Randgold Resources Annual Report 2006 01 Chairman’S Statement
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Value creation is in our DNA ANNUAL REPORT 2006 Mission Randgold Resources’ focus is on the creation of value through the discovery and development of world class gold projects. IFC Corporate profile and mission 01 2006 highlights Corporate profile 02 Chairman’s statement 04 Directors 06 Management Randgold Resources is an African focused gold mining and 08 Chief executive’s report exploration business incorporated in Jersey in the Channel REVIEW OF OPERATIONS Islands in 1995 and listed on the London Stock Exchange in 11 Financial review 1997 and on Nasdaq in 2002. 13 Operations and projects 13 Loulo mine Its discoveries to date include the 7.5 million ounce Morila deposit 24 Morila mine in southern Mali, the +6 million ounce Yalea deposit at Loulo in 29 Tongon project western Mali and the 3 million ounce Tongon deposit in the Côte Annual resource and reserve declaration 31 d’Ivoire. 32 Table of mineral rights 33 Exploration review The company financed and developed the Morila mine which 42 New business was brought into production in October 2000 and to date has 43 Social responsibility 43 Policy statement produced more than 4 million ounces of gold. It also financed 44 Environmental report and developed the Loulo mine, which was officially opened in 44 Human resources report November 2005. Loulo’s gold production is planned to average DIRECTORS’ REPORTS 250 000 ounces per year until 2009, when Yalea underground 47 Corporate governance will start contributing. The underground development will 53 Remuneration committee report significantly extend the mine’s production and life and is expected 59 Directors’ report to average above 350 000 ounces per year during the seven 60 Statement of directors’ responsibilities and year period from 2009 to 2015. approval of the annual financial statements FINANCIAL STATEMENTS At the Tongon project in Côte d’Ivoire, the company is progressing 61 Report of the independent auditors with a 30 000 metre drilling programme which will form the basis 62 Financial statements 87 Subsidiary and joint venture companies for a feasibility study on the development of a mine. 88 Group structure SHAREHOLDERS’ INFORMATION Randgold Resources’ focus is on the creation of value through 89 Directory the discovery and development of world class gold projects. 90 Analysis of shareholding This is supported by exploration projects in the major gold regions 92 Notice of annual general meeting of Mali, Senegal, Burkina Faso, Côte d’Ivoire, Ghana and Tanzania 93 Proxy form as well as its generative team’s ongoing search for new IBC Shareholders’ diary opportunities to replenish its portfolio of prospective targets. 2006 Profit before tax up 54%; net profit of US$51 million also Highlights up despite first full-year tax charge of US$23 million Loulo mine delivers robust results in first full year of production; work starts on Yalea underground development and planning updated on Gara Morila maintains its record as a solid cash generator Tongon moves into the bankable feasibility study phase Exploration expands reserves and resources in Mali and delivers promising results from Burkina Faso 31 Dec 31 Dec 2005 US$000 2006 (Restated)~ Gold sales# 262 717 151 502 Total cash costs* 132 540 65 939~ Profit from mining activity* 130 177 85 563~ Profit before income tax 73 973 48 026~ Net profit 50 876 47 856~ Net profit (as previously reported) n/a 40 887 Net profit attributable to equity shareholders 47 564 45 507~ Net cash generated from operations 70 410 29 736 Cash and cash equivalents 143 356 152 452 Attributable production§ (oz) 448 242 328 428 Group total cash costs per ounce* § (US$) 296 201~ Group cash operating costs per ounce* § (US$) 258 169~ # Gold sales does not include the non-cash profit/(loss) on the roll forward of hedges. * Refer to explanation of non-GAAP measures provided in note 23 on pages 84 and 85. § Randgold Resources consolidates 100% of Loulo and 40% of Morila. ~ Restated due to change in accounting policy relating to stripping costs. See note 6 on change in accounting policy on pages 73 and 74. n/a Not applicable. Annual Report 2006 London Stock Exchange: RRS Nasdaq: GOLD www.randgoldresources.com Randgold Resources Annual Report 2006 01 Chairman’s statement Even by the hectic standards of Given the robust balance sheet and the continued strong cash flows expected from the operations, the board decided that recent times, 2006 was a it was appropriate to start dividend payments and declared a momentous year for the gold market dividend of 10 cents per share. This is, of course, not our first and for Randgold Resources. The distribution to shareholders: In 2002, the company returned some US$81 million to investors through a share buyback. bull run continued into its seventh year - and is now the longest in the Operationally, it was also a successful year for Randgold Resources, with gold production increasing by 36%. The industry’s history - while Randgold delays and difficulties caused by a defaulting contractor at Resources advanced on all fronts Loulo were overcome and in its first full year of production, the as its profitable growth strategy mine has lived up to our expectations. With the plant and the openpit operations settled at the rated level, work started on continued to deliver positive results. the development of the Yalea underground mine and the planning of the Gara underground mine was completed. These higher grade mines will significantly enhance Loulo’s production In 2006, Randgold Resources profile and extend its life to 2024. increased its profit before tax by more than 50% to US$74 million The company’s Morila joint venture again continued to make a solid contribution. Unhedged and debt free, it remains a and its net profit by 6% to major cash generator. In Côte d’Ivoire, the Tongon project has US$51 million after a US$23 million progressed to the bankable feasibility stage; a development decision will be made within two years. Elsewhere in the tax charge at Morila. The company company’s prospect portfolio, a number of advanced targets ended the year with cash of are returning promising results. US$143 million after spending more During the review period, as before, Randgold Resources’ than US$100 million on the management has been guided by a simple philosophy: to completion of the Loulo plant, the invest our financial and intellectual capital in exploration to find successful operations capable of generating profits which we repayment of the first third of the can reinvest in our future to create sustainability. The growth Loulo project finance, the first stage strategy based on this belief is a long term one, and while we regularly review its implementation, we do not allow ourselves of the Yalea underground to become distracted from our course by transient market development and its ongoing trends. It is this consistency, I believe, that has given Randgold exploration programmes. Resources a record of value creation that has very few peers in the gold industry. This is particularly important in the current market, where the excitement of a rising gold price seems to have shifted the industry’s emphasis from building profitable businesses to pursuing short term trading opportunities. Similarly, some investors appear to be more interested in production and short term share price performance than in real value creation and sustainable profitability. The industry’s market capitalisation has grown substantially but this growth has been driven by merger and acquisition activity and a flurry of new listings, rather than by the discovery 02 Randgold Resources Annual Report 2006 “In the challenging spheres of African mining and international markets, a company’s success is directly linked to the skills and motivation of its personnel and their ability to work as a team.” Philippe Liétard Chairman and development of new gold reserves. Indeed, the new gold The fine results of the past year, and the company’s distinguished supply remains flat at best. This suggests that the market is record of delivery, stand as a tribute to the wide ranging abilities, being buoyed up by short term speculative sentiment rather depth of experience and seamless cooperation of its corporate, than the development of new resources and the creation of regional and operational teams. real value. As part of the continuing expansion of the company’s intellectual base, two eminent international businessmen We do not know how long the bull run in the gold price will joined our board as non-executive directors last year. They continue. However, as far as Randgold Resources is concerned, are Norborne P Cole, Jr and Karl Voltaire. our overriding priority is to continue finding and developing good gold prospects and building a business that will be Norb, a US national, is a former chief executive of the second- profitable not only at the present gold prices but also at the largest Coca-Cola bottler in the world while Karl, a French much lower price levels at which the metal has traded in the national, oversaw the development of a number of major mining past. projects in Africa during more than 20 years with the World Bank and the International Finance Corporation. Both of them This is why we maintain our focus on organic growth through have extensive board level experience and they have significantly discovery and development, and why we continue to invest broadened the Randgold Resources board’s international and to re-invest in our future, thus strengthening and enhancing dimensions and enhanced its capacity to deal with an increasingly complex legal and commercial environment. the quality of our assets. And it is important to note that in our pursuit of growth, we place quality far above size.