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Randgold Resources (NASDAQ:GOLD)

Q3 2007 Earnings Call

November 1, 2007 8:00 am ET

Executives

Mark Bristow - CEO

Analysts

Charles Kernot – Seymour Pierce

Unidentified Analysts

Mark Bristow

Good afternoon, ladies and gentlemen. Welcome to Randgold Resources quarterly presentation. As you see from the gold price today, it is a very pleasant experience to stand up and share our results with you; not only because the gold price is up; but it’s nice to be able to come back to you after three months and take you through this, as what we had promised you last time has materialized this time.

Moving directly into the highlights for the quarter, we’ve certainly seen the team produce another solid performance, despite some operational challenges at Loulo and I am happy to report after nine months into 2007, we are still steadily on track to achieve our overall targets for the year. Gold production for the quarter was up, group costs were contained and attributable profit rose by almost 70%.

Good news from Tongon where we completed the rescoping of the prefeasibility study and as expected, it supports a larger scale project on the back of a significant increase in both resources and mineable resources. We are now going all out to complete the bankable study on Tongon and the target being towards the end of next year.

On the exploration front, our teams are moving back into the field in West Africa after spending the wet season evaluating modeling and planning, with a little bit of leave in between. As I’ll show you later, our exploration portfolio now contains some interesting brownfield opportunities, in addition to the greenfield prospects which have traditionally driven our organic growth.

As we have been saying for the past two quarters, Morila would have a hockey stick production profile this year, with a sharp upturn in the latter half of the year. This was clearly demonstrated over the past quarter, when the mine’s gold output increased by 50% and operating costs per ounce reduced by one-third.

The expected increase in the production was attributable -- as I pointed out last quarter -- to a better mining rate, which provided access to the higher-grade phases. Had it not being for the lockup factor, which is the down time linked to the significant increase in ore grade and some plant issues, the ramp in production would have been even higher. In any event, with another good quarter in prospects, management has its sights now firmly set on achieving their revised forecast of 475,000 ounces for the year.

These are the numbers which speak quite eloquently for themselves. The big drivers of the performance improvement were, as I pointed, operational stability and of course the higher grade.

Summing up Morila, despite the fact that it’s now nearing a sunset phase, Morila remains a very substantial asset in the Randgold Resources portfolio, and as this comparison with some of the West African development projects shows, it’s still a very significant reserve base. We are, along with our partners, persevering with our efforts to extend its life by finding more ounces on site, and currently we are dealing with the processing of the data from the $6 million drilling program that we recently completed, which took some 20 months. These will be analyzed and evaluated. We have certainly highlighted some gaps in the data and once we complete that and have reached consensus on the next step, we will share that with you again.

Over at Loulo, the team delivered another sterling performance in the face of some tough operational items. It’s been a particularly -- as I’m sure you’ve seen in the news -- a wet season in West Africa and we’ve continued to have our fair share of challenges with the mining contractor relating to equipment availability and problems.

The combination of these two factors prevented us from achieving our design mix of soft and hard ore; soft ore coming from Yalea and the hard ore coming from Gara. The consequences of that is that we’ve seen a lot more Gara ore through the rainy season because its harder and its easier to treat when there is a lot of water around.

It comes with it’s challenges because it’s a lot more abrasive so we saw costs pick up on the back of the lieder and steel bore utilizations, but the benefit is that we got better recovery. If we had done the right mix our recoveries would have been around 90% to up closer to 95%. So we achieved our planned gold output despite the lower throughput of 58,000 ounces.

In these difficult circumstances -- and I think that’s the significance of operating these mines in remote areas. We have a management team that’s still able to change the way they do business and keep the targets that they set for us in sight and deliver against it.

You’ll see later on in the presentation as well we will take you through the underground development. Progress was slow there this quarter because we are still in that weather zone I talked about last quarter, and this has forced us to put in significant additional supports through that weather zone. It’s very important to us because this is the gateway to a 20-year life underground operation. I will touch on that a little bit later.

Our review of the exploration data from Loulo region and the adjacent Bambadji JV over the off-season has certainly confirmed that this is a very exciting geological province. Certainly, we continue to believe in the potential for this region to add both to our resource base and support in the future growth in production. We certainly have cornered the infrastructural competitive advantage in that region at this stage.

These are the operating results out of Loulo for the quarter, and you can see how lower throughput and slightly lower grades impacted on cash costs. Nevertheless, we achieved our targets, as I pointed out, because of the higher recovery from the Gara ore.

Going to the underground, I have already highlighted at the Yalea underground development, we had to dig through some very difficult weather material and consequently advanced for the quarter only 60 meters. To put this in perspective, our normal target would vary between 120 and 160 meters a month. So, it has slowed down the process a bit, but as I pointed out the integrity of the main, active plays as well as the safety of our worker is paramount. We’ve had to shotcrete it; we have put in concrete buttresses, we mined through them again.

In the earlier slide I showed you on the seam we have these solid, concrete tunnels. Once we are through that then we have got about 15 to 30 meters to go. Once we are through that in two-and-a-half months time, we will begin to take our first ore. So we are not far behind our original plan. It could well flow into next year, but we would only see that as investing on the Loulo’s production profile in any way. At worst, it will defer some of the costs that we are planning to spend this year into next year, because we won’t start mining ore until earlier next year.

Also as pointed out on the slide we were able to convert another 360,000 ounces into the mine plant. That’s significant and rapidly what’s becoming the challenge here is how do we access all these ounces a little faster than the current schedule? Because this new schedule just adds more life. We are always driven by NPV and so it’s important to see if we can enhance the production out of these underground operations and therefore be able to increase the throughput.

Just quickly catching up on Gara, which is our second underground mine slated to start development at the end of next year. We have been tidying up again the mine plan there. We’ve got three more holes to drill to be able to take that 400,000 ounce resource that we declared last year and put it into the mine plant and we hope to finish those holes before we declare our new ounces early next year.

I mentioned the Loulo upside and here is a closer look at it. The Bambadji joint venture in Senegal already forms part of the Loulo region which borders neighboring Mali. As I said we’ve been paying particular attention to the Senegal Mali shear zone. That’s the same structure that hosts Sadiola, Yatela, Yalea and Gara. The specific target that we’ve focused on now is a five-kilometer wide zone and some 25 kilometers long.

With this newly consolidated ground holding we’re planning on flying a very detailed airborne magnetic and electromagnetic survey over the entire area, some 1,200 square kilometers. We believe that will help us better understand the geological and structural architecture of the region; prioritize it for follow up and generate new models for drilling.

Specifically also within the Loulo area, Faraba as you know we’ve reported an indicated resource of some 500,000 ounces for just 350 meters of strike, and over the off-season our geologists have reviewed the data and certainly come up with a significantly different geological level model more akin to the Yalea model and that calls for a number of en-echelon and lensoid payshoots plunging down as you see on the right-hand side of the diagram.

That in itself, if you do a bit of math, is certainly highlighting a multi-million ounce project. At this stage the model steps up because its making a few boreholes and we plan to get that model again during this season which takes us out to June next year. Specifically we’ve got a program of 7,000 holes to test that model.

Staying with Loulo still and looking at some of the other satellite targets we’ve certainly dusted off Loulo 3. Again as we build our knowledge of the structural controls this is an interesting target. Up until now it’s been a very small strike. We know that some of these ore bodies get wider and bigger at depth. What’s interesting is the continuously up grade and relatively high grade. So, we put that back on and we are going to be drilling that out again through the season. The same over at the 500,000 ounce geological estimate progress in the North. Again we’ve remodeled that. We’ve got a lot more information and we have that back in the plan for this next field season.

Leaving Mali now for a moment, I’ll come back to exploration and moving down to Tongon in the Ivory Coast. The highlights of the quarter has to be the completion of a rescoping study which has demonstrated a significant increase in both the resource base from 41% as well as the reserves and mineable resources that moved from 1.4 million ounces to 2.8 million ounces.

On the back of that, we are now able to come up with a significantly enlarged operation that’s much bigger than we had originally envisaged in the first feasibility study or prefeasibility study. Right now, our focus is to complete the bankable; we’re on track, we’re well advanced with the social baseline studies, the environmental baseline study. We have the finished draft of the convention to engage the government; everything is working. We are starting deciding on the contractor, we will be looking to finalize audits for the long lead assets and that’s slated for early next year.

Just for the geologists in the audience and more for you to take away is a lot of detail on the boreholes, it gives you comfort that both these ore bodies up in the Northern Zone have a lot of continuity. We’ve got one gap to finish off in the Northern Zone as far as tightening up the current mine plan, and then we’ve a got significant gap between the trenches and the first line of boreholes. That’s the way they have done it, and we will be inputting that with our thesis, we expect that to enhance the grade, because you have got a repeat every couple of meters at the top that’s influencing the grade in the Northern Zone.

Likewise in the Southern Zone, which is a lot more complex than the Northern Zone, we’ve got some 12,000 meters to drill out and input; that’s why we’ve got a significant amount of ounces still in what we call geological or mineable resource. 1.6 million of that 2.8 million ounces is in reserve, and we’ve got a tidy up our concepts; we expect that to come with a slightly better selectivity. In other words, we expect it to lift the grade as we are able to select some of these ranges out of a bigger line of mineable units.

There are also some deeper drilled boreholes under both ore veins and certainly they are continuing at depth. Both ore bodies are down and have struck in 2 kilometers and so we have only drilled 350 meters below surface. The old adage in West Africa is they can be as deep as they are long.

This is a graphical representation of the results as it stands at present, with as I pointed out, 2.31 million ounces in indicated category and the another 2 million in the inferred. All the Northern Zone indicated inferred comes into the Southern Zone because of the geological continuity that we saw turning up.

I think that the other thing to point out is that Randgold Resources has always been driven by economics. So when we declare our resources, they are economically dependable and just in Tongon’s case the reserves or mineable resources are calculated as falling within a $525 an ounce strip, and the resources are calculated as falling in a $800 an ounce strip. The current movement in gold price is taking us very close to what we’ve defined as a resource.

These are the key parameters of the rescope prefeasibility study. You’ll see a significant increase in that resource base particularly the mineable resource at $525. The strip ratio is very attractive. Again you’ll see that we are very realistic with our costs. We are not coming to the market with a dollar a ton mining cost. We do mine in West Africa. With all the data in place now, our estimation for the total cash cost for the operation is $360 an ounce.

You can see the production profile significantly higher than the original prefeasibility which we had at 200,000 tons a month and about 200,000 ounces where we started off with the production profile in the first year giving close to 300,000 ounces; and then we have three years of about 250,000 ounces and then about 220,000. We have got some optimization still to go, particularly on the pit designs we have just used very conservative 45 degree angles. But once we have got the technical sign off, we will be able to design those perhaps a little bit more aggressively.

I think the significant thing in Tongon as you’ve seen in Loulo is Tongon has got length; there is lots of opportunity, prospectivity and the extension of the current ore-body depth in the long strike and immediately adjacent to those in the form of these deposits. The most interesting one at the moment being the Loulo South deposit where we’ve got our first exploration results coming out ranging from mineralization of significance that is structurally controlled and that’s what really drives Birimian gold exploration and certainly the structure that hosts the main deposits.

Just to point you to what we are going to next and you will see that the first four items in the slide really point to the infill drilling some 12,000 meters to be done. We’d like to see that finished, if not this quarter early into next year and we see that improving significantly both the definition and the selectivity so we will be able to convert all the resources in the pits you reserve and we will certainly be able to be a lot more comfortable in estimating the grade.

I think the point is when you go back to the summary the now, I will just point you the second bullet where you will see that that Southern Zone has a lot more dilution in it. That’s a result of the fact we are just little cautious about the continuity of these things. But we are comfortable once we’ve got the majority of the evaluation computed, we would like to see geological controls driving our estimate.

The last two items still outstanding is we’ve had some encouragements with the metallurgical test work certainly the metallurgy is looking better than we originally planned. We are now playing with the idea of introducing a flash flotation phase in the flow sheet, and we are looking at how we can enhance that ADA again for the 0.5% recovery on the South side. Then we will be able to report back again when we meet next time. As I’ve touched on, the final geotest that needs to be completed before we set the final pit design.

As I’ve pointed out, if we move on to exploration, then our West African exploration teams have had a well-earned respite from the fieldwork during the last few months, that is the wet season. However, in Tanzania, we have continued to work because it is dry there. I will just also highlight that this break, which is a traditional break for Randgold Resources doesn’t mean to say that they all go on holiday for three months. It has made us competitive in that we sit down, we collect all this data over nine months, and we actually have a concentrated three months where we review our budgets, we review our models, it’s time for the leaders, it gives the leaders time to actually interface with the geologists, bring out experts that interface with the field geologists and develop the next round of planning. That’s what we’ve been doing, and you have seen some of the results of that.

When that process is complete, they have got a one-week workshop next week or the week after. The geology team will try to put together a design interact their thinking and compete for the leftover drilling budget. The drilling budget is allocated on merit.

As already indicated, and I will highlight again here, as we grow up and we are able to talk more and more about brownfield exploration, we have two very significant brownfield prospects in the form of the area around Tongon and the area around Loulo. That is significant that in a market like this, we have a rapidly rising gold price because what it offers is the ability to add early stage ounces or early ounces into the plan.

Then of course we’ve got our investment which separates us, I have always said and firmly believe this, from the rest of the industry. That’s the greenfields which is our future. That requires constant and regular review and commitments to be able to ensure that into the future we are investing, and that’s what really supports, it’s these projects that support the new mines that are going to come on stream in five to ten years’ time.

Just going through them, you will see that in this slide is our Senegal position. Part of Senegal is now firmly in the Loulo infrastructure, and then we have still got a significant portfolio sitting on Bambadji trend 60 kilometers to the west of Loulo, and two significant targets at Massawa and Sofia. Sofia being a long continuous anomaly about 15 kilometers long, significant mineralization. We have now got drilling in sort of between 200 and 500 meters spacing. We are holding that model.

Moving south into Mali, something we haven’t touched on in this area around Morila just to reinforce that we haven’t given up in that area. It’s an area that’s delivered Syama, which is a multi-million ounce deposit and Morila. We believe in the prospectivity of this area, and you will see that we are constantly moving our portfolio around hunting for new stuff.

We’ve recently signed a joint venture with a junior company AGG, African Gold Group and those are the two yellow dots just below the Morila mine, two yellow space just below the Morila mine label, and we constantly do our review. More and more, we are seeing opportunities in the junior space as the market changes production and holds back on supporting exploration companies.

Burkina Faso, as we have indicated in our comments, we have completed the first round of metallurgical testing on the Kiaka deposit. Most of the results came back in well above 90% despite the lower grade feed. We are intrigued by this project. We have 2 million ounces, in big wide consistent mineralized units. We now have an idea that we would have certainly potential to continue this structure to the north as it comes up the other side. So, we haven’t put this one away yet, we actually have re-looked at, and we are going to be doing some more work along the strike.

At the same time, we’ve now generated the next generation of targets coming out of the new portfolio of permits which are the permits that you see to the west. Already we have another big anomaly, broad and long that we’ve done the first trenches; about 80 meters. Again, we are in the mineralized zone. We are intrigued by the geology and it certainly attract a substantial amount of our exploration dollars.

Moving back to the Ivory Coast, we think this country is the most prospective realization in West Africa at the moment. It boasts the highest surface area of Birimian rocks out of all the countries in West Africa. It’s got all the geology that you need and hosts all the big deposits and it hasn’t been explored. We, as you know as I’ve touched on already originally got the Nielle Permit and to the west of our Nielle Permit, that is a workup drill pilot where we will certainly move straight into that drilling program. As soon as we are comfortable to move out of Nielle Permit or the Tongon region and that’s across the Northern part of the country. We have started exploring, however, in the Southern province which you see marked in red.

In Ghana, as I’m sure you are aware, Ghana is a tough country to find new gold deposits. It’s a very thick weather zone. You get nice big surface enrichments, and then when you drill it up, you get disappointing indications. We have a significant anomaly and we’ve now got some trenches and it’s about 15 kilometers of anomalies there, and certainly the geology is pretty altered. This is another project, and we’ve had a couple of them in Ghana and this is our strategy targets in Ghana at this stage.

But again, next quarter I think you will see quite a bit of activity in Ghana, because there are quite a few junior companies that are putting up their permits for review for joint ventures. One of the big challenges we have, because we move through ground so quickly, is access to new real estate into our models.

Going across the east, a twin focus in Tanzania; one is that Miyabi joint venture that’s on a specific model. We’re looking at a model, this particular resource is located on the intersection of three big regional structures, all of which boast a gold deposit. Where these structures are in particular you have got Miyabi and there is significant alteration. They have certainly gone in a systematic way, about 500,000 ounces of low grade resource.

So we’ve done the first round of drillings just to get the references right and we’ll be drilling for more there. We’ve already got a generator team in this region and we’ve been picking on the proterozic rocks, which are younger than the Archean that traditionally host gold deposit both in Tanzania and the DRC and that's been our focus of our generative team and we’re pretty confident that we’ll be able to show you some ore mineralization in these rocks next quarter.

As always, talk is cheap and numbers support all those promises. This is the summary of our financials; consistently profitable is the best way to describe it. We told you that we had a pullback in the first half of the year and we’ve come out this half past. If you remember in January I said our costs were under pressure to increase by some 15%, and it was dependent on the oil cost and the euro/dollar exchange rates. We are well inline with that at 3.24 year-to-date. We don’t see next quarter being worse than this quarter. So that should hold us within our guidelines.

On the cash position we’ve got 130 million that is showing up. If you go through our cash flow, you will see that there is a significant amount of dollars tied up in working capital this quarter and they were largely easy to explain about $20 million of abnormal lockup. $10 million associated with just shipping of gold, so we haven’t received the money yet; and about $5 million to $5.5 million from the lockups with the higher grade out of Morila and that should come out this quarter. Then we paid all of our creditors early this quarter and normally you would pay them off at the end of this month, and we paid them before. So, we are comfortable. We are comfortably above the $100 million net cash position after providing for the debt.

It is always nice to show a share price performance like this, although we don’t hang on laurels on the share price. We certainly are breaking out that it is a way that the market measures us, and it is always gratifying to get recognition.

At the same time, it gives us encouragement that our strategy of forming a profitable pure gold company is the correct one. But that, be that as it may, I can assure you that we as a management team certainly don’t focus on the share price, but rather on the fundamentals of building and running a sustainable, successful business in an environment where more and more, new gold supply is declining and the industry is constantly dealing with increasing cost.

We’ve been saying that more and more, we’ve been saying that for a long-time, and what separates us from many of our peers is that we are bringing production online at this time.

I hope just to finish off and conclude today’s presentation by sharing those fundamental principles that we value in our company and form certainly the heart of the way we do business.

First of all, in an era of diversification we are and tend to remain a pure gold company. This offers investors undiluted leverage against the gold price. I think when you look at the move to ETS, what we say to people is buy ETS, to buy an ounce, it costs you today $796; if you take that $796 many more than an ounce with Randgold Resources.

The ounces you get are profitable, the reserve ounces, and they’ve got a margin in to find some more. Then you’ve got the upside in the resources, as we pointed out, our resources are economic to set a higher gold price. If you’re buying gold or ETS you must be doing that because you think the gold price is going to go up. So you get a whole lot of traditional leverage because we are a pure gold company and you don’t have to worry about the zinc price, the copper price and the other base metals.

We believe and we certainly have built this business through the discovery and development of profitable mining opportunities and we will maintain our emphasis on increasing production and creating value through real value, increasing growth.

We’re forecasting 50% growth in production over the next four years. That’s significant for us, with Loulo as we get into the underground higher grade areas and with Tongon coming on. That is net of the declining production out of Morila.

We will nevertheless continue to pursue acquisitions and other corporate opportunities, but one of the big focuses we have is we always rate them against our own organic growth prospects. We aspire to the higher standards of financial reporting. We are definitely the most highly regulated gold company listed on the main board of London Stock Exchange and we’re fully mature filing in the US with Sarbanes-Oxley compliance and all that stuff.

We are heavily invested in the development of our own people just as we invest in exploration. We believe in investing in people, and for those of you who often used to think that Randgold Resources was a one-man show, I think you can’t run these assets in the places that we run in without a quality team that is able to make decisions on its own within the guidance of an agreed-to strategy; that we certainly have.

On that I think if you look at the single scarcest assets in our industry right now its management and quality people. One of the things that we really put at the center of our next phase is continuing to invest in our management team and ensuring that we have the best management team in the industry to take our assets forward.

Really, that’s the story for this quarter. We’ve got the team or part of the team with us here. Graham is sitting in front, he is our new CFO; Dave Haddon, our Legal Counsel; Victor, Corporate Manager; and Lois who runs the Communications; and we have Raul out of the technical IT side with us today; and of course, Lisa who runs the shop in London.

With that, we will be delighted to take questions.

Question-and-Answer Session

Charles Kernot – Seymour Pierce

I just had a question on Tongon. You very kindly gave us the values around the reserves and resources. How much of the increase has actually come about via value of assets?

Mark Bristow

You can work it out. All the Northern Zone ounces are used. It’s the difference between the current resource, minus the Northern ounces, minus that 1.44. It would be at 1.44.

Charles Kernot – Seymour Pierce

Why did you do it [that way]?

Mark Bristow

It is just the way it works in Mali. last quarter, you would see we paid in less. It was just the way the months worked out, with the weekends in there.

Charles Kernot – Seymour Pierce

As far as the capital, I have a feeling that as we will being some pretty remarkable gains. The difference though, is the costs [inaudible].

Mark Bristow

That, as you know, is efficiencies and a lot of other things. There are three things, four things that drive our cost right now;

(1) The fuel cost; that’s 25% of our cost.

(2) Euro/dollar, that’s [20]% of our cost.

(3) In the rising gold price, the royalty, that is $12 every $100, so right now you can knock off $40 plus out of the cash front. We can’t control that.

(4) Then the mining cost. In the short term, the mining cost had a big impact. They had an impact because we are going through that transition from open cost to underground and so as we bring the underground and start leeching, we don’t capitalize that. That impact, the way we run our accounts, we take that on the nose.

We now talk about some of the cost going into next year, it is really that leeching and hedging and taking up the mining costs; obviously there will be some extra costs in there; they are not based on the long term. Once we’ve established the prices, we’ll be back to normal.

The significant thing on Loulo is that we see costs going from the upper 200 to below the mid 300. So it’s 290 to 350 for quite a few years, just because of grade. That’s the trick in this guidance.

If you looked at quarter on quarter, an average cost of $38 million; that’s after some adjustments last quarter against the cost in this quarter -- in favor of the cost -- but that’s just the way we run our stockpiles. We don’t diverge from it. We subscribe to the new SEC standards.

So if you look at our aggregate costs they were in fact, if you look at our unit costs they were also a little better because we produced more. I think that’s what you are seeing with Randgold Resources. The other thing that’s impacting on our process at the moment is we are expensing these costs, and we will continue to expense this until we take it. That’s again in our policy and we think that’s a prudent way to run our business.

I must say more and more it’s easier to present our accounts to non-gold engagements because our income statement looks like it does.

Unidentified Analyst

[Microphone not available] Why are your prices up?

Mark Bristow

It’s a little bit of a paradigm shift for us. There is definitely 2 million plus ounces. If this was in Canada or Mexico everyone would be all bubbly about it. The significance is there is no strip ratio. So if you look at the cost per ton, if you compare the cost per ton at Loulo we are talking about $13 a ton mined. The cost of mining one of these you are talking about probably $2.5 to $3 a ton mined.

So that is the trick in mining, is what is your total cost? If we could bring the processing cost down because currently Loulo’s processing costs are $12 to $14, so if we could bring them down to $5 because we are processing 600,000 tons a month instead of 200,000 tons a month and it is simple metallurgy and that’s the trick. The metallurgy is simple. Then you could, so you have $6 mining costs because of high volume, you’ve got $3 when the aggregate is $4, so that is $9. You have got a G&A because you are mining so much, it’s going to be down to $2. So, that’s $11, 2 grams revenue is right now at these gold prices, $23 and $24. So you’re selling at a 100% margin. That’s interesting.

Now, whether we mine it or somebody else mines it, there is definitely appetite to buy gold reserves and they would be reserves because they are economic in this market. So as a gold company, what we offer our shareholders and we have always been clear about it, we offer them profitable gold production and optionality. So, 2 million ounces is an option. We will invest in that option certainly over the next couple of quarters.

If we could get 6 million ounces, then we are in business. Then, it will become something we would want it to be. I’ll point out that this is a forward-looking statement.

Unidentified Analyst

Is this to say you will target most of the CapEx on Tongon?

Mark Bristow

$367 million is our current estimate. That includes $38 million for the mining fleet and $28 million of sustaining capital. So, if you take that all, it’s about $201 million capital cost, and you put that in perspective, what the overruns and extra paying Loulo costs are for a similar sort of plant are about $160 million. The Ivory Coast is definitely a cheaper place to work it than Loulo; in fact, you don’t have to go through a border pipe, there is all that extra.

Unidentified Analyst

2007, we are seeing reduced production but increased revenue, plus the gold price. If gold continues to rise, as many think perhaps to $1,500 an ounce, how will that change your cost to mine, the kind of mining you will carry out over the next few years?

Mark Bristow

The one thing I think that the market is rationalizing with us, is that when the gold price started moving, everyone got on the bandwagon and promised all of this production. The market is working out with the best ones in the world take five to ten years to build a gold mine; but first we have to find it. Having an anomaly and then chasing a couple of bore holes is not a discovery.

So right now, our big focus is what can we do differently in the short term to maximize our shareholders revenue stream? The first thing that is the initial follow up, the second thing is how do we expand Loulo. So those extra ounces that you see coming into the mining schedule, at this stage we are testing both underground deposits on a sequential basis.

What we are now going to be looking at is, is there anyway we can attack it from two different points? Now that we are getting comfortable, the heat comes down and we will be training people and we see that people can work underground, and we are more comfortable with working; by early next year we will have our first forecast and certainly we’ve set ourselves next year as the target.

We can easily expand the profit, for those who follow up, we have always had a little extra in the plan. The Loulo plan for $15 million to $20 million we can up it from 220,000 to 300,000 tons. The big challenge is our fill-in process, however, that is where our focus is.

So getting back to your question, you can do what everyone else does. You can go and pay a premium for more production and brag that you are making more money or you can expand your gold production and bring new production in. What we are doing is, as you saw in that graph, the industry is going like that. Our production although it looks rather pedestrian, compared to some of the promises in the market, again of growing about 50% in the next four years.

Next year, 2008, is flat and we are looking at ways to enhance that; certainly the revenue will be up and if we keep the costs under control we should make more profits. We have a significant step with the first high grades coming out of Loulo in following year. The following year, Tongon is in production and that counter-balances a Morila decline. I hope that answers your question. There is no magic in gold mine.

Unidentified Analyst

[Microphone not available]

Mark Bristow

I think three key points here as we speak; for us it’s a good business. If you at the IamGold JV there is a lot of data, $16 million of data right in this part of where we believe the base geology is. We did the pre-feasibility study with 51%, a controlling interest. The more junior JV that we do, we take control of it, we keep the rights, but IamGold they can stop us from diluting them at 51%. For the juniors, we force that through to 65% or 80% and we have the choice to take controlling interest or leave it. We bench at 31%. Pre-feasibility means that we make a decision.

On the corporate side, I have always said I looked at it to be the pooper scooper in West Africa. I have no interest in finding at all; if you look at our asset profile, Morila was 7 million ounces, Loulo is 6 million reserves, another 10 of resources; with due respect of all involved, that’s the game we play. So, we are after that. There are some big assets that are undeveloped in Africa, those are what attracts us.

We can compete against the new ones. We have bigger mines than them and we deliver ahead of their promises in Africa, so we think we are at least equal competitors. And again, what we have found in Africa is if you have a $1 billion junior, then doing a deal dilutes that $1 billion into $2.5 billion, so everyone benefits; our shareholders, everyone.

The one thing in the market right now, is people are not that interested in money; they are much more interested in equity. We see that as an emerging opportunity for us. That is why it is so significant when I say managers are an important asset, because shareholders are going to be more and more likely to be looking for delivery when people are not a problem.

Unidentified Analyst

With a higher gold price and mining lesser grades, wouldn’t that be a tactic in your mine, or even strategy, to leave the higher grades for higher returns, perhaps, on these assets? And go back? Or would you just flat out produce as much gold as possible at today’s rate to get the maximum revenue right now?

Mark Bristow

You will see that we have considered the gold price when we design our prospective; not just here in [inaudible] from any of the other mines. In Loulo, for instance, we changed the mix quality, but have taken it all out from underground, it is a natural swap over.

Randgold Resources is a profit-building company. So we could choose profit over production. We always have. NPV is the way to go. That’s the best way. So if you looked even at Tongon, you’ll see all the ounces are coming out in the first four years. We can maximize that and we will think the money right now, thank you.

Well if you have anymore we will move across, there are some snacks and glasses of wine next door, as per usual. We will be happy to continue the discussion.

Thank you again for coming.

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Source: Randgold Resources Q3 2007 Earnings Call Transcript
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