UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
| ¨ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ¨ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 000-49888
RANDGOLD RESOURCES LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
JERSEY, CHANNEL ISLANDS
(Jurisdiction of incorporation or organization)
3rd Floor Unity Chambers, 28 Halkett Street, St. Helier, Jersey JE2 4WJ, Channel Islands
(Address of principal executive offices)
Graham Shuttleworth
Finance Director and Chief Financial Officer
Tel: +44 1534 735 333
Graham.Shuttleworth@randgold.com
3rd Floor, Unity Chambers
28 Halkett Street, St Helier
Jersey JE2 4WJ
Channel Islands
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Name of each exchange on which registered | |
| American Depositary Shares each represented by one Ordinary Share | Nasdaq Global Select Market | |
| Ordinary Shares, par value US $0.05 per Share* |
| * | Not for trading, but only in connection with the listing of American Depositary Shares on the Nasdaq Global Select Market pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the Annual Report.
As of December 31, 2017, the Registrant had outstanding 94,124,872 ordinary shares, par value $0.05 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No
If the report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ¨ Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer x | Accelerated filer ¨ |
Non-accelerated filer ¨ Emerging growth company ¨ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ¨
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
|
U.S. GAAP ¨ |
International Financial Reporting Standards as issued by the International Accounting Standards Board x |
Other ¨ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ¨ Item 17 ¨ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
TABLE OF CONTENTS
GLOSSARY OF MINING TECHNICAL TERMS
The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding some of the terms as used in this annual report (Annual Report).
| Alteration: | The chemical change in a rock due to hydrothermal and other fluids. |
| Archaean: | A geological eon before 2.5 Ga. |
| Anastomosing: | A braided network of irregularly branching and reconnecting veins or structures. |
| Ankerite: | An iron carbonate mineral often associated with hydrothermal alteration. |
| Arsenopyrite: | An iron arsenic sulfide mineral. |
| Assay: | A chemical test performed on a sample of ores or minerals to determine the amount of valuable metals contained. |
| Backfill Operations: | Underground mining procedure where voids are filled to optimize ore recovery and safety. |
| BIF (Banded-Iron Formation): | Layered sedimentary rocks, normally from the Precambrian era, consisting of iron rich material (commonly magnetite) and silica (chert). |
| Bio-Oxidation: | A biological process which uses organisms to liberate gold from sulfide minerals. |
| Birimian: | Geological time era, about 2.1 billion years ago. |
| Breccia: | A rock in which angular fragments are surrounded by a mass of fine-grained minerals. |
| Carbonate: | A mineral salt typically found in quartz veins and as a product of hydrothermal alteration of sedimentary rock. |
| Chlorite: | A common silicate mineral which is typically green in colour and associated with metamorphism and hydrothermal alteration. |
| Concentrate: | A fine, powdery product of the milling process containing a high percentage of valuable metal. |
| Cut-off grade: | The lowest grade of material that can be mined and processed considering all applicable costs, without incurring a loss or gaining a profit. |
| Decline: | A sloping underground opening for machine access from level to level or from surface, also called a ramp. |
| Development: | Underground work carried out for the purpose of opening up a mineral deposit which includes shaft sinking, crosscutting, drifting and raising. |
| Diamond Drilling (DDH): | A rotary type of rock drilling that cuts a core of rock that is recovered in long cylindrical sections, two cm or more in diameter. |
| Dilution (mining): | Rock that is, by necessity, removed along with the ore in the mining process, subsequently lowering the grade of the ore. |
| Diorite: | A coarse-grained intrusive rock with a composition between that of a Granite and a Basalt. |
| Dip: | The angle at which a vein, structure or rock bed is inclined from the horizontal as measured at right angles to the strike. |
| Domain Boundary: | The limit of a geological domain, often defined by a change in lithologies and their orientation. |
| 1 |
| Doré: | Unrefined gold which is produced at a minesite before transportation to a refinery for further purification. |
| EEP: | Exclusive exploration permit. |
| Elution: | An extraction technique for the recovery of gold from activated carbon using a cyanide solution. |
| EP: | Exploitation permit. |
| Exploration: | Prospecting, sampling, mapping, diamond drilling and other work involved in searching for ore. |
| Fault: | A break in the Earth’s crust caused by tectonic forces which have moved the rock on one side with respect to the other. |
| Feasibility Study: | A comprehensive study of a mineral deposit in which all geological, engineering, legal, operating, economic, social, environmental and other relevant factors are considered in sufficient detail that it could reasonably serve as the basis for a final decision by a financial institution to finance the development of the deposit for mineral production. |
| Feldspar: | An alumino-silicate mineral. |
| Footwall: | The rock mass which is located below a dipping structure. |
| g/t: | Grams of gold per metric tonne. |
| Gabbro: | A dark, coarse-grained igneous rock. |
| Gneiss: | A coarse-grained, foliated rock produced by metamorphism. |
| Gold sales: | Represents the sales of gold at spot and the gains/losses on hedge contracts which have been delivered into at the designated maturity date. It excludes gains/losses which have been rolled forward to match future sales. This adjustment is considered appropriate because no cash is received/paid in respect of such contracts. |
| Grade: | The quantity of metal per unit mass of ore expressed as a percentage or, for gold, as grams of gold per tonne of ore. |
| Granite: | A coarse-grained intrusive igneous rock consisting of quartz, feldspar and mica. |
| Greenstone belt: | An area underlain by metamorphosed volcanic and sedimentary rocks, usually in a continental shield. |
| ha | Abbreviation for Hectare. 100 meters by 100 meters. |
| Hangingwall: | The rock on the upper side of a vein or ore deposit. |
| Head grade: | The grade of the ore as delivered to the metallurgical plant. |
| Hematite: | An oxide of iron, and one of that metal’s most common ore minerals. |
| Hydropower Station: | A power plant which generates electricity when river water turns an electric turbine. |
| Hydro-sluicing: | The method of mining soft, unconsolidated material by high pressure water. |
| Hydrothermal: | Relating to hot fluids circulating in the earth’s crust. |
| 2 |
| Kibalian: | A geological time era between 2.4 billion to 2.8 billion years before the present. |
| Kt: | Abbreviation for Kilotonne, 1000 metric tonnes. |
| kWh: | Abbreviation for kilowatt hours. |
| Lode: | A portion of a mineral deposit in solid rock. |
| Lower proterozoic: | Era of geological time between 2.5 billion and 1.8 billion years before the present. |
| Measures: | Conversion factors from metric units to US units are provided below: |
| Metric Unit | US Equivalent | ||||
| 1 tonne | = 1 t | 1.10231 tons | |||
| 1 gram | = 1 g | 0.03215 ounces | |||
| 1 gram per ton | = 1 g/t | 0.02917 ounces per ton | |||
| 1 kilogram per ton | = 1 kg/t | 29.16642 ounces per ton | |||
| 1 kilometer | = 1 km | 0.621371 miles | |||
| 1 meter | = 1 m | 3.28084 feet | |||
| 1 centimeter | = 1 cm | 0.3937 inches | |||
| 1 millimeter | = 1 mm | 0.03937 inches | |||
| 1 square kilometer | = 1 sq km | 0.3861 square miles |
| Metasedimentary: | Rocks formed by the deposition of sediment in water which have been subsequently been altered by pressure and temperature. |
| 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/a revolving drum used for the grinding of ores in preparation for treatment. |
| 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: | Abbreviation for million troy ounces. |
| Mt: | Abbreviation for million metric tonnes. |
| Mtpa: | Abbreviation for million tonnes per annum. |
| MW: | Abbreviation for megawatt. |
| Open pit: | A mine that is entirely on surface. Also referred to as open-cut or open-cast mine. |
| Ore: | A mixture of ore minerals and gangue from which at least one of the metals can be extracted at a profit. |
| Orebody: | A natural concentration of valuable material that can be extracted and sold at a profit. |
| 3 |
| Orogen: | A belt of volcanic, igneous and sedimentary rocks formed by the movement of tectonic plates. |
| Ounce: | One troy ounce, which equals 31.10348 grams. |
| Outcrop: | An exposure of rock or mineral deposit that can be seen on surface that is, not covered by soil or water. |
| Paste Backfill: | A backfill method for filling open stopes that uses cement and tailings material. |
| 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. |
| Proterozoic: | A geological eon representing the time period between 2500 and 541 million years ago. |
| 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 yellow iron sulphide mineral, normally of little value. It is sometimes referred to as “fool’s gold”. |
| 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: | The product of the weathering of rock and other surface processes. |
| 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. |
| Rockbursts: | A spontaneous and violent fracture of rock due to the buildup of pressure. |
| Sampling: | Selecting a fractional but representative sample for analysis. |
| Satellite deposit: | A smaller subsidiary deposit proximal to a main deposit. |
| Sedimentary: | Pertaining to or containing sediment. Used in reference to rocks which are derived from weathering and are deposited by natural agents, such as air, water and ice. |
| Shaft: | A vertical or inclined excavation in rock for the purpose of providing access to an orebody. Usually equipped with a hoist at the top, which lowers and raises a conveyance for handling ore, workers or materials. |
| Shear zone: | A zone in which shearing has occurred on a large scale. |
| 4 |
| Shearing: | The lateral movement of one rock surface against another, causing deformation and alteration to the rock. |
| Silica: | Silicon dioxide. Quartz is a common example. |
| Slag: | The vitreous mass separated from the fused metals in the smelting process. |
| Stockpile: | Broken ore heaped on surface, pending treatment. |
| Stope: | An excavation in a mine from which ore is, or has been, extracted. |
| Strike length: | The direction and length of a geological plane. |
| Stripping: | The process of removing overburden to expose ore. |
| Sulfide: | A mineral characterized by the linkages of sulfur with a metal or semi-metal, such as pyrite or iron sulfide. Also a zone in which sulfide minerals occur. |
| Sump: | An excavation where water accumulates before being pumped to surface. |
| Tailings: | Material rejected from a mill after most of the recoverable valuable minerals have been extracted. |
| 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). |
| 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, and royalties. Total cash costs exclude costs associated with capitalized stripping activities. |
| Tourmaline: | A group of silicate minerals that are commonly found in hydrothermal alteration systems. |
| Trend: | The direction, in the horizontal plane, of a linear geological feature, such as an ore zone, or a group of orebodies measured from true north. |
| TSF: | Tailings Storage Facility. |
| Ultramafic: | Igneous rocks with a very low silica content. |
| Vein: | A fissure, fault or crack in a rock filled by minerals that have travelled upwards from some deep source. |
| Volcaniclastic: | Where volcanic derived material has been transported and reworked through mechanical processes. |
| Volcanisedimentary: | Where volcanic and sedimentary material have been transported and reworked through mechanical processes. |
| VTEM: | Versatile Time Domain Electromagnetic system that measures the electrical properties of rocks while suspended below a moving helicopter. |
| Waste: | Rock mined with an insufficient gold content to justify processing. |
| Weathering: | Rock broken down by surface elements of temperature and water. |
| 5 |
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 “PART I. 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 U.S. Securities and Exchange Commission, or SEC.
We are incorporated under the laws of Jersey, Channel Islands with the majority of our operations located in West and Central Africa. Our books of account are maintained in US dollars and our annual and interim financial statements are prepared on a historical cost basis, except as otherwise required under International Financial Reporting Standards as issued by International Accounting Standards Board (IFRS), and in accordance with IFRS. IFRS differs in significant respects from generally accepted accounting principles in the United States, or US GAAP. This Annual Report includes our audited consolidated financial statements prepared in accordance with IFRS. The financial information included in this Annual Report has been prepared in accordance with IFRS and, except where otherwise indicated, is presented in US dollars. For a definition of cash costs and other non-GAAP information, please see “PART I. Item 3. Key Information—A. Selected Financial Data.”
Unless the context otherwise requires, “us”, “we”, “our”, “company”, “group” or words of similar import, refer to Randgold Resources Limited and its subsidiaries and affiliated companies.
Unless the context otherwise requires, “Morila” refers to Société des Mines de Morila SA, “Loulo” refers to Société des Mines de Loulo SA, “Gounkoto” refers to Société des Mines de Gounkoto SA, “Tongon” refers to Société des Mines de Tongon SA, “Kibali” refers to Kibali Goldmines SA and “Massawa” refers to the Massawa project.
| 6 |
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
The following selected historical consolidated financial data has 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, 2017, 2016 and 2015 and as at December 31, 2017 and 2016, which appear elsewhere in this Annual Report. The historical consolidated financial data as at December 31, 2015, 2014 and 2013, and for the years ended December 31, 2014 and 2013 have been derived from our audited consolidated financial statements not included in this Annual Report.
The financial data have been prepared in accordance with IFRS.
Year Ended December 31, 2017 | Year Ended December 31, 2016 | Year Ended December 31, 2015 | Year Ended December 31, 2014 | Year Ended December 31, 2013 | ||||||||||||||||
| $000: | ||||||||||||||||||||
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME DATA: | ||||||||||||||||||||
| Amounts in accordance with IFRS | ||||||||||||||||||||
| Revenues | 1,280,217 | 1,200,777 | 1,001,420 | 1,086,756 | 1,137,690 | |||||||||||||||
| Share of profits of equity accounted joint ventures | 11,950 | 17,299 | 77,303 | 75,942 | 54, 257 | |||||||||||||||
| Net profit | 335,047 | 294,221 | 212,775 | 271,160 | 325,747 | |||||||||||||||
| Net profit attributable to owners of the parent | 278,017 | 247,474 | 188,677 | 234,974 | 278,382 | |||||||||||||||
| Basic earnings per share ($) | 2.96 | 2.64 | 2.03 | 2.54 | 3.02 | |||||||||||||||
| Diluted earnings per share ($) | 2.92 | 2.61 | 2.01 | 2.51 | 2.98 | |||||||||||||||
| Weighted average number of shares used in computation of basic earnings per share | 94,054,762 | 93,644,110 | 93,093,692 | 92,603,191 | 92,213,511 | |||||||||||||||
| Weighted average number of shares used in computation of fully diluted earnings per share | 95,134,163 | 94,793,842 | 93,093,803 | 93,513,661 | 93,346,109 | |||||||||||||||
| Other data | ||||||||||||||||||||
| Dividends approved per share1 | 1.00 | 0.66 | 0.60 | 0.50 | 0.50 | |||||||||||||||
| 1 | Dividend distribution to the company’s shareholders is recognized as a liability in the group’s financial statements in the period in which the dividends are approved by the board of directors and paid to shareholders. |
| 7 |
At December 31, 2017 | At December 31, 2016 | At December 31, 2015 | At December 31, 2014 | At December 31, 2013 | ||||||||||||||||
| $000: | ||||||||||||||||||||
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION DATA: | ||||||||||||||||||||
| Amounts in accordance with IFRS | ||||||||||||||||||||
| Total assets | 4,303,469 | 4,040,958 | 3,737,320 | 3,533,083 | 3,376,513 | |||||||||||||||
| Total non-current liabilities | 111,284 | 100,606 | 85,894 | 88,585 | 80,564 | |||||||||||||||
| Share capital | 4,707 | 4,690 | 4,662 | 4,634 | 4,612 | |||||||||||||||
| Share premium | 1,563,361 | 1,537,326 | 1,493,781 | 1,450,984 | 1,423,513 | |||||||||||||||
| Retained earnings | 2,077,513 | 1,893,542 | 1,708,151 | 1,575,518 | 1,386,518 | |||||||||||||||
| Other reserves | 60,774 | 63,141 | 67,005 | 67,254 | 64,398 | |||||||||||||||
| Equity attributable to the owners of the parent | 3,706,355 | 3,498,699 | 3,273,599 | 3,098,090 | 2,879,041 | |||||||||||||||
| Non-controlling interests | 285,914 | 253,258 | 218,706 | 204,864 | 178,813 | |||||||||||||||
| Total equity | 3,992,269 | 3,751,957 | 3,492,305 | 3,302,954 | 3,057,854 | |||||||||||||||
Non-GAAP information
Randgold has identified certain measures that it believes will assist understanding of the performance of the business. As the measures are not defined under IFRS they may not be directly comparable with other companies’ adjusted measures. The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management has included them as these are considered to be important comparables and key measures used within the business for assessing performance.
These measures are explained further below:
Total cash costs and cash cost per ounce are non-GAAP measures. Total cash costs and total cash cost per ounce are calculated using guidance issued by the Gold Institute. The Gold Institute was a non-profit industry association comprising leading gold producers, refiners, bullion suppliers and manufacturers. This institute has now been incorporated into the National Mining Association. The guidance was first issued in 1996 and revised in November 1999. Total cash costs, as defined in the Gold Institute’s guidance, include mine production, transport and refinery costs, general and administrative costs, movement in production inventories and ore stockpiles, and royalties. Total cash costs exclude costs associated with capitalized stripping activities.
Total cash cost per ounce is calculated by dividing total cash costs, as determined using the Gold Institute guidance, by gold ounces sold for the periods presented. Total cash costs and total cash cost per ounce are calculated on a consistent basis for the periods presented. Total cash costs and total cash cost 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 measures. The data does not have a meaning prescribed by IFRS and therefore amounts presented may not be comparable to data presented by gold producers who do not follow the guidance provided by the Gold Institute. In particular depreciation and amortization would be included in a measure of total costs of producing gold under IFRS, but are not included in total cash costs under the guidance provided by the Gold Institute. Furthermore, while the Gold Institute has provided a definition for the calculation of total cash costs and total cash cost 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, Randgold believes that total cash cost per ounce is a useful indicator to investors and management of a mining company’s performance as it provides an indication of a company’s profitability and efficiency, the trends in cash costs as the company’s operations mature, and a benchmark of performance to allow for comparison against other companies.
| 8 |
Gold sales is a non-GAAP measure. It represents the sales of gold at spot and the gains/losses on hedge contracts which have been delivered into at the designated maturity date. It excludes gains/losses on hedge contracts which have been rolled forward to match future sales. This adjustment is considered appropriate because no cash is received/paid in respect of these contracts. Randgold currently does not have any hedge positions.
Profit from mining activity is calculated by subtracting total cash costs from gold sales for all periods presented.
3B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
3C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
In addition to the other information included in this Annual Report, you should carefully consider the following factors, which individually or in combination could have a material adverse effect on our business, financial condition and results of operations. There may be additional risks and uncertainties not presently known to us, or that we currently see as immaterial, which may also harm our business. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected. In this case, the trading price of our ordinary shares and American Depositary Shares, or ADS, could decline and you might lose all or part of your investment.
Risks Relating to Our Operations
The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely.
Substantially all of our revenue 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 investment purposes including exchange traded funds, industrial uses and for use in jewelry; |
| · | international or regional political and economic trends; |
| · | the strength of the US dollar, the currency in which gold prices generally are quoted, and of other currencies; |
| · | market expectations regarding inflation rates; |
| · | interest rates; |
| · | speculative activities; |
| · | actual or expected purchases and sales of gold bullion holdings by central banks, the International Monetary Fund, or other large gold bullion holders or dealers; |
| · | 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 approximate annual high, low and average of the afternoon London Bullion Market fixing price of gold in US dollars for the past ten years.
| 9 |
| Price Per Ounce ($) | ||||||||||||
| Year | High | Low | Average | |||||||||
| 2008 | 1,011 | 712 | 871 | |||||||||
| 2009 | 1,213 | 810 | 972 | |||||||||
| 2010 | 1,421 | 1,058 | 1,224 | |||||||||
| 2011 | 1,895 | 1,319 | 1,571 | |||||||||
| 2012 | 1,792 | 1,540 | 1,669 | |||||||||
| 2013 | 1,694 | 1,192 | 1,411 | |||||||||
| 2014 | 1,385 | 1,142 | 1,266 | |||||||||
| 2015 | 1,296 | 1,049 | 1,160 | |||||||||
| 2016 | 1,366 | 1,061 | 1,249 | |||||||||
| 2017 | 1,346 | 1,151 | 1,266 | |||||||||
| 2018 (through February 28) | 1,355 | 1,311 | 1,332 | |||||||||
The market price of gold has been and continues to be significantly volatile. In 2017, there was a 1% increase in the average gold price. If gold prices should fall below and remain below our cost of production for any sustained period we may experience losses, and if gold prices should fall below our costs of production we may be forced to re-plan and mine higher grade ore which will have a negative impact on our reserves and life of mine plans. Low gold prices for an extended period could result in us having to curtail or suspend some or all of our mining operations. In addition, we would also have to assess the economic impact of low gold prices on our ability to recover from any losses we may incur during that period and on our ability to maintain adequate reserves.
Our mining operations may yield less gold under actual production conditions than indicated by our gold reserve figures, which are estimates based on a number of assumptions, including assumptions as to mining and recovery factors, production costs and the price of gold.
The ore reserve estimates contained in this Annual Report are estimates of the mill delivered quantity and grade of gold in our deposits. They represent the amount of gold that we believe can be mined, processed and sold at prices sufficient to recover our estimated total cash costs of production, remaining investment and anticipated additional capital expenditure. Our ore reserves are estimated based upon many factors, including:
| · | the results of exploratory drilling and an ongoing sampling of the orebodies; |
| · | past experience with mining properties; |
| · | depletion from past mining; |
| · | mining method and associated dilution and ore loss factors; |
| · | control of ore stockpiles; |
| · | gold price; and |
| · | operating costs. |
Because our ore reserve estimates are calculated based on current estimates of future production costs and gold prices, they should not be interpreted as assurances of the economic life of our gold deposits or the profitability of our future operations.
Reserve estimates may require revisions based on actual production experience. Further, a sustained decline in the market price of gold may render the recovery of ore reserves containing relatively lower grades of gold mineralization uneconomical and ultimately result in a restatement of reserves. The failure of the reserves to meet our recovery expectations may have a material adverse effect on our business, financial condition and results of operations.
We are subject to various political and economic uncertainties associated with operating in Mali that could significantly affect our mines in Mali and our results of operations and financial condition.
We are subject to risks associated with operating gold mines in Mali. In 2017, gold produced in Mali represented approximately 58% of our consolidated group gold production, including joint ventures. On March 21, 2012, Mali was subject to an attempted coup d’état that resulted in the suspension of the constitution, the partial closing of the borders and the general disruption of business activities in the country. The supply of consumables to our mines in Mali was temporarily interrupted as a result of the political situation. The borders were reopened shortly after these events and an interim government was installed within a month. In January 2013, following military conflicts with terrorist insurgents, the Malian State requested the assistance of the French Government to assist the Malian army to repel the insurgents who had been occupying parts of the north of the country and beginning to move towards the southern part of the country. During 2013, French and other foreign troops occupied the northern part of the country to assist the Malian State in maintaining control of this region and presidential and parliamentary elections took place during the middle of 2013. During 2015, a number of attacks by insurgents took place. Despite a peace agreement reached in June 2015 between the Malian government and secular armed groups, the growing presence of armed groups in northern and central Mali and bouts of violence have continued. In July 2016, Mali extended the country’s state of emergency after a series of deadly attacks. During 2017, Mali experienced a number of attacks by insurgents, including an attack on peacekeeping troops in the north of the country. In April 2017 and October 2017, Mali extended the country’s state of emergency as there continues to be a threat to security in certain areas of the country. Although we have continued to produce and sell gold throughout this period, there can be no assurance that the political or security situation will not disrupt our ability to continue gold production, or our ability to sell and ship our gold from our mines in Mali. Furthermore, there can be no assurance that the political and security situation in Mali will not have a material adverse effect on our operations and financial condition.
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Our business and results of operations may be adversely affected if the State of Mali and the State of Democratic Republic of Congo (DRC) fail to repay Value Added Tax (TVA), owing to the Loulo, Morila, Gounkoto and Kibali mines.
Our mining companies operating in Mali are exonerated by their Establishment Conventions from paying TVA for the three years following first commercial production. After that, TVA is payable and reimbursable. In prior years and during 2016 and 2017 Loulo and Morila have offset TVA reimbursements they were owed against corporate and other taxes payable to the State of Mali under the terms of their legally binding mining conventions. The amount of TVA owed by the State of Mali to Loulo has increased in the current year from $61.6 million at December 31, 2016 to $91.9 million at December 31, 2017. At Loulo, the TVA receivable includes $17.6 million in respect of TVA withholding tax on payments to foreign service providers which were found payable by the group under the arbitration ruling (as detailed below). The arbitration ruled that these amounts are tax neutral and are therefore also recoverable as TVA. While the group submitted these amounts during 2016 for recovery under the TVA system, the submissions have been rejected by the tax authority, which appears in contravention of the arbitration ruling. As of December 31, 2016 and December 31, 2017, TVA refunds of $26.2 million and $21.9 million, respectively, remained owing to Gounkoto by the State of Mali. As of December 31, 2016 and December 31, 2017, TVA owed by the State of Mali to Morila amounted to $5.0 million (our 40% share) and $7.0 million (our 40% share), respectively.
By December 31, 2016 and December 31, 2017, TVA owing to Kibali by the DRC State amounted to $64.9 million (our 45% share) and $70.2 million (our 45% share), respectively. Kibali received TVA refunds during 2016, however no refunds have been received during 2017 and the process has been slower than set out by law, due to additional administrative requirements imposed by the relevant State departments, political uncertaintities owing to delayed elections and national budget constraints. In addition, the TVA balances owed to Kibali are denominated in Congolese francs. In the second half of 2016, the Congolese franc depreciated sharply relative to the dollar resulting in a $16.3 million foreign exchange loss (our 45% share) recognized during 2016; this depreciation continued throughout 2017 and resulted in a further $9.2 million foreign exchange loss (our 45% share) recognized during 2017.
Our business, cash flow and results of operations will be adversely affected to the extent the TVA amounts owing to the group are not paid or otherwise offset against other taxes payable.
Our business may be adversely affected if we fail to resolve disputed tax claims with the State of Mali.
As at December 31, 2017, the group is in receipt of claims for various taxes from the State of Mali totaling $200.5 million ($122.7 million as at December 31, 2016), in particular with respect to the Loulo, Gounkoto and Morila mines. Overall claims have increased by $77.8 million during the year. A significant portion of this increase is the result of the strengthening of the Communauté Financière Africane franc (CFA) against the US dollar due to the tax claims being based in CFA. Mali operations were subject to tax audits during 2017 and new disputed tax claims for these three entities amount to $20.7 million. The remainder of the increase in total outstanding claims relates to disputes regarding the recoverability of TVA withholding tax (see above), as well as the applicable rate.
The International Center for Settlement of Investment Disputes’ (ICSID) arbitration tribunal issued its final and binding award in 2016, resulting in Loulo being awarded $29.2 million in principal (together with an award for costs and interest) from the State of Mali, for monies found by the tribunal to have been wrongfully taken by the government through TVA credits. This amount was subsequently received during the third quarter of 2016. In addition, the arbitration ruled that TVA withholding tax on foreign suppliers was due to the State of Mali, although amounts due were also confirmed to be recoverable as TVA receivables by the award such that the TVA payable is matched by an equal TVA receivable. The arbitration however related to only a portion of the various tax claims which have been received by the group from the State of Mali in respect of its Mali operations.
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Having taken professional advice, the group considers the material elements of the outstanding claims to be without merit or foundation and is strongly defending its position in relation to these claims and following the appropriate legal process. Accordingly, no provision has been made for the material claims and the likelihood of a material outflow of economic benefits in respect of such claims are considered improbable under IFRS. In forming this assessment, the Board have considered the professional advice received, the legally binding mining convention with the State of Mali, the findings of the previous ICSID arbitration tribunal and the facts and circumstances of each individual claim.
Loulo, Gounkoto and Morila have each legally binding establishment conventions which guarantee fiscal stability, govern the taxes applicable to the companies and allow for international arbitration in the event a dispute cannot be resolved in the country. Management continues to engage with the Malian authorities at the highest level to resolve these outstanding fiscal issues. During the third quarter of 2016, the group received payment demands for these disputed amounts, and while it was engaged with the authorities on these demands, its office in Bamako was closed in early October 2016 by the authorities but subsequently reopened in that month. Following that, the group paid tax advances to the State of Mali in the amount of $25.0 million, to ensure that it could continue to engage with the Malian authorities to resolve the tax disputes, noting that any amounts which are legally not due will be refunded. These amounts are shown in non-current trade and other receivables and judgement was applied in assessing the recoverability of the balance. If for any reason these disputed tax claims become due and payable the results of Morila, Gounkoto and Loulo’s operations and financial position would be adversely affected, as would be their ability to pay dividends to their shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends from operations are not paid.
Changes in mining legislation can have significant effects on our operations.
Changes in mining legislation in the countries in which we operate could have significant adverse effects on our results of operations. In addition, changes in mining legislation may discourage future investments in these jurisdictions, which may have an adverse impact on our ability to develop new mines and reduce future growth opportunities. Among the jurisdictions in which we currently have major operations, there are several proposed or recently adopted changes in mining legislation that could materially affect us. The governments in these jurisdictions may require us to renegotiate our mining conventions. If so, there can be no assurance that the outcome of our negotiations will not have a material adverse impact on our financial condition or operational results.
While we have entered into binding mining conventions with the governments of Côte d’Ivoire, Mali and Senegal, in the DRC our Kibali mine operates under the DRC Mining Code and not under a mining convention. In March 2018, the DRC adopted a revised Mining Code, including significant increases in royalties, taxes, government ownership requirements and repatriation restrictions. In addition, the new Mining Code terminates the 10-year stability clause that exists in the current 2002 Mining Code, which was the basis on which we invested in the DRC. We are continuing to engage at the highest level with the government of the DRC regarding the new Mining Code and in particular, how it will be implemented and the transitional arrangements that will apply to Kibali. If the new Mining Code is implemented in its current form, it could have a significant adverse effect on our results of operations and on the mining industry in the DRC.
In addition, failure to adapt to changes in tax regimes and regulations may result in fines, financial losses and corporate reputational damage. Failure to react to tax notifications from authorities could result in financial losses or the seizure of assets. Inability to enforce legislation, including relevant tax stability arrangements in the event of changes to tax laws or mining codes, over tax or incorrectly applied legislation could result in lengthy arbitration and loss of profits or company assets and impact future investment decisions regarding the affected countries.
Our success may depend on our social and environmental performance.
Our ability to operate successfully in communities will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the health, safety and well-being of our employees, respecting human rights, the protection of the environment, and the creation of long term economic and social opportunities in the countries in which we operate. Mining companies are required to make a fair contribution and provide benefits to the communities and countries in which they operate, and are subject to extensive environmental, health and safety laws and regulations. As a result of public concern about the real or perceived detrimental effects of economic globalization and global climate impacts, businesses generally and large multinational corporations in natural resources industries, in particular, face increasing public scrutiny of their activities. These businesses are under pressure to demonstrate that, as they seek to generate satisfactory returns on investment to shareholders, human rights are respected and other stakeholders, including employees, governments, communities surrounding operations and the countries in which they operate, benefit and will continue to benefit from their commercial activities. Such pressures tend to be particularly focused on companies whose activities relate to non-renewable resources and are perceived to have a high impact on their social and physical environment. The potential consequences of these pressures include reputational damage and legal suits.
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Certain non-governmental organizations oppose globalization and resource development and are often vocal critics of the mining industry and its practices. Adverse publicity by such non-governmental agencies could have an adverse effect on our reputation and financial condition and could have an impact on the communities within which we operate.
In addition, our ability to successfully obtain key permits and approvals to explore for, develop and operate mines and to successfully operate in communities around the world will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the creation of social and economic benefits in the surrounding communities, which may or may not be required by law. Mining operations should be designed to minimize the negative impact on such communities and the environment, for example, by modifying mining plans and operations or by relocating those affected to an agreed location. The cost of these measures could increase capital and operating costs and therefore could have an adverse impact upon our financial condition and operations. We seek to promote improvements in health and safety, human rights, environmental performance and community relations. However, our ability to operate could be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health, safety and well-being of our employees, human rights, the environment or the communities in which we operate.
Any appreciation of the currencies in which we incur costs against the US dollar could adversely affect our results of operations and financial condition.
While our revenue is derived from the sale of gold in US dollars, a significant portion of our input costs are incurred in currencies other than the dollar, primarily Euro, Communauté Financière Africaine Franc and South African Rand. Accordingly, any appreciation in such other currencies could adversely affect our results of operations.
The profitability of our operations and the cash flows generated by these operations are significantly affected by the fluctuations in the price, cost and supply of fuel and other inputs, and we would be adversely affected by future increases in the prices of fuel and other inputs or a disruption in our supply chain.
Fuel, power and consumables, including diesel, steel, chemical reagents, explosives and tires, form a relatively large part of our operating costs. The cost of these consumables is impacted to varying degrees by fluctuations in the price of oil, exchange rates and the availability of supplies. Such fluctuations have a significant impact upon our operating costs and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for mining projects, new and existing, and could even render certain projects non-viable.
Fuel is the primary input utilized in our mining operations, and our results are significantly affected by the price and availability of fuel, which are in turn affected by a number of factors beyond our control. Historically, fuel costs have been subject to wide price fluctuations based on geopolitical factors and supply and demand. Political unrest in certain oil producing countries has in the past led to an increase in the cost of fuel. If there are additional outbreaks of hostilities or other conflicts in oil producing areas or elsewhere, or a reduction in refining capacity (due to weather events, for example), or governmental limits on the production or sale of fuel, or restrictions on the transport of fuel, there could be reductions in the supply of fuel and significant increases in the cost of fuel.
During 2017, the average price of our landed fuel was higher than 2016. In the year ended December 31, 2017, the cost of fuel and other power generation costs comprised approximately 18% of our operating costs (2016: 16%; 2015: 18%).
While we do not currently anticipate a significant reduction in fuel availability, factors beyond our control make it impossible to predict the future availability of fuel. We are not parties to any agreements that protect us against price increases or guarantee the availability of fuel. Extended disruptions to our supply chain would have a material impact on the mines’ ability to operate. Major reductions in the availability of fuel or significant increases in its cost for a significant period of time, would adversely affect our results of operations and profitability.
Our underground mines at Loulo and Kibali are subject to all of the risks associated with underground mining.
The business of underground mining by its nature involves significant risks and hazards. In particular, our underground mining operations could be subject to:
| · | rockbursts; |
| · | seismic events; |
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| · | underground fires; |
| · | cave-ins or falls of ground; |
| · | discharges of gases or toxic chemicals and other environmental hazards; |
| · | flooding; |
| · | accidents; and |
| · | other conditions resulting from drilling, blasting and the removal of material from an underground mine. |
We are at risk of experiencing any and all of these hazards. The occurrence of any of these hazards could delay the development of the mine, production, increase operating costs and result in additional financial liability for us.
The use of mining contractors at our operations may expose our operations to delays or suspensions in mining activities.
Mining contractors are used at Tongon, Gounkoto, Kibali and Morila to mine and deliver ore to processing plants and at Kibali to develop the underground mine. As a result of our use of mining contractors, our operations are subject to a number of risks, some of which are outside our control, including:
| · | Negotiating agreements with contractors on acceptable terms; |
| · | The inability to replace a contractor and its operating equipment in the event that either party terminates the agreement; |
| · | Reduced control over those aspects of operations which are the responsibility of the contractor; |
| · | Failure of a contractor to adhere to its obligations and perform under its agreement; |
| · | Interruption of operations or increased costs in the event that a contractor ceases its business due to insolvency or other unforeseen events; |
| · | Failure of a contractor to comply with applicable legal and regulatory requirements, to the extent it is responsible for such compliance; and |
| · | Problems of a contractor with managing its workforce, labor unrest or other employment issues. |
In addition, we may incur liability to third parties as a result of the actions of our contractors. The occurrence of one or more of these risks could adversely affect our results of operations and financial position.
Actual costs of production, production results, capital expenditure costs and economic returns may differ significantly from those anticipated by our feasibility studies for new development projects.
Feasibility studies and other project evaluation activities necessary to determine the current or future viability of a mining operation are often not economically beneficial. Activities often require substantial expenditure on exploration drilling to determine the extent and grade of mineralized material. It typically takes a number of years from initial feasibility studies of a mining project until development is completed and, during that time, the economic feasibility of production may change. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, metallurgical recoveries, capital and operating costs and future gold prices. The capital expenditure and time required to develop new mines or other projects are considerable, and changes in costs or construction schedules can affect project economics. Thus it is possible that actual costs and economic returns may differ materially from our estimates.
In addition, there are a number of uncertainties inherent in the development and construction of any new mine, including:
| · | the availability and timing of necessary environmental and governmental permits; |
| · | the timing and cost necessary to construct mining and processing facilities, which can be considerable; |
| · | the availability and cost of skilled labor, power, water and other materials; |
| · | the accessibility of transportation and other infrastructure, particularly in remote locations; and |
| · | the availability of funds to finance construction and development activities. |
At Massawa (Senegal), a technical and financial study was completed on the open pit enabling us to declare mineral reserves in 2010. In 2012 it was decided to focus on understanding the geological and metallurgical controls of the project. An updated technical and financial study was completed at the end of 2016, including both Massawa and the Sofia satellite deposit. The project is being progressed towards a final development decision which is expected to occur by the end of 2018. There can be no assurance that the Massawa project will ultimately result in a new commercial mining operation, or that such new commercial mining operations would be successful.
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We conduct mining, development and exploration activities in countries with developing economies and are subject to the risks of political and economic instability associated with these countries.
We currently conduct mining, development and exploration activities in countries with developing economies. These countries and other emerging markets in which we may conduct operations have, from time to time, experienced economic or political instability. It is difficult to predict the future political, social and economic direction of the countries in which we operate, and the impact government decisions may have on our business. Any political or economic instability in the countries in which we currently operate could have a material adverse effect on our business and results of operations.
The countries of Mali, Senegal, DRC and Côte d’Ivoire have, since independence, experienced some form of political upheaval with varying forms of changes of government taking place.
Goods are supplied to our operations in Mali primarily by road through Senegal and Côte d’Ivoire, and to our operations in DRC primarily by road through Kenya and Uganda, which at times have been disrupted by geopolitical issues. Any present or future policy changes in the countries in which we operate, or through which we are supplied, may in some way have a significant effect on our operations and interests.
The mining laws of Mali, Côte d’Ivoire, Senegal and DRC stipulate that, should an economic orebody be discovered on a property subject to an EEP, a permit that allows processing operations to be undertaken must be issued to the holder. Legislation in certain countries currently provides for the relevant government to acquire a free ownership interest in any mining project. The requirements of the various governments as to the foreign ownership and control of mining companies may change in a manner which adversely affects us.
In addition, unforeseen events, including war, terrorism and other international conflicts could disrupt our operations and disrupt the operations of our suppliers. Such events could make it difficult or impossible for us to conduct our mining operations, including delivering our products and receiving materials from suppliers.
We are subject to various political and economic uncertainties associated with operating in the DRC, and the success of the Kibali mine will depend in large part on our ability to overcome significant challenges.
We are subject to risks associated with operating the Kibali mine in the DRC. The Kibali mine is located in the north-east region of the DRC and is subject to various levels of political, economic and other risks and uncertainties associated with operating in the DRC. Some of these risks include political and economic instability, high rates of inflation, severely limited infrastructure, lack of law enforcement, labor unrest, and war and civil conflict. In addition, the Kibali mine is subject to the risks inherent in operating in any foreign jurisdiction including changes in government policy, restrictions on foreign exchange, changes in taxation policies, and renegotiation or nullification of existing concessions, licenses, permits and contracts.
The DRC is an impoverished country with physical and institutional infrastructure that is in a poor condition. It is in transition from a largely state-controlled economy to one based on free market principles, and from a non-democratic political system with a centralized ethnic power base to one based on more democratic principles. There can be no assurance that these changes will be effected or that the achievement of these objectives will not have material adverse consequences for the Kibali mine.
Any changes in mining or investment policies or shifts in political attitude in the DRC may adversely affect operations and/or profitability of the Kibali mine. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. These changes may impact the profitability and viability of the Kibali mine.
Moreover, the northeast region of the DRC has undergone civil unrest and instability that could have an impact on political, social or economic conditions in the DRC generally. There has been turmoil in the Eastern DRC, to the south of Kibali, following the defeat of the M23 rebel group in late 2013. In March 2016, certain open pits at Kibali were overrun by artisanal miners, the resolution of which required the involvement of the State security forces, which temporarily disrupted the operation of these pits. In late 2016, political tensions arose stemming from a constitutional crisis surrounding the presidency. Delays in the presidential elections, now scheduled for December 2018, have led to protests and increased tensions in the country. The failure to secure a peaceful transition of power could lead to armed conflict and pose a significant risk to the country’s stability. A sufficient level of stability and effective national and local administration must be maintained in order for us to continue to operate the Kibali mine. The impact of unrest and instability on political, social or economic conditions in the DRC could result in the impairment of the exploration, development and operations at the Kibali mine.
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We are subject to various political and economic uncertainties associated with operating in Côte d’Ivoire, that could significantly affect the success of the Tongon mine.
We are subject to risks associated with operating the Tongon mine in Côte d’Ivoire. Côte d’Ivoire has in prior years experienced political disruptions, including an attempted coup d’état and civil war. In January 2017, soldiers mutinied in Bouake and several other cities, including the economic capital Abidjan, demanding bonuses, better pay and housing and forcing the government into negotiations. Also in January 2017, the Tongon mine experienced an illegal sit-in which took place over a week, with employees demanding annual ex gratia payments. The incident ended after management, supported by the local and national authorities, came to an agreement and negotiated a settlement with the workers. In May 2017, a revolt by soldiers demanding bonus payments resulted in an agreement with the government, ending a four-day mutiny that caused widespread concern due to the country’s emergence from a decade of political crisis and violence in 2011. Labor relations at Tongon continue to be challenging for us. There can be no assurance that similar events and unrest may not occur in the future which would have a material adverse effect on our gold production and financial results. Our operations and financial conditions could be impacted by future political and economic instabilities.
We operate in remote geographical areas which lack adequate infrastructure.
Mining, processing, development and exploration activities depend, in some part, on adequate infrastructure. Reliable roads, power sources and water supply are important factors which affect our operating costs. A lack of infrastructure or varying weather phenomena, sabotage, terrorism or other interferences in the maintenance or provision of such infrastructure could affect our operations and financial condition.
Our mining operations are located in remote areas of Mali, Côte d’Ivoire and the DRC, which lack basic infrastructure, including adequate roads and other transport, sources of power, water, housing, food and transport. In order to develop any of the mineral interests, facilities and material necessary to support operations in the remote locations in which they are situated must be established. The remoteness of the mineral interests would affect the potential viability of mining operations, as we would also need to establish substantially greater sources of power, water, physical plant, roads and other transport infrastructure than are currently present in those areas. For example, hydropower stations are utilized at Kibali, which necessarily involve maintaining existing stations and building new hydropower stations and also obtaining certain government licenses relating to their operation. Two of three new hydropower stations at Kibali have been completed and an additional hydropower station is still to be completed in 2018.
Establishing infrastructure for our development projects requires significant resources, identification of adequate sources of raw materials and supplies, and necessary cooperation from national and regional governments, none of which can be assured.
Certain factors may affect our ability to support the carrying value of our property, plant and equipment, and other assets on our consolidated statement of financial position.
We review and test the carrying amount of our assets on an annual basis or when events or changes in circumstances suggest that the net book value may not be recoverable. Examples of changed circumstances could include a significant adverse change in the gold price or significant adverse changes in mining legislation or other applicable laws. If there are indications that impairment may have occurred, we prepare estimates of expected future discounted cash flows for each group of assets. Assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units) for purposes of assessing impairment. Expected future cash flows are inherently uncertain, and could materially change over time. Such cash flows are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure to extract reserves under the approved life of mine plan.
Under our joint venture agreements with AngloGold Ashanti Limited, or AngloGold Ashanti, we operate the Morila mine and the Kibali mine by means of a joint venture committee, and any disputes with AngloGold Ashanti over the management of the Morila mine or the Kibali mine could adversely affect our business.
We jointly control Morila, the owner of the Morila mine, and Kibali, the owner of the Kibali mine, with AngloGold Ashanti under joint venture agreements. We are responsible for the day-to-day operations of Morila and Kibali, subject to the overall management control of Morila and Kibali boards, respectively. Substantially all major management decisions, including approval of a budget for the Morila mine and the Kibali mine, must be approved by the Morila and Kibali boards, respectively. We and AngloGold Ashanti retain equal representation on the boards, with neither party holding a deciding vote. If a dispute arises between us and AngloGold Ashanti with respect to the management of Morila or Kibali, and we are unable to amicably resolve the dispute, we may have to participate in arbitration or other proceedings to resolve the dispute, which could materially and adversely affect our business.
Our mines and projects face many risks related to their present or future operations that may impact cash flows and profitability.
Our mines and projects are subject to all of the operating hazards and risks normally incident to exploring for, developing and operating mineral properties and mines, such as:
| · | encountering unusual or unexpected formations; |
| · | environmental pollution or damage; |
| · | mechanical breakdowns; |
| · | failures of TSF, open pit slopes or underground working; |
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| · | safety-related stoppages; |
| · | work stoppages or other disruptions in labor force; |
| · | disruptions to surrounding communities; |
| · | allegations of human rights abuses; |
| · | electrical power and fuel supply interruptions; |
| · | lack of affordable, sustainable sources of energy and water; |
| · | unanticipated ground conditions or flooding; |
| · | illness, personal injury or threat to personal security; and |
| · | threat to security arrangements for gold on site or transport of gold sales. |
Historically, the Tongon mine has experienced a series of operational challenges that have adversely affected its financial performance. In 2015, the mine experienced frequent outages of grid power which disrupted the processing plant. During the first half of 2016, mill downtime resulting from mechanical failures resulted in lower production than expected, but subsequent performance improvement and revised production guidance allowed Tongon to achieve its production target for 2016. In 2017, work stoppages among our Tongon labor force adversely affected our financial results. While we experienced financial performance improvement in 2017, there can be no assurance that similar operational issues will not occur in the future, or that such events will not adversely affect our results of operations.
Mining operations and projects are vulnerable to supply chain disruption and our operations could be adversely affected by shortages of, as well as lead times to deliver fuel, strategic spares, critical consumables, mining equipment or metallurgical plant.
Our operations could be adversely affected by both shortages and long lead times to deliver fuel, strategic spares, critical consumables, mining equipment and metallurgical plant. We have limited influence over suppliers and manufacturers of these items. In certain cases there are a limited number of suppliers for fuel, certain strategic spares, critical consumables, mining equipment or metallurgical plant who command superior bargaining power relative to us. We could at times face limited supply or increased lead time in the delivery of such items. There can be no assurance that such limited supply or increased lead time in the delivery of items will not happen in the future, or that such events will not adversely affect our results of operations.
Failure to comply with the U.S. Foreign Corrupt Practices Act, Corruption (Jersey) Law, the UK Bribery Act and any other applicable sanctions could subject us to penalties and other adverse consequences. We could suffer losses from corrupt or fraudulent business practices.
We abide by the provisions of the US Foreign Corrupt Practices Act, Corruption (Jersey) Law and the UK Bribery Act, which generally prohibit companies and their intermediaries from making improper payments to officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that represent our transactions and have an adequate system of internal accounting controls. The compliance mechanisms and monitoring programs that we have in place may not adequately prevent or detect possible violations under applicable anti-bribery and corruption legislation. There can be no assurance that our internal control policies and procedures always will protect us from recklessness, fraudulent behavior, dishonesty or other inappropriate acts committed by our affiliates, employees or agents. As such, our corporate policies and processes may not prevent all potential breaches of law or other governance practices. Failure to comply with such legislation may result in severe criminal or civil sanctions, and we may be subject to other liabilities, including fines, prosecution, potential debarment from public procurement and reputational damage, all of which could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition. In addition, investigations by governmental authorities could have a material adverse effect on our business, consolidated results of operations, and consolidated financial condition. We are also subject to the risks that our employees, joint venture partners, and agents may fail to comply with other applicable laws.
In 2016, we entered into a joint venture agreement with Société Minière Moku-Beverendi SA and Moku Goldmines AG (“Moku”) to develop the Moku-Beverendi gold project in DRC. Moku is majority-owned by Dan Gertler’s Fleurette Group. On December 21, 2017, Mr. Gertler was added to the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”) List of Specially Designated Nationals and Blocked Persons (“SDNs”) by an executive order issued under the Global Magnitsky Human Rights Accountability Act, P.L. 114-328. Pursuant to this executive order, U.S. persons, including U.S. person employees, officers, or directors of Randgold, are generally prohibited from engaging in transactions with SDNs. In addition, we may be indirectly exposed to liability if the company is deemed to take any action that causes, aids and abets, or conspires to violate U.S. sanctions.
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As further discussed under “Part I. Item 4. Information on the Company—B. Business Overview—Exploration Review”, we have suspended all exploration activities under the joint venture arrangements with Société Minière Moku-Beverendi SA and Moku Goldmines AG. We are currently involved in the demobilization of equipment and relocation of skills to other local projects in DRC (Kibali and Ngayu). We continue to evaluate the new sanctions and attempt to mitigate related risks, and we intend to continue to comply with all applicable sanctions. However, such sanctions may cause us to incur additional costs, including relocation and other costs.
We may experience unforeseen difficulties, delays or costs in successfully implementing our business strategy, including both existing and proposed projects, and any such strategy or project may not result in the anticipated benefits.
Many factors, including those outside our control, affect the success of our business strategy and projects. For example, fluctuations in the market prices of our inputs may adversely affect our management of costs, while unanticipated breakdowns of equipment or challenges in production process may lead to decreased production. The successful implementation of our existing and proposed projects, be they from our existing exploration portfolio or from new business initiatives, all of which are subject to the operations- and industry-related risks outlined in this section, will affect the continued growth of our business.
In addition, notwithstanding our core strategy of focusing on organic growth through the discovery and development of world-class orebodies and maintaining a pipeline of high quality projects and exploration targets, we routinely review global corporate and asset acquisition and merger opportunities, including strategic partnerships through the formation of joint ventures or otherwise. Our ability to successfully grow through any such acquisitions or strategic partnerships depends upon our ability to identify, negotiate, complete and integrate suitable acquisitions or strategic partnerships and to obtain any necessary financing and the prior approval of any relevant regulatory bodies or courts. These efforts could divert the attention of our management and key personnel from our core business operations. In connection with any such acquisitions or strategic partnerships, we could face significant challenges in managing or integrating our expanded or combined operations.
We may be required to seek funding from the global credit and capital markets to develop our properties, and weakness in those markets could adversely affect our ability to obtain financing and capital resources.
We require substantial funding to develop our properties, and may be required to seek funding from the credit and capital markets to finance these activities. Our ability to obtain outside financing will depend upon the price of gold and the market’s perception of its future price, and other factors outside of our control. We may not be able to obtain funding on acceptable terms when required, or at all.
The credit and capital markets in respect of the commodity sector experienced serious deterioration in 2015, and the conditions in these markets have continued to be difficult since then and may continue to be difficult in the future, which could have an impact on the availability and terms of credit and capital in the near term. The deteriorating financial condition of certain government authorities has significantly increased the potential for sovereign defaults in a number of jurisdictions, including within the European Union. If uncertainties in these markets continue, or these markets deteriorate further, it could have a material adverse effect on our ability to raise capital. Failure to raise capital when needed or on reasonable terms may have a material adverse effect on our business, financial condition and results of operations. A continued or worsened slowdown in the financial markets or other economic conditions, including but not limited to consumer spending, employment rates, inflation, fuel and energy costs, lack of available credit, the state of the financial markets, interest rates and tax rates may affect our growth and profitability.
In 2017 we entered into a new $400.0 million unsecured revolving credit facility with HSBC and an extended banking syndicate that replaced our existing credit facility. If any of the lenders are unable to fulfill their future commitments, our liquidity could be impacted, which could have a material unfavorable impact on our results of operations and financial condition.
If we draw down on our credit facility, our indebtedness could adversely impact our business.
Under the terms of the credit facility we entered into in 2017 we are obligated to meet certain financial and other covenants. Our ability to meet these covenants and to service our debt (should the credit facility be drawn down) will depend on our future financial performance which will be affected by our operating performance as well as by financial and other factors, some of which are beyond our control.
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Our operations are located in countries where tax laws and policies may change rapidly and unpredictably and such changes and policies may adversely affect our financial condition and results of operations.
Our failure to adapt to changes in tax regimes and regulations in the countries in which we operate may result in fines, financial losses and have a negative impact on our corporate reputation. In addition, if we fail to react to tax notifications from authorities, we could incur financial losses or the seizure of our assets. If we are unable to enforce existing tax legislation, tax stability arrangements or incorrectly applied tax legislation, we may pursue arbitration or other proceedings to resolve the matter, all of which could materially and adversely affect our business.
The failure of any bank in which we deposit our funds could reduce the amount of cash we have available for operations.
Most of our cash deposited with banks is not insured and would be subject to the risk of bank failure. If any of the banking institutions in which we have deposited funds ultimately fails, we may lose our deposits. The loss of our deposits would reduce the amount of cash we have available for operations and additional investments in our business, and would have a material adverse effect on our financial condition.
We may incur losses or lose opportunities for gains as a result of any future use of derivative instruments to protect us against low gold prices.
We have from time to time used derivative instruments to protect the selling price of some of our anticipated gold production. The intended effect of our derivative transactions was to lock in a fixed sale price for some of our future gold production to provide some protection against a subsequent fall in gold prices. Although we currently do not use derivative instruments to protect us against low gold prices at our operations, we may in the future determine to implement the use of derivatives in connection with a portion of our anticipated gold production.
Derivative transactions can result in a reduction in revenue if the instrument price is less than the market price at the time the hedged sales are recognized. Moreover, our decision to enter into a given instrument would be based upon market assumptions. If these assumptions are not ultimately met, significant losses or lost opportunities for significant gains may result. In all, the use of these instruments may result in significant losses which would prevent us from realizing the positive impact of any subsequent increase in the price of gold on the portion of production covered by the instrument.
The SEC has adopted rules that may affect mining operations in the DRC.
The SEC adopted final rules pursuant to the Dodd Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) regarding disclosure on potential conflict minerals that are necessary to the functionality or production of a product manufactured by a company that files reports with the SEC. Under the final rules, an issuer that mines conflict minerals, such as Randgold, is not deemed to be manufacturing or contracting to manufacture those minerals, unless the issuer also engages in manufacturing, whether directly or indirectly through contract. Though we are not subject to the disclosure requirements of the final rules, we may be called upon by other entities we contract with to provide information to them for their own supply-chain due diligence investigations. This may result in the increased cost of demonstrating compliance in connection with the sale of gold emanating from the DRC and its neighbors. The complexities of the gold supply chain, especially as they relate to ‘scrap’ or recycled gold, and the fragmented and often unregulated supply of artisanal and small-scale mined gold are such that there may be significant uncertainties at each stage in the chain as to the origin of the gold, and as a result of uncertainties in the process, the costs of due diligence and audit, or the reputational risks of defining their product or a constituent part as containing a ‘conflict mineral’ may be too burdensome for the buyers of our gold. Accordingly, they may decide to switch supply sources. We do not purchase any gold from artisanal miners nor do we purchase gold from any other sources, and we only sell gold sourced from ore at our mines that has been produced at our mines. This could have a material negative impact on the gold industry, our relationship with the buyers of our gold, and our financial results.
Inflation may have a material adverse effect on our operations.
Some of our operations are located in countries that have and may continue to experience high rates of inflation during certain periods. It is possible that significantly higher future inflation in countries in which we operate may result in increased future operational costs in local currencies. This could have a material adverse effect upon our operations and financial condition.
Regulations and pending legislation governing issues involving climate change could result in increased operating costs which could have a material adverse effect on our business.
A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to various climate change interest groups and the potential impact of climate change. Legislation and increased regulation regarding climate change could impose significant costs on us, our venture partners and our suppliers, including increased energy, capital equipment, environmental monitoring and reporting and other costs to comply with such regulations. Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Given the political significance and uncertainty around the impacts of climate change and how it should be dealt with, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete. Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. The potential physical impacts of climate change on our operations are highly uncertain, and would be particular to the geographic circumstances in areas in which we operate. These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures. These impacts may adversely impact the cost, production and financial performance of our operations.
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We may not pay dividends to shareholders in the future.
We paid our eleventh dividend to ordinary shareholders in 2017. It is our policy to pay dividends if profits and funds are available for that purpose. Whether or not funds are available depends on a variety of factors, including capital expenditure. We cannot guarantee that dividends will be paid in the future.
If we are unable to attract and retain key personnel our business may be harmed.
Our ability to bring additional mineral properties into production and explore our extensive portfolio of mineral rights will depend, in large part, upon the skills and efforts of a small group of management and technical personnel, including D. Mark Bristow, our Chief Executive Officer. If we are not successful in retaining, developing or attracting highly qualified individuals in key management positions our business may be harmed. The loss of any of our key personnel could adversely impact our ability to execute our business plan.
Our insurance coverage may prove inadequate to satisfy future claims against us.
We may become subject to liabilities, including liabilities for pollution or other hazards, against which we have not insured adequately or at all, or cannot insure. Our insurance policies contain exclusions and limitations on coverage. Our current insurance policies provide worldwide indemnity of $100.0 million in relation to legal liability incurred as a result of death, injury, disease of persons and/or loss of or damage to property. Main exclusions under this insurance policy, which relates to our industry, include war, nuclear risks, silicosis, asbestosis or other fibrosis of the lungs or diseases of the respiratory system with regard to employees, and gradual pollution. In addition, our insurance policies may not continue to be available at economically acceptable premiums. As a result, in the future our insurance coverage may not cover the extent of claims against us.
It may be difficult to effect service of process and enforce legal judgments against us or our affiliates.
We are incorporated in Jersey, Channel Islands and a majority of our directors and senior executives are not residents of the United States. Virtually all of our assets and the assets of those persons are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon those persons or us. Furthermore, the United States and Jersey currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, it may not be possible to enforce a final judgment for payment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon United States Federal securities laws against those persons or us.
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In order to enforce any judgment rendered by any Federal or state court in the United States in Jersey, proceedings must be initiated by way of common law action before a court of competent jurisdiction in Jersey. The entry of an enforcement order by a court in Jersey is conditional upon the following:
| · | that the court which pronounced the judgment has jurisdiction to entertain the case according to the principles recognized by Jersey law with reference to the jurisdiction of the foreign courts; |
| · | that the judgment is final and conclusive – it cannot be altered by the courts which pronounced it; |
| · | that there is payable pursuant to a judgment a sum of money, not being a sum payable in respect of tax or other charges of a like nature or in respect of a fine or other penalty; |
| · | that the judgment has not been prescribed; |
| · | that the courts of the foreign country have jurisdiction in the circumstances of the case; |
| · | that the judgment was not obtained by fraud; and |
| · | that the recognition and enforcement of the judgment is not contrary to public policy in Jersey, including observance of the rules of natural justice which require that documents in the United States proceeding were properly served on the defendant and that the defendant was given the right to be heard and represented by counsel in a free and fair trial before an impartial tribunal. |
Furthermore, it is doubtful whether you could bring an original action based on United States Federal securities laws in a Jersey court.
We are subject to significant corporate regulation and other corporate governance best practice standards as a public company and failure to comply with all applicable regulations and corporate governance best practice standards could subject us to liability, regulatory penalties and higher compliance costs or negatively affect our share price and reputation.
As a publicly traded company we are subject to a significant body of regulation as well as corporate governance best practice standards advocated by shareholder advisory and other groups. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance and continue to update this program in response to newly implemented or changing regulatory requirements or recommended best practices, there can be no assurance that we are or will be in compliance with all potentially applicable corporate regulations or suggested best practices. For example, there can be no assurance that in the future our management will not find a material weakness in connection with its annual review of our internal control over financial reporting pursuant to Section 404 of the US Sarbanes-Oxley Act of 2002. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. If we must disclose any material weakness in our internal control over financial reporting, our share price could decline. Furthermore, lack of precedent and varying interpretations of any new or changed laws, regulations, and standards may introduce uncertainty regarding and inconsistencies in compliance matters and lead to higher compliance costs. In addition, if we do not adopt current corporate governance best practices advocated by shareholder advisory and other groups, our reputation may be adversely affected.
We utilize information technology and communications systems, the failure of which could significantly impact our operations and business.
We are dependent upon information technology systems in the conduct of our operations. Our information technology systems are subject to disruption, damage or failure from a variety of sources, including, without limitation, computer viruses, security breaches, cyber-attacks, natural disasters and defects in design. Cybersecurity incidents, in particular, are evolving and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. Various measures have been implemented to manage our risks related to information technology systems and network disruptions. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could potentially be subject to production downtimes, operational delays, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our cash flows, competitive position, financial condition or results of operations.
We maintain global information technology and communication networks and applications to support our business activities. Information technology security processes may not prevent future malicious actions, denial-of-service attacks, or fraud, resulting in corruption of operating systems, theft of commercially sensitive data, misappropriation of funds and business and operational disruption. Material system breaches and failures could result in significant interruptions that could in turn affect our operating results and reputation.
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Risks Relating to Our Industry
The exploration of mineral properties is highly speculative in nature, involves substantial expenditures, and is frequently unproductive.
We must continually seek to replace our ore reserves depleted by production to maintain production levels over the long term. Ore reserves can be replaced by expanding known orebodies or exploring for new deposits. Exploration for gold is highly speculative in nature. Our future growth and profitability will depend, in part, on our ability to identify and acquire additional mineral rights, and on the costs and results of our continued exploration and development programs. Many exploration programs, including some of ours, do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Our mineral exploration rights may not contain commercially exploitable reserves of gold. Uncertainties as to the metallurgical recovery of any gold discovered may not warrant mining on the basis of available technology.
If we discover a viable deposit, it usually takes several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change.
Moreover, we will use the evaluation work of professional geologists, geophysicists, and engineers for estimates in determining whether to commence or continue mining. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether or not the deposit contains economically recoverable mineralization. As a result of these uncertainties, we may not successfully acquire additional mineral rights, or identify new proven and probable reserves in sufficient quantities to justify commercial operations in any of our properties.
If management determines that capitalized costs associated with any of our gold interests are not likely to be recovered, we would recognize an impairment provision against the amounts capitalized for that interest. All of these factors may result in losses in relation to amounts spent which are found not to be recoverable.
Title to our mineral properties may be challenged which may prevent or severely curtail our use of the affected properties.
Title to our properties may be challenged or impugned, and title insurance is generally not available. Each sovereign state is the sole authority able to grant mineral property rights, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties.
Our ability to obtain desirable mineral exploration projects in the future may be adversely affected by competition from other exploration companies, or from changes to government regulations that may limit the size or number of EEPs that we may be permitted to hold.
We compete with other mining companies in connection with the search for and acquisition of properties producing or possessing the potential to produce gold. Existing or future competition in the mining industry could materially and adversely affect our prospects for mineral exploration and success in the future.
In addition, we compete with other mining companies to attract and retain key executives, skilled labor, contractors and other employees. We also compete with other mining companies for specialized equipment, components and supplies necessary for exploration and development, as well as for rights to mine properties. If we are unable to continue to attract and retain skilled and experienced employees, obtain the services of skilled personnel and contractors or specialized equipment or supplies, or acquire additional rights to mine properties, our competitive position or results of operations could be adversely impacted.
Illegal and artisanal mining can disrupt our business and expose us to liability.
Artisanal miners are active on, or adjacent to, many of our properties. Artisanal mining is associated with a number of negative impacts, including environmental degradation, human rights abuse and funding of conflict. Additionally, effective local government administration is often lacking in the locations where artisanal miners operate where rapid population growth and the lack of functioning structures can create a complex social and unstable environment. We do not purchase any gold from artisanal miners. There is a misconception that artisanally-mined gold is channeled through large-scale mining operators and such misconceptions have a negative impact on the reputation of the mining industry.
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The activities of illegal miners could cause damage to our properties, including pollution, underground fires, or personal injury or death. We could potentially be held responsible. Illegal mining and theft could result in lost gold reserves, mine stoppages, and have a material adverse effect on our operations and financial condition. For example, the increasing and unhindered encroachment of illegal mining at Boundiali (where our exploration programs defined a large target in the Fonondara corridor) is a challenge reflecting the need for greater resolve and engagement by the Côte d’Ivoire government, particularly in the north of the country where the new opportunities are located. Within our Life of Mine (LoM) plans, we have various satellite pits that we intend to mine, and our ability to mine them could be hampered by illegal and artisanal mining, which could materially and adversely affect our competitive position or results of operations.
Our operations are subject to extensive governmental and environmental regulations, which could cause us to incur costs that adversely affect our results of operations.
Our mining facilities and operations are subject to substantial government laws and regulations, concerning mine safety, land use and environmental protection. We must comply with requirements regarding exploration operations, public safety, employee health and safety, use of explosives, air quality, water pollution, noxious odor, noise and dust controls, reclamation, solid waste, hazardous waste and wildlife as well as laws protecting the rights of other property owners and the public.
Any failure on our part to be in compliance with these laws, regulations, and requirements with respect to our properties could result in us being subject to substantial penalties, fees and expenses, significant delays in our operations or even the complete shutdown of our operations. We provide for estimated environmental rehabilitation costs when the related environmental disturbance takes place. Estimates of rehabilitation costs are subject to revision as a result of future changes in regulations and cost estimates. The costs associated with compliance with government regulations may ultimately be material and adversely affect our results of operations and financial condition.
If our environmental and other governmental permits are not renewed or additional conditions are imposed on our permits, our financial condition and results of operations may be adversely affected.
Generally, compliance with environmental and other government regulations requires us to obtain permits issued by governmental agencies. Some permits require periodic renewal or review of their conditions. We cannot predict whether we will be able to renew these permits or whether material changes in permit conditions will be imposed. Non-renewal of a permit may cause us to discontinue the operations requiring the permit, and the imposition of additional conditions on a permit may cause us to incur additional compliance costs, either of which could have a material adverse effect on our financial condition and results of operations.
Labor disruptions could have an adverse effect on our operating results and financial condition.
Our operations are highly unionized, and strikes are legal in the countries in which we operate. Therefore, our operations are at risk of having work interrupted for indefinite periods due to industrial action, such as strikes by employee collectives. Should long disruptions take place on our operations, the results from our operations and their financial condition could be materially and adversely affected.
AIDS, Ebola and tropical disease outbreaks pose risks to us in terms of productivity and costs.
The incidence of AIDS in the DRC, Mali, Côte d’Ivoire and Senegal poses risks to us in terms of potentially reduced productivity and increased medical and insurance costs. The prevalence of AIDS in the countries in which we operate and among our workforce could become significant. Significant increases in the incidence of AIDS infection and AIDS-related diseases among members of our workforce in the future could adversely impact our operations and financial condition.
In 2014 and 2015, Ebola virus cases were identified in Mali and Senegal along with epidemics in neighboring countries which have now been largely contained. We formed a crisis management team to spearhead a major campaign to safeguard our employees and host communities. If the incidence of the Ebola virus re-emerges and spreads, it could pose risks to us in terms of potentially reduced productivity and increased medical and insurance costs. An Ebola virus outbreak could cause the closing of borders of the countries in which we operate, or neighboring countries, which poses a risk in operation of our supply chain.
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Malaria and other tropical diseases pose significant health risks at all of our operations in West Africa and Central Africa where such diseases may assume epidemic proportions. Malaria is a major cause of death and also gives rise to absenteeism in employees and contractors. Consequently, if uncontrolled, the disease could adversely impact our operations and financial condition.
The SEC has issued proposed rules which would overhaul the disclosure regime for mining companies required to file periodic reports in the United States.
In June 2016, the SEC proposed rules to modernize disclosures for mining registrants required to file periodic reports in the United States. The proposed rules are intended to align U.S. reporting standards more closely with global regulatory and industry standards such as the Committee for Mineral Reserves International Reporting Standards (CRIRSCO), which has been adopted by a number of jurisdictions around the world. However, these proposed rules may contain inconsistencies with CRIRSCO or other industry standards, which may result in confusion and higher compliance costs. For example, the proposed rule providing that the price used to estimate mineral reserves can be no higher than the average spot price for the 24-month period prior to the end of the fiscal year may be inconsistent with the long-term commodity cycle, which may impede investors’ ability to assess the long-term prospects of the company. The proposed rules are subject to public comment, and if adopted, can differ from those proposed.
Item 4. Information on the Company
4A. HISTORY AND DEVELOPMENT OF THE COMPANY
Randgold Resources Limited was incorporated under the laws of Jersey, Channel Islands in August 1995, to engage in the exploration and development of gold deposits in Sub-Saharan Africa. Our principal executive offices are located at 3rd Floor Unity Chambers, 28 Halkett Street, St. Helier, Jersey, JE2 4WJ Channel Islands and our telephone number is (00 44) 1534-735-333. Our agent in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.
We discovered the Morila deposit during December 1996 and we subsequently financed, built and commissioned the Morila mine.
During July 2000, we concluded the sale of 50% of our interest in Morila Limited (and also a shareholder loan made by us to Morila Limited) to AngloGold Ashanti for $132.0 million in cash.
We have an 80% controlling interest in Loulo through a series of transactions culminating in April 2001. In February 2004, we announced that we would develop a new mine at Loulo in western Mali. The Loulo mine commenced operations in October 2005 and mines the Gara (formerly Loulo 0) and Yalea deposits. In addition, the board agreed to proceed with the development of the underground mine and, after the award of the development contract, work commenced with the construction of the boxcut at the Yalea mine in August 2006. We accessed first ore at Yalea in April 2008 with full production beginning in 2010. We commenced development of Loulo’s second underground mine, Gara, and started mining in 2011. We discovered the Yalea deposit in 1997.
We have an 80% controlling interest in Gounkoto, which owns the Gounkoto mine. The Gounkoto mine commenced mining in January 2011 and processes its ore by way of a toll treatment agreement with the Loulo mine, in June 2011.
We have an 89.7% controlling interest in Tongon, which owns the Tongon mine. The Tongon mine commenced mining in April 2010 and first gold was produced in 2010.
Effective on June 11, 2004, we undertook a split of our ordinary shares, which increased our issued share capital from 29,263,385 to 58,526,770 ordinary shares. In connection with this share split, our ordinary shareholders of record on June 11, 2004 received two $0.05 ordinary shares for every one $0.10 ordinary share they held. Following the share split, each shareholder held the same percentage interest in us; however, the trading price of each share was adjusted to reflect the share split. ADS holders were affected the same way as shareholders and the ADS ratio remains one ADS to one ordinary share.
On October 15, 2009, we completed the acquisition of 50% of Moto Goldmines Limited (Moto Goldmines), in a joint venture with AngloGold Ashanti, which resulted in joint control of a 70% interest in the Kibali mine in the DRC. On December 22, 2009 we completed a further acquisition of a 20% interest, on behalf of the joint venture, from Société des Mines d’Or de Kilo-Moto SA (SOKIMO), the parastatal mining company of the DRC, resulting in an effective interest in the Kibali mine of 45%. The Kibali mine commenced mining in 2012 and first gold was produced in 2013.
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We conduct our mining operations through:
| · | a 50% joint venture interest in Morila Limited (which in turn owns an 80% interest in the Morila mine); |
| · | an 80% interest in Loulo; |
| · | an 80% interest in Gounkoto; |
| · | an 89.7% interest in Tongon; and |
| · | a 50% joint venture interest in Kibali (Jersey) Limited (which in turn indirectly owns a 90% interest in the Kibali mine). |
We also have an 83.25% interest in the Massawa project.
Principal Capital Expenditure
Capital expenditure incurred for the year ended December 31, 2017 totaled $199.3 million compared to $189.4 million for the year ended December 31, 2016 and $203.1 million for the year ended December 31, 2015. Total capital expenditure is expected to be approximately $155 million in 2018. Ongoing development of the underground mines at Loulo, as well as other projects and exploration, is planned to cost $85 million, while Gounkoto is forecasting $16 million, mostly on the super pit development which includes deferred stripping costs. Capital at Tongon, including completion of the plant, power and TSF upgrades, is estimated at $17 million. Continued work on the Massawa project expenditure, mostly in respect of drilling, is forecast to incur capital expenditure of approximately $17 million. The remaining group capital expenditure, mostly in respect of asset leasing and information technology investments, is estimated at $20 million.
At our equity accounted joint ventures capital expenditure is expected to be approximately $70 million (45% of project) at Kibali and approximately $1 million (40% of project) at Morila.
OVERVIEW
We engage in gold mining, exploration and related activities. Our activities are focused on West and Central Africa, some of the most promising areas for gold discovery in the world. In Mali, we have an 80% controlling interest in the Loulo mine through Loulo. The Loulo mine is currently mining from two underground mines. We also have an 80% controlling interest in the Gounkoto mine through Gounkoto. We own 50% of Morila Limited, which in turn owns 80% of Morila, the owner of the Morila mine in Mali. In addition, we own an effective 89.7% controlling interest in the Tongon mine located in the neighboring country of Côte d’Ivoire, which was commissioned in November 2010. We also own an effective 83.25% controlling interest in the Massawa project in Senegal where we completed an updated technical and financial study in 2016. In 2009, we acquired an effective 45% interest in the Kibali mine, which is located in the DRC. Since that time we have constructed and brought the mine into operation on both open pit and underground material. We also have exploration permits and licenses covering substantial areas in Côte d’Ivoire, DRC, Mali, and Senegal. At December 31, 2017, we declared proven and probable reserves of 172 million tonnes at 3.8g/t for 14Moz attributable to our percentage ownership interests in Loulo, Morila, Tongon, Gounkoto, Massawa and Kibali.
Our strategy is to create value for all our stakeholders by finding, developing and operating profitable gold mines. We seek to discover significant gold deposits, either from our own phased exploration programs or the acquisition of early stage to mature exploration programs. We actively manage both our portfolio of exploration and development properties and our risk exposure to any particular geographical area. We also routinely review opportunities to acquire development projects and existing mining operations and companies.
Loulo
In February 2004, we announced that we would develop a new mine at Loulo in western Mali. In 2005, we commenced open pit mining operations at the Gara and Yalea pits. In 2010, an application was made to split the Loulo and Gounkoto permits. In 2011 mining ceased in the Gara open pit. In 2017, the Loulo mine produced 437,255oz of gold at a total cash cost of $535oz. We currently anticipate that mining at Loulo will continue through 2028.
We commenced development of the Yalea underground mine in August 2006, where first ore was accessed in April 2008. We commenced development of Loulo’s second underground mine, Gara, in 2010 with first ore being intersected during the second quarter of 2011 and stoping began in November 2011. From June 2011, ore from Gounkoto was processed through the Loulo processing plant following the conclusion of a toll-treatment agreement between the two mines. Mining of the Yalea South pushback pit was completed in 2013. The Yalea and Gara underground mines are now in full production and paste backfill and refrigeration plants at both mines are fully operational.
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The focus of exploration at Loulo is to continue to explore and discover additional orebodies within the Loulo permit.
Gounkoto
The Gounkoto mine is located approximately 25km south of Loulo’s plant and consists of the Gounkoto and Faraba orebodies, with the Gounkoto open pit currently in production. Following the completion of the Gounkoto open pit feasibility study in 2010, construction of the mine commenced in late 2010.
In January 2011, mining commenced at Gounkoto. In June 2011, the Loulo plant started to treat Gounkoto ore. 2012 represented the first full year of production for Gounkoto. During 2017, a total of 2.34Mt of Gounkoto ore at a grade of 4.2g/t was fed to the Loulo plant and 293,117oz were produced at a total cash cost of $555oz. We currently anticipate that mining at Gounkoto will continue through 2025.
The feasibility study on the Gounkoto super pit was completed at the end of 2016 and the project was approved by both the Gounkoto and Randgold boards. The super pit option was shown to be economically more attractive than the smaller pit and underground option. The feasibility study included an economic and financial evaluation of a small underground mine below the Gounkoto pit and the Faraba satellite pit. Mining of the super pit started during the year and is scheduled to continue until 2024, based on a revised mine plan focusing on sustainable production over a 10 year period.
The focus of exploration at Gounkoto is to continue to explore and discover additional orebodies within the Gounkoto permit.
Tongon
The Tongon mine is located within the Nielle exploitation permit in the north of Côte d’Ivoire, approximately 55km south of the border with Mali.
We commenced construction of the Tongon mine at the end of 2008, and commissioned the first stream in the fourth quarter of 2010, with first gold production being recorded. We completed and commissioned the second stream including secondary and tertiary crushing circuit and the sulfide circuit of the processing plant in 2011. Further upgrades to the crushing and milling circuit have resulted in increased throughput, while changes to the flotation circuit and additional oxygen has improved the metallurgical recovery of the fresh material. Tongon has two main pits, South Zone (SZ) and the smaller North Zone (NZ). In 2017, we produced 288,680oz at a total cash cost of $676/oz. The Tongon mine has a remaining mine life of 4 years (to 2021) but has the potential to extend this with nearby discoveries and satellite pits.
The focus of exploration at Tongon is to evaluate near-mine targets with a 15km radius and Greenfield programs beyond the near-mine 15km radius.
Kibali
Our interest in the Kibali mine was acquired in 2009 following the acquisition of Moto Goldmines, in conjunction with AngloGold Ashanti, and the further acquisition of a 20% interest from Sokimo on behalf of the joint venture. The Kibali mine is located approximately 560km northeast of the city of Kisangani and 180km west of the Ugandan border town of Arua in the northeast of the DRC. We are managing the development and operation of the Kibali mine.
First gold production at the Kibali mine was recorded in the third quarter of 2013. In 2017, we produced 596,225oz at a total cash cost of $773/oz.
The Kibali mine is being developed in two phases. Phase 1, which includes the KCD open pit operation and processing plant, the mine infrastructure and the first of three new hydropower stations was completed in December 2014. Phase 2 comprises the underground mine development, including the vertical shaft, which was commissioned at the end of the year and two additional hydropower stations, one of which was commissioned at the start of 2017 and the other is scheduled for commissioning in mid-2018, along with further satellite pits.
The focus of exploration at Kibali is to evaluate extension to the known deposits, especially KCD where mineralization has been confirmed.
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Morila
In 1996, we discovered the Morila deposit, which we financed and developed and was our major gold producing asset through 2009. Morila’s total production for 2017 was 70,019oz at a cash cost of $988/oz. Consistent with the mine plan, Morila is primarily processing TSF material and mining a small satellite deposit. Closure of the operation is scheduled for 2020.
Massawa Gold Project
The Massawa project is a grassroots exploration discovery located on the Kanoumba permit in eastern Senegal. Randgold owns 83.25% in partnership with a Senegalese company who owns 6.75%, after providing for the State of Senegal’s right to a non-contributory 10% share of any mine developed on the property. The project is located about 700 kilometers south east of the capital city of Dakar and approximately 90 kilometers due west of Randgold’s Loulo operation in Mali. An updated technical and financial study was completed at the end of 2016, and the project is being progressed towards a final development decision which is expected to occur by the end of 2018.
Exploration
We are exploring in four African countries (Mali, Senegal, Côte d’Ivoire and the DRC) with a portfolio of 157 active targets within an exploration permit portfolio of 15,260km2. We target profitable gold deposits that have the potential to host mineable gold reserves. Our business strategy of organic growth through exploration has been validated by our discovery and development track record, including the Morila mine, Loulo mine, Gounkoto mine, Tongon mine and the Kibali mine and the Massawa discovery.
In 2017, the exploration focus was sustained on the priority areas: the MTZ in Senegal, the Senegal-Mali Shear in Senegal and Mali, the Boundiali and Senefou belts in Côte d’Ivoire and the KZ Structure in NE DRC. The group’s portfolio of mineral rights was expanded through the acquisition of new permits as well as additional joint ventures in Mali and Côte d’Ivoire.
OWNERSHIP OF MINES AND SUBSIDIARIES
The Loulo mine is owned by a Malian Company, Loulo, which is owned 80% by us and 20% by the State of Mali.
The Gounkoto mine is owned by a Malian company, Gounkoto, which is owned 80% by us and 20% by the State of Mali.
The Tongon mine is owned by an Ivorian company, Tongon, in which we have an 89.7% interest, the State of Côte d’Ivoire 10% and 0.3% is held by a local Ivorian company.
The Kibali mine is controlled by a 50:50 joint venture, between ourselves and AngloGold Ashanti, which holds an effective 90% interest in the Kibali mine. The remaining 10% of the shares are held by SOKIMO, the parastatal mining company of the DRC. We thus have an effective 45% interest in the Kibali mine. Responsibility for the day-to-day operations rests with us.
The Morila mine is owned by Morila, which in turn is owned 80% by Morila Limited and 20% by the State of Mali. Morila Limited is jointly owned by us and AngloGold Ashanti and the mine is controlled by a 50:50 joint venture management committee. We thus have an effective 40% interest in the Morila mine. Responsibility for the day-to-day operations rests with us.
We hold an effective 83.25% interest in the Massawa project. The government of Senegal retains a 10% carried interest in the project, with the remaining 6.75% held by our Senegalese joint venture partner.
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MINING OPERATIONS
The following table sets out our total ounces sold and total cash cost (non-GAAP) and production cost per ounce sold for each operation for the years ended December 31, 2017 and 2016:
| Year Ended December 31, | ||||||||||||||||
| 2017 | 2016 | |||||||||||||||
| Ounces sold | $ Per Ounce | Ounces sold | $ Per Ounce | |||||||||||||
| Loulo (100% share) cash costs | 432,464 | 535 | 420,660 | 551 | ||||||||||||
| Gounkoto (100% share) cash costs | 290,973 | 555 | 289,076 | 581 | ||||||||||||
| Tongon (100% share) cash costs | 292,322 | 676 | 255,942 | 771 | ||||||||||||
| Kibali (45% share) cash costs | 272,100 | 773 | 255,769 | 736 | ||||||||||||
| Morila (40% share) cash costs | 27,125 | 988 | 20,918 | 1,113 | ||||||||||||
| Total ounces (sold) | 1,314,984 | 1,242,366 | ||||||||||||||
| Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
We account for our effective 45% joint venture holding in Kibali and our 40% joint venture holding in Morila using the equity method of accounting under IFRS. As such, we own an interest in the investee as a whole and do not have a proportionate legal interest in each financial statement line item.
For a discussion of our mineral rights and ore reserves, see “PART I. Item 4. Information on the Company—D. Property, Plant and Equipment.”
Loulo-Gounkoto Mine Complex
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tones mined (000) | 34,965 | 37,776 | ||||||
| Ore tonnes mined (000) | 5,028 | 4,804 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 4,918 | 4,875 | ||||||
| Head grade milled (g/t) | 5.0 | 5.0 | ||||||
| Recovery (%) | 92.7 | 91.0 | ||||||
| Ounces produced | 730,372 | 707,116 | ||||||
| Ounces sold | 723,438 | 709,737 | ||||||
| Average price received ($/oz) | 1,260 | 1,242 | ||||||
| Total cash costs1 ($/oz) | 543 | 563 | ||||||
| Profit from mining activity1 ($000) | 518,396 | 481,651 | ||||||
| Gold sales1 ($000) | 911,452 | 881,529 | ||||||
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
The Loulo-Gounkoto mining complex straddles two distinct mining permits, the Loulo mining permit and the Gounkoto mining permit. It is situated in western Mali, approximately 500 kilometers from the capital city, Bamako, bordering Senegal and 800 kilometers from the port of Dakar. Loulo owns the Loulo permit and associated gold mining operations, and Gounkoto owns the Gounkoto permit and gold mine. Both Loulo and Gounkoto are owned by Randgold (80%) and the State of Mali (20%).
The Loulo-Gounkoto complex, a long life, high production operation, currently comprises two underground mines at Loulo and an open pit mine at Gounkoto. Production started in 2005 from two open pit mines at Loulo which were subsequently converted to underground mines. Gounkoto, a greenfields discovery made in 2009, poured its first gold in 2011. The ore from Gounkoto is processed by the Loulo metallurgical plant under a tolling agreement.
Gold production at the Loulo-Gounkoto complex was 730,372oz in 2017, 3% above the prior year. The increase in production was due to a 1% improvement in tonnes processed and 2% increase in recovery, while head grade milled remained in line with the prior year. Total cash cost per ounce decreased by 4% to $543/oz (2016: $563/oz) as a result of the increase in ounces produced and improved operating unit costs.
Gold sales of $911.5 million were 3% higher than 2016, reflecting the increased gold production and slightly higher average gold price received. Profit from mining activity (before interest, tax and depreciation) increased by 8% to $518.4 million, due to the increased gold sales and slightly higher average gold price received together with lower operating cost.
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Loulo
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tones mined (000) | 2,715 | 2,682 | ||||||
| Ore tonnes mined (000) | 2,684 | 2,652 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 2,576 | 2,587 | ||||||
| Head grade milled (g/t) | 5.7 | 5.5 | ||||||
| Recovery (%) | 92.6 | 91.0 | ||||||
| Ounces produced | 437,255 | 419,801 | ||||||
| Ounces sold | 432,464 | 420,660 | ||||||
| Average price received ($/oz) | 1,260 | 1,247 | ||||||
| Total cash costs1 ($/oz) | 535 | 551 | ||||||
| Profit from mining activity1 ($000) | 313,491 | 292,484 | ||||||
| Gold sales1 ($000) | 544,941 | 524,358 | ||||||
Randgold owns 80% of Loulo and the State of Mali 20%. Randgold has funded the whole investment in Loulo by way of shareholder loans and therefore controls 100% of the cash flows from Loulo until the shareholder loans are repaid.
Randgold consolidates 100% of Loulo and shows the non-controlling interest separately.
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| Reconciliation of non-GAAP measures to IFRS for the 12 months ended December 31 | 2017 | 2016 | ||||||
| $000: | ||||||||
| Gold Sales | ||||||||
| Gold sales per IFRS | 544,941 | 524,357 | ||||||
| Gold sales1 | 544,941 | 524,357 | ||||||
| Costs | ||||||||
| Mine production costs | 177,415 | 173,945 | ||||||
| Depreciation and amortization | 106,255 | 105,236 | ||||||
| Other mining and processing costs | 19,910 | 18,257 | ||||||
| Royalties | 32,616 | 31,384 | ||||||
| Movement in production inventory and stockpiles | 1,508 | 8,287 | ||||||
| Total cost of producing gold | 337,705 | 337,109 | ||||||
| Less: Non-cash costs included in total costs of producing gold: | ||||||||
| Depreciation and amortization under IFRS | (106,255 | ) | (105,236 | ) | ||||
| Total cash costs using the Gold Institute’s guidance1 | 231,450 | 231,873 | ||||||
| Profit from mining activity1 ($000) | 313,491 | 292,484 | ||||||
| Ounces sold | 432,464 | 420,660 | ||||||
| Total cost of producing gold per ounce ($ per ounce) | 781 | 801 | ||||||
| Total cash costs per ounce ($ per ounce)1 | 535 | 551 | ||||||
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
Operations
Gold production at Loulo increased by 4% to 437,255oz following an increase in head grade milled to 5.7g/t (2016: 5.5g/t) and improved recovery at 92.6% (2016: 91.0%). The gold production increase positively impacted on total cash costs which dropped 3% from 2016 to $535/oz. Gold sales of $544.9 million were 4% higher than the previous year due to the higher ounces sold and a slightly higher average gold price received.
Profit from mining activity (before interest, tax and depreciation) increased by 7% to $313.5 million for the year, in line with the higher sales and lower costs.
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Capital expenditure for the year of $87.3 million decreased by 33% from 2016. The decrease in spend in 2017 follows the completion of the refrigeration plants and power plant upgrades in 2016. Capital expenditure in 2017 mainly related to underground mine development, ongoing surface capital and brownfields exploration expenditure.
Mining and Production
The underground owner mining team has continued to perform well since taking over from the contractors in November 2015. In 2017, mine development continued with 13.7km completed and ore production of 2,683kt at 6.2g/t hoisted to surface from Yalea and Gara. The stability of the backfill operation has been the key to sustained higher ore production rates.
Ongoing training on equipment, including safety, has enabled the mine to increase the upskilling of the local workforce in the underground mines with most of the operators of loaders, solos and trucks now being host country nationals.
The new Yalea underground crusher and conveyor system completed during the year has improved the trucking efficiency and increased production. Four booster fans, connected to the two new refrigeration plants, have been installed, increasing the mines’ operating flexibility during periods of higher temperature and humidity in the rainy season.
Processing, Plant and Engineering
Processing
A total of 4,918kt at 5.0g/t, which included 2,343kt from Gounkoto, was treated at the Loulo plant during the year, compared to 4,875kt at 5.0g/t in 2016. The modifications initiated in 2016 and completed during the year, including the elution circuit upgrade with extra electrowinning cell capacity, enabled the plant to maintain inventory at the desired level. The throughput was sustained above 4.8Mtpa with the installation of an 8MW mill motor and thinner shell liners at the primary mill.
Overall gold recovery of 92.7% was 2% up on 2016, while plant utilization of 94.8% decreased slightly from 96.0% in 2016. Going forward, Loulo is targeting gold recovery of +92%, as a result of the improved plant stability and circuit upgrades which include the elution and regeneration upgrade, continuous oxygenation improvement initiatives, the oxygen plant expansion and enhanced oxygen dispersion system. Similarly, reduced Carbon In Leach (CIL) reagent consumption is also being targeted by way of the improved plant stability and alternative reagent usage to lower the cost of processing, and consequently extend the Life of Mine (LoM).
Loulo contributed 52% (22% Gara underground; 29% Yalea underground; 1% Gara opencast stockpile) and Gounkoto 48% of the ore tonnes to the plant but, with the higher grade from Loulo, gold production was in line with the 60:40 plan to balance the mines’ respective ore reserves.
Engineering and power supply
In the metallurgical plant, the availability of the mills and crushers increased to 97.4% (2016: 96.9%) and 91.9% (2016: 90.3%) respectively. This followed improvements in planned maintenance which increased crusher runtime to 84.9% (2016: 80.0%) and maintained mill runtime at 95.7% (2016: 96.0%).
The power plant produced a total of 381.2GWh of electricity (2016: 353.8 GWh), an 8% increase on the prior year, due to the additional underground demand and the operation of the new refrigeration plants for the two mines. Additional booster fans were installed in both underground mines, increasing flexibility in the mines when operational in the summer.
During the year, an advanced power management system was commissioned to further enhance power efficiency. Maintenance on medium speed generators and an increasing fuel unit price contributed to an increase in power costs compared to 2016 at $0.146 /kWh (2016: $0.13/kWh). One additional medium speed Heavy Fuel Oil (HFO) generator is planned for 2018, and the focus will remain on operating the power plant efficiently with the goal of producing 80% of the mine’s power from HFO and 20% from LFO, while continuing to maintain and service the medium speed and high speed engines.
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Exploration
Near mine exploration continued to add ounces, with potential new extensions identified at Yalea and Loulo 3 deposits. In the south of Yalea, structural models show additional opportunity for more high grade mineralization within the Yalea orebodies. At Loulo 3, two sub-parallel structures (MZ1 and MZ2) host a high grade (+7g/t) mineralized shoot at their intersection with the regional scale Yalea structure. Drilling to date has confirmed a strike length of 300m and remains open at depth below 500m, with potential to host a small underground operation.
A project-wide regolith map has been completed and will be used together with soil geochemistry and the updated integrated geology map to re-rank targets and refresh the base of the resource triangle for advancement in 2018. Work also continued to evaluate the structural extensions to the south and north of the Gounkoto orebodies with a particular focus on the main domain boundary structure.
Health and Safety
One Lost Time Injury (LTI) case was recorded during the year, representing a Lost Time Injury Frequency Rate (LTIFR) of 0.17 per million hours worked compared to 0.67 in 2016. Safety highlights include achieving 5 million LTI free hours. No LTIs were recorded by the underground operation for the whole year.
A safety alignment workshop with senior corporate and mine management highlighted the importance of safety and increased awareness across the mine, and included a focus on managing occupational hygiene.
679 malaria cases were treated during the year, a Malaria Incidence Rate (MIR) of 23%, down 18% on 2016. Overall, 3,743 Voluntary Counselling and Testing cases (VCTs) for HIV/AIDS were conducted for the year with a positivity rate of 1.3%, a slight decrease on the previous year. The continual improvement in the number of VCTs undertaken compared to the previous year is attributable to the activities of the mine’s management together with its NGO partner, Soutoura.
The Hepatitis B awareness program continued during the year, including voluntary screening and management of positives cases (26%), and 1,870 inoculations were provided.
Environment
The mine renewed its Environmental Management System (EMS) certification (ISO 14001) following the recertification audit. The transition to the new ISO 14001:2015 version was completed and an external audit is planned for early 2018. As part of a concurrent rehabilitation plan of the mine’s footprint, 102ha were rehabilitated with more than 15,000 trees planted. As part of its biodiversity offset program, the mine supported the Mali elephant project through the training of 725 local eco-guards to look after elephants and discourage poaching.
No major environmental incidents were recorded during the year. The Tailings Storage Facility (TSF) water recycling rate increased to 78% from 75% in 2016. A wetland was established to treat nitrate contained in the discharged water from the underground mines. Power consumed per tonne of ore milled increased from 72.5kWh/t in 2016 to 76.7kWh/t, mainly driven by the full operation of the refrigeration plants.
Human Resources and Industrial Relations
The Loulo employee complement comprises 1,925, excluding contractors, and 2,975 including personnel employed by contractors and temporary laborers, of which 95% are Malians. The total number of expatriates at the mine is steadily decreasing due to the continuation of the localization program designed to promote employment and advancement of host country nationals. Otherwise stable industrial relations on the mine was impacted by two industry-wide strikes initiated at the national level by Section Nationale des Mines et Industries du Mali (SECNAMI), and the Union Nationale des Travailleurs du Mali (UNTM) section in charge of mines and industries. Notwithstanding this action, Loulo was the only gold mine in Mali where the production was not seriously affected and operations continued, although with reduced staffing.
A total of 1,005 employees received formal training during the year, in line with the company’s development program.
Loulo Manpower
| 2017 | 2016 | |||||||||||||||||||||||
| at December 31 | Expats | Nationals | Total | Expats | Nationals | Total | ||||||||||||||||||
| Employees | 124 | 1,801 | 1,925 | 151 | 1,596 | 1,747 | ||||||||||||||||||
| Contractors | 31 | 1,019 | 1,050 | 37 | 1,131 | 1,168 | ||||||||||||||||||
| TOTAL | 155 | 2,820 | 2,975 | 188 | 2,727 | 2,915 | ||||||||||||||||||
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Community
No grievances were recorded from the communities during the year. The mine continued to engage with the local communities with monthly development committee meetings, meetings of the group CEO with the village chiefs, courtesy visits and an open grievance mechanism. The second round of excellency bursaries was awarded by the company to local students. A new secondary school was built at Loulo. Support of local economic growth continued with the funding of youth projects through the micro-credit company supported by the mine. A tractor was handed over to the local villages to support agricultural development. The mine’s agricollege initiative performed well through the year. The project was included in the local, regional and national economic program and a follow-up committee created with the authorities and state technical services. A cooperation convention valued at €1 million was signed with a German NGO to support the center and to help it implement the SONGHAI (an agricultural development plan) partnership plan. Illegal mining continued to be a critical issue and ongoing engagement with the relevant authorities and communities has contributed to decreasing the number of illegal miners on the permit areas.
Gounkoto
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tones mined (000) | 32,250 | 35,094 | ||||||
| Ore tonnes mined (000) | 2,344 | 2,152 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 2,343 | 2,288 | ||||||
| Head grade milled (g/t) | 4.2 | 4.3 | ||||||
| Recovery (%) | 92.8 | 91.0 | ||||||
| Ounces produced | 293,117 | 287,315 | ||||||
| Ounces sold | 290,973 | 289,076 | ||||||
| Average price received ($/oz) | 1,260 | 1,236 | ||||||
| Total cash costs1 ($/oz) | 555 | 581 | ||||||
| Profit from mining activity1 ($000) | 204,922 | 189,166 | ||||||
| Gold sales1 ($000) | 366,510 | 357,171 | ||||||
Randgold owns 80% of Gounkoto and the State of Mali 20%. Randgold consolidates 100% of Gounkoto and shows the non-controlling interest separately.
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| Reconciliation of non-GAAP measures to IFRS for the 12 months ended December 31 | 2017 | 2016 | ||||||
| $000: | ||||||||
| Gold Sales | ||||||||
| Gold sales per IFRS | 366,510 | 357,171 | ||||||
| Gold sales1 | 366,510 | 357,171 | ||||||
| Costs | ||||||||
| Mine production costs | 138,879 | 137,168 | ||||||
| Depreciation and amortization | 10,506 | 23,513 | ||||||
| Other mining and processing costs | 19,227 | 17,461 | ||||||
| Royalties | 21,991 | 21,430 | ||||||
| Movement in production inventory and stockpiles | (18,508 | ) | (8,054 | ) | ||||
| Total cost of producing gold | 172,095 | 191,518 | ||||||
| Less: Non-cash costs included in total costs of producing gold: | ||||||||
| Depreciation and amortization under IFRS | (10,506 | ) | (23,513 | ) | ||||
| Total cash costs using the Gold Institute’s guidance1 | 161,589 | 168,005 | ||||||
| Profit from mining activity1 ($000) | 204,922 | 189,166 | ||||||
| Ounces sold | 290,973 | 289,076 | ||||||
| Total cost of producing gold per ounce ($ per ounce) | 591 | 663 | ||||||
| Total cash costs per ounce ($ per ounce)1 | 555 | 581 | ||||||
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| 32 |
Operations
Gounkoto produced 293,117oz of gold, up 2% on 2016. Tonnes processed increased 2% to 2,343kt while the head grade milled reduced by 2% to 4.2g/t, in line with the mining plan.
Gold sales of $366.5 million were 3% above the previous year due to the increased production and a 2% higher average gold price received, and together with lower operating costs resulted in an 8% increase in profit from mining activity (before interest, tax and depreciation) of $204.9 million.
Capital expenditure totaled $42.6 million for the year (2016: $19.7 million), mainly in respect of the deferred stripping on the MZ3 zone of the Gounkoto orebody ($18.5 million), mining fleet rebuild programs ($16.0 million), super pit feasibility drilling ($5.5 million) and exploration ($1.4 million).
During the year, Gounkoto paid a total of $69.6 million in dividends to its shareholders (2016: $47.3 million).
Mining and Production
A total of 32.3Mt was mined, including 2.3Mt of ore at an average grade of 4.1g/t, compared to 35.1Mt including 2.2Mt of ore at 4.7g/t in 2016. A total of 2,343kt of ore was fed from Gounkoto to the Loulo plant at an average head grade of 4.2g/t, compared to 2,288kt of ore at 4.3g/t in 2016. While pushing the pit back at Gounkoto in 2018, plant feed at the complex is expected to increase to approximately 5Mt, including the addition of softer Baboto satellite pit ore of 0.3Mt from Loulo.
The strip ratio for the year was 12.8:1, compared to 15.3:1 in 2016, slightly below the LoM projection.
Mining of the super pit started during the year and is scheduled to continue until 2024, based on a revised mine plan focusing on sustainable production over a 10 year period.
Exploration
A system wide structural review at Gounkoto has generated several new near mine targets including MZ4 down plunge, P64 Intersection, Domain Boundary down plunge and iron structure for future advancement.
Greenfields drilling has focused on two priority targets, Faraba North and Faraba West, located on the Faraba and Domain Boundary regional scale structures. At Faraba North, scout Reverse Circulation (RC) drilling returned higher grade intercepts from a hematite zone located in the hanging wall of the system. Further drilling is planned to evaluate this opportunity early in 2018. On the Domain Boundary at Faraba West, scout RC drilling followed-up on strong intercepts from historic trenching and drilling, with FARC640 intersecting significant mineralization hosted in an interpreted west dipping footwall finger adjacent to the Domain Boundary.
Recent diamond drilling has confirmed this model, with the significant implication that Gounkoto style mineralization occurs 2km SE of the pit. Further drilling is planned to trace and test this target along strike. Over the year, scout pitting and trenching programs have successfully updated the surface trace of the Domain Boundary across the project. The updated surface trace will be used during 2018 to generate and rank new greenfields targets along the Domain Boundary.
Health and Safety
One LTI was recorded during the year with a LTIFR of 0.42 per million hours worked compared to 0.45 per million hours worked in 2016.
20 emergency response team members undertook advanced first aid training facilitated by the regional fire brigade.
442 malaria cases were treated during the year representing a MIR of 37%, an 8% reduction on the previous year.
HIV/AIDS awareness continually improved and 1,571 VCTs were performed (2016: 1,443) with an HIV positivity rate of 0.76% compared to 0.90% for the previous year.
The Hepatitis B awareness program continued during the year, including voluntary screening and management of positive cases (10%) and 2,087 inoculations were provided.
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Environment
No major environmental incidents were recorded during the year. The mine retained its EMS certification for ISO 14001 following a surveillance audit during the year. The transition to the new ISO 14001:2015 version was completed and successfully audited in the first quarter of 2018.
As part of the progressive rehabilitation program, 24ha of land was rehabilitated with more than 3,000 trees planted. The environmental permit for the super pit project was approved by the government following an update and presentation of the Environmental and Social Impact Assessment (ESIA) to the inter-ministerial committee.
Human Resources and Industrial Relations
The total Gounkoto employee complement is 146, excluding contractors, and 1,209 including personnel employed by contractors and temporary employees, of which 97% are Malian. The increase in the total number reflects the additional employees recruited by the main mining contractor (GMS) to meet the production and maintenance needs of the super pit project. A plan is in place to reduce the number of expatriates as part of the focus to train and advance national employees.
As discussed above, the mine experienced some industrial activity during the year associated with two industry-wide strikes initiated by the union at national level. However, production at Gounkoto was not materially affected.
Gounkoto Manpower
| 2017 | 2016 | |||||||||||||||||||||||
| at December 31 | Expats | Nationals | Total | Expats | Nationals | Total | ||||||||||||||||||
| Employees | 3 | 143 | 146 | 4 | 127 | 131 | ||||||||||||||||||
| Contractors | 31 | 1,032 | 1,063 | 25 | 1,028 | 1,053 | ||||||||||||||||||
| TOTAL | 34 | 1,175 | 1,209 | 29 | 1,155 | 1,184 | ||||||||||||||||||
Community
The mine continued to engage with the communities through monthly development committee meetings. Two secondary schools were built in Mahinamine and Koundan villages near Gounkoto. A tractor was donated to the local communities, as well as fertilizer and seeds, as part of the mine’s agricultural support program. Six housekeeping businesses were formed in the surrounding villages to create revenue sources for villagers and to improve housekeeping. The Loulo-Gounkoto agricollege initiative functioned well through the year as further discussed above.
Illegal mining continued to pose challenges across the permit area. However, management continued its engagement as part of an industry-wide initiative to find a working solution to this ongoing issue.
Tongon
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 24,536 | 27,547 | ||||||
| Ore tonnes mined (000) | 4,334 | 4,195 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 4,360 | 3,853 | ||||||
| Head grade milled (g/t) | 2.5 | 2.5 | ||||||
| Recovery (%) | 83.8 | 83.7 | ||||||
| Ounces produced | 288,680 | 260,556 | ||||||
| Ounces sold | 292,322 | 255,942 | ||||||
| Average price received ($/oz) | 1,262 | 1,247 | ||||||
| Total cash costs1 ($/oz) | 676 | 771 | ||||||
| Profit from mining activity1 ($000) | 171,202 | 121,847 | ||||||
| Gold sales1 ($000) | 368,765 | 319,249 | ||||||
Randgold owns 89.7% of Tongon, with the State of Côte d'lvoire and outside shareholders owning 10% and 0.3% respectively. Randgold consolidates 100% of Tongon and shows the non-controlling interest separately.
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| 34 |
| Reconciliation of non-GAAP measures to IFRS for the 12 months ended December 31 | 2017 | 2016 | ||||||
| $000: | ||||||||
| Gold Sales | ||||||||
| Gold sales per IFRS | 368,765 | 319,249 | ||||||
| Gold sales1 | 368,765 | 319,249 | ||||||
| Costs | ||||||||
| Mine production costs | 157,615 | 165,880 | ||||||
| Depreciation and amortization | 65,304 | 45,704 | ||||||
| Other mining and processing costs | 23,988 | 24,423 | ||||||
| Royalties | 11,055 | 9,562 | ||||||
| Movement in production inventory and stockpiles | 4,905 | (2,464 | ) | |||||
| Total cost of producing gold | 262,867 | 243,106 | ||||||
| Less: Non-cash costs included in total costs of producing gold: | ||||||||
| Depreciation and amortization under IFRS | (65,304 | ) | (45,704 | ) | ||||
| Total cash costs using the Gold Institute’s guidance1 | 197,563 | 197,402 | ||||||
| Profit from mining activity1 ($000) | 171,202 | 121,847 | ||||||
| Ounces sold | 292,322 | 255,942 | ||||||
| Total cost of producing gold per ounce ($ per ounce) | 899 | 950 | ||||||
| Total cash costs per ounce ($ per ounce)1 | 676 | 771 | ||||||
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
The Tongon gold mine is located within the Nielle mining permit, 628 kilometers north of the Côte d’lvoire port city of Abidjan and 55 kilometers south of the border with Mali. The Tongon gold mine and associated mining permit is owned by Société des Mines de Tongon SA (Tongon), in which Randgold has an 89.7% interest, the State of Côte d’lvoire 10% and 0.3% is held by Ivorian investors.
Operations
Tongon mine comprises two open pit operations, the SZ and NZ, and based on current reserves, has just over three years LoM.
The mine produced 288,680oz of gold in 2017, a 9.7% increase year on year, as a result of an 11.6% improvement in tonnes processed, a small improvement in recovery and a slightly higher head grade. The installation of an 8MW motor on Mill No 1, lower profile mill liners and the conversion of Mill No 1 discharge end liners to a grate and pebble port discharge liner system, contributed to the throughput increase. The operation of the fourth flotation cell and the installation of an additional 20 tonne oxygen plant in the fourth quarter resulted in the higher recovery at the higher throughput.
In the second quarter of 2017, optimization of the tertiary and quaternary crusher circuits continued with the installation of a recycling screen to close the circuit and the operation of an additional new quaternary crusher. By the third quarter of 2017, the debottlenecking of Mill No 1 discharge grate liner system with the insertion of pebble ports had been completed. Based on the throughput gain achieved in Mill No 1, the same grating system will be adopted in Mill No 2 and this is expected to be completed by the second quarter of 2018. The installation of the fourth flotation rougher cell should ensure sufficient pulp residence time, mass pull and hence flotation recovery with the expected increase in milling rate. Extensive training, the improvement of operator skills and localization of the workforce continued in 2017.
Gold sales increased year on year to $368.8 million at a total cash cost of $676/oz, resulting in a profit from mining activities, before interest, tax and depreciation, of $171.2 million. Capital expenditure for the year totaled $20.0 million, mainly for mining fleet rebuild activities ($9.9 million), the naked crusher CH660 purchase and installation ($1.9 million), installation of the fourth flotation rougher cell ($1.2 million), exploration activities ($1.1 million), TSF piping phase 3 and standby line installation ($1.0 million) and the double busbar reconfiguration ($0.9 million).
During the year, Tongon paid a total of $101 million in dividends, including withholding tax, to its shareholders and the State of Côte d’Ivoire.
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Mining and Production
Mining operations took place in both SZ and NZ pits in the period under review. The SZ pit remained the main fresh sulphide ore source for the process plant within three active zones, namely the pit bottom, southern and western pushbacks. NZ pit mining activities were focused primarily on higher level oxide benches and transitional ore, which added flexibility regarding ore feed to the process plant during the first quarter and the second quarter of 2017, with stripping continuing throughout the year.
As in 2017, mining activities for 2018 will focus on both the NZ and SZ pits, mining both ore and waste.
The LoM schedule is summarized as follows:
| · | Mining in the SZ pit started in 2010 and will continue to 2020, with southern and western pushback while the oxide pit extension of SZ is planned to be mined from 2019. |
| · | Mining in the NZ pit started in 2011 and will continue to 2020; mining of the NZ satellite pit has been included in the mine plan and is scheduled to start in 2019. |
Total material mined in 2017 of 24.5Mt was less than the prior year (2016: 27.5 Mt). Total ore mined at 4,333kt was slightly above the prior year (2016: 4.2Mt) resulting in a lower strip ratio for the year at 4.7:1, in line with the LoM plan.
Dewatering remains an integral part of Tongon’s mining strategy as the pits lie in the catchment area of an old river system and are downstream of the water storage dam. Mining schedules and plans are developed with a view to ensuring there are two low working areas (sumps) in the pit at any one time and ahead of the mining cycle, to allow mining to take place in dry ground while the water is pumped away from the sumps. Borehole pumps are permanently pumping on the perimeter of the pits. Sumps and trenches around the pits and waste dumps are in place to capture surface water for ex-pit dewatering. The rainy season preparation and action plan for 2018 is already in place.
Processing, Plant and Engineering
Processing
Ore tonnes treated in 2017 at 4,360kt was 11.6% above the previous year’s performance, following the installation of an 8MW motor and the conversion of Mill No 1 from an overflow to a grate liner discharge system in the second quarter of 2017. By the third quarter of 2017 the optimization of the Mill No 1 grate discharge system with the insertion of pebble ports was completed. During the fourth quarter of 2017, optimization of the total crushing plant, inclusive of the primary, tertiary, secondary and quaternary circuits, was completed along with the commissioning of the quaternary recycle screen and the installation and operation of the fourth quaternary crusher.
These changes contributed to the increase of Mill No 1’s power draw from 6.3MW to 7.0MW and resulted in a 7% increase in milling rate from 523 to 562tph. The same changes, which will be duplicated in Mill No 2, are expected to be completed by the second quarter of 2018, and coupled with the recommissioning of the final tails thickener to reduce slurry tailings volumes pumped to the TSF, should ensure achievement of an overall targeted mill tonnage throughput of 4.5Mtpa for 2018.
Year on year, gold recovery improved by 0.2% to 83.8% and by December 2017 had improved to +84.5%. This was achieved mainly by increasing the flotation pulp residence with the installation of the fourth flotation rougher cell, optimizing the ultra fine grinding circuit and improving dissolved oxygen levels with the commissioning of an additional 20 tonnes of oxygen capacity. Further recovery gains are expected from a combination of:
| · | Optimization of the flotation circuits through prior assessment of reagent needs from advanced grade control and metallurgical test work in order to recover all the arsenopyrite associated gold. |
| · | Addition of 20 tonnes of oxygen capacity to satisfy the leach dissolved oxygen requirements. |
This should enable the attainment of the targeted 86%.
Engineering and power supply
Overall mill runtime for 2017 was 88.5%, up 4.7% from 2016. Mill runtime improved significantly quarter on quarter as minor items were addressed, such as installing a new still-well in the tails thickener and the replacement of the tails and concentrate thickener auto dilution tanks. Runtime was also aided by the increased grid power supply and improved power management, using the newly installed double Busbar system to selectively run thermal power to augment supply during periods of grid power instability.
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The grid power to generated power ratio improved to 91:9 in 2017 from the 89:11 achieved in 2016. Fewer grid power interruptions were experienced in 2017 mainly as a result of improved liaison with the national power utility (CIE) and improvement of the mine’s total power supply facilities and their management.
The completion of the CIE 225kV grid power ring line, passing from Leboa to Ferkessédougou, is key to future stabilization of the grid power supply to the mine and is expected to be completed by the end of the third quarter of 2018.
Power demand consumption increased from 23.2MW to an average of 26.5MW in 2017. Mine consumption increased in line with the raised operational availability and utilization, and an increase in demand from new equipment such as the 8MW mill motor, the fourth quaternary crusher and fourth rougher flotation cell which were commissioned during the year. During 2017, CIE increased the tariff for grid power supply to $0.12/kWh compared to the $0.11kWh in 2016.
Exploration
The exploration team has continued to pursue the dual strategy of working to replace depletion at the mine with further drilling in and around the Tongon pits while also searching for a new deposit on the Nielle permit, balancing a brownfields focus and intensive greenfields activities. Work included re-evaluating the Nielle permit geology with a renewed focus on replacing ounces or throughput tonnes for the Tongon plant. This has resulted in opening up additional areas for exploration particularly around the competent core intrusive of the Tongon Transfer Zone. Closer to the mine, extensive work was undertaken to evaluate the possibility for an economic underground operation at the Tongon NZ. Drilling in the fourth quarter indicated that at current gold prices this is unlikely. However, it did determine a geologically definable high grade component in the center of the NZ deposit. Work is ongoing to determine if this new model will have a material impact on deepening the $1,000/oz pit and adding additional ounces to Tongon.
Health and Safety
Four LTIs were recorded in 2017 resulting in a LTIFR of 0.84 per million hours worked compared to 0.21 for 2016. The LTIs were fully investigated and corrective and preventative measures were implemented. The mine’s 10 ‘safety lifesaving rules’, visible leadership and risk assessments prior to work done were emphasized.
The mine maintained its OHSAS 18001 certification after a successful audit in November 2017. The safety skills and knowledge of 60 mine personnel were further enhanced with training in the NEBOSH system, which equipped the team to identify risks effectively and improve the management of safety in their respective work areas. Risk assessments were again reinforced as the key prerequisite at the start of every task on the mine.
Twenty safety personnel across the Randgold group mines attended the NEBOSH IGC course held at Tongon and were certificated as part of their capacity building, enabling the team to perform more effectively in their various roles.
An intervention was made in malaria management and control as the MIR of 33% remained the same year on year. Following the 2017 entomological study recommendations, the strategy was modified as follows:
| · | Changing the chemical spray used to prevent parasite resistance, |
| · | Extending the spraying program to the surrounding eight villages, and |
| · | Stepping up the distribution of quantity of long-lasting impregnated mosquito nets to the mine’s employees and community members. |
Environment
Tongon mine maintained its ISO 14001 certification after a successful surveillance audit in November 2017. No major or significant environmental incidents occurred during the year.
As part of Tongon’s biodiversity offset strategy, the mine visited Comoe Park (a UNESCO listed national park in Côte d’Ivoire), to explore ways to contribute towards its conservation program. Following this visit, a biodiversity consultancy was appointed to assist the mine personnel to conduct a gap analysis and provide recommendations for its implementation. The consultancy brief was extended to develop a roadmap for Tongon’s biodiversity strategy. Interim results indicated that most steps required to align with international good practice and Randgold’s biodiversity commitment were already in place, and several more could readily be achieved with additional work and investment.
| 37 |
The mine progressed with its rehabilitation program on available areas in 2017 while mining operations continued, rather than leaving this to the end of the mine’s life.
An extensive and passive natural wetland system was established and commissioned in the SZ pit area to improve the control of arsenic levels in solution. Results show a reduction in nitrates via the natural vegetation planted, a drop in sediments via the many still-pools installed and decreased arsenic in the water discharged into the environment via the natural occurring iron-containing laterite gravel, within permitted levels. The mine continues to monitor arsenic levels at the TSF and from both pits’ water discharge to the environment.
Human Resources and Industrial Relations
Tongon’s recruitment and localization strategy is designed to minimize the influx of outsiders into the area and any disruption to community life, while maximizing the benefits of the mine’s operations for the communities surrounding the mine. The principle of employing locally first and spreading recruitment between local villages is fundamental to the mine’s recruitment and localization policy. This is evident in the percentage of Ivoirians employed by the mine, now up to 97%. Currently 80% of the operational labor is from local villages. Tongon employs 659 personnel, excluding people employed by contractors, while the total manpower including contract workers is 1,756.
In January 2017, the mine experienced an illegal sit-in which took place over a week, with employees demanding annual ex gratia payments. The incident ended after management, supported by the local and national authorities, came to an agreement and negotiated a settlement with the workers. Tongon has, throughout its history, had to deal with the social and political complexities in the north of the country arising from a decade and half of conflict. In its ongoing efforts to heal some of the associated social challenges, the mine continued with its initiatives involving open engagement between Tongon’s workforce, the union, management and the community, in order to encourage a constructive and integrated social and work environment.
Tongon’s In-Reach program continued during the year as part of the overall Randgold strategy of reaching inwards to all mine employees including contractors, and building a ‘One Team, One Mission’ mindset and culture. The In-Reach programs objectives have been shared with all mine employees and contractors, and social events and actions are being rolled out. As part of this program, a social climate survey was conducted to review and improve internal communications, relations and work conditions. A code of good conduct was adopted by Tongon’s management team, union members and signed by all employees. There is now an initiative to share with sub-contractors to obtain their workers’ commitment to this initiative.
As part of Tongon’s succession plan, several training workshops were held for workers. These consisted mainly of engineering employees identified for promotion to higher levels of responsibility. In addition, all lower level employees were moved up in category following successful skills assessments.
The Tongon manpower complement increased mainly due to temporary workers, such as samplers and workers for the wetland project, and partly due to recruitment of key skilled Ivorian personnel. This coincided with the decrease in expatriate contractor numbers at the mine.
Tongon Manpower
| 2017 | 2016 | |||||||||||||||||||||||
| at December 31 | Expats | Nationals | Total | Expats | Nationals | Total | ||||||||||||||||||
| Employees | 15 | 644 | 659 | 15 | 625 | 640 | ||||||||||||||||||
| Contractors | 26 | 1,071 | 1,097 | 29 | 1,067 | 1,096 | ||||||||||||||||||
| TOTAL | 41 | 1,715 | 1,756 | 44 | 1,692 | 1,736 | ||||||||||||||||||
Community
Three minor grievances were recorded and resolved with the help of local authorities and the community.
The investment in the community for the year was primarily focused on the supply of potable water infrastructure in partnership with the government, mainly directed at Tongon village which received the largest water supply provision. In addition to this, since each community village now has a primary school, the focus in the field of education was on the construction of nursery schools with two being completed at Poungbe and Mbengue villages.
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Tongon’s goal that each of the eight surrounding villages should have a medical health clinic was realized with the establishment of a clinic at Kationron. The construction of the Mbengue surgical unit was completed during the year, and the NGO CURE was engaged to supply the required medical and surgical equipment.
Revenue generating projects, including the Tongon restaurant and bar and the Poungbe abattoir and butchers shop, are both nearing completion and formed part of the mine’s ongoing investment in the surrounding community.
Agribusiness infrastructure development continued with the supply of tractors and related garages, the installation of feed processing units to support poultry farming, egg production and pig breeding, as well as a maize farming project.
Kibali
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 36,522 | 31,879 | ||||||
| Ore tonnes mined (000) | 6,761 | 6,218 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 7,619 | 7,296 | ||||||
| Head grade milled (g/t) | 2.9 | 3.1 | ||||||
| Recovery (%) | 83.4 | 80.0 | ||||||
| Ounces produced | 596,225 | 585,946 | ||||||
| Ounces sold | 604,667 | 568,375 | ||||||
| Average price received ($/oz) | 1,248 | 1,248 | ||||||
| Total cash costs1 ($/oz) | 773 | 736 | ||||||
| Profit from mining activity1 ($000) | 287,676 | 291,101 | ||||||
| ATTRIBUTABLE (45%) | ||||||||
| Gold sales1 ($000) | 339,683 | 319,217 | ||||||
| Ounces produced | 268,301 | 263,676 | ||||||
| Ounces sold | 272,100 | 255,769 | ||||||
| Profit from mining activity1 ($000) | 129,454 | 130,995 | ||||||
Randgold owns an effective 45% of Kibali with the DRC State and joint venture partner owning 10% and 45% respectively. The group equity accounts for its effective 45% joint venture holding in Kibali.
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| Reconciliation of non-GAAP measures to IFRS² for the 12 months ended December 31 | 2017 | 2016 | ||||||
| $000: | ||||||||
| Gold Sales | ||||||||
| Gold sales per IFRS | 339,683 | 319,218 | ||||||
| Gold sales1 | 339,683 | 319,218 | ||||||
| Costs | ||||||||
| Mine production costs | 166,493 | 151,945 | ||||||
| Depreciation and amortization | 123,679 | 102,718 | ||||||
| Other mining and processing costs | 24,507 | 24,339 | ||||||
| Royalties | 14,361 | 14,839 | ||||||
| Movement in production inventory and stockpiles | 5,032 | (2,910 | ) | |||||
| Total cost of producing gold | 334,072 | 290,931 | ||||||
| Less: Non-cash costs included in total costs of producing gold: | ||||||||
| Depreciation and amortization under IFRS | (123,679 | ) | (102,718 | ) | ||||
| Total cash costs using the Gold Institute’s guidance1 | 210,393 | 188,213 | ||||||
| Profit from mining activity1 ($000) | 129,454 | 130,995 | ||||||
| Ounces sold | 272,100 | 255,769 | ||||||
| Total cost of producing gold per ounce ($ per ounce) | 1,228 | 1,137 | ||||||
| Total cash costs per ounce ($ per ounce)1 | 773 | 736 | ||||||
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
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| ² | The information presented in relation to the Kibali mine is consistent with the segmental information included in internal reports and reviewed by the group’s chief operating decision maker as detailed in Note 15 to the financial statements. The segmental information in respect of the group’s joint ventures is presented using the proportionate consolidation method for a joint venture to reflect the way information is reported to the board. The joint ventures are accounted for using the equity method of accounting under IFRS as the company holds rights to the net assets of the arrangements as a whole rather than rights to the assets, and obligations for the liabilities, relating to the arrangement. |
The Kibali gold mine is located in the northeast of the Democratic Republic of Congo (DRC), approximately 220 kilometers east of the capital of the Haut Uele province, Isiro, 150 kilometers west of the Ugandan border town of Arua and 1,800 kilometers from the Kenyan port of Mombasa. The mine is owned by Kibali Goldmines SA (Kibali) which is a joint venture company effectively owned 45% by each of Randgold and AngloGold Ashanti, and 10% by Société Miniére de Kilo-Moto (SOKIMO). The mine was developed and is operated by Randgold.
Operations
The Kibali mine has been developed in two phases. Phase 1, which encompassed the KCD open pit operation and processing plant, the mine infrastructure (including a 36-unit high speed thermal power station) and the first of three hydropower stations, was completed in December 2014. Phase 2, comprising the underground mine development, including the vertical shaft, was commissioned at the end of the year and two additional hydropower stations, one of which was commissioned at the start of 2017 and the other is scheduled for commissioning in mid-2018, along with further satellite pit developments. Open pit mining started in July 2012 and commissioning of the oxide processing circuit began in the third quarter of 2013. Kibali poured its first gold in September 2013, ahead of plan, and started commercial production in the fourth quarter of 2013. Commissioning of the sulphide circuit began early in 2014 and production has steadily ramped-up since then with the mine now consistently exceeding its processing nameplate capacity.
In 2017, Kibali produced 596,225oz of gold at a total cash cost of $773/oz. Gold sales amounted to $754.9 million (100% basis) resulting in a profit from mining activity (before interest, tax and depreciation) of $287.7 million.
Capital expenditure for the year was $244.3 million (at 100%). The underground development and the shaft completion ($132.2 million), along with the completion of the second and start of the third hydropower station, were the key capital projects for the year. Capital expenditure was also incurred on the expansion of the Ultra-Fine Grind (UFG) capacity, deferred stripping at both Kombokolo and Pakaka satellite pits, the Gorumbwa Resettlement Action Plan (RAP) and rebuilds to the open pit mining fleet.
Mining and Production
Open pit mining
A total volume of 34.5Mt was mined from the open pits in 2017, including close to 5.0Mt of ore, an increase from the 33.9Mt mined in 2016. Mining from Pakaka and Kombokolo continued according to plan, while a pit optimization study resulted in rescheduling Gorumbwa to 2019 and bringing forward the KCD pushback 3, which was initiated mid-year. Pakaka, Kombokolo and KCD PB3 will all continue into the first quarter of 2018, with Pakaka replaced by Sessenge, the sixth satellite pit at Kibali, during the second quarter of 2018. A Pakaka pushback is planned for later in the mine life.
Underground mining
Underground mining continued to ramp-up during the year, with an ore production of 1.79 Mt, up 17% on the previous year. The completion and commissioning of the shaft infrastructure enabled its first beneficial use during the fourth quarter, with 118kt hoisted. The optimization of the shaft and materials handling system will be a key focus in 2018 to bring underground production up to full capacity, with a mining target of approximately 3.5Mt of ore for the year.
Processing, Plant and Engineering
Processing
Following the team restructuring and processing stabilization in the second half of 2016, the plant steadily improved during 2017 and operated consistently above its design capacity, treating 7.6Mt of ore for the year. This was achieved while increasing the sulphide feed until the fourth quarter, when the predominant feed was sulphide on both streams. Following the successful extension and commissioning of the UFG completed during the first quarter of 2017, Kibali was able to demonstrate substantial improvements in pumpcell dissolution with an increase in the proportion of KCD ore, contributing to a 4% overall recovery improvement year on year.
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Engineering and power supply
With continued improvement in planned maintenance, mill availability increased to 96% for the year, with a corresponding runtime of 94%, up from 93% in 2016. The commissioning of Ambarau, Kibali’s second new hydropower station at the end of the first quarter of 2017 was another milestone in the mine’s hydropower strategy. Despite the maximum power generation capacity increasing to 34MW, a dry year with lower than expected river flow resulted in higher power costs of $0.14/kWh (2016: $0.13/kWh). However, power costs during the wet season in the second quarter with all turbines running was $0.07kWh, demonstrating the potential for low cost, low emission power generation in a typical rainfall year. Azambi, the third and last hydropower station, will produce first power in mid-2018 with immediate full integration into the Kibali grid. Total power consumption was 316GWh in 2017 compared to 284GWh in 2016.
Construction
The concentrate fine grind capacity was increased in the first quarter of 2017, with four additional UFG mills and pumpcell capacity added to the circuit. This enabled the treatment of the increased sulphide content as underground volumes and deeper pits contributed most of the feed. A cyanide detox facility was constructed and commissioned during the year, enabling more efficient water use, with greater volumes of tailings water returned to the circuit. Construction of the next phase of the cyanide tailings storage facility was initiated during the last quarter, to increase the capacity for Cyanide In Leach (CIL) tails, and is scheduled for completion in third quarter of 2018.
The major construction project for the year was the Azambi hydropower station, which is on track for first power in mid-2018 as river levels rise, with the intake and Rubble Masonry Concrete (RMC) weir construction to start on the second phase river diversion in March 2018 during the lowest flow of the river.
Decline Development
The C-decline holed in July 2017, linking the declines with the shaft and providing flexibility in access and movement of equipment and material. This completed 4.5 years and 7.7km of decline development, with a maximum displacement of 0.16mm on the holing. The total development meters for the year was 12.97km, taking the total for the project to 47.6km.
Vertical Shaft System
All the shaft infrastructure was completed during the year, with the system fully commissioned in the fourth quarter, effectively completing the capital phase of Kibali. The underground capital phase included the completion of the first phase of the Roller Compacted Concrete (RCC) central haulage, which is required for the automated hauling of ore from the waste passes to the crusher coarse ore bins. The automated haulage was also commissioned in the fourth quarter but loader synchronization faults delayed the optimization and full capacity operation of the system which is planned for early 2018, following system software updates by the original equipment manufacturers, Sandvik. Additional installed infrastructure includes two underground 500t/h crushers, underground conveyors, the shaft itself as well as surface conveyors feeding the ore from the shaft to the plant.
| KIBALI VERTICAL SHAFT RESULTS | ||||||||
| 12 months ended December 31 | 2017 | 2016 | ||||||
| Off shaft development | 1,257 | 3,116 | ||||||
| Hoisted ore tonnes | 118,120 | - | ||||||
| KIBALI UNDERGROUND DECLINE RESULTS | ||||||||
| 12 months ended December 31 | 2017 | 2016 | ||||||
| Ore tonnes mined | 1,668,488 | 1,578,386 | ||||||
| Development meters | 11,721 | 13,182 | ||||||
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Exploration
Exploration focused mainly on three key objectives: mine plan flexibility, resource addition/replacement and new discovery. Rhino-Agbarabo-Kombokolo was evaluated further, leading to the identification of multiple discreet, plunging, high-grade shoots along the Kombokolo Hill banded Iron Formation (BIF). The potential to mine these shoots from underground is being assessed.
Following up on the updated model of KCD, a deep hole was drilled 600m down plunge from the known model, to test the BIF model associated with the 3000, 5000 and 9000 lode. The hole was a success, intersecting the BIF as projected along with an additional BIF below the 9000 lode, interpreted to link up-plunge to the Sessenge SW target on surface. A program to test this additional potential is planned for 2018.
On the new discovery front, Kalimva-Ikamva was drilled from the beginning of 2017 following up on the mineralization identified in earlier surface and sub-surface work. This work confirmed the potential of the target as a satellite pit. Work was also completed on the Oere, and Belengo target with encouraging results. In the south of the KZ trend, new targets were generated, among them the Zakitoko target, which has been the subject of field work in the last quarter of the year and which has returned strong lithosample results over strike length of 6kms.
Health and Safety
One of Kibali’s hauling contractors suffered a truck collision during the year, resulting in a double fatality. Kibali had six LTIs during the year, an increase of one LTI, bringing the LTIFR to 0.63 compared with 0.44 the previous year.
Emphasis was placed on individuals taking responsibility for safety through Tool Box Talks and one-on-one counselling. Increased training of contractors and supervisors across the organization, together with awareness campaigns in conjunction with the union, were implemented in the last two quarters.
The malaria incidence rate deteriorated slightly with an MIR of 28% for the year, up from 26 % in 2016, mainly due to a spike during the height of the wet season between May and July. A review and revision of the residual spraying regime and insecticides used is expected to address this in 2018.
Environment
Kibali underwent a successful certification and conversion of its environmental management system to the updated ISO 14001:2015. No major or moderate environmental incidents were recorded and biodiversity results from an aquatic survey indicated significantly improved indices. Support for conservation in Garamba National Park continued for the third year and interaction with Kibali environmental representatives was initiated. The closure liability assessment resulted in an increase of 3% due to new infrastructure in the plant (detox ponds and UFG) and expansion of the waste rock dumps.
Human Resources and Industrial Relations
Constructive labor relations were maintained with the unions and workforce during the year and there were no disruptions to operations resulting from industrial action. The roll-out of the group In-Reach program enhanced communication and opened channels for improved understanding among the workforce. With the work program intensifying at Azambi, build-up of the underground owner’s team, start of the TSF lift project as well as additional Congolese contractors appointed in open pit mining, the total workforce including contractors increased to 5,377 from 5,048 in 2016. The total number of Kibali employees was 901 and in line with Randgold’s strategy, the mine continued to focus on host country employment and skills transfer, steadily increasing the Congolese component to more than 91% of the manpower.
Kibali Manpower
| 2017 | 2016 | |||||||||||||||||||||||
| at December 31 | Expats | Nationals | Total | Expats | Nationals | Total | ||||||||||||||||||
| Employees | 108 | 793 | 901 | 105 | 664 | 769 | ||||||||||||||||||
| Contractors | 352 | 4,124 | 4,476 | 409 | 3,870 | 4,279 | ||||||||||||||||||
| TOTAL | 460 | 4,917 | 5,377 | 514 | 4,534 | 5,048 | ||||||||||||||||||
Community
There was prolonged political uncertainty in the DRC during 2017 and the long-delayed elections triggered public demonstrations in some parts of the country. However, in Durba (the nearest town to the mine) and surrounding communities, the situation remained calm as the mine proactively maintained a meaningful stakeholder engagement with local communities.
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The mine continues to invest in community infrastructure development with a large scale water distribution program, health care centers, schools and recreation facilities funded during the year. Vocational and technical programs for youth, summer soccer and educational clinics, a women’s leadership program, HIV screening and counselling and malaria awareness are some of the initiatives supported by the mine through local NGOs.
The mine also invested in alternative livelihood projects and agricultural development initiatives. Poultry, livestock and community maize farms, fisheries and a cocoa tree nursery were successfully implemented by local entrepreneurs, while the large scale palm oil and processing project has been delayed pending an improvement in the DRC investment climate.
Morila
| Production results for the 12 months ended December 31 | 2017 | 2016 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 2,291 | - | ||||||
| Ore tonnes mined (000) | 502 | - | ||||||
| TSF material processed (000) | 4,940 | 1,760 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 5,453 | 3,774 | ||||||
| Head grade milled (g/t) | 0.6 | 0.6 | ||||||
| Recovery (%) | 67.2 | 79.4 | ||||||
| Ounces produced | 70,019 | 54,022 | ||||||
| Ounces sold | 67,812 | 52,296 | ||||||
| Average price received ($/oz) | 1,269 | 1,245 | ||||||
| Total cash costs1 ($/oz) | 988 | 1,113 | ||||||
| Profit from mining activity1 ($000) | 19,108 | 6,867 | ||||||
| Attributable (40%) | ||||||||
| Gold sales1 ($000) | 34,429 | 26,034 | ||||||
| Ounces produced | 28,008 | 21,609 | ||||||
| Ounces sold | 27,125 | 20,918 | ||||||
| Profit from mining activity1 ($000) | 7,643 | 2,747 | ||||||
Randgold owns 40% of Morila with the State of Mali and joint venture partner owning 20% and 40%, respectively. The group equity accounts for its 40% joint venture holding in Morila.
| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. |
| Reconciliation of non-GAAP measures to IFRS² for the 12 months ended December 31 | 2017 | 2016 | ||||||
| $000: | ||||||||
| Gold Sales | ||||||||
| Gold sales per IFRS | 34,429 | 26,035 | ||||||
| Gold sales1 | 34,429 | 26,035 | ||||||
| Costs | ||||||||
| Mine production costs | 19,180 | 16,427 | ||||||
| Depreciation and amortization | 6,592 | 3,785 | ||||||
| Other mining and processing costs | 6,202 | 6,026 | ||||||
| Royalties | 2,064 | 1,544 | ||||||
| Movement in production inventory and stockpiles | (660 | ) | (709 | ) | ||||
| Total cost of producing gold | 33,378 | 27,073 | ||||||
| Less: Non-cash costs included in total costs of producing gold: | ||||||||
| Depreciation and amortization under IFRS | (6,592 | ) | (3,785 | ) | ||||
| Total cash costs using the Gold Institute’s guidance1 | 26,786 | 23,288 | ||||||
| Profit from mining activity1 ($000) | 7,643 | 2,747 | ||||||
| Ounces sold | 27,125 | 20,918 | ||||||
| Total cost of producing gold per ounce ($ per ounce) | 1,231 | 1,294 | ||||||
| Total cash costs per ounce ($ per ounce)1 | 988 | 1,113 | ||||||
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| 1 | Refer to explanation of non-GAAP information provided in the section “—Non-GAAP information” above. | |
| ² | The information presented in relation to the Morila mine is consistent with the segmental information included in internal reports and reviewed by the group’s chief operating decision maker as detailed in Note 15 to the financial statements. The segmental information in respect of the group’s joint ventures is presented using the proportionate consolidation method for a joint venture to reflect the way information is reported to the board. The joint ventures are accounted for using the equity method of accounting under IFRS as the company holds rights to the net assets of the arrangements as a whole rather than rights to the assets, and obligations for the liabilities, relating to the arrangement. |
The Morila gold mine is situated some 280 kilometers southeast of Bamako, the capital of Mali, and 900 kilometers to the north of the port of Abidjan in Côte d’Ivoire. The mine and associated mining lease is owned by Société des Mines de Morila SA (Morila), a joint venture company held by Randgold (40%), AngloGold Ashanti (40%) and the State of Mali (20%). The mine is operated by Randgold.
Mine closure was originally scheduled for 2013 but retreatment of the TSF material, mining of the Domba satellite pit and an agreement to acquire Birimian Limited’s Ntiola and Viper targets, have extended the life of mine to 2020.
Work continues on the development of commercial agribusiness to provide sustainable economic activity in the area once the mine closes.
Operations
Morila has produced more than 6Moz since mining started from the open pit in 2000. After the first conversion of the mine to a stockpile treatment operation in 2009 and the completion of the pit pushback program initiated in 2013, the mine was again resized to treat its mineralized waste stockpiles from mid-2015 and then converted to a TSF reclamation operation in the second half of 2016. The Domba project is located 8.5km from the plant within the permit area. Mining of the oxide portion of the deposit started in September 2017. The Ntiola and Viper targets are located 24km from the plant outside the current Morila permit area and mining of these deposits is planned for 2018 pending receipt of the necessary permits.
In 2017, 70,019oz of gold was produced, up 30% on the prior year as a result of the higher throughput achieved by processing TSF material and the oxide ore of Domba. The mine continued its rehabilitation and closure plan and a total of 7.8Mt of low grade waste material from the TSF was hydro-sluiced to the pit.
As a result of the higher grade fed from the Domba deposit and the increased tonnage of TSF material processed, total cash costs decreased to $988/oz compared to $1,113/oz in the previous year.
Gold sales amounted to $86.1 million (100% basis), up 32% on the previous year, leading to a significant increase in the profit from mining activity (before interest, tax and depreciation) to $19.1 million for the year compared to the $6.9 million in 2016.
Capital expenditure for the year of $1.9 million (at 100%) was related to the feasibility work on the Ntiola and Viper projects (2016: $2.1 million).
Mining and Production
Reclamation of the tailings storage facility produced 4.9Mt of slurry material which was reprocessed through the plant in parallel with the hydro-sluicing of waste material to the pit. Production was mainly focused on the higher grade eastern wall until its depletion before moving to the basin material. The coarse wall was reground in the milling section of the processing plant prior to leach recovery while the decapping operation continued to expose the basin material which was directly fed to the leach circuit, allowing the ball mill operation to be stopped to further reduce costs.
The mine reached an agreement with a commission representing the local community to exploit the Domba deposit and a relocation program was completed to rehouse certain families from the exclusion zone. A local Malian civil works company was used for the mining and construction as part of the mine’s commitment to develop and transfer mining skills in the country.
The mining operation started in September and a total of 2,291kt of material was mined including 502kt of ore at an average grade of 1.8g/t. The open pit mine is scheduled for completion in the first quarter of 2018, allowing the rehabilitation program to start during the course of the year.
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Processing, Plant and Engineering
Processing
Throughput increased during the year by 44% to 5,453kt (2016: 3,774kt) at a rate of 666tph as a result of the high feeding rate of the TSF material for the first eight months of the year and the processing of Domba oxide ore over the last four months of the year. Changes were made in the plant to enable a rapid switch from open pit material treatment through the mill to TSF material feeding through CIL with higher volumes and to allow for the recycling of the excess water.
Domba material was fed through the oxide crusher while the hard rock crushing circuit was placed under care and maintenance awaiting the Ntiola fresh ore feed expected in the second quarter of 2018.
Engineering and power supply
The plant availability improved to 95.2% for the year (2016: 90.2%) after implementing an enhanced maintenance program, which included replacing the ball mill and CIL gearboxes and overhauling three of the medium speed power generators.
Total power consumption of 98.93GWh decreased by 5% from the previous year (2016: 104GWh) as result of a program to optimize the generation of power based on production. This was generated at a fuel efficiency of 0.235l/kWh.
Health and Safety
No LTI was recorded during the year compared to one in the prior year. The LTIFR was zero compared to 0.56 in 2016. The mine retained its OHSAS 18001 certification following an external audit in February.
The malaria incidence rate dropped to 11% during the year, a 15% decrease from the previous year. This was achieved by the mass drug administration program extended to five months compared to three months in the prior year. More than 1,200 people were tested for HIV and the prevalence rate was 0.3%. A study was initiated to assess the impact of recent mining activity on communities and the result is expected in early 2018.
Environment
Morila has retained its ISO 14001 certification with no major environmental incidents being experienced. The environmental permit for the Domba project was received during the year.
25ha of land has been rehabilitated as per the rehabilitation and closure plan. Local community members were employed to apply mulching on 71ha of the tailings dam to prevent dust emissions. An additional 4,400 trees were provided to the regional forestry department for planting on 22ha in the surrounding communities of Sanso and Domba. Regular closure workshops were held with the communities and government representatives. A plan for converting the mine into an agripole was submitted to the government for approval as a closure strategy and authorization is expected in 2018.
Human Resources and Industrial Relations
Total manpower recorded at the end of the year was 372, excluding 444 people employed by contractors, of which 99% are Malian. During the year the industrial relations climate was stable despite SECNAMI’s national strike which did not affect the Morila operation. The mine continued with its downsizing exercise in line with cessation of mining activities and the planned closure.
Morila Manpower
| 2017 | 2016 | |||||||||||||||||||||||
| at December 31 | Expats | Nationals | Total | Expats | Nationals | Total | ||||||||||||||||||
| Employees | - | 372 | 372 | - | 372 | 372 | ||||||||||||||||||
| Contractors | 3 | 441 | 444 | 4 | 400 | 404 | ||||||||||||||||||
| TOTAL | 3 | 813 | 816 | 4 | 772 | 776 | ||||||||||||||||||
Community
Overall the mine maintained a good relationship with the surrounding community throughout the year, and regular meetings were held with the community development committee to disclose project information including the Domba mining project and decide on the community development projects to be sponsored by the mine. Projects implemented include:
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| · | Construction of three boreholes in the Sanso women’s market gardens. |
| · | Introduction of 20 community trainees to the operation. |
| · | Construction of a water supply system at Morila village. |
A tripartite protocol between a local NGO, Morila, and the townhalls of Sanso and Domba has been signed to promote the economic empowerment of women through activities such as market gardening. A training session on hygiene and sanitation in collaboration with a local environmental department was conducted in the surrounding villages to improve living conditions.
The Domba Resettlement Action Plan (RAP) was completed and 27 households were relocated to new houses with compensation for all affected farms. Some of the agreed community projects have been completed and others are still in progress. These include:
| · | Installing 20 solar powered street lights. |
| · | Revamping of the local clinics and an ambulance ordered. |
| · | Completing the classroom in the library and supplying school material to Domba and Sanso. |
| · | Equipping the borehole with a solar system for the market garden. |
Development and maintenance of a water supply system in the village is ongoing.
Agribusiness
As part of the strategy to facilitate and endorse the Morila agricenter project, the key closure committee members and local authorities visited the Songhai agriproject in Benin. Following the visit, unanimous support was given for the project by authorities with a recommendation that the government approves it.
Massawa Gold Project
The Massawa project is a grassroots exploration discovery located on the Kanoumba permit in eastern Senegal. Randgold owns 83.25% in partnership with a Senegalese company who owns 6.75%, after providing for the State of Senegal’s right to a non-contributory 10% share of any mine developed on the property. The project is located about 700 kilometers south east of the capital city of Dakar and approximately 90 kilometers due west of Randgold’s Loulo operation in Mali.
The Massawa feasibility project is being progressed towards a final development decision which includes its potential to meet Randgold’s internal investment filters. These investment criteria include 3Moz of mineable gold reserves capable of delivering an IRR of 20% at $1,000/oz for the project. Currently the project includes open pitable reserves from four orebodies, namely Massawa Central and Northern Zone, Sofia and Delya. The project currently falls slightly short of our key hurdles and work is focusing on testing the potential of the high grade portion of the Central Zone (CZ) orebody and the surrounding satellite deposits of KB, Kaviar and others. Results from the CZ and satellite targets have recently highlighted some exciting potential for high grade mineralization.
The Massawa project is located within the Kedougou-Kenieba inlier which is underlain by Lower Proterozoic Birimian metasedimentary-volcanic sequences. Regionally it is located on the plus 150 kilometer long northeast/southwest trending Main Transcurrent Shear Zone (MTZ) which is a significant transcrustal dislocation between the Mako Supergroup (basaltic flow rocks, minor intercalated volcaniclastics, and ultramafic sub-volcanic intrusions) and the Diale-Dalema Supergroup (volcano-sedimentary to sedimentary rocks). Mineralization at Massawa occurs in various lithologies but is structurally controlled within anastomosing shears which exploit the contact between volcanic, sedimentary and intrusive lithologies.
Evaluation work on the Massawa project continued through the year focusing on the Massawa, Sofia and Delya orebodies. The non-refractory Sofia deposit, located 11km west of the Massawa deposit, has been extended to include the Sofia North extension and now contributes a total of 5.9Mt at 2.9g/t for 0.54Moz of ore reserves. The mineralization remains open to the north and south of Sofia and further exploration is underway to determine if these reserves can be expanded.
The Delya satellite deposit was infill drilled and confirmed 0.60Mt at 4.8g/t for 0.092Moz of ore reserves.
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Pilot scale metallurgical testwork commenced on the CZ orebody with two of four pilot plant tests completed. Each test comprises a 2.5t composite sample collected from all RC sample intersections modelled within the mineralization in a 15m by 10m drilled block.
Results of the first two pilot plant programs have confirmed the following:
| · | The closer spaced drilling has confirmed a complex array of anastomosing shears which range in width from 1m to 12m, being continuous over the strike of the block. |
| · | The RC drilling has returning significantly higher grades than the original diamond core drilling. |
| · | The Leachwell assay method has returned a 10% higher grade across all grade ranges compared to the fire assay method. |
| · | The back calculated grades from the two 2.5t pilot plant samples have confirmed the higher grades reported from RC sampling and the Leachwell assay method. |
| · | Both blocks have returned high gravity gold recoveries of +55%. |
| · | Both blocks have reported overall gravity plus whole leach recoveries of +80%. |
Bio–oxidation pilot plant testwork has progressed on the Massawa Northern Zone (NZ). Flotation optimization and pilot bio-oxidation results indicate that an overall recovery of 88% is achievable. Batch scale bio-oxidation tests have confirmed that similar overall recoveries are likely from the Delya fresh ore.
Based on the latest improvements in the geological and metallurgical models, a mining scenario analysis is being undertaken to understand the optimal mining approach to maximize the value of the ore. This includes a tradeoff between grade, dilution and ore selectivity.
Environmental and social baseline studies have been completed and these will be used to identify the potential impact of the project to the area and define mitigation measures to implement.
Exploration
Exploration this year focused on pursuing multiple priority targets with the aim of identifying both upside potential and adding further reserves to meet the economic filter of 3Moz. A strategy of aggressive exploration is in progress on 11 priority targets around the Massawa deposit, with positive results already forthcoming from initial drilling on the KB and Kaviar targets that are located south west of the Massawa orebody.
EXPLORATION REVIEW
2017 was a year during which Randgold made significant progress on its brownfields work, where strong results in particular at Loulo and Kibali continued to highlight the potential to replace our mining depletion. The company progressed the Massawa project in Senegal and expanded its greenfields work with new partnerships and with fieldwork starting on new projects in Mali, Côte d’Ivoire and DRC. Randgold’s landholding increased to 15,260km2 (2016: 14,000km2) of prospective Proterozoic and Archean greenstone belts, adding new targets to the base of the resource triangle. With a total portfolio of 157 exploration targets, its focus continues to be the delivery of world-class projects which pass Randgold’s investment filters. Currently exploration is being carried out in the Birimian rocks of Eastern Senegal, Mali and Côte d’Ivoire, while in Central Africa teams are active across north eastern DRC.
Mali
Loulo
Following success in recent years in extending the Gara deposit down plunge, strong exploration results this year from both Yalea and Loulo 3 meant that these projects were prioritized over other brownfields targets at Loulo.
Exploration models at Yalea have, for some time, highlighted the opportunity for high grade southern extensions to the main orebody and in particular the development of Purple Patch type, high grade ore where strain transfers across the main orebody between less competent lithologies in the hangingwall and footwall. This year, drilling across the Yalea south transfer zone targeted two separate areas. The work at the Yalea Plunge target builds on strong intersections at the southern margin of the existing model, such as: YaDH21 - 26.4m @ 11.23g/t from 552.4m; and YaDH22 - 38.4m @ 4.55g/t from 504.5m. The first hole, situated 300m south of the existing model, targeting the plunge, intersected: YDH274 - 35.3m @ 19.85g/t from 738.2m, true width (TW) 9m. Subsequent drilling in the plunge target returned strong intercepts of: YaDH42 - 38.7m @ 9.75g/t, TW 9.8m; and YaDH42 -17.0m @ 12.27g/t, TW 4.4m, and results of the five holes drilled in the target to date have a weighted true width of 12.8m (range 4.4m to 30.7m) and an average grade of 11.6g/t. Further drilling down plunge confirmed that the target extends to approximately 500m strike length before pinching out due to a change in the footwall lithologies.
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Meanwhile, exploration drilling at depth at the Yalea Intersection target confirmed continuity of a panel of mineralization with YDH276 returning 5.4m @ 4.5g/t from 1,131m (TW 3.8m). These targets continue to be a focus for exploration while attention also turns to the next priority targets to the immediate north of the deposit.
Early in the year, at Loulo 3, two drillholes testing a dilational jog model below the current pit returning: 2.7m @ 3.73g/t; and L3DH113 - 5m @ 9.18g/t and 2.0m @ 6.8g/t, confirming geological potential at depth. Further results from drilling during the year have continued to confirm the model of high grade mineralization in two sub-parallel structures (MZ1 and MZ2) at their intersection with the principal Yalea structure. Drilling has confirmed the high grade shoot remains open beyond 550vm below surface and measures 300m in strike. Revised weighted average intersections (true width) are 4.6m @ 10.3g/t for MZ1 and 7m @ 7.13g/t for MZ2, and drilling is ongoing to test the extensions to the high grade mineralization.
Moving to greenfields exploration, weak results were returned from the Saba target to the North of Gara. Surface exploration over the remaining 4.1km of mapped strike north of the permit boundary is planned, however work at Saba is on hold while the team finalizes updates to interpretations and re-ranks targets within the portfolio.
Further work was carried out during the year on other targets, such as Falémé, where the potential southern extension of the Gara system has been traced and will be drill-tested in 2018, while work is still in progress on the reassessment of the Gara West deposit, where the open southern extension to higher grade mineralization has been identified for follow-up in 2018.
Gounkoto
During the year, exploration work on the extensions of the main deposit were concluded, some seven years after its initial discovery, and the team reverted to early stage work where targets are being generated along inferred structures.
At Faraba North, scout trenching intersected several zones of mineralization confirming multiple, narrow, steeply-dipping silica-carbonate shears that host mineralization. Shallow RC drilling returned higher grade intercepts from a haematite zone in the hanging wall of the system (FARC619: 5.5m @ 3.73g/t and 7m @ 5.38g/t) and further infill drilling is planned to evaluate this in 2018.
At Faraba West, on the Domain Boundary, high grade intercepts from previous trenching (FT42Ex: 13.6m @ 6.98g/t) and drilling (FADH016: 2.9m @ 5.44g/t) were followed up. The Domain Boundary is a structural discordance seen in the Gounkoto deposit, which is interpreted to have an intimate relationship with mineralization although this is not yet fully understood. RC drilling delivered strongest results beneath the trench, with FARC640 returning 6m @ 5.64g/t in the hangingwall of the domain boundary, 8m @ 0.99g/t (on the domain boundary), and 8m @ 2.94g/t from 88m (including 5m @ 4.48g/t from 88m) and 28m @ 2.13g/t from 100m (including 6m @ 3.2g/t and 3m @ 3.74g/t) from two interpreted footwall mineralization zones which dip to the west, sub-parallel to the drillhole. A twin diamond hole has confirmed the model with a clear angular discordance observed at the albite altered Domain Boundary. Work will continue to trace and test this target along strike at this key structure 2km from the Gounkoto pit.
Bakolobi JV (Taurus Gold)
Work on the Bakolobi permit under the joint venture with Taurus Gold was paused for a significant part of the year as Taurus Gold went into liquidation. The situation was resolved shortly before the wet season, delaying drilling until October.
At Gamaye, the completion of wide spaced RC drilling on the southern part of the structure beneath thick laterites succeeded in intersecting high grade mineralization with GARC048 returning 19m @ 8.98g/t (from 55m) including 6m @ 25.6g/t associated with strong silica-albite, and sericite alteration overprinted by hematite and chlorite alteration with strong disseminated Pyrite mineralization. Second hole GARC50, located 400m further to the south, intersected similar mineralization at depth with 16m @ 2.95g/t from 187m, including 3m @ 10.67g/t. Infill drilling is planned for the first half of 2018.
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At Dioula, the shallow RC program completed in the southern part of the structure extended the stronger grade in the target over 200m strike with an intersection of 34m @ 2.01g/t (from 30m) including 7m @ 8.31g/t (DLRC0052). Four diamond holes drilled at depth at Dioula confirmed the system but failed to intersect significantly stronger mineralization.
Further work is planned to infill the high grades at Gamaye while further testing the Kolinguida target beneath transported gravels in the west of the permit.
Bena License
On the Bena permit to the immediate south of Gounkoto, reinterpretation of the Sinsinko Main target identified a prospective zone where artisanal miners exposed saprolite hosted mineralization that exhibited some structural complexity which had not been fully tested.
Four diamond drillholes were completed but results were generally weak with best intersection from the northern hole SNDH005 intersecting 12.6m @ 1.26g/t from 86.7m including 3.2m @ 2.24g/t within weak to moderately altered pink quartzite and altered breccias. Further evaluation of a low grade target of 1g/t to 1.5g/t which may be able to be trucked to one of the local plants, is ongoing.
Massakama JV (Alecto Minerals)
Work on the two Alecto minerals permits this year has consisted of mapping and sampling and follow-up pitting and trenching. Results have been weak and have not identified a significant mineralized system.
Along strike to the NW of the Alecto project, two other joint ventures were concluded, with Randgold earning into 90% of both. Soil sampling, mapping and lithosampling were completed over the permits of Ouiaga and Diangounte West, which have generated targets for follow-up in H1 2018.
Elsewhere in Mali, Randgold was granted two exploration permits in the south of the country where initial work will begin in 2018, while at Morila the feasibility studies on the Viper and Ntiola satellite deposits were completed.
Senegal
All work completed in Senegal this year has been on the Massawa project. This is likely to be Randgold’s next mine development and is a robust project with reserves of 2.7Moz. The exploration team is focused on defining the potential for additional reserves of 300koz to push the project past the required hurdle of 3Moz.
A close-spaced RC drilling program has been in progress through the year at the Central Zone with bulk sampling for pilot plant testwork.. In addition, we completed the evaluation of Sofia. The definition of this high grade, non-refractory mineralization at Sofia is one of the key developments on the Massawa project.
Along strike from Sofia Main is Sofia North. Early infill trenching and RC drilling this year defined a 600m long zone of elevated grades with an average width of 15m and grades between 2g/t and 3g/t. Significant results from the trench program include: SFTR058 - 15.2m @ 5.02g/t and 10m @ 2.15g/t; and SFTR056 - 19.7m @ 2.02g/t. An infill RC and diamond drill program was completed over the full strike of the Sofia North target including a 30m by 30m infill program over the 600m strike high grade zone. Significant results from the RC drilling confirmed the elevated grades and thicknesses in this part of the deposit: SFRC201 - 17m @ 5.12g/t from 86m including 10m @ 7.71g/t and 15m @ 3.39g/t from 112m including 8m @ 4.52g/t; and SFRC203 - 33m @ 3.36g/t from 22m including 7m @ 9.10g/t which were incorporated into the updated evaluation of this pit.
Towards the end of the year trenching and wide spaced RC drilling at Matiba, the northern strike extension of Sofia North, confirmed that the newly interpreted target structure is located to the east of historical work over a strike of 4km. An infill drilling program along the full strike of the target was initiated with the aim of locating the small <300m strike high grade zones typical of the Sofia system. Observations from drill chips are encouraging, with zones of alteration and disseminated pyrite mineralization intersected along the target. All results are pending.
The Delya satellite is 18km along strike to the NE of Massawa and, like Massawa North, features sulphide mineralization which is refractory. An infill-drilling program this year has confirmed the strong grades in the non-refractory oxides over a 1.3km strike length. A selection of results in the high grade shoot includes DLRC034 - 14m @ 5.29g/t from 132m; DLRC035 - 10m @ 9.66g/t from 67m; and DLRC038 - 20m @ 5.73g/t from 44m. Results from the trenching were also good and illustrate the high grades in the shallow oxides over a 500m strike length. Highlights include: DLTR0022- 6.4m @ 7.63g/t; DLTR023 - 18.2m @ 7.29g/t; and DLTR024 - 14.6m @ 5.24g/t.
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The structure hosting Delya extends in both directions along strike and this has already been confirmed over 2km by drilling to the south of the main target. Historical RAB lines intersected significant mineralization of: DLRAB030 - 15m @ 6.65g/t; DLRAB049 - 9m @ 3.44g/t; and DLRAB039 - 6m @ 2.76g/t. Further trenching and drilling is planned on the Delya extensions to define zones of high grade mineralization.
On the KB and Kaviar targets, positive results from field observations and lithosampling confirmed the potential for significant gold mineralization and confirmed multiple ENE structural trends being exploited by artisanal miners. Highlights include 4.64g/t, 4g/t, 3.38g/t and 2.01g/t from lithosamples associated with exposed areas of significant carbonate ± silica alteration with visible sulphides ± quartz-carbonate veining. Observations from ongoing drilling are confirming 250m strike continuity of alteration and mineralization on one structure where historical drilling intersected 6.8m @ 5.2g/t from 65.8m and 5.5m @ 4.6g/t from 99m (KB99004D). On a separate structure drilling is in progress along strike from a diamond hole drilled in the fourth quarter of 2017 (KBDDH009) which intersected 7.8m @ 2.79g/t from 84.5m, 1m @ 22.4g/t from 127m and 2.8m @ 1.21g/t from 193.5m.
Further drilling is planned on the Kawsara, Makana and Kaliana targets in the first quarter of 2018.
Bambadji
Following lengthy negotiations with the Senegalese government, the new convention was submitted to the Ministry of Mines at the end of the year and Randgold expects to restart work at Bambadji in 2018.
CÔte D’Ivoire
Nielle
With four years LoM remaining, the priority at Tongon is to discover and develop large tonnage satellite deposits. Thanks to the cheaper gridpower at Tongon and the fact that Tongon has repaid its shareholder loans, the mining of relatively low grade orebodies is feasible across the Nielle permit.
Further work was completed on Seydou East, Jubula and the Gap Zone, all to the NE of the Tongon deposits. The work indicated that the targets have the potential to host minor (<50koz) deposits in narrow discontinuous shear zones and as such they are not a priority for exploration and have been downrated for the time being.
At the Tongon North Zone deposit, a complete structural review of the deposit was undertaken which led to the generation of a number of deeper targets beneath the pit where little historical drilling has been carried out. A range of targets was tested but none returned strong enough results to warrant any follow-up work.
Across the permit, further studies highlighted the northern end of the Competent Core granodiorite, the Tongon-Nafoun East arsenic trend and the Nafoun-Delta western margin trend as three priority areas for further exploration. In the competent core, the Shadow and Kadjolo targets were identified around an intrusion with very similar age and geochemistry to the Tongon Granodiorite. They are also located within the same corridor of NNE striking orogen oblique structures that Randgold interprets to be deep transcrustal faults. Work on these targets has identified a number of ‘Tongon-like’ features, including skarn alteration in outcrop. Gradient array IP surveys were completed this year over both areas to help define targets for additional trenching and drilling. At Nafoun East, two trenches were excavated returning significant intersections of: NET011 - 27.70m @ 1.34g/t from 36m; and NET012 - 45m @ 1.77g/t from 34m, including 28m @ 2.52g/t, confirming mineralization over a 200m strike, forming three exciting targets for follow-up work in 2018.
Boundiali
Work continued this year on the regional structures along the Fonondara corridor, a 50km long system of faults that form the boundary between a volcanic belt and a sedimentary basin. Extensive pitting on anomalies along this trend has been carried out this year with many areas returning anomalous results over significant widths, such as Nata and Baya where a broad zone of mineralization of 200m width averaging 0.3g/t was defined.
A phased program of drilling has been carried out over the main part of the Fonondara target following up on the initial weak results reported last year. The results of this year’s program tested targets around artisanal workings, often on flexures of the main structure which previous drilling missed, and has returned strongly mineralized intersections, including: 10m @ 3.58g/t from 55m; 11m @ 4.71g/t including 8m @ 6.32g/t from 66m; 10m @ 9.59g/t including 4m @ 23.20g/t from 55m; and 11m @ 18.73g/t including 9m @ 22.75g/t from 92m.
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This drilling extended the Fonondara target to 9km, intersecting a hydrothermal system up to 350m wide consisting of anastomosing carbonaceous shears with at least three styles of mineralization. However, outside this, the geometry of the mineralized system is complex, with multiple bifurcating structures diverging and converging, creating a range of tight plunging shoots in an array of orientations at their intersection. As a result, the mineralization at Fonondara is unlikely to be exploited through a large pit but more likely as a system of smaller pits. Further drilling to confirm the nature of these shoots is to be carried out in the first quarter of 2018.
Meanwhile, the exploration focus remains on the prospectivity of the 50km long Fonondara structure. Therefore, in addition to Fonondara, the team has prioritized a portfolio of additional targets which will be evaluated through 2018. Sani, for example, is 30km to the north of Fonondara and features a wide zone of low grade mineralization. The target remains open to the south and first results from the fourth quarter drilling confirm the thick mineralized system previously defined in the target with 83m @ 0.94g/t from surface, including 23m @ 2.29g/t from 48m in SANRC001. 500m to the south, SANRC002 returned 6m @ 15.72g/t from 1m. Drilling is still in progress to extend this mineralization. In the first half of 2018, a detailed airborne VTEM survey is planned over the Fonondara structure to assist with targeting and interpretation.
Mankono
Gbongogo Main is a mineralized diorite with the potential for a large low grade target. Work to identify the extension of this mineralized system beyond the limits of the intrusion was the priority in 2017.
Six trenches were excavated over mineralized lithosamples, 320m south of the main Gbongogo intrusion exposing a wide alteration system associated with brittle and ductile deformation, flat and steep quartz-tourmaline veins, strong brecciation, silica, and ankerite and tourmaline alteration. Trench intersections received from this corridor include: GBTR041 - 18.5m @ 8.29g/t including 3.3m @ 44.77g/t; GBTR043 - 39.4m @ 1.78g/t including 23.4m @ 2.68g/t and 15.3m @ 3.68g/t and trench GBTR046 with a strong zone of mineralization of 16.1m @ 6.76g/t including 4.1m @ 5.0g/t hosted in the sheared and tourmaline altered amphibolite dyke and 7m @ 10.94g/t from a strong quartz-tourmaline-pyrite shear affecting the contact between the intrusive and the sediment.
A program of five diamond drill holes was completed beneath the strongly mineralized trenches towards the end of the year. Results from the first four holes have confirmed the continuity of geology, mineralization and alteration, but grades are lower than those seen in the trenches. Results from that drilling include: GBDDH013 - 10m @ 1.03g/t from 240.8m; 16.3m @ 1.07g/t including 1m @ 4.32g/t and 1.1m @ 3.88g/t; GBDDH014 - 37m @ 1.15g/t including 5.5m @ 3.21g/t from 170.2m and 4.6m @ 2.64g/t from 179m; and GBDDH015 - 12.7m @ 2.15g/t from 205.3m including 3.9m @ 5.34g/t. The alteration system is up to 160m wide and is composed of silica, ankerite, tourmaline and disseminated pyrite. However, the key control of the mineralization at Gbongogo south is the quartz tourmaline veining and/or the tourmaline alteration, with the mineralization being stronger where the veins have undergone shearing or folding. The Gbongogo South system is still a priority target due to the scale of the alteration system and the multiple styles of mineralization and work will continue to infill and step out along strike. At the same time, a number of large sub-parallel anomalies are being tested at surface.
A second phase of diamond drilling has also started on the Gbongogo Main target to investigate the continuity at depth of the intrusive within the conceptual $1,000 pit shell. Two holes have confirmed the northern lobe of the mineralized intrusion with an average thickness of 94m at +200m vertical depth with strong quartz tourmaline veins, sulphides and alteration. The first hole GBDDH017 returned 92.7m @ 0.82g/t including 20.2m @ 1.92g/t, which is a lower grade than shallower holes but is drilled parallel to the mineralized veins. Further results are pending.
Towards the end of the year, a new joint venture was signed with Endeavour Mining to jointly explore the Mankono and Sissedougou permits. The joint venture is 70:30 in Randgold’s favor and Randgold is the operator. Field traverses and core reviews have begun on Sissedougou, which is contiguous to Mankono and hosts the extensions of the Gbongogo system, to build a geological framework prior to a VTEM survey being flown in the first half of 2018. Sissedougou contains multiple, largely untested, strong soil anomalies, some of which have been observed to be affected by the same tourmaline alteration system as Gbongogo up to 25km away.
Newcrest JV
A new joint venture with Newcrest Mining was signed during the year. The joint venture company is a 50:50 venture to explore in the SE of Côte d’Ivoire where the prospective structures from southern Ghana extend. The JV company has secured a number of permits and has started regional traverses and sampling to build up regional and permit scale models.
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Fapoha
A pitting and trenching program was completed over the Fapoha West targets defining two main anomalous trends. This anomalism is mostly located at the weakly sheared contact between the volcanics and mafic intrusives and grades are weak. Neither of these trends has the potential to host significant mineralization.
Elsewhere Randgold has completed mapping and soil sampling over its portfolio of regional permits, generating a range of identified targets for follow up work.
Democratic Republic of Congo
Kibali
At Rhino NE, RC drilling confirmed two projected mineralized lenses with a weighted average of 8.4m @ 1.94g/t over a strike of 60m for lens 1 and 6m @ 1.23g/t over 60m for lens 2. Drillhole RHDD0011, drilled 120m down plunge from the Rhino oxide pit, returned 16.9m @ 3.18g/t from 134.1m including 4.2m @ 10.8g/t and 9.9m @ 1.77g/t, confirming open mineralization. At Agbarabo East, ADD014 tested 100m down plunge from the high grade RC intersections close to surface and intersected the down plunge continuity of Agbarabo footwall lens returning 12m @ 4.39g/t from 175.4m, and 10.1m @ 0.71g/t from 104.4m including 3m @ 2.05g/t.
At Agbarabo, three holes targeted historical underground mining and confirmed that there is significant potential for remnant mineralization around old stopes. The main lens, which featured very high grades and which was mined underground in the 1960s, was intersected by hole ADD013 which returned 18.2m @ 2.44g/t from 64.6m including 6.1m @ 4.94g/t in the roof of a 22m void, and 28.7m @ 11.38g/t from 110.3m including 2m @ 129g/t beneath the void. 50m east of this hole, ADD015 intersected 26.7m @ 4.61g/t from 130m including 10.6m @ 9.64g/t, which was later confirmed to be a separate shoot to Agbarabo. Results of follow-up drilling around the intersections described above confirmed the continuity of the mineralized structures between Agbarabo and Rhino but indicated that very high grade mineralization is confined to isolated rods within the system. The underground potential of these shoots is being evaluated as they form a portfolio of underground targets on the Kibali project, along with Mengu Hill, Gorumbwa and Kombokolo.
At KCD, a deep hole (DDD602) totaling 1 491m was completed, testing the model of a folded banded ironstone with mineralization located on the limbs, in the fold hinges or along axial planes. The hole tested the model that was projected 600m down plunge from existing data. Results of this drilling confirmed the continuation of the BIF and the 3000, 5000 and 9000 ore domains. Intersections include 16.8m @ 6.47g/t from 668m and 12m @ 0.83 g/t from 708.8m interpreted as the extension of the 5102 lode, and two other intercepts of 8.4m @ 3.58g/t from 725.6m and 7.2m @ 1.07g/t from 741.2m interpreted as the extension of the 5101 lode. A new domain (12000 lode) below the known 9000 lode was intersected and is interpreted to be the down plunge projection of Sessenge SW, some 2.6km up plunge. Mineralization in this lode is associated with pyrite and arsenopyrite on the contacts of the BIF. The main intersection was 16.7m @ 2.27g/t from 1318.5m including 3.1m @ 3.24g/t and 2.4m @ 3.79g/t. At the same time wide spaced drilling from underground will begin to test the 12000 lode model.
At Kalimva, 20km from KCD, further infill drilling has been completed and observations and results support the model of a tabular zone of silica-chlorite alteration with pyrite mineralization. Drilling has identified the presence of five stacked higher grade shoots (>2g/t) along the 1.6km mineralized trend and a recent sectional estimate returned 910koz @ 1.89g/t. Infill drilling at Kalimva is ongoing ahead of a new pit optimization when a decision will be made on the optimal timing of the development of Kalimva.
At Ikamva, to the immediate west of Kalimva, a fence of close-spaced RC holes, 100m down plunge from an old Belgian pit returned encouraging results with 150m width of alteration and an average mineralized intersection of 22m @ 2.71g/t over 50m strike, with best intercepts: IVRC0083 - of 28m @ 3.08g/t; and IVR0084 - 10m @ 3.39g/t and 8m @ 3.32g/t. A second fence drilled 470m down plunge from the pit returned results including: IVRC0096 - 4m @ 2.78g/t from 124m, 4m @ 0.78g/t from 138m, 2m @ 2.14g/t from 156m; and IVRC0097 - 28m @ 1.05g/t from 132m including 4m @ 3.2g/t. Infill drilling is in progress over the main shoot at shallower depths between these two fences with results due in the first quarter of 2018.
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Work at the Makoke target over 740m strike between the Megi and Pamao satellite deposits confirmed continuity. Results from near surface confirmed that the hangingwall lens returned a weighted average of 9.7m @ 2.55g/t over 200m strike while the main lens returned an average of 11.6m @ 3.92g/t over 435m strike. Subsequent drilling showed that grade and thickness diminished rapidly with depth and the model was handed over to the mining department for optimization and scheduling.
Elsewhere, the team confirmed the continuity between Megi and Aerodrome and started work on a number of early stage targets across the project. At the same time, a regional stream sediment program across the permit was started to define anomalous basins in as yet unsampled areas.
Moku JV (SMB)
Fieldwork continued at Moku in the year. This work developed the team’s understanding of the regolith on the project and we completed detailed soil sampling programs over a range of anomalous basins along the target structures, results of which are pending. The team carried out pitting and trenching on multiple targets and returned mineralized saprock samples from the Ganga-PC and Concasseur targets in the north, and the Meyo, Gau and Moku targets in the center and SW of the project. However, following the imposition of sanctions by the US Government applicable to Moku Goldmines AG and certain affiliates in December 2017, Randgold suspended all exploration activities under the joint venture arrangements with Société Minière Moku-Beverendi SA and Moku Goldmines AG. Randgold will continue to comply with all applicable sanctions. Currently, the team is involved in the demobilization of equipment and relocation of skills to other local projects in DRC (Kibali and Ngayu).
KGL Isiro JV
Randgold has relinquished the permits of the Isiro belt in NE DRC following fieldwork that downgraded their prospectivity.
Ngayu JV (Loncor Resources)
The results of the helicopter borne electromagnetic VTEM survey over the Ngayu belt were combined with all other geological layers to complete an updated integrated geological map of the belt. This work resulted in the identification of a major fault boundary separating older and younger geological domains in the belt which is interpreted to control prospectivity. Randgold has prioritized the western half of this structure, where its strike changes from NW to SW, as the main area of interest in the belt and the sole focus of its work programs going forward, with the exception of the Anguluku-Yindi trend in the SE of the belt. Renovation of the road access to these western targets is now complete so fieldwork can start in 2018.
At Anguluku, three targets have been identified along the 5km long antiform in the center of the target area. From northwest to southeast these are Golgotha, Anguluku and Baberu Bayinga. Golgotha displays strong gold anomalism, multiple contrasting lithologies and extensive artisanal mining activity in folded BIFs. Lithosample assay results are pending. Anguluku is a folded, mineralized BIF with results of six recent lithological samples up to 2.94g/t. Baberu Bayinga in the SE is located in an anomalous basin with numerous past and present artisanal activities with multiple anomalous lithosamples in cherty BIF up to 0.73g/t. Further mapping and auger drilling programs are planned in the first quarter to further evaluate these targets.
GENERATIVE
Randgold is pursuing a range of world class research projects across its portfolio in central and West Africa aimed at identifying the structures where exploration is more likely to locate a world class deposit. This work is building a foundation of knowledge which it believes will assist the teams in making new discoveries. The generative team has and will continue to make contributions to generating new targets and developing Randgold’s exploration and orebody models while constantly improving its geology skill base. In particular the generative team has added material value to the company this year through the review and remodelling of the orebodies at Tongon, Loulo and Kibali. In 2018 the focus will be on identifying new opportunities while reviewing the follow-up and advanced targets in the resource triangle to ensure no new world-class discoveries are missed.
MARKETING
We derive the majority of our income from the sale of gold produced by Morila, Loulo, Gounkoto, Tongon and Kibali in the form of doré, which we sell under agreement to a refinery. Under these agreements, we receive the ruling gold price on the day after dispatch, less refining and freight costs, for the gold content of the doré gold. We have only one customer with whom we have an agreement to sell all of our gold production. The “customer” is chosen periodically on a tender basis from a selected pool of accredited refineries and international banks to ensure competitive refining and freight costs. Gold mines do not compete to sell their product given that the price is not controlled by the producers.
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HEALTH AND SAFETY REGULATIONS
Mali
The primary laws, regulations and standards governing Safety and Health in our Malian operations are as follows:
| · | Law 1992-020 Code du travail (the Labor Code) modified by Law N°2017-021 of 12/6/2017; |
| · | Ordonnance No. 99-032 le code minier, Ordonnance 200-013 le code minier modifications 2000 (the Mining Code); |
| · | Decree No. 91-278 / PM-RM Approving the Establishment Agreement Covering Research and Mining in the Republic of Mali (the Decree); |
| · | LOI N°62-68 AN-RM du 9 août 1962 modified by Law N°99-041 of 12th August 1999, modified by Law N°03-036 of 30th December 2003, modified by Law N°06-008 of 23rd January 2006 Code de prévoyance sociale (INPS-Institut National de Prévoyance Sociale); |
| · | Convention Collective (National Collective Agreement for the Mining Industry); and |
| · | Loi No 15-09 du 26 juin 2009 instituant un régime de l’Assurance Maladie Obligatoire (AMO). |
Labor Code
The Labor Code provides generally for the following:
| · | General provision for protection, prevention and hygiene; |
| · | Dangerous goods handling; |
| · | Employer responsibility regarding safety and health (implementation of safety system); |
| · | Labor inspector duty (control of employer safety system); |
| · | Injury notification to Labor Inspector within 48 hours; |
| · | Requirement to ensure medical service on site; |
| · | Medical leave (up to 6 months) and medical separation compensation; and |
| · | Establishment of a Joint Management and employees health and safety committee. |
Mining Code
The Mining Code provides generally for an Occupational Health and Safety Committee (joint management and employee safety committee), the provision of Personal Protective Equipment (PPE), the establishment of safety guides, emergency procedures, means of education and sensitization, and employees’ obligation regarding occupational health.
The Decree
The Decree provides generally for the following:
| · | Must carry out research or mining work to ensure the safety and health of the public; |
| · | Must inform the local administrative authorities and the Director in the event of a fatal accident or serious injury or any natural phenomenon which may have an adverse effect on the safety of the area, the safety and hygiene of the personnel or conservation of the mine, neighboring mines or public roads; and |
| · | In the case of imminent danger or an accident, the local administrative authorities and the Director may requisition the necessary material and personnel to alleviate the danger, at the expense of the mining company. |
LOI N°62-68 AN-RM du 9 août 1962 modified by Law N°99-041 of 12th August 1999, modified by Law N°03-036 of 30th December 2003, modified by Law N°06-008 of 23rd January 2006 Code de prévoyance sociale (INPS – Institut National de Prévoyance Sociale)
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The Code de la Sécurité Sociale provides generally for the following:
| · | Requirement to have medical service on work site for occupational health and primary health care purposes; |
| · | Requirement for pre-employment medical check; |
| · | Requirement for periodical medical check of employees; |
| · | Requirement for general hygiene (ablutions, change house, potable water, workplace); |
| · | Protection against injury, environmental pollutants, occupational disease); |
| · | Ergonomic conditions; |
| · | Notification of occupational disease to the employer by the occupational health practitioner; |
| · | Requirement for first aid training for one employee per section of work or shift; |
| · | Requirement for compensation in case of debilitating injury, occupational disease; |
| · | Requirement for notifying injury and or occupational disease to INPS/Labor inspection; and |
| · | Redeployment of employee following injury and/or occupational disease. |
Morila, Loulo and Gounkoto have a Committee of hygiene, safety, and working condition made up of elected labor and specialist management representatives, as outlined in the respective labor code. This committee designates, from its members, a consultative technical sub-committee charged with the elaboration and application of a concerted policy of improvement of health and security safety conditions at work. Its composition, attributions and operational modalities are determined by legal provisions and regulations.
The chairman of this committee (the general manager of the mine or his deputy) coordinates quarterly committee meetings, sets the agendas with his secretariat, monitors resolutions and signs off on committee determinations.
The committee’s secretariat ensures under the supervision of the chairman that:
| · | follow-up activities such as action resulting from the regular surveys and inspections are carried out; and |
| · | health and safety manuals and updates are distributed, posters are posted on notice boards and safety committee minutes and reports are distributed. |
Each mine’s medical officer sits on the Committee of hygiene, safety, and working condition and advises on the following:
| · | working conditions improvements; |
| · | general hygiene on the operation; |
| · | ergonomics; |
| · | protection of workers safety in the workplace; and |
| · | medical checks and eye and ear testing. |
The Committee of hygiene, safety, and working condition forms, from within its membership, two consultative commissions, the Commission of Inquiry and the Educational Commission. The Commission of Inquiry:
| · | investigates accidents and makes recommendations to avoid repetitions; |
| · | ensures plant, machinery and equipment have adequate protection to avoid injury; and |
| · | updates and revises safety and health manuals. |
The Educational Commission:
| · | provides information and training on safe practices and potential risks; |
| · | provides first aid training; |
| · | administers and promotes the safety suggestion scheme; and |
| · | explains, where necessary, the contents of the safety and health manual. |
La Loi No 15-09 du 26 juin 2009 instituant un régime de l’Assurance Maladie Obligatoire (AMO):
The law establishes a compulsory health insurance scheme called AMO. The scheme will replace the health provision included in the LOI N°62-68 AN-RM du 9 août 1962 (INPS – Institut National de Prévoyance Sociale).
| · | The compulsory health insurance scheme is based on the principle of solidarity, and required third-party payments; |
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| · | Employees shall contribute 3.06% of their gross salary to the scheme; |
| · | Employer complement the employees payement by a contribution of 1.5% for each employee; and |
| · | The sheme covers 70-80 % of health care expenditures. |
All employees are covered by the state’s social security scheme, Compulsory Health Insurance (AMO) and our medical reimbursement scheme, that reimburses a large portion of expenses related to medical treatment and medicines not covered by AMO (Dental and optical expenses which are also covered to 50%).
No post-employment medical aid liability exists for the group.
Côte d’Ivoire
The primary laws, regulations and standards governing Safety and Health in our Côte d’Ivoire operations are:
| · | Mining Code (95-553) of July 15, 1995; Loi N° 2014- 138 du 24 Mars 2014 (Loi portant nouveau code minier) |
| · | Loi no 95-15 du 12 janvier 1995 portant Code du travail (previous Labour Code) Loi no 2015-522 du 20 juillet 2015 portant Code du travail (New Labour Code); and |
| · | Loi no 99-477 du 2 août 1999 portant modification du Code de prévoyance sociale (Social security law). |
The Mining Code provides generally for the following:
| · | Any individual or legal entity carrying out works for prospecting or mining mineral substances is required to undertake such works in a way that the safety of the people and goods is assured; |
| · | Must adopt and comply with internal regulations concerning safety and specific hygiene measures, subject to approval by the Mining Authority; |
| · | Any accident in a mine or quarry or in their dependencies and any identified cause of accident must be reported to the Mining Authority as soon as possible; and |
| · | In case of impending danger or accident in a mine, mining engineers and other authorized agents of the Mining Authority must take all necessary measures, at the expense of the individual or legal entity, to stop the danger and prevent it from occurring again. |
The Code de la Sécurité Sociale provides generally for the following:
| · | Requirement to have medical service on work site for occupational health and primary health care purposes; |
| · | Requirement for pre-employment medical check; |
| · | Requirement for periodical medical check of employees; |
| · | Requirement for general hygiene (ablutions, change house, potable water, workplace); |
| · | Protection against injury, environmental pollutants, occupational disease); |
| · | Ergonomic conditions; |
| · | Notification of occupational disease to the employer by the occupational health practitioner; |
| · | Requirement for first aid training for one employee per section of work or shift; |
| · | Requirement for compensation in case of debilitating injury, occupational disease; |
| · | Requirement for notifying injury and or occupational disease to CNPS (National Security Department) INPS/Labor inspection; and |
| · | Redeployment of employee following injury and/or occupational disease. |
Labor Code
The Labor Code provides generally for the following:
| · | General provision for protection, prevention and hygiene; |
| · | Dangerous goods handling; |
| · | Employer responsibility regarding safety and health (implementation of safety system); |
| · | Labor inspector duty (control of employer safety system); |
| · | Injury notification to CNPS (National Security Department) Labor Inspector within 48 hours; |
| · | Requirement to ensure medical service on site; |
| · | Medical leave (up to 12 months) and medical separation compensation; and |
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| · | Establishment Safety and health Committee composed by the Management, Doctor, Social workers and Employees representatives of a Joint Management and employees health and safety committee. |
Democratic Republic of Congo
The Mining Code, Law No. 007/2002 signed into law on July 11, 2002, and its ancillary Mining Regulation (Decree 038/2003 of March 26, 2003), adopted in 2003, is the primary statute forming the legal basis for mining activities in the DRC.
| · | Loi no-015/2002 du 16 Octobre 2002 portant Code du travail (Labor code) |
| · | Decret-loi du 29 Juin 1961 organique de la sécurité sociale |
Articles relating to social and environmental impact studies are listed below:
Key Environmental Legislation in the DRC by aspect General environment
| · | Arrêté Ministériel No. 043 of December 8, 2006 and No. 08 of April 3, 2007 |
| · | Ordinance No. 07/018 of May 16, 2007 |
Soils and land use
| · | Article 28 (Topography, Geology and Land Use) from Chapter II of Schedule IX, Mining Regulations, Decree No. 038/2003 of March 26, 2003 |
| · | Article 75 (Dead Ground Management) of Chapter V of Schedule IX, Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
Water
| · | Decree of May 6, 1952 on water |
| · | Ordinance 52-443 of December 21, 1952 |
| · | Regulation on lake and watercourse contamination and pollution of July 1, 1914 |
| · | Article 30 to 33 from Chapter II of Schedule IX, Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
| · | Articles 53 to 74 of Schedule IX of the Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
Climate and air quality
| · | Article 29 (Climate and Air Quality) of Schedule IX of the Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
| · | Articles 49 to 52 of Schedule IX of the Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
Biodiversity and protected areas
| · | Forest Code (Law 011,2002 of 28 May 2002) |
| · | Regulation No. 69-041 of 22 August 1969 |
| · | Regulation No. 79-244 of 16 October 1997 (Amended 1995 and 1996) |
| · | Law No. 75-023 of July 22, 1975 and Regulation No. 78-190 of May 5, 1978 |
| · | Articles 34 to 37 (Biological Environment) of Schedule IX of the Mining Regulations, Decree No. 038 / 2003 of March 26, 2003 |
| · | Schedule XII of the Mining Regulations, Decree no. 038 / 2003 of March 26, 2003 |
Noise and vibrations
| · | Schedule XIII of the Mining Regulations, Articles 1 to 6 |
| · | Articles 46 to 48 from Chapter II of Schedule IX, Mining Regulations, Decree No. 038/2003 of March 26, 2003 |
Cultural heritage
| · | Ordinance 70-089 of 11 March 1970 |
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| · | Ordinance 71-016 of 15 March 1971 |
| · | Article 46 of the Constitution of the DRC of February 18, 2006 |
| · | Articles 205 and 206 of the Mining Code and Regulations |
Resettlement
| · | Code Foncier Immobilier et Régime des Sûretés, April 5, 2006 |
Artisanal mining
| · | Articles 223, 224, 232, 233, 416, 417 and 575 of the Mining Regulations, Decree No. 038/2003 of March 26, 2004 |
Mining code
Mining articles which were taken into account for the Kibali mining project include the following:
| · | Article 15 of the DRC Mining Code confers the responsibility on the Department in charge of Protection of the Environment, within the Ministry of Mines, in conjunction with other government departments, of environmental protection including the technical evaluation of the EIS and EMP of the project and the Mitigation and Rehabilitation Plan (MRP). The Mining Code is supported by the mining regulations. |
| · | Article 42 requires that, and provides the framework within which, the EIS and EMP for a new mining right is evaluated. |
| · | Article 50 defines the scope of a mineral exploration license. The undertaking of exploitation activities on an exploration permit is prohibited. The holder of an exploration license, however, has the exclusive right to apply for the conversion to an exploitation license during the validity period of the exploration license. |
| · | Article 69 requires that an applicant for an exploitation permit submits an EIS and EMP for the project and approval of said documents are required for granting of the exploitation license in terms of article 71. |
| · | Article 277 regulates works required between adjacent mines, and should such works be required, the title owners cannot object to them and payment of costs will be pro-rata. |
| · | Article 279 stipulates the restrictions on the occupation of land and requires consent before any area within 180m from temporary or permanently occupied buildings, 45m from ploughed land and 90m from land used for breeding cattle or with a reservoir; dam or private water reserve is occupied. |
| · | Compensation for use of the land is regulated by articles 280 and 281. |
| · | Article 283 determines the authorized activities within the exploitation right and adjacent areas. |
| · | Article 294 allows for the confiscation of the provision for rehabilitation by the court should the owner fail to adhere to the provisions of the EMPP at completion of the exploitation works. |
The following table identifies our subsidiaries and joint ventures and our percentage ownership in each subsidiary or joint venture:
| Countries incorporated | % Effective Ownership | |||
| JERSEY | ||||
| Bambadji (Jersey) Limited | 100 | |||
| CDI Exploration Limited | 50 | |||
| Isiro (Jersey) Limited | 51 | |||
| KAS 1 Limited | 25 | |||
| Kibali (Jersey) Limited | 50 | |||
| Kibali 2 (Jersey) Limited | 50 | |||
| Kibali Services Limited | 50 | |||
| Mankono Exploration Limited | 70 | |||
| Mining Investments (Jersey) Limited | 100 | |||
| Morila Limited | 50 | |||
| Moto (Jersey) 1 Limited | 50 | |||
| Moto (Jersey) 2 Limited | 50 | |||
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| Palm Oil (Jersey) Limited | 50 | |||
| RAL 1 Limited | 50.1 | |||
| RAL 2 Limited | 50.1 | |||
| Randgold Resources (Burkina) Limited | 100 | |||
| Randgold Resources (Côte d’Ivoire) Limited | 100 | |||
| Randgold Resources (DRC) Limited | 100 | |||
| Randgold Resources (Geology) Limited | 100 | |||
| Randgold Resources (Gounkoto) Limited | 100 | |||
| Randgold Resources (Kibali) Limited | 100 | |||
| Randgold Resources Limited | - | |||
| Randgold Resources (Mali) Limited | 100 | |||
| Randgold Resources (Secretaries) Limited | 100 | |||
| Randgold Resources (Senegal) Limited | 100 | |||
| Randgold Resources (Somilo) Limited | 100 | |||
| Randgold Resources T1 Limited | 100 | |||
| Randgold Resources T2 Limited | 100 | |||
| Randgold Resources T7 Limited | 100 | |||
| Randgold Technical Services Limited | 100 | |||
| AUSTRALIA | ||||
| Border Energy Pty Limited | 50 | |||
| Border Resources NL | 50 | |||
| Moto Goldmines Australia Pty Limited | 50 | |||
| Westmount Resources NL | 50 | |||
| BRITISH VIRGIN ISLANDS | ||||
| New Mining Holdings Limited | 100 | |||
| BURKINA FASO | ||||
| Randgold Resources Burkina Faso SARL | 100 | |||
| CANADA | ||||
| 0858065 BC Limited | 50 | |||
| Moto Goldmines Limited | 50 | |||
| CÔTE D’IVOIRE | ||||
| Exxor Exploration SA | 51 | |||
| Mankono Exploration SA | 70 | |||
| New Mining Côte d’Ivoire SA | 71 | |||
| Randgold Resources (Côte d’Ivoire) SARL | 100 | |||
| Société des Mines de Tongon SA | 89.7 | |||
| Tchologo Exploration SA | 51 | |||
| DEMOCRATIC REPUBLIC OF CONGO | ||||
| Bilanga Palm Oil SARL | 50 | |||
| KGL Isiro SARL | 51 | |||
| Kibali Goldmines SA | 45 | |||
| Milona Entreprises SARL | 50 | |||
| Randgold Resources Congo SARL | 100 | |||
| MALI | ||||
| Kankou Moussa SARL | 75 | |||
| Randgold Resources Mali SARL | 100 | |||
| Société des Mines de Gounkoto SA | 80 | |||
| Société des Mines de Loulo SA | 80 | |||
| Société des Mines de Morila SA | 40 | |||
| SENEGAL | ||||
| Bambadji SA | 100 | |||
| Randgold Resources (Senegal) SA | 100 | |||
| SOUTH AFRICA | ||||
| Seven Bridges Trading 14 (PTY) Limited | 100 | |||
| TANZANIA | ||||
| Randgold Resources Tanzania (T) Limited | 100 | |||
| UGANDA | ||||
| Border Energy East Africa Pty Limited | 50 | |||
| UNITED KINGDOM | ||||
| Randgold Resources (UK) Limited | 100 |
| 59 |
4D. PROPERTY, PLANT AND EQUIPMENT
For a discussion of our principal properties, see “PART I. Item 4. Information on the Company—A. History and Development of the Company” and “PART I. Item 4. Information on the Company—B. Business Overview.” We have all material legal rights necessary to entitle us to exploit such deposits over the remaining life of mines which are estimated in respect of Morila in Mali to 2020, Loulo in Mali to 2032, Tongon in Côte d’Ivoire to 2021, Gounkoto in Mali to 2027 and Kibali in the DRC to 2032.
The exploration permits in Côte d’Ivoire, Mali, Senegal, Burkina Faso and DRC give us the exclusive right for a fixed time period, which is open to renewal, to prospect on the permit area.
Once a discovery is made, we, as the permit holder, then commence negotiations with the respective governments as to the terms of the exploration or mining concession. Depending on the country, some of the terms are more open to negotiation than others, but the critical areas which can be agreed to are the government’s interest in the mine, taxation rates and taxation holidays, repatriation of profits and the employment of expatriates and local labor.
PROPERTY
Our active mining areas comprise of the Morila mining permit of 200km2, the Loulo mining permit of 263km2, the Gounkoto mining permit of 100km2, the Tongon mine located within the 751km2 Nielle exploitation permit and the Kibali mine located within the 10 mining permits which make up the Kibali mine and cover 1,836km2. Our exploration permits are described under the subheading “–Mineral Rights and Permits” in this report.
We also lease offices in Abidjan, Côte d’Ivoire; Bamako, Mali; Dakar, Senegal; Entebbe, Uganda; St. Helier, Jersey; Johannesburg, South Africa; Kinshasa, DRC; and London, United Kingdom.
GEOLOGY
West Africa is one of the more geologically prospective regions for gold deposits in the world. Lower Proterozoic rocks are known to contain significant gold occurrences and exist in West Africa in abundance. The Birimian greenstone belts, part of the Lower Proterozoic, which are younger than the Archaean greenstones of Canada, Australia and South Africa, contain similar types of ore deposits and are located in Ghana, Côte d’Ivoire, Burkina Faso, Guinea, Mali, Senegal and Niger. Although a significant amount of geological information has been collected by government and quasi-government agencies in West Africa, the region has largely been under-explored by mining and exploration companies using modern day technology. Most of our exploration properties are situated within the Birimian Formation, a series of Lower Proterozoic volcanic and sedimentary rocks. The West African Birimian sequences host a number of world class gold deposits and producing gold mines.
The Central African gold belts have a long history of gold production, particularly during the colonial era but due to regional instability they have seen little modern exploration. The Kibalian greenstone belts of northeastern DRC are comprised of Archaean Kibalian (Upper and Lower) volcanisedimentary rocks and ironstone-chert horizons metamorphosed to greenschist facies. They are cut by regional-scale north, east, northeast and northwest trending faults and are bounded to the north by the Middle Achaean West Nile granite-gneiss complex and cut to the south by the Upper Congo granitic complex. Our Kibali mine is located within the Moto greenstone belt.
Our strategy was initiated before the current entry of our competitors into West Africa and we believe that this enabled us to secure promising exploration permits in the countries of Côte d’Ivoire, Mali, Burkina Faso, and Senegal at relatively low entry costs.
ORE RESERVES
In estimating proven and probable ore reserves, current industry standard estimation methods are used. The geological estimates were calculated using classical geostatistical techniques, following geological modeling of the borehole information. The sampling and assaying is done to internationally acceptable standards and routine quality control procedures are in place.
| 60 |
All reserves are based on appropriate technical and financial studies. Factors such as grade distribution of the orebody, planned production rates, forecast working costs, dilution and mining recovery factors, geotechnical parameters and metallurgical factors as well as current forecast gold price are all used to determine a cut-off grade from which a life of mine plan is developed in order to optimize the profitability of the operation.
The following table summarizes the declared reserves at our mines as of December 31:
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable gold (Moz) | |||||||||||||||||||||||||||||||
| Mine/project | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES | ||||||||||||||||||||||||||||||||||
| Kibali | 45 | % | 45 | % | ||||||||||||||||||||||||||||||
| Proven | 19 | 4.3 | 4.1 | 1.9 | 2.5 | 0.26 | 1.1 | 0.12 | ||||||||||||||||||||||||||
| Probable | 47 | 66 | 4.1 | 4.2 | 6.2 | 8.9 | 2.8 | 4.0 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 66 | 71 | 4.1 | 4.0 | 8.7 | 9.2 | 3.9 | 4.1 | |||||||||||||||||||||||||
| Loulo | 80 | % | 80 | % | ||||||||||||||||||||||||||||||
| Proven | 12 | 14 | 4.2 | 4.7 | 1.6 | 2.1 | 1.3 | 1.7 | ||||||||||||||||||||||||||
| Probable | 24 | 23 | 4.7 | 4.3 | 3.6 | 3.1 | 2.9 | 2.5 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 36 | 37 | 4.5 | 4.5 | 5.2 | 5.3 | 4.1 | 4.2 | |||||||||||||||||||||||||
| Gounkoto | 80 | % | 80 | % | ||||||||||||||||||||||||||||||
| Proven | 6.1 | 6.8 | 3.9 | 3.9 | 0.78 | 0.86 | 0.62 | 0.69 | ||||||||||||||||||||||||||
| Probable | 14 | 15 | 4.9 | 4.9 | 2.2 | 2.3 | 1.7 | 1.8 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 20 | 21 | 4.6 | 4.6 | 3.0 | 3.1 | 2.4 | 2.5 | |||||||||||||||||||||||||
| Morila | 40 | % | 40 | % | ||||||||||||||||||||||||||||||
| Proven | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Probable | 11 | 15 | 0.56 | 0.55 | 0.19 | 0.27 | 0.077 | 0.11 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 11 | 15 | 0.56 | 0.55 | 0.19 | 0.27 | 0.077 | 0.11 | |||||||||||||||||||||||||
| Tongon | 89.7 | % | 89.7 | % | ||||||||||||||||||||||||||||||
| Proven | 7.0 | 7.5 | 2.2 | 2.2 | 0.49 | 0.53 | 0.44 | 0.48 | ||||||||||||||||||||||||||
| Probable | 9.3 | 12 | 2.5 | 2.5 | 0.74 | 0.95 | 0.66 | 0.85 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 16 | 19 | 2.3 | 2.4 | 1.2 | 1.5 | 1.1 | 1.3 | |||||||||||||||||||||||||
| Massawa | 83.25 | % | 83.25 | % | ||||||||||||||||||||||||||||||
| Proven | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Probable | 23 | 19 | 3.6 | 4.3 | 2.7 | 2.6 | 2.2 | 2.2 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 23 | 19 | 3.6 | 4.3 | 2.7 | 2.6 | 2.2 | 2.2 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and probable | 172 | 182 | 3.8 | 3.7 | 21 | 22 | 14 | 14 | |||||||||||||||||||||||||
Randgold reports its mineral reserves in accordance with the JORC 2012 code and as such are reported to the second significant digit.
Reporting standards are equivalent to National Instrument 43-101.
The reporting of ore reserves is also in accordance with SEC Industry Guide 7.
Reserve pit optimizations are carried out at a gold price of $1,000/oz for all pits, except for KCD pit in Kibali which is carried out at a gold price of $1,100/oz.
Underground ore reserves are also based on a gold price of $1,000/oz. Dilution and ore loss are incorporated into the calculation of reserves.
Loulo
Ore reserves were relatively flat from 2016, net of depletion, with infill drilling on both Gara and Yalea deposits mostly offsetting the depletion from mining and the sale of Baboto North reserve. A study is currently underway at the Loulo 3 deposit where exploration drilling has identified the potential below the current reserve pit. Further drilling will be conducted on this target in 2018 to confirm the potential.
| 61 |
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable Gold2 (Moz) | |||||||||||||||||||||||||||||||
| at December 31 | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| ■ Stockpiles | Proven | 1.7 | 1.7 | 1.6 | 1.7 | 0.086 | 0.093 | 0.068 | 0.075 | |||||||||||||||||||||||||
| ■ Open pits | Proven | 1.5 | - | 2.4 | - | 0.12 | - | 0.093 | - | |||||||||||||||||||||||||
| Probable | 3.9 | 6.9 | 3.9 | 3.2 | 0.48 | 0.71 | 0.39 | 0.57 | ||||||||||||||||||||||||||
| ■ Underground | Proven | 8.8 | 12 | 5.0 | 5.1 | 1.4 | 2.0 | 1.1 | 1.6 | |||||||||||||||||||||||||
| Probable | 20 | 16 | 4.8 | 4.8 | 3.1 | 2.4 | 2.5 | 1.9 | ||||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 36 | 37 | 4.5 | 4.5 | 5.2 | 5.3 | 4.1 | 4.2 | |||||||||||||||||||||||||
| 1 | Open pit ore reserves are reported at a gold price of $1,000/oz and an average cut-off of 1.1g/t and include dilution and ore loss factors. Open pit ore reserves were estimated by Shaun Gillespie, an officer of the company and competent person. Underground ore reserves are reported at a gold price of $1,000/oz and a cut-off of 2.69g/t for Yalea underground and 2.4g/t for Gara underground and includes dilution and ore loss factors. Underground ore reserves were estimated by Andrew Fox, an external consultant and competent person. |
| 2 | Attributable gold (Moz) refers to the quantity attributable to Randgold based on its 80% interest in Loulo. | |
| Ore reserve numbers are reported as per JORC 2012 and as such are reported to the second significant digit. |
Gounkoto
Total ore reserves decreased as a result of depletion which was partially offset due to a gain in ounces from the changed model incorporating results from grade control drilling.
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable Gold2 (Moz) | |||||||||||||||||||||||||||||||
| at December 31 | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| ■ Stockpiles | Proven | 1.8 | 1.7 | 2.0 | 2.2 | 0.11 | 0.12 | 0.089 | 0.099 | |||||||||||||||||||||||||
| ■ Open Pits | Proven | 4.4 | 5.1 | 4.7 | 4.5 | 0.66 | 0.74 | 0.53 | 0.59 | |||||||||||||||||||||||||
| Probable | 12 | 12 | 4.6 | 4.6 | 1.8 | 1.8 | 1.4 | 1.5 | ||||||||||||||||||||||||||
| ■ Underground | Probable | 2.2 | 2.2 | 6.1 | 6.1 | 0.42 | 0.42 | 0.34 | 0.34 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 20 | 21 | 4.6 | 4.6 | 3.0 | 3.1 | 2.4 | 2.5 | |||||||||||||||||||||||||
| 1 | Open pit ore reserves are reported at a gold price of $1,000/oz at an average cut-off of 1.1g/t including both dilution and ore loss factors. Open pit ore reserves were estimated by Shaun Gillespie, an officer of the company and competent person. Underground ore reserves are reported at a gold price of $1,000/oz and a cut-off of 3.0g/t, and include dilution and ore loss factors. Underground ore reserves were estimated by Apolinary Lyambiko, an officer of the company, under the supervision of Rodney Quick, an officer of the company and competent person. | |
| 2 | Attributable gold (Moz) refers to the quantity attributable to Randgold based on its 80% interest in Gounkoto. | |
| Ore reserve numbers are reported as per JORC 2012 and as such are reported to the second significant digit. |
Tongon
The Tongon open pit designs were updated during the year, principally with additional data from grade control drilling. This has resulted in gains of 23koz within the ore reserve from increased grade of down dip ore intersections in the Northern Zone (NZ) and Southern Zone (SZ) orebodies, partially replenishing depletion.
A feasibility study has been completed on the Sedou South and Sekala satellite deposits within haulage distance of the plant. The studies have confirmed their viability at $1,000/oz gold price and, together with small grade control gains in the main Tongon pits, have contributed to partially offsetting depletion from mining. Sekala contributes 432kt @ 1.8g/t for 25koz of additional oxide ore reserve and Seydou contains 614kt @ 2.0g/t for 40koz of ore reserve.
| 62 |
Work continues on a third satellite, Tongon West, to the southwest of the SZ pit and additional incremental ounces are likely to be defined here during 2018.
With the capital of the Tongon mine paid off, opportunities to extend the main pits are being investigated.
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable gold2 (Moz) | |||||||||||||||||||||||||||||||
| at December 31 | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| ■ Stockpiles | Proven | 2.9 | 2.4 | 1.6 | 1.4 | 0.15 | 0.11 | 0.13 | 0.10 | |||||||||||||||||||||||||
| ■ Open pits | Proven | 4.1 | 5.0 | 2.5 | 2.6 | 0.34 | 0.42 | 0.30 | 0.37 | |||||||||||||||||||||||||
| Probable | 9.3 | 12 | 2.5 | 2.5 | 0.74 | 0.95 | 0.66 | 0.84 | ||||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 16 | 19 | 2.3 | 2.4 | 1.2 | 1.5 | 1.1 | 1.3 | |||||||||||||||||||||||||
| 1 | Open pit ore reserves are reported at a gold price of $1,000/oz and at an average cut-off of 0.8g/t cut-off, including both dilution and ore loss factors. Open pit ore reserves were estimated by Shaun Gillespie, an officer of the company and competent person. | |
| 2 | Attributable gold (Moz) refers to the quantity attributed to Randgold based in its 89.7% interest in Tongon SA. | |
| Ore reserve numbers are reported as per JORC 2012 and as such are reported to the second significant digit. |
Kibali
Extensive underground grade control drilling and mapping continued on KCD underground as the mine prepared for the significant ramp-up planned for 2018. This resulted in an increase in proven material available for production.
Drilling programs in 2018 will shift focus to orebody extensions and reserve expansion with the first exploration drive planned for the 275L, to test the down plunge extensions of the 3000 and 5000 Lodes. Reserves decreased this year as a function of mining depletion and the geological model changes in 9105; partially offset by some gains in the 3000 and 9000 up plunge targets. Drilling will continue exploring these targets to potentially identify additional shallower reserves, which could be hauled out the declines, thus supporting the build-up in ore mined from underground.
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable gold2 (Moz) | |||||||||||||||||||||||||||||||
| at December 31 | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| ■ Stockpiles | Proven | 1.7 | 2.9 | 1.4 | 1.4 | 0.080 | 0.13 | 0.036 | 0.060 | |||||||||||||||||||||||||
| ■ Open pits | Proven | 4.9 | 1.4 | 2.7 | 2.9 | 0.43 | 0.13 | 0.19 | 0.058 | |||||||||||||||||||||||||
| Probable | 16 | 25 | 2.3 | 2.1 | 1.2 | 1.7 | 0.54 | 0.77 | ||||||||||||||||||||||||||
| ■ Underground | Proven | 12 | - | 5.0 | - | 2.0 | - | 0.89 | - | |||||||||||||||||||||||||
| Probable | 31 | 42 | 5.1 | 5.4 | 5.0 | 7.2 | 2.3 | 3.2 | ||||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 66 | 71 | 4.1 | 4.0 | 8.7 | 9.2 | 3.9 | 4.1 | |||||||||||||||||||||||||
| 1 | Open pit ore reserves were reported at a gold price of $1,000/oz except KCD open pit which is reported inside a $1,100 pit design at an average cut-off of 1.0g/t, including both dilution and ore loss factors. Open pit ore reserves were estimated by Nicholas Coomson, an officer of the company and a competent person. Underground ore reserves are reported at a gold price of $1,000/oz and a cut-off of 2.5g/t and include dilution and ore loss factors. Underground ore reserves were estimated by Andrew Fox, an external consultant and a competent person. | |
| 2 | Attributable gold (Moz) refers to the quantity attributable to Randgold based on its 45% interest in the Kibali gold mine. | |
| Ore reserve numbers are reported as per JORC 2012 and as such are reported to the second significant digit. |
| 63 |
Morila
Morila reserves currently comprise TSF material of 10.3Mt at 0.55g/t for 179koz and the remaining ore from the Domba satellite pit of 293kt at 1.3g/t for 13koz, which is currently scheduled to be depleted in the first quarter of 2018. The TSF retreatment is forecast to continue until the first quarter of 2020.
After agreement was reached with Birimian Limited, a full feasibility study and environmental impact assessment was completed on the near mine deposits of Ntiola and Viper. The geological studies returned a total reserve of 655kt at a grade of 1.96g/t for 41koz at Ntiola and 589kt at a grade of 1.49g/t for 30koz at Viper. Exploitation of these two deposits is still subject to the transfer of the relevant portions of the permits to Morila and thus are not reported in the reserve table below. The related documentation has been filed with the authorities.
During the year, the mine focused on the TSF activities as well as the mining and feeding of the Domba satellite orebody.
| Tonnes (Mt) | Grade(g/t) | Gold (Moz) | Attributable Gold2 (Moz) | |||||||||||||||||||||||||||||||
| at December 31 | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| ■ Stockpiles | Proven | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
| ■ Open pit | Probable | 0.29 | - | 1.3 | - | 0.013 | - | 0.0051 | - | |||||||||||||||||||||||||
| ■ TSF | Probable | 10 | 15 | 0.54 | 0.55 | 0.18 | 0.27 | 0.071 | 0.11 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 11 | 15 | 0.56 | 0.55 | 0.19 | 0.27 | 0.077 | 0.11 | |||||||||||||||||||||||||
| 1 | TSF ore reserves are reported at a $1,000/oz cut-off grade of 0.49g/t. Ore reserves were estimated by Shaun Gillespie, an officer of the company and competent person. | |
| 2 | Attributable gold (MOZ refers to the quantity attributed to Randgold based in its 40% interest in Morila. | |
| Ore reserve numbers are reported as per JORC 2012 and as such reported to the second significant digit. |
MASSAWA
The Massawa project is being progressed towards a final development decision, expected at the end of 2018. The project currently includes reserves from four open pit deposits of namely, Massawa Central and North Zone, Delya and Sofia.
| Tonnes (Mt) | Grade (g/t) | Gold (Moz) | Attributable Gold (Moz) 2 | |||||||||||||||||||||||||||||||
| at December 31, | Category | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| ORE RESERVES1 | ||||||||||||||||||||||||||||||||||
| Open pits | Probable | 23 | 19 | 3.6 | 4.3 | 2.7 | 2.6 | 2.2 | 2.2 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and Probable | 23 | 19 | 3.6 | 4.3 | 2.7 | 2.6 | 2.2 | 2.2 | |||||||||||||||||||||||||
| 1 | Open pit ore reserves are reported at a gold price of $1,000/oz and at an average cut-off of 1.1g/t, including both dilution and ore loss factors. Open pit ore reserves were estimated by Shaun Gillespie, an officer of the company and competent person. |
| 2 | Attributable gold (Moz) refers to the quantity attributable to Randgold based on its 83.25% interest in Massawa. |
MINERAL RIGHTS
Schedule of mineral rights at December 31, 2017:
| COUNTRY/PERMIT | TYPE1 | AREA | AREA | EFFECTIVE EQUITY INTEREST3 | ||||||||||
| (km²) | (miles2) | (%) | ||||||||||||
| MALI | ||||||||||||||
| Loulo | EP | 263 | 101 | 80.0 | ||||||||||
| Gounkoto | EP | 100 | 35 | 80.0 | ||||||||||
| Morila | EP | 200 | 77 | 40.0 | ||||||||||
| Djidian | EEP | 325 | 125 | 90.0 | ||||||||||
| Bena West | EEP | 22 | 22 | 90.0 | ||||||||||
| 64 |
| COUNTRY/PERMIT | TYPE1 | AREA | AREA | EFFECTIVE EQUITY INTEREST3 | ||||||||
| (km²) | (miles2) | (%) | ||||||||||
| Bakolobi2 | EEP | 120 | 46 | Earn in minimum 45.9 | ||||||||
| Kobokoto Est2 | EEP | 100 | 38 | Earn in minimum 58.5 | ||||||||
| Koussikoto2 | EEP | 37 | 14 | Earn in minimum 58.5 | ||||||||
| Mogoyafara | EEP | 100 | 38 | 90.0 | ||||||||
| Ouaiga2 | EEP | 50 | 19 | 81.0 | ||||||||
| Diangoute West2 | EEP | 50 | 19 | 81.0 | ||||||||
| Diangouemerila | EEP | 100 | 38 | 90.0 | ||||||||
| Finkola | EEP | 88 | 34 | Under transfer to Morila | ||||||||
| Ntiola | EEP | 64 | 25 | Under transfer to Morila | ||||||||
| CÔTE D'IVOIRE | ||||||||||||
| Nielle | EP | 751 | 290 | 89.7 | ||||||||
| Boundiali | EEP | 1,320 | 510 | 84.6 | ||||||||
| Mankono | EEP | 519 | 200 | 70.0 | ||||||||
| Kouassi Datekro N | EEP | 350 | 135 | 84.6 | ||||||||
| Fapoha North2 | EEP | 387 | 149 | 84.6 | ||||||||
| Fapoha South2 | EEP | 398 | 153 | 84.6 | ||||||||
| Tengrela South | EEP | 400 | 154 | 84.6 | ||||||||
| Tiorotieri2 | EEP | 86 | 33 | 84.6 | ||||||||
| Nafoun | EEP | 382 | 147 | 84.6 | ||||||||
| Angoda | EEP | 398 | 154 | 84.6 | ||||||||
| Attobrou | EEP | 400 | 154 | 84.6 | ||||||||
| Tengrela North | EEP | 397 | 153 | 84.6 | ||||||||
| Kouassi Datekro C | EEP | 396 | 153 | 84.6 | ||||||||
| Sissedougou | EEP | 314 | 121 | 70.0 | ||||||||
| SENEGAL | ||||||||||||
| Kanoumba | EEP | 606 | 234 | 83.3 | ||||||||
| Dalema | EEP | 301 | 116 | 83.3 | ||||||||
| Bambadji2 | EEP | 236 | 91 | Earn in minimum 58.5% | ||||||||
| DEMOCRATIC REPUBLIC OF CONGO | ||||||||||||
| Kibali2 | ||||||||||||
| 11447 | EP | 227 | 88 | 45.0 | ||||||||
| 11467 | EP | 249 | 96 | 45.0 | ||||||||
| 11468 | EP | 46 | 18 | 45.0 | ||||||||
| 11469 | EP | 92 | 36 | 45.0 | ||||||||
| 11470 | EP | 31 | 12 | 45.0 | ||||||||
| 11471 | EP | 113 | 44 | 45.0 | ||||||||
| 11472 | EP | 85 | 33 | 45.0 | ||||||||
| 5052 | EP | 302 | 117 | 45.0 | ||||||||
| 5073 | EP | 399 | 154 | 45.0 | ||||||||
| 5088 | EP | 292 | 113 | 45.0 | ||||||||
| Ngayu project JVs2 | ||||||||||||
| 1793 | EEP | 196 | 98 | Earn in minimum 61.75% | ||||||||
| 1794 | EEP | 198 | 99 | Earn in minimum 61.75% | ||||||||
| 1796 | EEP | 97 | 34 | Earn in minimum 61.75% | ||||||||
| 1797 | EEP | 157 | 78 | Earn in minimum 61.75% | ||||||||
| 1798 | EEP | 185 | 92 | Earn in minimum 61.75% | ||||||||
| 1800 | EEP | 168 | 85 | Earn in minimum 61.75% | ||||||||
| 1801 | EEP | 167 | 87 | Earn in minimum 61.75% | ||||||||
| 1802 | EEP | 163 | 82 | Earn in minimum 61.75% | ||||||||
| 1803 | EEP | 147 | 57 | Earn in minimum 61.75% | ||||||||
| 1804 | EEP | 124 | 62 | Earn in minimum 61.75% | ||||||||
| 1805 | EEP | 175 | 88 | Earn in minimum 61.75% | ||||||||
| 1806 | EEP | 86 | 43 | Earn in minimum 61.75% | ||||||||
| 1807 | EEP | 119 | 56 | Earn in minimum 61.75% | ||||||||
| 12975 | EEP | 6 | 7 | Earn in minimum 61.75% | ||||||||
| 12976 | EEP | 71 | 71 | Earn in minimum 61.75% | ||||||||
| 12982 | EEP | 7 | 6 | Earn in minimum 61.75% | ||||||||
| 12984 | EEP | 20 | 20 | Earn in minimum 61.75% | ||||||||
| 12985 | EEP | 186 | 186 | Earn in minimum 61.75% | ||||||||
| 12986 | EEP | 111 | 111 | Earn in minimum 61.75% | ||||||||
| 12988 | EEP | 70 | 70 | Earn in minimum 61.75% | ||||||||
| 12990 | EEP | 11 | 11 | Earn in minimum 61.75% | ||||||||
| 2226 | EEP | 137 | 137 | Earn in minimum 48.45% | ||||||||
| 2227 | EEP | 137 | 137 | Earn in minimum 48.45% | ||||||||
| 2230 | EEP | 155 | 155 | Earn in minimum 48.45% | ||||||||
| Moku4 | ||||||||||||
| 5047 | EP | 152 | 59 | Earn in minimum 51% | ||||||||
| 5057 | EP | 356 | 137 | Earn in minimum 51% | ||||||||
| 12709 | EP | 190 | 73 | Earn in minimum 51% | ||||||||
| 12710 | EP | 220 | 85 | Earn in minimum 51% | ||||||||
| 12711 | EP | 146 | 56 | Earn in minimum 51% | ||||||||
| 12712 | EP | 208 | 80 | Earn in minimum 51% | ||||||||
| TOTAL AREA | 15,260 | 6,652 | ||||||||||
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| 1 | EP Exploitation permit EEP Exploration permit |
| 2 | Joint venture arrangement |
| 3 | Effective equity interest takes into account joint venture interest and free carried interest of the state. |
| 4 | Following the imposition of sanctions by the US Government in December 2017, all exploration activities are suspended under the joint venture arrangements with Société Minière Moku-Beverendi SA and Moku Goldmines AG. |
Mineral Rights and Permits:
The following map shows the position of our current permits in West Africa:
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The following map shows the position of our current permits in Central Africa:
Although we believe that our exploration permits will be renewed when they expire, based on the current applicable laws in the respective countries in which we have obtained permits, there can be no assurance that those permits will be renewed on the same or similar terms, or at all. In addition, although the mining laws of Mali, Côte d’Ivoire, Senegal and DRC provide a right to mine should an economic orebody be discovered on a property held under an exploration permit, there can be no assurance that the relevant government will issue a permit that would allow us to mine. All mineral rights within the countries in which we are currently prospecting are state-owned. Our interests effectively grant us the right to develop and participate in any mine development on the permit areas.
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
Statements in this Annual Report concerning our business outlook or future economic performance; anticipated revenues, expenses or other financial items; and statements concerning assumptions made or expectations as to any future events, conditions, performance or other matters, are “forward-looking statements” as that term is defined under the United States Federal securities laws. Forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from those stated in such statements. Factors that could cause or contribute to such differences include, but are not limited to, those set forth under “PART I. 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 SEC.
General
We earn substantially all of our revenues in US dollars and a large proportion of our costs are denominated or based in US dollars. We also have Euro, Communauté Financière Africaine franc and Pound Sterling denominated costs, which are primarily wages and material purchases. A large portion of our capital commitments for 2018 are denominated in South African Rand and Euros and relate to the Loulo-Gounkoto complex and Kibali.
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Impact of Malian, Côte d’Ivoire and DRC Economic and Political Environment
We are a Jersey incorporated company and are subject to income tax at a rate of zero percent in Jersey. However, our current significant operations are located in Mali, Côte d’Ivoire and the DRC and are therefore subject to various economic, fiscal, monetary and political policies and factors that affect companies operating in Mali, Côte d’Ivoire and the DRC as discussed under “PART I. Item 3. Key Information—D. Risk Factors—Risks Relating to Our Operations.”
Impact of Favorable Tax Treaties
We are subject to corporate tax at a rate of zero percent in Jersey. Loulo benefited from a five year tax holiday until November 2010. Tongon benefited from a five year tax holiday in Côte d’Ivoire which commenced on December 2010 and expired in December 2015. The Gounkoto convention was signed in March 2012. In terms of this convention Gounkoto benefitted from an initial corporate tax exoneration of two years which expired in June 2013, with an opportunity to extend this to five years in the event of further investment such as an underground mine as discussed under “PART I. Item 3. Key Information—D. Risk Factors—Risks Relating to Our Operations.” The benefit of the tax holidays to the group was to increase its net profit by $7.9 million and $8.0 million for the years ended December 31, 2015 and 2014, respectively. There was no benefit of tax holidays to the group net profit for the year ended December 31, 2016 nor the year ended December 31, 2017.
Under Malian tax law, income tax is based on the greater of 30% of taxable income or 0.75% of gross revenue. Under Ivorian tax law, income tax is based on the greater of 25% of taxable income or 0.5% of gross revenue.
The Loulo, Tongon and Gounkoto operations have no assessable capital expenditure carry forwards or assessable tax losses, as at December 31, 2017, 2016, and 2015 respectively, for deduction against future mining income. The group’s share of profits from equity accounted joint ventures is stated net of $23.1 million tax credits (2016: $9.7 million tax credits; 2015: $11.0 million tax charges) of current and deferred tax (credits)/charges primarily in respect of Kibali and Morila. The share of profits from the Kibali joint venture is stated after deferred tax that was calculated at 30% of profit, notwithstanding the mine has an accelerated tax allowance which reduces the cash tax paid in the current year.
Revenues
Substantially all of our revenues are derived from the sale of gold. As a result, our operating results are directly related to the price of gold. Historically, the price of gold has fluctuated widely. The gold price is affected by numerous factors over which we have no control. See “PART I. Item 3. Key Information—D. Risk Factors—Risks Relating to Our Operations—The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely.”
We have in previous years followed a hedging strategy the aim of which is to secure a minimum price which is sufficient to protect us in periods of significant capital expenditure and debt finance, while at the same time allowing significant exposure to the spot gold price.
Significant changes in the price of gold over a sustained period of time may lead us to increase or decrease our production, which could have a material impact on our revenues.
Our Realized Gold Price
The following table sets out the average, high and low afternoon London Bullion Market fixing price of gold and our average US dollar realized gold price during the years ended December 31, 2017, 2016 and 2015.
| Year Ended December 31, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
| Average | 1,266 | 1,249 | 1,160 | |||||||||
| High | 1,346 | 1,366 | 1,296 | |||||||||
| Low | 1,151 | 1,061 | 1,049 | |||||||||
| Average realized gold price1 | 1,258 | 1 | 1,244 | 1 | 1,152 | 1 | ||||||
| 1 | Our average realized gold price differs from the average gold price as a result of the timing of our gold deliveries for each year. |
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Costs and Expenses
Following a review of the underground mining activities at Loulo, the mine took a decision in 2015 to take over the mining and development activities that were previously managed by the underground mining contractor. Milling operations are undertaken by the group’s own employees. Total mining and processing costs in the year ended December 31, 2017 mainly comprised mining and milling costs, including labor and consumable stores costs. Consumable stores costs include diesel, reagent and other store item costs.
The price of diesel for the Loulo, Gounkoto, and Tongon operations increased from 2016 to 2017. Should prices increase further, this could significantly impact total cash costs mainly as a result of the high volume of diesel consumed to generate power and to run the mining fleet. A significant portion of the costs at Loulo, Gounkoto, Tongon and Morila are denominated in Communauté Financière Africaine Franc (CFA), which has a fixed exchange rate to the Euro. Therefore, costs are exposed to fluctuations in the Euro/dollar exchange rate. The Euro strengthened against the dollar during 2017 . The remainder of our total costs and expenses consists primarily of amortization and depreciation, exploration costs, exchange losses, interest expense and corporate charges.
Looking Forward
Given Randgold’s commitment to growing through discovery and development, the company will continue to commit significant expenditure to exploration. In 2018, corporate and exploration expenses of approximately $50 to $60 million are anticipated. Total group capital expenditure is expected to be approximately $155 million. Ongoing development of the underground mines at Loulo, as well as other projects and exploration, is planned to cost $85 million, while Gounkoto is forecasting $16 million, mostly on the super pit development which includes deferred stripping costs. Capital at Tongon, including completion of the plant, power and TSF upgrades, is estimated at $17 million. Continued work on the Massawa study, mostly in respect of drilling, is forecast to incur capital expenditure of approximately $17 million. The remaining group capital, mostly in respect of asset leasing and information technology investments, is estimated at $20 million.
At our equity accounted joint ventures capital expenditure is expected to be approximately $70 million (45% of project) at Kibali and approximately $1 million (40% of project) at Morila.
Critical Accounting Policies
Our significant accounting policies are more fully described in Note 2 and Note 3 to our consolidated financial statements in this Annual Report on Form 20-F. Some of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. Refer to Note 3 to our consolidated financial statements in this Annual Report on Form 20-F for disclosure of critical accounting estimates and judgments. By their nature, these judgments are subject to an inherent degree of uncertainty and are based on our historical experience, terms of existing contracts, management’s view on trends in the gold mining industry and information from outside sources. The audit committee considered and approved the key estimates and accounting policies.
The critical accounting estimates and judgments as detailed in Note 3 to our financial statements included in this Annual Report on Form 20-F are follows:
| · | TVA; |
| · | Corporation tax claims; |
| · | Carrying values of property, plant and equipment and joint venture investments; |
| · | Capitalization and depreciation; |
| · | Gold price assumptions; |
| · | Determination of ore reserves; |
| · | Future rehabilitation obligations; |
| · | Stockpiles, gold in process and product inventories; |
| · | Post production open cast mine stripping; |
| · | Exploration and evaluation expenditure; and |
| · | Share-based payments. |
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New standards and interpretations applied
The IASB has issued the following new standards, amendments to published standards and interpretations to existing standards with effective dates on or prior to January 1, 2017 which have been adopted by the group for the first time this year. These have not had a material impact.
| Effective period commencing on or after | ||||
| IAS 12 | Recognition of deferred tax assets for unrealized losses (Amendments to IAS12) | January 1, 2017 | ||
| IAS 7 | Disclosure Initiative: Amendments to IAS 7 | January 1, 2017 | ||
| Annual Improvements to IFRSs (2014 – 2016 Cycle) | January 1, 2017 | |||
Standards effective in future periods
Certain new standards, amendments and interpretations to existing standards have been published that are relevant to the group’s activities and are mandatory for the group’s accounting periods beginning after January 1, 2018 or later periods and which the group has decided not to adopt early. These include:
| Effective period commencing on or after | ||||
| IFRS 9 | Financial instruments | January 1, 2018 | ||
| IFRS 15 | Revenue from contracts with customers | January 1, 2018 | ||
| IFRS 16 | Leases | January 1, 2019 | ||
| IFRS 17 | Insurance contracts | January 1, 2021 | ||
| IFRS 2 | Classification and Measurement of Share-based Payment Transactions (Amendments to IFRS 2) | January 1, 2018 | ||
| IFRIC 22 | IFRIC 22 Foreign Currency Transactions and Advance Consideration | |||