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. In addition, 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 statements of consolidated operations 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 statements of
consolidated operations immediately.
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. In addition, final environmental
rehabilitation obligations are estimated based on these interpretations
and in line with responsible programs undertaken by similar operations
elsewhere in the world, with provisions made over the expected lives of
our mines. While management believes that the environmental
rehabilitation provisions made are adequate and that the
interpretations applied are appropriate, the amounts estimated for the
future liabilities may differ materially from the costs that will
actually be incurred to rehabilitate our mine sites in the future.
If management determines that an insufficient rehabilitation
provision has been created, earnings will be adjusted as appropriate in
the period that the determination is made.
In general, mining
costs are allocated to production costs, inventories and ore
stockpiles, and are charged to
mine
production costs when gold is sold. However, at our open pit mines,
which have diverse grades and waste-to-ore
ratios over the mine, we defer the costs of waste stripping in excess
of the expected pit life average stripping
ratio. These mining costs, which are commonly referred to as
"deferred
stripping" costs, are incurred in mining
activities that are generally associated with the removal of
waste rock. The deferred stripping method is
generally accepted in the mining industry where mining
operations have diverse grades and
waste-to-ore ratios; however industry practice does vary. Stripping
costs (including any adjustment through the
deferred stripping asset) is treated as a production cost
and included in its valuation of
inventory.
The expected pit life
stripping ratios are recalculated annually in light of additional
knowledge and changes in estimates. These
ratios are calculated as the ratio of the total of waste tonnes
deferred at the calculation date and future
anticipated waste to be mined, to anticipated future ore to be mined.
Changes in the mine plan, which will include
changes in future ore and waste tonne to be mined, will
therefore result in a change of the expected
pit life average stripping ratio, which will impact prospectively
on amounts deferred or written
back.
If the expected pit life
average stripping ratio is revised upwards, relatively lower stripping
costs will, in the future, be deferred in
each period, or a relatively higher amount of charges will be written
back, thus impacting negatively upon
earnings. The opposite is true when the expected pit life average
stripping ratio is revised downwards,
resulting in more costs being deferred and a positive impact on
earnings during the period of cost deferral.
Any costs deferred will be expensed in future periods over the life
of the Morila mine, resulting in lower
earnings in future periods. If we were
to expense stripping costs as incurred, there might be greater
volatility in our results of operations.
During 2004, a committee of the Emerging
Issues Task Force ("EITF") began discussing
the accounting treatment for stripping costs
incurred during the production phase of a mine under U.S.
GAAP. In March 2005, the EITF reached a consensus
(ratified by the Financial Accounting Standards
Board) that stripping costs incurred during the
production phase of a mine are variable production costs
that should be included in the costs of inventory
produced during the period that the stripping costs are
incurred. The EITF consensus is effective for the first
reporting period in fiscal years beginning after
December 15, 2005, with early adoption
permitted.
The Company will
therefore adopt the consensus of the EITF for US GAAP
purposes on January 1, 2006, and anticipates
recording a cumulative effect of a change in
accounting principle on that date. The cumulati"left">
|
|
|
|
|
|
|
| Metamorphism: |
|
Alteration
of rocks and minerals by a combination of heat, pressure and chemical
processes over a long time period. |
| Metallurgical
plant: |
|
A processing plant used to treat ore and extract the
contained gold. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2004 |
|
2003 |
|
2002 |
| Net
income as
reported |
|
Metallurgy: |
|
In the context
of this document, the science of extracting metals from ores and
preparing them for sale. |
| Mill delivered
tonnes: |
|
A quantity, expressed in tonnes, of ore delivered to
the metallurgical plant. |
| Milling/mill: |
|
The
comminution of the ore, although the term has come to cover the broad
range of machinery inside the treatment plant where the gold is
separated from the ore. |
| Mineable: |
|
That
portion of a mineralized deposit for which extraction is technically
and economically
feasible. |
| Mineralization: |
|
The presence of a
target mineral in a mass of host rock. |
| Mineralized
material: |
|
A mineralized body which has been delineated by
appropriately spaced drilling and/or underground sampling to support a
sufficient tonnage and average grade of metals to warrant further
exploration. |
| |
|
A deposit of mineralized
material does not qualify as a reserve until a comprehensive evaluation
based upon unit cost, grade, recoveries, and other material factors
conclude legal and economic
feasibility. |
| Moz: |
|
Million troy
ounces. |
| Mt: |
|
Million metric
tonnes. |
| Open pit: |
|
Mining in which the ore is
extracted from a pit. The geometry of the pit may vary with the
characteristics of the orebody. |
| Orebody: |
|
A
continuous, well-defined mass of material containing sufficient
minerals of economic value to make extraction economically
feasible. |
| Orogenic: |
|
Of or related to
mountain building, such as when a belt of the Earth's crust is
compressed by lateral forces to form a chain of
mountains. |
| Ounce: |
|
One troy ounce, which
equals 31.1035 grams. |
| Oxide: |
|
Soft, weathered
rock. |
| Payshoot: |
|
A defined zone of
economically viable mineralization. |
|
v
|
|
|
|
|
|
|
| Probable reserves: |
|
Reserves
for which quantity and grade and/or quality are computed from
information similar to that used for proven reserves, but the sites for
inspection, sampling, and measurement are farther apart or are
otherwise less adequately spaced. The degree of assurance, although
lower than that for proven reserves, is high enough to assume
continuity between points of
observation. |
| Prospect: |
|
An area of land with
insufficient data available on the mineralization to determine if it is
economically recoverable, but warranting further
investigation. |
| Prospecting license or
permits: |
|
An area for which permission to explore has been
granted. |
| PL: |
|
Prospecting
License. |
| PLR: |
|
Prospecting License
(reconnaissance). |
| Proven reserves: |
|
Reserves
for which quantity is computed from dimensions revealed in outcrops,
trenches, workings or drill holes; grade and/or quality are computed
from the results of detailed sampling; and the sites for inspection,
sampling and measurement are spaced so closely and the geologic
character is so well defined that size, shape, depth and mineral
content of reserves are
well-established. |
| Pyrite: |
|
A brassy-colored
mineral of iron sulphide (compound of iron and
sulfur). |
| Pyrrhotite: |
|
A mineral compound of
iron and sulphide. |
| Quartz: |
|
A mineral
compound of silicon and
oxygen. |
| Quartzite: |
|
Metamorphic rock with
interlocking quartz grains displaying a mosaic
texture. |
| Refining: |
|
The final stage of metal
production in which final impurities are removed from the molten metal
by introducing air and fluxes. The impurities are removed as gases or
slag. |
| Regolith: |
|
Weathered products of fresh
rock, such as soil, alluvium, colluvium, sands, and hardened oxidized
materials. |
| Rehabilitation: |
|
The process of
restoring mined land to a condition approximating its original
state. |
| Reserve: |
|
That part of a mineral
deposit which could be economically and legally extracted or produced
at the time of the reserve determination. |
| Reverse
circulation (RC) drilling: |
|
A drilling
method. |
| Rotary Air Blast (RAB) drilling: |
|
A
drilling method. |
| Sampling: |
|
Taking small
pieces of rock at intervals along exposed mineralization for assay (to
determine the mineral content). |
|
vi
|
|
|
|
|
|
|
| Sedimentary: |
|
Sourced from
erosion of other rocks. |
| Shear zone: |
|
An
elongated area of structural
deformation. |
| Silica: |
|
A naturally occurring
dioxide of silicon. |
ound-color: #cceeff;" align="right" valign="bottom" colspan="1">
18,793 |
|
|
|
47,526 |
|
|
|
Stockpile: |
|
A store of
unprocessed ore. |
| Stope: |
65,728 |
|
| Adjustment
to
income
as a result of not deferring stripping
costs |
|
|
(1,067 |
) |
|
|
(1,620 |
) |
|
|
(3,462 |
) |
| Net
income |
|
|
|
The underground
excavation within the orebody where the main gold production takes
place. |
| Stripping: |
|
The process of removing
overburden to expose ore. |
| Stripping
ratio: |
|
Ratio of waste material to ore material needed to be
moved in an open pit mine. |
| Sulphide: |
|
A
mineral characterized by the linkages of sulfur with a metal or
semi-metal, such as pyrite or iron sulphide. Also a zone in which
sulfide minerals occur. |
| Tailings: |
|
Finely
ground rock from which valuable minerals have been extracted by
milling. |
| Tectonic: |
|
Deformation related to
orogenic events. |
| Tonalite: |
|
A type of igneous
rock. |
| Tonnage: |
|
Quantities where the ton or
tonne is an appropriate unit of measure. Typically used to measure
reserves of gold-bearing material in situ or quantities of ore and
waste material mined, transported or
milled. |
| Tonne: |
|
One tonne is equal to 1,000
kilograms (also known as a "metric"
ton). |
| 17,726 |
|
|
|
45,906 |
|
|
|
62,266 |
|
|
See
"Item 5 – Operating and Financial Review and
Prospects – Recent Accounting Pronouncements".
Recent Accounting Pronouncements
IFRS
Total cash costs: |
|
Total cash costs, as
defined in the Gold Institute standard, include mine production,
transport and refinery costs, general and administrative costs,
movement in production inventories and ore stockpiles, transfers to and
from deferred stripping and
royalties. |
| Trenching: |
|
Making elongated
open-air excavations for the purposes of mapping and
sampling. |
| Trend: |
|
The arrangement of a group
of ore deposits or a geological feature or zone of similar grade
occurring in a linear pattern. |
| Waste: |
|
Rock
mined with an insufficient gold content to justify
processing. |
| Weathered: |
|
Rock broken down by
erosion. |
|
vii
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.
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 U.S. dollars and our
annual and interim financial statements are prepared on a historical
cost basis in accordance with International Financial Reporting
Standards, or IFRS. IFRS differs in significant respects from generally
accepted accounting principles in the United States, or U.S. GAAP. This
Annual Report includes a discussion of the relevant differences between
IFRS and U.S. GAAP, and Note 24 to our consolidated financial
statements included in this Annual Report sets forth a reconciliation
from IFRS to U.S. GAAP of net income and shareholders' equity. We
have also included in this Annual Report the audited financial
information for the years ended December 31, 2004 and 2003 and 2002 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 U.S. 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 1
Item
1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected
Timetable
Not applicable.
Item 3. Key
Information
A. SELECTED FINANCIAL DATA
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,
2004, 2003, and 2002 and as at December 31, 2004 and 2003 which appear
elsewhere in this Annual Report. The historical consolidated financial
data as at December 31, 2001 and 2000 have been derived from our
audited consolidated financial statements not included in this Annual
Report.
The financial data, other than total
cash costs and total cash cost per ounce, have been prepared in
accordance with IFRS unless otherwise noted. Total cash costs and total
cash cost per ounce are non-GAAP financial measures. For further
information, refer to footnote 1 on page 3. In Note 24 to
our audited consolidated financial statements, we present the principal
differences between IFRS and U.S. GAAP and a reconciliation of our net
income and shareholders' equity to U.S. GAAP.
1
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| |
|
Year
Ended
December 31,
2004 |
|
IFRS 3 – Business
Combinations
All business combinations within the scope of
IFRS 3 must be accounted for using the purchase method. The pooling of
interests method is prohibited. Costs expected to be incurred to
restructure an acquired entity's (or the acquirer's)
activities must be treated as post-combination costs, unless the
acquired entity has a pre-existing liability for restructuring its
activities. Intangible items acquired in a business combination must be
recognized as assets separately from goodwill if they meet the
definition of an asset, are either separable or arise from contractual
or other legal rights, and their faire value can be measure reliably.
Identifiable assets acquired, and liabilities and contingent
liabilities incurred or assumed, must be initially measured at faire
value. Amortisation of goodwill and intangible assets with indefinite
useful lives is prohibited. Instead they must be tested for impairment
annually, or more frequently if events or changes in circumstances
indicate a possible impairment.
Effective for the year
beginning January 1, 2005
IFRS 5 – Non-current
Assets Held for Sale and Discontinued Operations
IFRS 5
requires assets that are expected to be sold and meet specific criteria
to be measured at the lower of carrying amount and fair value less
costs to sell. Such assets should not be depreciated and should be
presented separately in the balance sheet. It also requires operations
that form a major line of business or area of geographical operations
to be classified as discontinued when the assets in the operations are
classified as held for sale. These requirements relating to assets held
for sale and the timing of the classification of discontinued
operations are substantially the same as the equivalent requirements in
U.S. GAAP. The type of operation that can be classified as discontinued
is narrower than under U.S. GAAP.
51
Effective for the year beginning
January 1, 2005
Other developments – IASB
14 IAS standards were improved (1, 2, 8, 10, 16, 17, 21, 24, 27, 28,
31, 33, 36, 40) and IAS 15 withdrawn. The changes have removed
accounting choices and are expected to result in better reporting. New
guidelines and significantly enhanced disclosures have been introduced.
Limited revisions were also made to IAS 32 and 39.
The
improvements and amendments are effective for periods beginning on or
after January 1, 2005. Earlier adoption is encouraged.
All changes to each individual standard must be implemented at a
point – selective application is prohibited.
IFRIC
Interpretations
IFRIC Interpretation 1 – Changes in
Existing Decommissioning, Restoration and Similar Liabilities
This Interpretation addresses how the effect of the following events
that change the measurement of an existing decommissioning, restoration
or similar liability should be accounted for :
|
|
| a) |
a change in the estimated outflow of resources
embodying economic benefits (e.g. cash flows) required to settle the
obligation; |
|
|
| b) |
a change in the current
market-based discount rate as defined in paragraph 47 of IAS 37 (this
includes changes in the time value of money and the risks specific to
the liability); and |
|
|
| c) |
an increase that
reflects the passage of time (also referred to as the unwinding of the
discount). |
Effective for the year beginning January 1,
2005.
U.S. GAAP
In December 2004, the
Financial Accounting Standards Board, or the FASB, issued Statement of
Financial Accounting Standards No. 123R "Share-Based
Payment", or FAS 123R. FAS 123R revised Statement of
Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" and supersedes Accounting
Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees" and its related implementation
guidance. FAS 123R requires measurement and recording to the financial
statements the costs of employee services received in exchange for a
award of equity instruments based on the grant-date fair value of the
award, recognized over the period during which an employee is required
to provide service in exchange for such award. We will adopt the
provisions of FAS 123R on January 1, 2006 and anticipate using the
modified prospective application. Accordingly, compensation expense
will be recognized for all newly granted awards and awards modified,
repurchased, or cancelled after July 1, 2005. Compensation costs for
the unvested portion of awards that are outstanding as of July 1, 2005
to be recognized ratably over the remaining vesting period. The
compensation costs for the unvested portion of awards will be based on
the fair value at date of grant as calculated for our pro forma
disclosure under FAS 123. The effect on net income and earnings per
share in the periods following adoption of FAS 123R are expected to be
consistent with our pro forma disclosure under FAS 123, except that
estimated forfeitures will be considered in the calculation of
compensation expense under FAS 123R. Additionally, the actual effect on
net income and earnings per share will vary depending upon the number
and fair value of options granted in 2005 compared to prior years.
In November 2004, the FASB issued Statement of Financial Accounting
Standards No. 151, "Inventory Costs – an amendment
of ARB NO. 43, Chapter 4," which clarifies the accounting
for abnormal amounts of idle facility expense, freight, handling costs
and wasted material as current
52
period costs. It also requires that
allocations of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. The
Statement applies to inventory costs incurred in the first fiscal year
beginning after June 15, 2005. We are currently determining the impact
on our financial position and results from operations.
During
2004, a committee of the EITF began discussing the accounting treatment
for stripping costs incurred during the production phase of a mine. In
March 2005, the EITF reached a consensus (ratified by the FASB) that
stripping costs incurred during the production phase of a mien are
variable production costs that should be included in the costs of
inventory produced during the period that the stripping costs are
incurred. The EITF consensus is effective for the first reporting
period in fiscal years beginning after December 15, 2005, with early
adoption permitted. We are currently evaluating the impact on our
financial position and results of operations.
A. OPERATING
RESULTS
Our operating and financial review and prospects should
be read in conjunction with our financial statements, accompanying
notes thereto, and other financial information appearing elsewhere in
this Annual Report.
Years Ended December 31, 2004 and 2003
Revenues
Total revenues decreased by $32.8 million,
or 28.1%, from $116.5 million for the year ended December 31,
2003 to $83.7 millspan="3">Year Ended
December
31,
2003 |
|
Year Ended
December 31,
2002 |
|
Year Ended
December 31,
2001 |
|
Year
Ended
December 31,
2000 |
| STATEMENT OF OPERATIONS
DATA: |
|
(In
thousands, except per share and per ounce
data) |
| Product Sales
From the year ended December 31, 2003 to the
year ended December 31, 2004, gold sales revenues decreased by $36.2
million, or 33.1%, from $109.6 million to $73.3 million. This
was mainly due to 114,897 less ounces available for sale as a result of
a drop in head grade from 8.33g/t to 5.20 g/t compounded by a decrease
of 3.1% in recoveries, partially offset by an increase in
throughput of 7.5% and an improved average gold price per ounce
of $382 for 2004 compared to $345 for 2003.
Interest
Income
Interest income amounts consist primarily of interest
received on cash held at banks. Interest income of $1 million for the
year ended December 31, 2004, is consistent with the interest income of
$1 million for the year ended December 31, 2003.
Exchange
Gains
The exchange gain for the year ended December 31, 2004 of
$1.0 million is lower than the exchange gain of $3.8 million, for the
year ended December 31, 2003 as the prior year figure includes realized
-10pt;padding-top: 0pt; background-color: #ffffff;" align="left" valign="bottom" colspan="3">Amounts in accordance with
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
$ |
83,743 |
|
|
$ |
116,505 |
|
|
$ |
134,651 |
Other
Income
Other income of $1.5 million for the year ended December
31, 2004 consists mainly of cost recoveries of $0.7 million, compared
to $0.9 million for the year ended December 31, 2003 and various other
income received at Morila and on a corporate level.
|
|
$ |
87,507 |
|
|
$ |
201,385 |
|
| Operating
income |
|
|
35,850 |
|
|
|
77,936 |
|
|
|
100,021 |
|
|
Profit on
sale of Syama
In April 2003, we entered into an option
agreement with Resolute Mining, over our interest in the Syama Mine in
Mali. In terms of the agreement, Resolute Mining was given a 12 month
period in which to conduct a full due diligence over Syama.
53
On April 5, 2004, Resolute Mining
exercised its option to buy our 80% interest in the Syama Mine.
Resolute Mining paid us $9.9 million, resulting in a profit on sale of
$7.1 million (after transaction fees of $1.2 million). Furthermore, at
a gold price of more than $350 per ounce, we would receive a royalty of
$10 per ounce on the first million ounces of production from Syama and
$5 per ounce on the next three million ounces based on the attributable
ounces acquired by Resolute Mining. No royalty has been received during
the year ended December 31, 2004, since the Syama mine is still on care
and maintenance.
Costs and Expenses
Total
Cash Costs
The following table sets out our total ounces
produced and total cash cost per ounce for the years ended December 31,
2004 and 2003 (for a definition of cash costs, please see
"Item 3. Key Information – A. Selected financial
data"):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December
31, |
| |
|
|
31,999 |
|
|
|
1,885 |
|
| Net
income |
|
2004 |
|
2003 |
| |
|
Ounces |
|
$
Per Ounce |
|
Ounces |
|
$ Per Ounce |
| Morila
(40%
share) |
|
|
204,194 |
|
18,793 |
** |
|
|
47,526 |
|
|
|
|
|
|
184 |
|
|
|
317,597 |
|
|
|
100 |
|
|
From
the year ended December 31, 2003 to the year ended December 31, 2004,
our total cash cost per ounce increased $84 per ounce, or 84%,
from $100 per ounce to $184 per ounce, as a result of decreased
production ounces and increases in diesel and mining contractor
costs.
Transfer to Deferred Stripping Costs
The
increase in the transfer to deferred stripping costs of $0.5 million or
approximately 15% from $3.5 million for the year ended December
31, 2003 to $4.0 million for the year ended December 31, 2004, was due
to the relative waste stripped being more in the y#cceeff;">65,728 |
|
|
|
17,759 |
Depreciation and
Amortization
Depreciation and amortization charges decreased
by $1.6 million, or 16% from $10.3 million for the year ended
December 31, 2003 to $8.7 million for the year ended December 31, 2004.
The decrease was mainly due to the reclassification of assets which
took place in 2003. The charge in 2004 is therefore comparable with the
charge in 2002.
|
|
|
24,361 |
|
| Basic
earnings/(loss) per share
($) |
|
|
0.32 |
** |
|
|
0.83 |
* |
|
|
1.31 |
* |
|
Interest Expense
Interest expense
for the year ended December 31, 2004 was $1.6 million and $1.9 million
for the year ended December 31, 2003 and comprised mainly interest on
our attributable share of the Morila project financing facility. The
decrease is due to the loan being fully repaid in June 2004.
(Gain)/loss on Derivative Financial Instruments
The
gain on derivative financial instruments of $2.2 million for the year
ended December 31, 2004 and the loss on financial instruments of $1.7
million for the year ended December 31, 2003, represents the change in
the fair value between December 31, 2004 and 2003, for those derivative
financial instruments that did not qualify for hedge accounting.
The Loulo instruments were previously deemed speculative for
accounting purposes and any marked-to-market movements had to be
accounted for through the income statement. With the completion of the
final mining schedules and feasibility study, as well as credit
approval of the project financing, the hedged ounces were rolled out
and matched to future production. This means that the marked-to-market
valuation is now accounted for in equity. The Morila hedge book was
fully utilized in 2004.
54
Royalties
Royalties
decreased by $2.3 million, or 31%, from $7.6 million for the
year ended December 31, 2003 to $5.3 million for the year ended
December 31, 2004. The decreased royalties reflect decreased gold
sales.
General and Administrative Expenses
General and administrative costs comprise various expenses
associated with providing administration support services to the Morila
mine. These charges increased to $6.8 million for the year ended
December 31, 2004 from $6.1 million for the year ended December 31,
2003 reflecting the payment of custom duties since November 2003, and
an increase in site administration and environmental expenditure.
Exploration and Corporate Expenditure
Exploration and corporate expenditures were $15.5 million for the
year ended December 31, 2004 and $17 million for the year ended
December 31, 2003. The expenditure for both years reflects largely
activities which are focused on the defining of additional mineralized
materials and converting them to reserve ounces, in particular for the
Loulo Project, and additional drilling programs in Senegal, the Morila
region and more recently Tanzania, Burkina Faso and Ghana. The decrease
in expenditure of $1.5 million from the prior year, is the result of
savings in exploration related staff expenditure.
Exchange Losses
The exchange losses for the
year ended December 31, 2004 of $1.4 million and $1.9 million for the
year ended December 31, 2003 relate primarily to Morila and result from
the weakening of the U.S. dollar against other currencies in which
goods and services are denominated.
Other
Expenses
Other expenses of $1.1 million for the year ended
December 31, 2004 consist mainly of costs associated with the care and
maintenance of Syama for the period ending March 2004 and insurance
costs. Other expenses of $4.9 million for the year ended December 31,
2003 comprise operational and other costs associated with the care and
maintenance of Syama, insurance costs and tax penalties paid.
Minority Interests
The minority interest for
the years ended December 31, 2003 represents the net of the 20%
minority share of the losses in the Syama mine and the 20%
minority share of losses on the Loulo Project. No minority interest was
booked in 2004, as all costs directly related to the construction of
the Loulo mine were capitalized and the Syama mine was sold in April
2004.
Share – Based Payments
Shared-based expenses are as a result of our adopting IFRS 2
from January 1, 2005, in accordance with the
standards provisions. The standard requires an entity to recognize
share-based payment transactions in its
financial statements. The effect of the
change is a charge of $1.3 million for the year ended December 31,
2004. No share options were granted from
November 7, 2002 to December #000000; font-weight: normal; font-style: normal;background-color: #ffffff;"> |
0.29 |
* |
|
|
0.37 |
* |
| Fully
diluted earnings per share
($) |
|
|
0.31 |
** |
|
|
Years Ended
December 31, 2003 and 2002
Revenues
Total revenues decreased by $18.2 million, or 13.5%, from
$134.7 million for the year ended December 31, 2002 to $116.5 million
for the year ended December 31, 2003.
Product
Sales
From the year ended December 31, 2002 to the year
ended December 31, 2003, gold sales revenues decreased by $21.8
million, or 16.6%, from $131.4 million to $109.6 million. The
effect of the lower grades, partially offset by an improved average
sales price of gold per ounce of $345 compared to $308 for 2002,
resulted in the reduction in revenue from gold
sales.
55
Interest Income
Interest
income amounts consist primarily of interest received on cash held at
banks. Interest income of $1 million for the year ended December 31,
2003, compared to $0.2 million for the year ended December 31, 2002,
reflected interest earned on our higher cash balances during the
year.
Exchange Gains
The exchange gain for the
year ended December 31, 2003 of $3.8 million is higher than the
exchange gain of $2.4 million, for the year ended December 31, 2002 as
it includes an unrealized exchange gain of $0.9 million and a reali" valign="bottom" colspan="1" nowrap="nowrap">0.83 |
* |
|
|
1.30 |
* |
|
|
0.29 |
* |
|
|
0.37 |
* |
| Weighted
average number of shares used in computation of basic earnings per
share
(3) |
|
|
58,870,632 |
Other Income
Other income of $2.1 million for the year
ended December 31, 2003 consists mainly of option fees receivable of
$0.7 million, reversal of the doubtful debts provision of $0.5 million
and recoveries of $0.9 million, compared to $0.5 million for the year
ended December 31, 2002.
Costs and
Expenses
Total Cash Costs
The following table
sets out our total ounces produced and total cash cost per ounce for
the years ended December 31, 2003 and 2002 (for a definition of cash
costs, please see "Item 3. Key Information – A.
Selected financial
data"):
|
|
|
|
|
|
57,441,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December
31, |
| |
|
2003 |
|
2002 |
| |
|
Ounces |
|
* |
|
|
50,295,640 |
* |
|
|
61,035,295 |
* |
|
|
66,124,418 |
* |
| Weighted
average number of shares used in computation of fully diluted earnings
per share
(3) |
|
|
59,996,257 |
|
|
|
57,603,364 |
* |
|
|
50,817,466 |
* |
|
|
61,523,810 |
* |
|
|
66,588,904 |
* |
| Amounts
in accordance with U.S. GAAP
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenues |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
16,723 |
|
|
|
48,613 |
|
| Loss
from operations before joint
venture |
|
|
(8,274 |
) |
|
|
(24,621 |
) |
|
|
(31,081 |
) |
|
|
(16,703 |
) |
color: #ffffff;">$
Per Ounce |
|
Ounces |
|
$ Per Ounce |
| Morila
(40%
share) |
|
|
317,597 |
|
|
|
100 |
|
|
|
421,126 |
|
|
|
74 |
|
|
From
the year ended December 31, 2002 to the year ended December 31, 2003,
our total cash cost per ounce increased $26 per ounce, or 35%,
from $74 per ounce to $100 per ounce, as a result of decreased
production and increases in diesel and mining contractor costs.
Transfer to Deferred Stripping Costs
The decrease in
the transfer to deferred stripping costs of $1.5 million or
approximately 30% from $5 million for the year ended December
31, 2002 to $3.5 million for the year ended December 31, 2003, was due
to the actual waste stripped being less in the year ended December 31,
2003 than in the year ended December 31, 2002 but still in excess of
the life of the mine estimated stripping ratio.
Depreciation
and Amortization
Depreciation and amortization charges
increased by $1.5 million, or 17% from $8.8 million for the year
ended December 31, 2002 to $10.3 million for the year ended December
31, 2003. The increase was mainly due to the reclassification of assets
in the fixed asset register into various categories. Previously, all
assets were amortized over the life of the mine. Depreciation and
amortization in both years were largely related to Morila assets. There
was no depreciation and amortization charge for the Syama mine as all
assets had been impaired in previous years.
Interest
Expense
Interest expense for the year ended December 31,
2003 was $1.9 million and comprised mainly interest on our attributable
share of the Morila project financing facility.
|
|
(15,179 |
) |
| Equity
income of Morila joint
venture |
|
|
25,162 |
|
|
|
67,230 |
|
|
Interest expense
for the year ended December 31, 2002 was $3.7 million and comprised
interest on our attributable share of the Morila project financing
facility as well as the $35 million syndicated loan and revolving
credit facility, which was repaid during the year.
Loss on
Derivative Financial Instruments
The loss on derivative
financial instruments of $1.7 million for the year ended December 31,
2003 and $0.3 million for the year ended 2002, represents the change in
the mark-to-market, between December 31, 2002 and 2003, for those
financial instruments that did not qualify for hedge accounting.
56
The loss on financial instruments at
December 31, 2003 mainly results from the mark-to-market valuation of
the forward sales and forward rate agreements taken out as part of the
Loulo Project financing. These have been taken out at the corporate
level and are currently classified as speculative and are therefore
accounted for through the profit and loss statement.
Morila has
style="font-family: serif; font-size: 8pt; color: #000000; font-weight: normal; font-style: normal;background-color: #cceeff;"> |
90,522 |
|
|
|
32,482 |
|
|
|
Royalties
Royalties decreased by $1.6
million, or 17%, from $9.2 million for the year ended December
31, 2002 to $7.6 million for the year ended December 31, 2003. The
decreased royalties reflect decreased gold sales.
General and Administrative Expenses
General and
administrative costs comprise various expenses associated with
providing administration support services to the Morila mine. These
charges increased to $6.1 million for the year ended December 31, 2003
from $4.1 million for the year ended December 31, 2002 reflecting an
increase in site administration, environmental expenditure and head
office charges.
Exploration and Corporate Expenditure
Exploration and corporate expenditures were $17 million for the year
ended December 31, 2003 and are consistent with $16.7 million for the
year ended December 31, 2002. The expenditure for both years reflects
largely activities which are focused on the defining of additional
mineralized materials and converting them to reserve ounces, in
particular for the Loulo Project, and additional drilling programs in
Senegal, the Morila region and Tanzania.
Exchange
Losses
The exchange losses for the year ended December 31,
2003 of $1.9 million and $1.9 million for the year ended December 31,
2002 relate primarily to Morila and result from the weakening of the
U.S. dollar against other currencies in which goods and services are
denominated.
7,908 |
|
| Net
income |
|
|
16,888 |
|
|
|
42,960 |
|
|
|
59,661 |
Other Expenses
Other expenses of $4.9
million for the year ended December 31, 2003 and for the year ended
December 31, 2002 of $5.7 million comprise operational and other costs
associated with the care and maintenance of Syama, insurance costs and
tax penalties paid.
Minority Interests
The
minority interest for the years ended December 31, 2003 and 2002
represents the net of the 20% and 26% respectively
minority share of the losses in the Syama mine and the 20%
minority share of losses on the Loulo Project.
B. LIQUIDITY AND CAPITAL RESOURCES
Cash
Resources
Operations
|
|
|
16,435 |
|
|
|
24,323 |
|
| Basic
earnings per share
($) |
|
|
0.29 |
|
|
|
0.75 |
* |
|
|
1.19 |
* |
|
|
0.27 |
* |
|
|
0.37 |
* |
| Fully
diluted earnings per share
($) |
|
|
Net cash provided by
operations was $4.3 million for the year ended December 31, 2004 and
$51.2 million for the year ended December 31, 2003. The $46.9 million
decrease was mainly the result of lower grades and lower production at
Morila, compared to the previous year.
Net cash provided by
operations was $51.2 million for the year ended December 31, 2003 and
$70.6 million for the year ended December 31, 2002. The $19.4 million
decrease was the result of lower grades and lower production at Morila,
compared to the previous year.
Investing
0.29 |
|
|
|
0.74 |
* |
|
|
1.17 |
* |
|
|
0.27 |
* |
|
|
0.37 |
* |
| Weighted
average number of shares used in computation of basic earnings per
share
(3) |
|
|
58,870,632 |
|
|
|
57,441,360 |
* |
|
|
50,295,640 |
* |
|
|
61,035,295 |
* |
|
|
66,124,418 |
* |
| Weighted
average number of shares used in computation of fully diluted earnings
per share
(3) |
|
|
59,996,257 |
|
|
|
57,603,364 |
* |
|
|
50,817,466 |
* |
|
|
61,523,810 |
* |
|
|
66,588,904 |
* |
| Non-GAAP
measures |
|
|
|
|
|
|
|
Investing activities for the year ended December 31, 2004 utilized
$57 million compared to $6 million utilized for the year ended December
31, 2003. This was due to development expenditure incurred in 2004 in
the construction of the Loulo Mine.
57
Investing activities for the year ended
December 31, 2003 utilized $6 million as compared to $5.5 million
utilized for the year ended December 31, 2002. Both years represent
ongoing capital expenditure at Morila.
Financing
Financing activities for the year ended December 31, 2004 generated
net cash of $25.5 million compared to net cash generated of $0.6
million for the year ended December 31, 2003. The net cash generated in
the year ended December 31, 2004 related mainly to the first draw down
of $35 million on the Loulo Project loan in December 2004, partially
offset by repayment of the Morila project loan.
Credit and
Loan Facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
cash costs ($ per ounce)
(1) |
|
|
184 |
|
|
|
100 |
|
|
|
74 |
|
|
|
153 |
|
|
|
260 |
|
|
|
|
| *
|
Reflects adjustments resulting from the sub-division of
shares |
|
|
| ** |
Reflects
adoption of IFRS 2: Share-based
payment. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
At
December
31,
2004 |
|
At
December 31,
2003 |
|
At
December 31,
2002 |
|
At
December 31,
2001 |
|
At
December 31,
2000 |
| BALANCE SHEET AMOUNTS IN ACCORDANCE
WITH
IFRS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
assets |
|
$ |
268,461 |
|
|
$ |
224,534 |
|
|
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 carried interest at U.S. three month
LIBOR plus 2% per annum. At December 31, 2003, the interest rate
on this loan was 3.29%. The loan was scheduled to be repaid over
5 years with the first payment having been made on June 30, 2001, and
was collateralized by the assets of Morila. Also, we had pledged our
interest in Morila Limited and related assets and the Morila joint
venture had pledged its interest in Morila and related assets to secure
Morila's obligations under the Morila Project Loan Agreement. In
addition to the periodic payments of principal, Morila was required to
make interest payments at periodic intervals. 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 us and Rolls-Royce. The
lease is repayable over ten years commencing April 1, 2001 and bears
interest at a variable rate of which at December 31, 2004 was
approximately 20% per annum. Our attributable share of this
finance lease amounted to $5.8 million at December 31, 2004 and $6.7
million at December 31, 2003. Together with AngloGold Ashanti, we have
guaranteed the repayment of the lease.
Somisy and Randgold
Resources Mali SARL, our subsidiaries, had a Communauté
Financière Africaine franc denominated, uncollateralized
overdraft facility of approximately $1.6 million with Banque de
Developpement du Mali bearing interest at a fixed interest rate of
10.25% per annum at December 31, 2003. The Somisy facility was
taken over by Resolute Mining as part of the sale of Syama.
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. This loan carried interest at the
relevant interbank rate plus 3%, which equated to an average
rate of 4.37% at December 31, 2003. 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, 2004 stood at approximately
3.09%.
Somilo SA also 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. This loan is repayable from cash flows of the Loulo mine
after the repayment of all other loans. At December 31, 2004, the
interest rate on this loan was 7%.
The $60 million Loulo
Project Loan was arranged by NM Rothschild & Sons Limited and SG
Corporate & Investment Banking, who have been joined in the
facility by Absa Bank and HVB Group, and is repayable between June 2006
and September 2009.
A first installment of $35 million was drawn
against the project loan in December 2004. The loan is collateralized
over the assets of the Loulo Project. Additionally, we have pledged our
interest in
58
Randgold Resources (Somilo) Limited and
related assets, and Randgold Resources (Somilo) Limited has pledged our
interest in Somilo and related assets to secure Somilo's
obligations under this loan. The loan is guaranteed by us until
economic completion of the project has been achieved, which is expected
before December 31, 2007. The loan bears interest at LIBOR plus
1.75% pre-completion of the Loulo capital program, or at any
time when we continue to be a guarantor of the facility. Post
completion until the fourth anniversary of signing facility
documentation, the interest rate is LIBOR plus 2.10% and
thereafter 2.25%. The weighted average interest rate for the
year amounted to 4.17%.
Under the term of this loan, we
are required to enter into certain gold price forward sales. 365,000
ounces of gold have been sold forward over the financial years 2005 to
2009, at an average forward price of $432 per ounce. The facilities are
margin free.
Various debt covenants apply to the loan,
including:
|
|
| $ |
173,858 |
|
|
• |
Hedging arrangements
reasonably acceptable to N M Rothschild & Sons Limited will remain
in place. We will continue to provide evidence to the effect that we or
Somilo Limited have entered into committed hedging agreements and that
the proceeds of sale of gold are sufficient to ensure that, as at all
calculation dates scheduled, it is and will continue to be in
compliance with required financial ratio's
; |
|
|
| • |
Limitations on material asset
disposals and acquisitions; |
|
|
| • |
Restrictions
with regards to the repayment of inter-company debt or dividend
payments by Somilo; |
|
|
| • |
Maintain insurance
with reputable insurance
companies; |
|
|
| • |
Establish a Debt Service
Reserve Account with the minimum credit balance on all dates equal to
the aggregate principal amount of and interest accruing on the loan and
the aggregate amount of premium accruing in connection with the
Political Risk Insurance during the six month period commencing on such
date; |
|
|
| • |
Limitations on additional
indebtedness by us; and |
|
|
| • |
Certain
financial ratios need to be adhered to throughout the loan
agreement. |
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year
Ended December
31, |
| |
|
2004 |
|
2003 |
|
2002 |
| Area |
|
(dollars
in
thousands) |
| Africa |
|
|
8 |
|
|
|
190 |
|
|
|
239 |
|
| Burkina
Faso |
|
|
957 |
|
|
|
— | "bottom" colspan="1">$
119,554 |
|
|
$ |
178,471 |
|
| Long-term
loans |
|
|
40,718 |
|
|
|
6,832 |
|
|
|
19,307 |
|
|
|
57,147 |
|
|
|
44,071 |
|
| Share
capital |
|
|
2,961 |
|
|
|
2,926 |
|
|
|
|
944 |
|
| Mali |
|
|
4,767 |
|
|
|
7,597 |
|
|
|
8,521 |
|
|
|
2,766 |
|
|
|
2,246 |
|
|
|
3,307 |
|
| Additional
paid-in
capital |
|
Tanzania |
|
|
3,343 |
|
|
|
1,756 |
|
|
|
— |
|
| Côte
d'Ivoire |
|
|
949 |
|
|
|
1,603 |
|
|
|
5,190 |
|
| Senegal |
|
|
3,932 |
|
|
|
2,749 |
|
|
|
1,791 |
|
| Merger
transaction
costs |
|
|
— |
|
|
|
|
102,342 |
|
|
|
200,244 |
|
|
|
190,618 |
|
|
|
161,830 |
|
|
|
240,742 |
|
| Accumulated
profit/(loss) |
|
|
100,213 |
|
|
|
(18,580 |
) |
|
|
(66,106 |
) |
|
3,112 |
|
|
|
— |
|
| Ghana |
|
|
(131,834 |
) |
|
|
(149,593 |
) |
| Other
reserves |
|
|
|
(14,347 |
) |
|
|
(7,403 |
) |
|
|
(8,293 |
) |
|
|
(1,745 |
) |
|
|
2,388 |
|
| Shareholders'
equity |
|
|
191,169 |
|
|
|
177,187 |
|
|
|
118,985 |
|
|
|
30,497 |
|
|
|
96,844 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AMOUNTS
IN ACCORDANCE WITH U.S. GAAP
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
assets |
|
|
245,026 |
|
|
|
193,458 |
|
|
|
136,789 |
|
|
|
78,107 |
|
|
|
132,587 |
1,589 |
|
|
|
— |
|
|
|
— |
|
| Total
exploration and corporate
expenditure |
|
|
15,529 |
|
|
|
17,007 |
|
| Long-term
debt |
|
|
|
|
|
16,686 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
None
of the
above-mentioned
expenditures
have
been capitalized.
The main focus of exploration work
is on our advanced projects in Mali West, around Morila and in Senegal
and more recently Tanzania, Burkina Faso and Ghana.
The Tongon
project in Côte d'Ivoire is at an earlier stage of
feasibility, where the data currently available is less accurate but of
a sufficient level of detail for preliminary economic analysis to be
59
40,718 |
|
|
|
6,832 |
|
|
|
19,307 |
|
|
|
57,147 |
|
|
|
44,071 |
|
| Shareholders'
equity |
|
|
187,253 |
|
|
|
177,187 |
|
|
|
118,771 |
|
|
|
undertaken. As a result of the political
situation in Côte d'Ivoire, which started in September
2002, no further exploration activity has been possible on the
project.
Contractual Obligations and Commercial
Commitments
Our contractual obligations and commercial
commitments consist primarily of credit facilities, as described above.
The related obligations as at December 31, 2004 are set out
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 30,359 |
|
|
|
93,903 |
|
| |
|
|
Contractual
Obligations |
|
1 Year |
|
1-5 Years |
|
After 5
Years |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in
thousands) |
| Long-term
debt |
|
|
— |
|
|
|
35,042 |
|
|
|
— |
|
|
|
35,042 |
|
| Short-term
borrowings |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Capital
lease
obligations |
|
|
1,156 |
|
|
|
4,392 |
|
|
|
1,284 |
|
|
|
6,832 |
|
|
|
|
2
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Costs |
|
Year
Ended
December 31,
2004 |
|
Year Ended
December
31,
2003 |
|
Year Ended
December 31,
2002 |
|
Year Ended
December 31,
2001 |
|
Year
Ended
December 31,
2000 |
| Mine
production
costs |
|
|
37,468 |
|
|
|
26,195 |
|
|
|
22,706 |
|
|
|
37,349 |
|
|
|
43,823 |
|
| Depreciation
and amortization |
|
|
8,738 |
|
|
|
10,269 |
|
|
|
8,765 |
|
|
|
7,097 |
|
|
|
12,208 |
|
| General and
administration
expenses |
|
|
6,986 |
|
|
|
7,098 |
|
|
|
4,128 |
|
|
|
11,262 |
|
| Unconditional
purchase
obligations |
|
|
17,119 |
|
|
|
— |
|
|
|
— |
|
|
|
17,119 |
|
| Total
contractual cash
obligations |
|
|
18,275 |
|
|
|
39,434 |
|
|
|
|
|
9,332 |
|
| Transport
and refinery
costs |
|
|
233 |
|
|
|
408 |
|
|
|
588 |
|
|
|
547 |
|
|
|
237 |
|
| Royalties |
|
|
5,304 |
|
|
|
7,648 |
|
|
|
9,185 |
|
|
|
5,801 |
|
|
|
3,718 |
|
| Movement
in production inventory and ore
stockpiles |
|
|
(8,512 |
) |
|
|
(6,229 |
) |
|
|
(145 |
) |
|
1,284 |
|
|
|
58,993 |
|
| Other
long-term
obligations |
|
|
|
(813 |
) |
|
|
537 |
|
|
|
15,131 |
|
|
|
|
5,153 |
|
| Transfer
to deferred stripping costs |
|
|
(3,999 |
) |
|
|
(3,484 |
) |
|
|
(5,043 |
) |
|
|
(1,991 |
) |
|
|
(367 |
) |
| Total
cost of producing gold determined in
accordance with
IFRS |
|
|
3,701 |
|
|
|
19,369 |
|
| |
|
|
|
|
|
|
|
46,218 |
|
|
|
41,905 |
|
|
|
|
|
|
|
|
|
|
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.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
We are not involved in any research and development and have no
registered patents or licenses.
D. TREND INFORMATION
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
U.S. 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 (which accounts for 85% of
fabricated demand), 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 plays 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 and currency
devaluation, 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 U.S. dollar interest rates
60
also make hedging of 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-color: #ffffff;white-space:nowrap;" align="left" valign="bottom"> |
|
|
40,184 |
|
|
|
59,252 |
|
|
|
74,104 |
|
Less:
Non-cash costs included in total cost of producing
gold:
depreciation and
amortization |
|
|
(8,738 |
) |
|
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 U.S. dollars for the past ten years. On
December 31, 2004, the morning fixing price of gold on the London
Bullion Market was $438 per
ounce.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Price
Per Ounce
($) |
| Year |
|
High |
|
|
(10,269 |
) |
|
|
(8,765 |
) |
|
|
Low |
|
Average |
| 1995 |
|
|
396 |
|
|
|
(7,097 |
) |
|
|
(12,208 |
) |
Total
cash costs using the Gold
institute's
guidance |
|
|
372 |
|
|
|
384 |
|
| 1996 |
|
|
415 |
|
|
|
37,480 |
|
|
|
367 |
|
|
|
388 |
|
| 1997 |
|
|
367 |
|
|
|
283 |
|
|
|
331 |
|
| 1998 |
|
|
313 |
|
|
|
273 |
|
31,636 |
|
|
|
31,419 |
|
|
|
52,155 |
|
|
|
|
294 |
|
| 1999 |
|
|
326 |
|
|
|
253 |
|
|
|
279 |
|
| 2000 |
|
61,896 |
|
| Ounces
produced
(our
share) |
|
|
204,194 |
|
|
|
|
313 |
|
|
|
264 |
|
|
"bottom" colspan="1"> |
317,596 |
|
|
|
421,127 |
|
|
|
298,375 |
|
|
|
| 279 |
|
| 2001 |
|
|
293 |
|
|
|
256 |
|
|
|
183,225 |
|
| Total
production cost per
ounce under
IFRS |
|
|
226 |
|
|
|
132 |
|
|
|
95 |
271 |
|
| 2002 |
|
|
349 |
|
|
|
278 |
|
|
|
310 |
|
| 2003 |
|
|
|
|
|
199 |
|
|
|
404 |
|
| Total
cash cost per ounce using Gold
Institute's
guidance |
|
|
184 |
|
|
|
100 |
|
|
|
74 |
|
|
|
175 |
* |
|
|
338 |
* |
|
|
|
| * |
These
figures include costs for Syama at 100%. Our attributable
share (including 75% of cash costs
associated with Syama) amounted to $153 per ounce
in 2001 and $260 in
2002. |
1. 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
manufactures. 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, and royalties.
The transfer to and from deferred stripping is calculated
based on the actual historical waste
stripping costs, as applied to a life of mine
estimated stripping ratio. The costs of waste stripping
in excess of the life of mine estimated
stripping ratio, are deferred, and charged to production,
at the average historical cost of mining the deferred
waste, when the actual stripping ratio is
below the life of mine stripping ratio. The net effect is
to include a proportional share of total estimated
stripping costs for the life of the mine,
based on the current period ore mined. 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
the periods presented. Total cash costs and
total cash costs per ounce should not be
considered by investors as an alternative to operating profit or net
profit attributable to shareholders, as an
alternative to other IFRS or U.S. GAAP measures
or an indicator of our performance. The data does not
have a meaning prescribed by IFRS or US GAAP
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 and U.S GAAP, but is not included in
total cash costs under the guidance provided by the Gold
Institute. The total cost of producing gold
calculated in accordance with IFRS and U.S.
GAAP would provide investors with an indication of
earnings before interest expense and taxes,
when compared to the average realized price. The Company
has therefore provided an IFRS
measure of total cash
cost and total cash per ounce as required by
securities regulations that govern non-GAAP
performance
3
measures. 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 are
useful indicators 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 company's operations mature, and a
benchmark of performance to allow for
comparison against other companies. Within this
annual
report, the
Company's discussion and analysis is focused on
the "total cash cost" measure
as defined by the Gold
Institute.
2. Under
IFRS, we account for our interest in Morila Limited using the
proportionate consolidation method, whereby our proportionate share of
Morila Limited's assets, liabilities, income, expenses and cash
flows are incorporated in our consolidated financial statements under
the appropriate headings. Under U.S. GAAP, we equity account for our
interest in Morila Limited. This requires that we recognize our share
of Morila Limited's net income as a separate line item in the
statement of operations, equity income of Morila joint venture. In the
balance sheet, we reflect as an investment our share of Morila
Limited's net assets. While this results in significantly
different financial statement presentation between IFRS and U.S. GAAP,
it has no impact on our net income or our net asset value except for
any difference between IFRS and U.S. GAAP which relates to Morila.
3. 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
(2) $0.05 ordinary shares for every one (1) $0.10 ordinary 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.
Risks Relating to Our Business
Because we depend upon
Société des Mines de Morila SA, and our interest in
Morila Limited, for substantially all of our revenues and cash flow,
our business will be harmed if Morila's revenues or its ability
to pay dividends are adversely
impacted.
We hold our ownership interest in Morila through
our 50% ownership interest in Morila Limited, which in turn owns
80% of Société des Mines de Morila SA, the direct
owner of Morila, or the Morila mine. During 2004, substantially all of
our revenues and cash flows were derived solely from sales of gold
mined at Morila, and we expect that this mine will continue to provide
substantially all of our operating revenue and cash flows for at least
the next twelve months. As a result, our results of operations, cash
flows and financial condition could be materially and adversely
affected by any of the following
factors:
|
|
| • |
fluctuations
in the price of gold realized by
Morila; |
|
|
| • |
the
failure of Morila to produce expected amounts of gold;
and |
|
|
| • |
any
disputes which may arise between us and AngloGold Ashanti Limited, or
AngloGold Ashanti, with respect to the management of Morila
Limited. |
4
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
demand for gold for industrial uses and for use in
jewelry; |
|
|
| • |
international
or regional political and economic
trends; |
|
|
| • |
the
strength of the U.S. dollar, the currency in which gold prices
generally are quoted, and of other
currencies; |
|
|
| • |
416 |
|
|
|
320 |
|
|
|
363 |
|
| financial
market expectations regarding the rate of
inflation; |
|
|
| • |
interest
rates; |
|
|
| • |
speculative
activities; |
|
|
| • |
actual
or expected purchases and sales of gold bullion holdings by central
banks or other large gold bullion holders or
dealers; |
61
Item
6. Directors, Senior Management and Employees
A. DIRECTORS AND SENIOR MANAGEMENT
Our Articles of
Association provide that the board must consist of no less than two and
no more than 20 directors at any time. The board currently consists of
7 directors.
hedging
activities by gold producers;
and |
|
|
| • |
the
production and cost levels for gold in major gold-producing
nations. |
The volatility of gold prices is illustrated in
the following table, which shows the quarterly high, low and average of
the afternoon London Bullion Market fixing price of gold in U.S.
dollars for the past two years and the first quarter of
2005.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Price
per ounce
($) |
| Year |
|
|
|
High |
|
Low |
|
Average |
| 2005 |
|
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.
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 and Mr. R.A.
Williams' positions as executive directors were the subject of an
ordinary resolution at the annual general meeting held on April 25,
2005, as requested 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 : serif; font-size: 10pt; color: #000000; font-weight: normal; font-style: normal;background-color: #cceeff;">First
Quarter |
|
|
443.00 |
|
|
|
411.10 |
|
|
Executive
Directors
D. Mark Bristow (46) Chief Executive Officer. Dr
Bristow was appointed a director in August 1995 and Chief Executive
Officer in October 1995. A geologist with more than 22 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 has held
directorships in Harmony Gold Mining Company Limited and DRD Gold
Limited.
Roger A. Williams (41) Finance Director. Mr. Williams
is a chartered accountant with 17 years experience in finance including
eight years in the mining industry. Prior to joining us in January
1997, he was a financial manager for Kimberly-Clark of Southern Africa
and an audit manager with Deloitte & Touche in the United Kingdom.
In November 2001 he was appointed an alternate director and was
appointed as Finance Director in April 2002.
Non-Executive
Directors
Philippe Liétard (56) 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
(68) Non-Executive Director; Chairman of the audit committee and Member
of the remuneration committee. 1986 – 1998, he was an executive
director of HSBC Holdings plc and chairman of HSBC Holdings subsidiary,
HSBC Investment Bank plc. He was chairman 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 a
senior independent director of Morgan Sindall plc. He was appointed a
director in June 1997 and senior independent director in October
2003.
Jean-Antoine Cramer (73) Non-Executive Director; Member of
the audit committee. Mr. Cramer was appointed a director in June 1997.
Mr. Cramer was senior partner in Messieurs Cramer & Cie, a Geneva
portfolio management company and was president of the Corporate
Association of Geneva Investment Managers and lectures on various
topics relating to politics and economics.
62
Robert I. Israel (55) Non-Executive
Director; Chairman 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 26 years of experience in corporate finance, especially in the
natural resources sector.
Aubrey L. Paverd (66) 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 42 years of international geological
experience.
Executive Officers
David Haddon (47)
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 20 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.
Bill Houston (57) General Manager — Human Resources. Mr.
Houston joined us in 1992 as group training and development manager and
olspan="1"> |
427.35 |
|
| 2004 |
![]()
Amadou Konta (47) General Manager
– Loulo. Amadou 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 (40) Manager - Corporate Finance. Mr.
Matfield is a chartered accountant with 12 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 (54) Group Commercial
and Financial Manager. Mr. Prinsloo became Group Financial Manager in
January 2002. He has 32 years of experience in the mining industry. He
is a director of Somilo SA and Morila SA.
Richard Quarmby (45)
Technical Manager. Mr. Quarmby is a qualified chemical engineer with
extensive experience in the mining industry. He joined our
metallurgical team in 1997, playing a pivotal role in the development
and implementation on site of the Syama and Morila metallurgical plant
designs. His responsibilities include metallurgical development through
liaising with partner consultants and evaluating all technical and
economic implications with the aid of both proprietary and in-house
developed software.
Adrian J. Reynolds (50) General Manager
— Exploration and Evaluation. Mr. Reynolds has 24 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 Samake (57) General Manager — Randgold Resources
Mali. Mr. Samake is the general manager of the Bamako office and is a
director of our Malian subsidiaries. He is also a professor of company
law at the University of Mali.
John Steele (44) 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.
63
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Director |
|
Date
of
Appointment |
|
Date of Expiration
of
Term |
|
Number of
Years
Service |
| Executive |
|
|
|
|
|
|
|
|
|
|
|
|
| D.M.
Bristow |
|
|
8/11/95 |
|
|
|
5/31/08 |
|
|
|
9 |
|
| R.A.
Williams |
|
|
5/01/02 |
|
|
|
5/31/0c="spacer.gif" height="1" width="2"> |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Fourth
Quarter |
|
|
454.20 |
|
|
|
411.25 |
|
|
|
433.77 |
|
| |
|
Third
Quarter |
|
|
415.65 |
|
|
|
391.40 |
|
|
|
401.30 |
|
| |
|
Second
Quarter |
|
|
|
|
3 |
|
| Non-Executive |
|
|
|
|
427.25 |
|
|
|
375.15 |
|
|
|
|
|
|
|
|
|
|
|
|
| B.H.
Asher |
|
|
6/12/97 |
|
|
|
5/05/06 |
|
|
|
7 |
|
| J.A.
Cramer |
|
|
6/12/97 |
|
|
|
5/05/06 |
|
|
|
7 |
|
| R.I.
Israel |
|
|
6/12/97 |
|
|
|
5/05/07 |
|
|
|
7 |
|
| P.
Liétard |
|
|
2/11/98 |
|
|
|
5/05/07 |
|
|
|
6 |
|
| A.L.
Paverd |
|
|
7/29/95 |
|
|
|
5/05/06 |
393.27 |
|
| |
|
First
Quarter |
|
|
425.50 |
|
|
|
390.50 |
|
|
|
|
|
9 |
|
| |
|
|
|
|
408.44 |
|
| 2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None
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.
B. COMPENSATION
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 perftyle="font-family: serif; font-size: 10pt; color: #000000; font-weight: normal; font-style: normal;background-color: #cceeff;"> |
|
|
|
|
|
|
|
|
| |
|
Fourth
Quarter |
|
|
416.25 |
|
|
|
370.25 |
|
|
|
391.92 |
|
| |
|
Third
Quarter |
|
|
390.70 |
|
|
|
342.50 |
|
|
|
363.24 |
|
| |
|
Second
Quarter |
|
|
371.40 |
|
|
|
319.90 |
|
|
|
346.74 |
|
| |
|
First
Quarter |
|
|
382.10 |
|
|
|
329.45 |
|
|
We 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 by the annual
performance of our share price.
The board has accepted the
recommendations of the remuneration committee relating to non-executive
directors' fees. Following acceptance by the board, the
recommendations were submitted to shareholders and were approved on the
annual general meeting held on April 25, 2005, as
follows:
|
|
| • |
A general retainer to all
non-executive directors of
$45,000; |
|
|
| • |
An annual committee
assignment fee of $25,000, with an additional premium for membership of
the audit committee of $10,000; |
|
|
| • |
The
chairman of a board committee to receive a committee assignment fee of
$40,000; |
|
|
| • |
The senior independent
director, in addition to the general annual retainer but in lieu of any
committee assignment fee, to receive an additional
$75,000; |
|
|
| • |
The non-executive chairman,
in addition to the general annual retainer but in lieu of any committee
assignment fee, to receive an additional $90,000; |
64
|
|
| • |
An award to
each director of $30,000 to be translated into a number of
"restricted" shares. The shares are to vest
over a three year period from the date of the award, January 1, 2005.
Vesting would accelerate on the following
conditions: |
|
|
| • |
Termination other
than resignation or
dismissal; |
|
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