any new director should be reelected by the shareholders at the annual general meeting following the date of the director’s appointment. As a result of his appointment during the year, Mr. Shuttleworth was the subject of an ordinary resolution and reelected at the annual general meeting held on April 28, 2008, as required by our Articles of Association. Furthermore, each director is subject to reelection on a rotation basis every three years as required by our Articles of Association and the Companies (Jersey) Law, 1991. Dr. D.M. Bristow, our C.E.O. was the subject of an ordinary resolution and reelected at the annual general meeting held on April 28, 2008, as required by our Articles of Association.
According to the Articles of Association, the board meets at intervals determined by the board from time to time.
The address of each of our executive directors and non-executive directors is the address of our principal executive offices, La Motte Chambers, La Motte Street, St. Helier, Jersey, JE1 1BJ, Channel Islands.
Executive Directors
D. Mark Bristow (49) Chief Executive Officer. Dr. Bristow was appointed a director in August 1995 and Chief Executive Officer in October 1995. A geologist with more than 25 years’ experience in the mining industry, he holds a Ph. D. in Geology from Natal University, South Africa. Prior to this he held executive responsibility for the exploration and new business activities of Randgold & Exploration from 1992 to 1995. During the period 1995 to 1997 he also directed the re-engineering of the reserve management functions of the gold mining of the Randgold & Exploration Group and its affiliated gold mining companies. He is currently a non-executive director of Rockwell Resources International and previously held directorships at African Platinum, Harmony Gold Mining Company Limited, DRD Gold Limited and Randgold & Exploration Company Limited.
Graham P. Shuttleworth (39) Chief Financial Officer; Financial Director. Mr Shuttleworth joined us as Chief Financial Officer and Financial Director on July 1, 2007 but has been associated with Randgold Resources since its inception, initially as part of the management team involved in listing the company on the London Stock Exchange in 1997, and subsequently as an adviser. A chartered accountant, he was a managing director and the New York-based head of metals and mining for the Americas in the global investment banking division of HSBC before taking his new poistion with us. At HSBC he led or was involved in a wide range of major mining industry transactions, including our Nasdaq listing, our bid for Ashanti Goldfields and our 2005 equity offering.
Non-Executive Directors
Philippe Liétard (59) Non-Executive Chairman; Mr. Liétard was appointed a director in February 1998. Mr. Liétard was managing director of the Global Natural Resources Fund from 2000 to 2003. Prior to July 2000, he was director of the Oil, Gas and Mining Department of the International Finance Corporation. His experience in corporate and project finance with UBS, IFC and the World Bank extends over 30 years, most of them in the minerals business and in Africa. Mr. Liétard is now an independent consultant and a promoter of mining and energy investments. He was appointed a director in February 1998 and chairman in November 2004.
Bernard H. Asher (71) Non-Executive Director; Chairman of the audit committee and member of the nomination and governance committee. From 1986 to 1998, he was an executive director of HSBC Holdings plc and chairman of HSBC Holdings’ subsidiary, HSBC Investment Bank plc. He was
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Table of Contentschairman of Lonrho Africa plc, vice-chairman of the Court of Governors of the London School of Economics and of the Legal & General Group plc and a director of Morgan Sindall plc. He is Chairman of Lion Trust Asset Management and senior independent director of Morgan Sindall plc. He was appointed a director in June 1997 and senior independent director in October 2003.
Norborne P. Cole (66) Non-Executive Director. Chairman of the remuneration committee and member of the nomination and governance committee. Mr. Cole was appointed a director in May 2006. Mr. Cole was CEO of Coca-Cola Amatil based in Sydney, Australia until 1998. Currently he is vice-chairman of Silver Eagle Distributers of Houston, Texas and a director of Lancer Corporation and Papa John’s International Inc.
Robert I. Israel (58) Non-Executive Director; Member of the remuneration committee. Mr. Israel was appointed a director in June 1997. Mr. Israel is a partner at Compass Advisers, LLP. Until April 2000, Mr. Israel served as a managing director of Schroder & Co. Inc. and head of its Energy Department. He has 28 years of experience in corporate finance, especially in the natural resources sector.
Aubrey L. Paverd (69) Non-Executive Director; Member of the audit committee. Dr. Paverd was appointed a non-executive director in August 1995. He is also a director of the Peruvian mining company Cia. Minas Buenaventura. Dr. Paverd is now an independent consultant. He has 45 years of international geological experience.
Karl Voltaire (58) Non-Executive Director; Member of the audit committee and member of the remuneration committee. Dr. Voltaire was appointed a director in May 2006. He holds a Ph.D in finance from the University of Chicago. He is currently the CEO of The Nelson Mandela Institute and was previously a director of the African Development Bank. Dr. Voltaire was formerly with the International Finance Corporation where he was the director in charge of Global Financial Markets.
Executive Officers
David Haddon (50) General Counsel and Secretary. Having overseen our administrative obligations from our incorporation in 1995, Mr. Haddon assumed full secretarial responsibility when we became listed on the London Stock Exchange in July 1997. He has over 23 years of legal and administrative experience. He assumed the responsibility as general counsel in January 2004. He is a director of Seven Bridges Trading 14 (Pty) Limited.
Paul Harbidge (38) General Manager − Exploration. Mr. Harbidge is a geologist with 15 years’ experience, mainly in West Africa. He joined us in 2000 and was appointed exploration manager in 2004 and general manager − exploration in November 2006.
Bill Houston (60) General Manager − Human Resources. Mr. Houston joined us in 1992 as group training and development manager and currently heads the human resources function. He has 27 years of human resources experience. He is a director of Morila SA and Seven Bridges Trading 14 (Pty) Limited.
Amadou Konta (50) General Manager − Loulo. Mr. Konta has a degree in civil engineering as well as several management and project management qualifications. He was appointed mine foreman and superintendent at Syama mine and served as mine manager from 1997. In 2001 he was promoted as our construction manager in Mali and was appointed Loulo general manager on October 1, 2004.
Victor Matfield (43) General Manager − Corporate Finance. Mr. Matfield is a chartered accountant with 14 years’ experience in the mining industry. He was appointed corporate finance manager in August 2001, prior to that he served as financial manager of the Syama mine and of the Morila capital project. He is a director of Seven Bridges Trading 14 (Pty) Limited.
Chris Prinsloo (57) Group Commercial and Financial Manager. Mr. Prinsloo became Group Financial Manager in January 2002. He has 35 years of experience in the mining industry. He is a director of Somilo SA and Morila SA.
Rodney Quick (36) General Manager − Project Development and Evaluation. Mr. Quick is a geologist with 14 years’ experience in the gold mining industry. Since joining us in 1996, he has been
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Table of Contentsinvolved in the exploration, evaluation and production phases of the Morila, Loulo and Tongon deposits and was appointed the Somilo resource manager in 2006. He is now responsible for all project development and evaluation.
Adrian J. Reynolds (53) General Manager − Technical. Mr. Reynolds has 27 years’ experience in the exploration and mining industries and was part of the team that developed our original strategy. He leads the exploration team and manages the evaluation of early stage and development projects. He is responsible for the Morila technical oversight and for compilation of our technical audits, due diligences and feasibility studies. He is a director of Morila Limited and Somilo SA.
Mahamadou Samaké (60) General Manager − Randgold Resources Mali. Mr. Samaké is the general manager of the Bamako office and is a director of our Malian subsidiaries. He was a professor of company law at the University of Mali.
John Steele (47) General Manager − Capital Projects. Mr. Steele has overseen the capital expansion program at the Syama mine, and at the beginning of July 1998, assumed the position of general manager capital projects for the Randgold Resources Group, overseeing the construction of Morila. He is a director of Somilo SA and Morila Limited and is currently leading the Loulo construction project.
Samba Touré (54) General Manager − Morila. Mr. Touré has a masters degree in chemical engineering and geochemistry and was part of the team that set up Mali’s first research laboratory for the mining and petroleum industries in 1985. As country manager for BHP Minerals, he oversaw that company’s exploration programs in West Africa. He joined Morila in 2000 and was promoted to operations manager in 2004 and general manager in 2007.
Our Articles of Association provide that the longest serving one-third of directors retire from office at each annual general meeting. Retiring directors normally make themselves available for re-election and are re-elected at the annual general meeting on which they retire. Our officers who are also directors retire as directors in terms of the Articles of Association, but their service as officers is regulated by standard industry employment agreements.
The date of appointment, date of expiration and length of service for each of our directors is set forth in the table below:
Appointment
Expiration of
Term
Years Served ExecutiveNone of our directors and executive officers was selected under any arrangements or understandings between that director or executive officer and any other person. All of our non-Executive directors are considered independent directors.
Our objective is to provide senior management, including executive directors, with a competitive remuneration package which will attract and retain executives of the highest caliber and will encourage and reward superior performance in the manner consistent with the interests of our shareholders. The remuneration committee’s policies are designed to meet these objectives and to ensure that the individual directors are fairly and responsibly rewarded for their respective contributions to our performance.
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Table of ContentsWe have no liability in respect of retirement provisions for executive directors. We do, however, provide a vehicle in the form of a defined contribution fund into which employees, including executive directors, may contribute for the purpose of providing for retirement. While we make an annual contribution on behalf of our employees, we do not do so on behalf of our executive directors.
Each executive director receives a basic salary. Executive directors do not receive any fees. Executive directors are paid an annual bonus which is determined in accordance with set performance criteria agreed between the executive directors and the board.
Following approval of a change at the last annual general meeting, fees paid to non-executive directors are:
Termination other than resignation or dismissal;
Voluntary retirement after the age of 65 with a minimum of three years service as a director; and
Change in control of the company.
A director must hold shares at least equal in value (as at the beginning of the year) to the general annual retainer. A director would be granted three years in which to acquire the required shareholding and this period could be extended by the unanimous approval of the uninterested directors. If the number of shares were to fall below the threshold due to a fall in the share price, no additional purchase of shares would be required. Currently, all the directors hold shares equal to the value of the general annual retainer.
Non-executive directors have been granted options to purchase our ordinary shares. Details of the options still held by the non-executive directors are shown below.
On May 11, 2005 the first $30,000 award was allocated to each of the non-executive directors for the purpose of acquiring restricted stock. The price of the restricted stock calculation was the Nasdaq National Market closing price on May 10, 2005, being $12.78. In terms of the policy, 783 shares were issued directly to each non-executive director and 1,565 shares were held as restricted stock. Non-executive directors were issued the second tranche of 782 ordinary shares on February 13, 2006 and, subject to agreed conditions, the final balance was issued January 3, 2007.
On February 13, 2006 the second $30,000 award was allocated to each of the non-executive directors for the purpose of acquiring restricted stock. The price of the restricted stock calculation was the Nasdaq National Market closing price on February 10, 2006, or $17.11. In terms of the policy, 584 shares were issued directly to each non-executive director and 1,169 shares were held as restricted stock. Non-executive directors were issued the second tranche of 584 ordinary shares on January 3, 2007 and the balance will be issued on January 1, 2008 subject to agreed conditions.
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Table of ContentsOn January 3, 2007 the third $30,000 award was allocated to each of the non-executive directors for the purpose of acquiring restricted stock. The price of the restricted stock calculation was the Nasdaq Global Select Market closing price on January 3, 2007, or $22.37. In terms of the policy 447 shares were issued directly to each non-executive director and 894 shares were held as restricted stock. Non-executive directors will be issued the second and third tranches on January 1, 2008 and January 1, 2009, respectively.
On January 3, 2008, the fourth $30,000 award was allocated to each of the non-executive directors for the purpose of acquiring restricted stock. The price of the restricted stock calculation was the Nasdaq Global Select Market closing price on January 2, 2008, or $38.15. In terms of the policy 262 shares were issued directly to each non-executive director and 524 shares were held as restricted stock. Non-executive directors will be issued the second and third tranches on January 1, 2009 and January 1, 2010, respectively.
During the year ended December 31, 2007, the aggregate compensation paid or payable to our directors and executive officers as a group was approximately $6.5 million, of which $4.4 million was payable to directors and recognized as a remuneration expense.
The following table sets forth the aggregate compensation for each of the directors:
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