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, 2014 |
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)
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, 2014, the Registrant had outstanding 92,724,116 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). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer | ¨ |
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
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).
|
Albite: |
A mineral within the Feldspar Group which is the sodium rich end member of the Albite-Anorthite Series. It is a common type of hydrothermal alteration. |
| Alteration: | The chemical change in a rock due to hydrothermal and other fluids. |
| Archaean: | A geological eon before 2.5 Ga. |
| 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. |
| Banded iron formation: | A bedded deposit of iron minerals. |
| Basalt: | An extrusive volcanic rock composed primarily of plagioclase, pyroxene and some olivine. |
| bcm: | A measure of volume representing a cubic meter of in-situ rock. |
| 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. |
| Cage: | The conveyance used to transport men and equipment between the surface and the mine levels. |
| Carbonate: | A mineral salt typically found in quartz veins and as a product of hydrothermal alteration of sedimentary rock. |
| Cemented Aggregate Fill: | A backfill method for filling open stopes that uses cement and rock aggregate. |
| Clastic: | Rocks built up of fragments of pre-existing rocks which have been produced by the processes of weathering and erosion. |
| 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. |
| Cyanidation: | A method of extracting exposed gold or silver grains from crushed or ground ore by dissolving it in a weak cyanide solution. Carried out in tanks inside a mill or in heaps of ore outside. |
| 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. |
| Dip: | The angle at which a vein, structure or rock bed is inclined from the horizontal as measured at right angles to the strike. |
| Discordant: | Structurally unconformable. |
| EEP: | Exclusive EP. |
| EP: | Exploration 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. |
| Felsic: | A light colored igneous rock composed of quartz, feldspar and muscovite. Also a term used to describe light-colored rocks containing feldspar, feldspathoids and silica. |
| Feldspar: | An alumino-silicate mineral. |
| Footwall: | The underlying side of a fault, orebody or stope. |
| g/t: | Grams of gold per metric tonne. |
| Gabbro: | A dark, coarse-grained igneous rock. |
| Geophysical survey: | A scientific method of prospecting that measures the physical properties of rock formations. Common properties investigated include magnetism, specific gravity, electrical conductivity and radioactivity. |
| Gneiss: | A coarse-grained, foliated rock produced by metamorphism. |
| Gold reserves: | The gold contained within proven and probable reserves on the basis of mining recoverable material (reported as tonnes and head grade we expect to be delivered to the mill). |
| 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. |
| - 2 - |
| Greenstone belt: | An area underlain by metamorphosed volcanic and sedimentary rocks, usually in a continental shield. |
| Greywacke: | A dark gray, coarse grained, indurated sedimentary rock consisting essentially of quartz, feldspar, and fragments of other rock types. |
| 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 |
| Hydrothermal: | Relating to hot fluids circulating in the earth’s crust. |
| Igneous rocks: | Rocks formed by the solidification of molten material from far below the earth’s surface. |
| In situ: | In place or within unbroken rock or still in the ground. |
| Kibalian: | A geological time era between 2.4 billion to 2.8 billion years before the present. |
| Lode: | A portion of a mineral deposit in solid rock. |
| Logging: | The process of recording geological observations of drill core either on paper or on computer disk. |
| Lower proterozoic: | Era of geological time between 2.5 billion and 1.8 billion years before the present. |
| Magnetite: | Black, magnetic iron ore, an iron oxide. |
| 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 |
|
Metamorphism: |
The process by which the form or structure of rocks is changed by heat and pressure. |
| 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. |
| - 3 - |
| Mineralization: | The presence of a target mineral in a mass of host rock. |
| Mineralized material: | A mineralized body which has been delineated by appropriately spaced drilling and/or underground sampling to support a sufficient tonnage and average grade of metals to warrant further exploration. A deposit of mineralized material does not qualify as a reserve until a comprehensive evaluation based upon unit cost, grade, recoveries, and other material factors conclude legal and economic feasibility. |
| Moz: | Million troy ounces. |
| Mt: | Million metric tonnes. |
| Nugget: | A small mass of precious metal, found free in nature. |
| 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. |
| 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. |
| Oxide Ore: | Soft, weathered rock that is oxidized. |
| Paste Backfill: | A backfill method for filling open stopes that uses cement and tailings material. |
| Plutonic: | Refers to rocks of igneous origin that have come from great depth. |
| Porphyry: | Any igneous rock in which relatively large crystals, called phenocrysts, are set in a fine-grained groundmass. |
| Prefeasibility Study: | A comprehensive study of the viability of a mineral project that has advanced to a stage where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit, has been established, and which, if an effective method of mineral processing has been determined and includes a financial analysis based on reasonable assumptions of technical, engineering, operating, economic, social and environmental factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineral material may be classified as a mineral reserve. |
| 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. |
| 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. |
| - 4 - |
| Pyrite: | A yellow iron sulphide mineral, normally of little value. It is sometimes referred to as “fool’s gold”. |
| Pyrrhotite: | A bronze-colored, magnetic iron sulphide mineral. |
| Quartz: | A mineral compound of silicon and oxygen. |
| Quartzite: | Metamorphic rock with interlocking quartz grains displaying a mosaic texture. |
| Reconnaissance: | A preliminary survey of ground. |
| 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. |
| 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. |
| RP: | Reconnaissance Permit. |
| 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. |
| 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. |
| - 5 - |
| 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, transfers to and from deferred stripping where relevant and royalties. |
| 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. |
| Ultramafic: | An igneous rock with a very low silica content and rich in iron magnesium minerals. |
| 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. |
| Waste: | Rock mined with an insufficient gold content to justify processing. |
| Weathered or weathering: | Rock broken down by surface elements of temperature and water. |
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 Securities and Exchange Commission.
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 measures, 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 feasibility project.
| - 6 - |
Part I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
A. SELECTED FINANCIAL DATA
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, 2014, 2013 and 2012 and as at December 31, 2014 and December 31, 2013, which appear elsewhere in this Annual Report. The historical consolidated financial data as at December 31, 2012, 2011 and 2010, and for the years ended December 31, 2011 and 2010 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, unless otherwise noted.
| Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | ||||||||||||||||
| $000: | ||||||||||||||||||||
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME DATA: | ||||||||||||||||||||
| Amounts in accordance with IFRS unless otherwise stated | ||||||||||||||||||||
| Revenues | 1,086,756 | 1,137,690 | 1,183,127 | 970,315 | 484,553 | |||||||||||||||
| Profit from operations1 | 281,267 | 354,699 | 505,845 | 429,908 | 136,141 | |||||||||||||||
| Share of profits of equity accounted joint ventures | 75,942 | 54, 257 | 40, 927 | 44,119 | — | |||||||||||||||
| Net profit attributable to owners of the parent | 234,974 | 278,382 | 431,801 | 383,860 | 103,501 | |||||||||||||||
| Basic earnings per share ($) | 2.54 | 3.02 | 4.70 | 4.20 | 1.14 | |||||||||||||||
| Diluted earnings per share ($) | 2.51 | 2.98 | 4.65 | 4.16 | 1.13 | |||||||||||||||
| Weighted average number of shares used in computation of basic earnings per share | 92,603,191 | 92,213,511 | 91,911,444 | 91,337,712 | 90,645,366 | |||||||||||||||
| Weighted average number of shares used in computation of fully diluted earnings per share | 93 513 661 | 93,346,109 | 92,824,926 | 92,276,517 | 91,926,912 | |||||||||||||||
| Dividends declared per share2 | 0.50 | 0.50 | 0.40 | 0.20 | 0.17 | |||||||||||||||
| Other data | ||||||||||||||||||||
| Total cash costs ($ per ounce sold)3 | 698 | 715 | 735 | 688 | 681 | |||||||||||||||
| 1. | Profit from operations is calculated as profit before income tax under IFRS, excluding net finance income/(costs) and share of profits of equity accounted joint ventures. Profit from operations all arises from continuing operations. |
| 2. | 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 declared to shareholders. |
| 3. | Refer to explanation of non-GAAP measures provided. |
Following the introduction and adoption of IFRS 11 Joint arrangements in 2013, the group changed its accounting policy on joint ventures from January 1, 2013 with prior periods 2011 and 2012 restated accordingly (refer to the prior year Annual Report Form 20-F). IFRS 11 did not require restatement for earlier years, therefore the information extracted from the Statement of Comprehensive Income for 2010 and the Statement of Financial Position forthat year were not restated.
| At December 31, 2014 | At December 31, 2013 | At December 31, 2012 | At December 31, 2011 | At December 31, 2010 | ||||||||||||||||
| $000: | ||||||||||||||||||||
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION AMOUNTS: | ||||||||||||||||||||
| Amounts in accordance with IFRS | ||||||||||||||||||||
| Total assets | 3,533,083 | 3,376,513 | 3,008,891 | 2,477 267 | 1,994,340 | |||||||||||||||
| Share capital | 4,634 | 4,612 | 4,603 | 4,587 | 4,555 | |||||||||||||||
| Share premium | 1,450,984 | 1,423,513 | 1,409,144 | 1,386,939 | 1,362,320 | |||||||||||||||
| Retained earnings | 1,575,518 | 1,386,518 | 1,154,273 | 759,209 | 393,570 | |||||||||||||||
| Other reserves | 67,254 | 64,398 | 50,994 | 40,531 | 31,596 | |||||||||||||||
| Equity attributable to the owners of the parent | 3,098,090 | 2,879,041 | 2,619,014 | 2,191,266 | 1,792,041 | |||||||||||||||
| - 7 - |
Non-GAAP Measures
We have identified certain measures that we believe 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 further explained 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, transfers to and from deferred stripping where relevant and royalties. Total cash costs and cash cost per ounce also include our share of our equity accounted joint ventures’ total cash costs and cash cost per ounce.
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 or an indicator of our performance. The data does not have a meaning prescribed by IFRS and therefore amounts presented may not be comparable to data presented by gold producers who do not follow the guidance provided by the Gold Institute. In particular depreciation and amortization would be included in a measure of total costs of producing gold under IFRS, but are not included in total cash costs under the guidance provided by the Gold Institute. Furthermore, while the Gold Institute has provided a definition for the calculation of total cash costs and total cash 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, we believe 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 - |
Cash operating costs and cash operating cost per ounce are calculated by deducting royalties from total cash costs. Cash operating cost per ounce is calculated by dividing cash operating costs by gold ounces sold for the periods presented. Total cash operating costs and cash operating cost per ounce include our share of joint ventures’ total operating cash cost and operating cash cost per ounce.
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. We currently do not have any hedge positions. Gold sales include our share of our equity accounted joint ventures’ gold sales.
Profit from mining activity is calculated by subtracting total cash costs from gold sales for all periods presented. Profit from mining includes our share of our equity accounted joint ventures.
Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. Gold on hand includes our share of our equity accounted joint ventures’ gold on hand.
The following table lists the costs of producing gold, based on IFRS figures extracted from the financial statements of the Company, and reconciles this measure to total cash costs as defined by the Gold Institute’s guidance, as a non-GAAP measure, for each of the periods set forth below:
| $000: | Year Ended December 31, 2014 | Year Ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | Year Ended December 31, 2010 | |||||||||||||||
| Gold Sales | ||||||||||||||||||||
| Gold sales per IFRS | 1,086,756 | 1,137,690 | 1,183,127 | 970,315 | 484,553 | |||||||||||||||
| Gold sales adjustment for joint ventures | 348,117 | 129,022 | 134,703 | 156,771 | — | |||||||||||||||
| Gold sales2 | 1,434,873 | 1,266,712 | 1,317,830 | 1,127,086 | 484,553 | |||||||||||||||
| Costs | ||||||||||||||||||||
| Mine production costs | 525,909 | 3 | 538 892 | 3 | 441 049 | 3 | 339 927 | 3 | 249 503 | 3 | ||||||||||
| Depreciation and amortization | 146,762 | 130,638 | 117,991 | 65 562 | 28,127 | |||||||||||||||
| Other mining and processing costs | 64,762 | 61,319 | 75,770 | 62,758 | 20,598 | |||||||||||||||
| Cash cost adjustment for joint ventures | 169,260 | 49,055 | 50,511 | 69,532 | — | |||||||||||||||
| Depreciation and amortization adjustment for joint ventures | 86,183 | 19,322 | 13,750 | 16,498 | — | |||||||||||||||
| Royalties | 56,490 | 58,415 | 59,710 | 44,414 | 27,680 | |||||||||||||||
| Movement in production inventory and ore stockpiles | 24,665 | (49,730 | ) | (43,716 | ) | (21,907 | ) | (16,152 | ) | |||||||||||
| Total cost of producing gold2 | 1,024,701 | 807,911 | 715,065 | 576,784 | 309,756 | |||||||||||||||
| Less: Non-cash costs included in total cost of producing gold: Depreciation and amortization under IFRS | (146,762 | ) | (130,638 | ) | (117,991 | ) | (65,562 | ) | (28,127 | ) | ||||||||||
| Less: Non-cash costs included in total cost of producing gold: Depreciation and amortization for joint ventures | (86,183 | ) | (19,322 | ) | (13,750 | ) | (16,498 | ) | — | |||||||||||
| Total cash costs using the Gold Institute’s guidance2 | 791,756 | 657,951 | 583,324 | 494,724 | 281,629 | |||||||||||||||
| Ounces sold1 | 1,134,941 | 920,248 | 793,852 | 718,762 | 413,262 | |||||||||||||||
| Total cost of producing gold per ounce ($ per ounce)2 | 903 | 878 | 901 | 802 | 750 | |||||||||||||||
| Total cash costs per ounce ($ per ounce)2 | 698 | 715 | 735 | 688 | 681 | |||||||||||||||
| 1. | 40% share of Morila, 45% share of Kibali and 100% share of Loulo, Tongon and Gounkoto |
| 2. | Refer to explanation of non-GAAP measures provided. Randgold consolidates 100% of Loulo, Gounkoto and Tongon, 40% of Morila and 45% of Kibali in the consolidated non-GAAP measures. |
| 3. | Comparative figures excluded transport and refining costs from mine production costs and disclosed such costs separately. Given its immateriality, it has now been included in mine production costs. Transport and refining costs total $3.0 million for 2014 (2013:$2.7 million; 2012:$2.7 million; 2011: $2.4 million; 2010: $1.7million) and are now included in mine production costs. |
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B. CAPITALIZATION AND INDEBTEDNESS
Not applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not applicable.
D. RISK FACTORS
In addition to the other information included in this Annual Report, you should carefully consider the following factors, which individually or in combination could have a material adverse effect on our business, financial condition and results of operations. There may be additional risks and uncertainties not presently known to us, or that we currently see as immaterial, which may also harm our business. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected. In this case, the trading price of our ordinary shares and American Depositary Shares, 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.
| Price Per Ounce ($) | ||||||||||||
| Year | High | Low | Average | |||||||||
| 2005 | 537 | 411 | 444 | |||||||||
| 2006 | 725 | 525 | 604 | |||||||||
| 2007 | 841 | 608 | 695 | |||||||||
| 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 (through February) | 1,296 | 1,172 | 1,240 | |||||||||
The market price of gold has been and continues to be significantly volatile. In 2014, there was a 17.5% reduction in the 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 cash 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 total cash cost of production per ounce of gold sold was $698 in the year ended December 31, 2014, $715 in the year ended December 31, 2013 and $735 in the year ended December 31, 2012.
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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; |
| • | 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 2014, gold produced in Mali represented approximately 60% 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. Although we have continued to produce and sell gold during the political crisis, there can be no assurance that the political 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 situation in Mali will not have a material adverse effect on our operations and financial condition.
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 Morila, Loulo, 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. During 2012, 2013 and 2014 Loulo and Morila has offset TVA reimbursements it was owed against corporate and other taxes payable to the State of Mali under the terms of its legally binding mining conventions. At December 31, 2013, TVA owed by the State of Mali to Loulo stood at $115.6 million. This amount has decreased to $91.3 million at December 31, 2014 inclusive of exchange rate variances of $12.1 million. As of December 31, 2012, December 31, 2013 and December 31, 2014, TVA owed by the State of Mali to Morila amounted to $6.4 million (our 40%), $4.4 million (our 40%) and $10.5 million (our 40%) respectively. By December 31, 2013 and December 31, 2014, TVA refunds of $10.1 million and $14.5 million respectively remained owing to Gounkoto by the State of Mali.
By December 31, 2012, December 31, 2013 and December 31, 2014, TVA owing to Kibali by the DRC State amounted to $18.5 million (our 45%), $35.3 million (our 45%) and $50.5 million (our 45%), respectively. Kibali has received TVA refunds during the year, but the process has been slower than set out by law, due to additional administrative requirements imposed by the relevant State departments.
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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.
Our business may be adversely affected if we fail to resolve disputed tax claims with the State of Mali.
As at December 31, 2014, the group had received claims for various taxes from the State of Mali totaling $313.0 million, in particular with respect to the Loulo, Gounkoto and Morila mines. The claims have increased by $190.0 million in the year, substantially representing $201.3 million of additional claims received in respect of Loulo and Gounkoto following the tax audits during the year, offset by foreign exchange movements. Having taken professional advice, the group considers the material claims to be without foundation and is strongly defending its position, including following the appropriate legal process for such disputes in Mali. Loulo, Gounkoto and Morila have legally binding mining conventions which guarantee fiscal stability, govern the taxes applicable for the companies and allow for international arbitration in the event that a dispute cannot be resolved in the country. Management continues to engage with the Malian authorities at the highest level to resolve this issue. On November 25, 2013, Loulo instigated arbitration proceedings against the State of Mali pursuant to the terms of Loulo’s Establishment Convention at the International Center for Settlement of Investment Disputes in respect of $57.0 million of the tax claims. The arbitration process is ongoing, with hearings being held in the first quarter of 2015. The outcome of the process is expected to be concluded during 2015. Management continues to engage with the Malian authorities at the highest level to resolve this issue and the other unresolved tax claims. However, it may be necessary to instigate additional arbitration proceedings to resolve these disputes. 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 their ability to pay dividends to their shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends are not paid.
Changes in mining legislation can have significant effects on our operations.
While we have entered into binding mining conventions with the governments of Côte d’Ivoire, Mali and Senegal, 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.
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, 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, 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.
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 conditions and operations. We seek to promote improvements in health and safety, environmental performance and community relations. However, our ability to operate could be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health, safety and well-being of our employees, the environment or the communities in which we operate.
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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.
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 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 2014, the average price of our landed fuel was lower than 2013. In the year ended December 31, 2014, the cost of fuel and other power generation costs comprised approximately 23% of our operating costs (2013: 20%; 2012: 25%).
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. 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; |
| • | 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 cash operating costs and result in additional financial liability for us.
The use of mining contractors at certain of our operations may expose it to delays or suspensions in mining activities.
Mining contractors are used at Tongon, Loulo, Gounkoto, Kibali and Morila to mine and deliver ore to processing plants and at Loulo and 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; |
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| • | Failure of a contractor to 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. We have reviewed the underground mining activities at the Loulo mine and decided to take over the mining and development activities previously managed by the underground mining contractor. Consequently, the Loulo mine is working with the contractor to agree to an orderly changeover, which is expected to be completed over the course of 2015. Any disruption to our workforce resulting from the changeover could have a material adverse effect on our operations.
The Ebola virus poses a risk to our operations.
Ebola virus cases have been identified in Mali and Senegal along with epidemics in neighboring countries, and we have formed a crisis management team to spearhead a major campaign to safeguard our employees and host communities. If the incidence of the Ebola virus 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.
Actual cash 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. |
Kibali completed an optimized feasibility during 2011 and construction of the mine started in 2012. At Kibali, open pit mining started in July 2012 and the mine’s first gold was produced in September 2013. However, there can be no assurance that the mine will not be subject to the risks and uncertainties listed above, all of which could have a material adverse effect on our operating results and financial condition.
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. The current plan is to progress the Massawa project review and make a decision on revising the feasibility study scope in 2015. 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.
The underground feasibility study on Gounkoto was successfully completed at the end of 2014. Work on the portal in the south of the pit is planned to start in 2018 with access to ore anticipated in 2019. However, there can be no assurance that the Gounkoto underground project will not be subject to the risks and uncertainties listed in this section, all of which could have a material adverse effect on our operating results and financial condition.
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.
| - 14 - |
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, 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 EP, 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 if 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.
Furthermore, the Kibali mine is located in a remote area of the DRC, which lacks 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 the area. 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. The first of three hydropower stations was completed in 2014 and a further additional two hydropower stations are still to be completed.
Moreover, the north-east 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 recent turmoil in the Eastern DRC, to the south of Kibali, following the defeat of the M23 rebel group in late 2013. A sufficient level of stability 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.
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 have been subject to risks associated with operating the Tongon mine in Côte d’Ivoire. Côte d’Ivoire has experienced several years of political disruptions, including an attempted coup d’état and civil war. A dispute over the Côte d’Ivoire presidential election in November 2010 resulted in the establishment of two rival governments and the imposition of targeted sanctions. The political impasse, however, was resolved during 2011, and while the Tongon mine continued to operate throughout the crisis, at times we were unable to ship and sell our Tongon gold production, which resulted in timing discrepancy between our gold produced and the
| - 15 - |
recognition of revenue from gold sales. While all our gold production was subsequently sold and the country reverted to normality, there can be no assurance that similar events 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.
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 when events or changes in circumstances suggest that the net book value may not be recoverable. 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.
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.
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; |
| • | mechanical breakdowns; |
| • | safety-related stoppages; |
| • | work stoppages or other disruptions in labor force; |
| • | electrical power and fuel supply interruptions; |
| • | unanticipated ground conditions; and |
| • | personal injury and flooding. |
| - 16 - |
During 2011, Tongon’s operations were negatively impacted by flooding as a result of the rainy season and by problems encountered during the change-over from diesel generated power to Côte d’Ivoire’s national grid. Also, in November 2011, the Tongon mine suffered a major failure of the barring gear at its No 1 mill. As a result, management also shut down Tongon’s No 2 mill as well in the interests of personal safety and to protect the No 2 mill from a similar failure. In November 2011 and March 2012, the Tongon mine experienced temporary work stoppages during the course of negotiating a mine level agreement with a newly established union. During 2012 the Tongon mine was plagued by a series of operational challenges, including underperformance in the mining of the open pit as the mine struggled to manage the transition from softer oxide material to fresh rock. Also, the mine experienced frequent outages of grid power which disrupted the processing plant. Additionally, during December 2012 there was a fire in the milling circuits which resulted in both mills being offline for one week followed by lower throughput and recoveries. These issues led to gold production at Tongon missing its target by 26%. The plant was restored to full production by the end of January 2013 and the power problems were addressed during 2013. The mine continued to experience problems with recovery in 2013 and 2014 which contributed to Tongon missing its target by 17% in 2013 and 13% in 2014, as well as issues associated with the crushing circuit, which required certain of the installed crushers to be replaced in 2014. The mine continues to engineer out key process deficiencies and improve operator skills and plant maintenance. Upgrades to the flotation circuits at the mine are forecasting for completion in the first quarter of 2015.
During 2011, the Gounkoto’s mine operations were disrupted by flooding following unusually heavy rains. In July 2009, the Loulo mine experienced some disruption, caused by a small group of disaffected people unable to secure long term employment at the mine. The disruption resulted in some damage to the tailings pipeline as well as to some accommodation units and other property. All operations were suspended for 36 hours, following which all mining and processing operations were restored and operating back at normal capacity.
There can be no assurance that similar operational issues will not happen 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 and the UK Bribery Act 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.
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 experienced serious deterioration in 2008, including the failure of significant and established financial institutions in the US and abroad, which continued throughout 2014 and may continue in 2015 and beyond, and the
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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. Although general global economic conditions have improved, the credit and capital markets for commodities have not improved to the same degree. 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.
To ensure additional liquidity, in 2013 we entered into a $200.0 million unsecured revolving credit facility with HSBC and a syndicate of three other banks. In 2014 we cancelled the existing credit facility, which was undrawn at that time, and entered into a new $400.0 million unsecured revolving credit facility with HSBC and an extended banking syndicate. 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 2014 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.
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 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.
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. 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 conditions.
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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.
Some of our operations are carried out in 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 conditions.
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.
We may not pay dividends to shareholders in the future.
We paid our eighth dividend to ordinary shareholders in 2014. 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 for you 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 for you 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 for you to enforce a final judgment for payment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon United States Federal securities laws against those persons or us.
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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 as a public company and failure to comply with all applicable regulations could subject us to liability or negatively affect our share price.
As a publicly traded company we are subject to a significant body of regulation. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance and continue to update this program in response to newly implemented or changing regulatory requirements, there can be no assurance that we are or will be in compliance with all potentially applicable corporate regulations. 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.
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.
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
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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.
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.
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. 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. 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.
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.
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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 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, which has been forecast to increase over the next decade, poses risks to us in terms of potentially reduced productivity and increased medical and insurance costs. The exact extent to which our workforce is infected is not known at present. The prevalence of AIDS 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.
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.
Item 4. Information on the Company
A. HISTORY AND DEVELOPMENT OF THE COMPANY
Randgold Resources Limited was incorporated under the laws of Jersey, Channel Islands in August 1995, to engage in the exploration and development of gold deposits in Sub-Saharan Africa. Our principal executive offices are located at 3rd Floor Unity Chambers, 28 Halkett Street, St. Helier, Jersey, JE2 4WJ Channel Islands and our telephone number is (011 44) 1534 735-333. Our agent in the United States is CT Corporation System, 111 Eighth Avenue, New York, New York 10011.
We discovered the Morila deposit during December 1996 and we subsequently financed, built and commissioned the Morila mine.
During July 2000, we concluded the sale of 50% of our interest in Morila Limited (and also a shareholder loan made by us to Morila Limited) to AngloGold Ashanti for $132.0 million in cash.
We have an 80% controlling interest in Société des Mines de Loulo SA, or 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.
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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% controlling interest in Tongon, which owns the Tongon mine. The Tongon mine commenced mining in April 2010 and first gold was produced in 2010.
In April 2004, Resolute Mining Limited, or Resolute, acquired the Syama mine from us. The agreement entered into in June 2004 between the parties provides for the payment of a production royalty by Resolute to us relating to Syama’s production equal to $10/oz on the first million ounces produced by Syama and $5/oz on the next 3Moz produced by Syama. This royalty payment is capped at $25.0 million. We received our first royalties in 2009. During 2014, quarterly royalty payments were received from Resolute throughout the year.
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.
During November 2009, we completed the sale of our Kiaka gold project to Volta Resources Inc., for CAD$4.0 million in cash and 20 million Volta Resources Inc. shares. During 2010, we sold 15.5 million Volta Resources Inc. shares for a net profit of $19.3 million. We had received CAD$4.0 million in full by the end of 2011.
Effective December 19, 2013, Volta Resources Inc. and B2 Gold Corp completed a Canadian law combination which resulted in Volta Resources Inc. becoming a wholly-owned subsidiary of B2 Gold Corp. As a result of this combination we received 898,003 shares in B2 Gold Corp in exchange for our Volta Resources Inc. shares.
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% 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 feasibility project.
Principal Capital Expenditure
Capital expenditure incurred for the year ended December 31, 2014 totaled $179.3 million compared to $303.1 million for the year ended December 31, 2013, and $272.2 million for the year ended December 31, 2012. Although lower than 2014, significant capital expenditure is forecasted to be incurred across the group during the year to support the planned continued growth in production, especially at Kibali, of approximately $280.0 million (100% of the project), and the ongoing development of the underground mines at Loulo, where total capital at the Loulo-Gounkoto complex is forecast at $155.0 million. Project and sustaining capital at Tongon, including completion of the flotation circuit upgrade, is estimated at $20.0 million, and $12.0 million will be spent at Morila (100% of the project), with Massawa capital expenditure estimated at $10.0 million. Consequently, total group capital expenditure for 2015 is expected to be approximately $330.0 million (including attributable share of joint ventures). The capital expenditure is projected to be financed out of internal funds.
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Recent Developments
The Kibali gold mine in the DRC poured its first gold on September 24, 2013, ahead of the originally forecasted date for the fourth quarter of 2013 and the mine moved into commercial production on one mill stream during October 2013. The secondary crushing, flotation and concentrate handling circuits were completed in 2014. The first hydropower plant entered operation in 2014. A sophisticated paste backfill system was installed at the Yalea and Gara underground mines. The feasibility study into the viability of an underground mine below the Gounkoto pit was successfully completed at the end of 2014.
B. BUSINESS OVERVIEW
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% 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 a technical and financial study in December 2009. In 2009, we acquired an effective 45% interest in the Kibali mine, which is located in the DRC. Since that time we have updated the feasibility study and constructed the mine such that we commissioned the first mill stream in 2013 and commissioned the second mill stream in 2014. We also have exploration permits and licenses covering substantial areas in Côte d’Ivoire, DRC, Mali, and Senegal. At December 31, 2014, we declared proven and probable reserves of 15Moz 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 2014, its ninth year of production, the Loulo mine produced 382,263 oz of gold at a total cash cost of $713/oz. 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. The commencement of the toll-treatment of ore from Gounkoto resulted in a reduction of ore processing with respect to the Loulo mine. Mining of the Yalea South pushback pit was completed in 2013. In 2013, cemented aggregate fill (CAF) came into full production at both Yalea and Gara and the Gara underground conveyor and crushing system was commissioned.
The Yalea, Gara and Baboto grade and tonnage models were updated during 2014. This included additional infill drilling on the Gara and Yalea deposits, while infill reverse circulation (RC) drilling was completed on Baboto. The Yalea and Gara underground mines are now in full production and paste backfill plants at both mines have been commissioned and are operational.
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. Following the completion of the 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 2014 a total of 1.7Mt of Gounkoto ore at a grade of 5.3g/t was fed to the Loulo plant and 256,957oz were produced at a total cash cost of $613/oz. We currently anticipate that mining at Gounkoto will continue through 2025.
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The Gounkoto grade and tonnage model was updated during 2014 to include the additional drilling that was completed in 2014. The underground feasibility study on Gounkoto was successfully completed at the end of 2014. Work on the portal in the south of the pit is planned to start in 2018 with access to ore anticipated in 2019.
The focus of exploration at Gounkoto is to continue to explore and discover additional orebodies within the Gounkoto permit. The viability of an enlarged pit or an underground project beneath the current pit in the Jog Zone is currently being investigated.
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 2014 was 110,272oz at a cash cost of $1,143/oz. Consistent with the mine plan, Morila ceased open pit mining in April 2009 and is currently processing lower grade stockpiles. During 2010 a study of the reprocessing of the Morila Tailings Storage Facility (TSF) was completed and in 2011 a feasibility study on the viability of treating the TSF material, marginal ore and mineralized waste stockpiles was completed and approved by the board in January 2012. During 2012, a feasibility study on the viability of the Pit 4S pushback was completed, and approved by the board in January 2013. Closure of the operation was originally scheduled for 2013, but, together with the Pit 4S pushback and the tailings treatment projects, processing of the marginal ore and mineralized waste should extend its life to 2017.
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. Tongon has two main pits, South Zone (SZ) and the smaller North Zone (NZ). In 2014, we produced 227,103oz at a total cash cost of $872/oz. The Tongon mine has a remaining mine life of 7 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 2014, we produced 526,627oz at a total cash cost of $573/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 hydropower stations was completed in December 2014. Phase 2 comprises the underground mine development and two additional hydropower stations. A key achievement in 2014 was the commissioning of the sulphide circuit and subsequent ramp up to design production level by the end of 2014. The mine is expected to operate through 2031.
The focus of exploration at Kibali is to evaluate extension to the known deposits, especially KCD where mineralization has been confirmed.
Exploration
We are exploring in four African countries (Mali, Senegal, Côte d’Ivoire and the DRC) with a portfolio of 115 targets on 12,213km2 of ground holding, of these 64 are satellite targets located near existing operations while 51 are potential stand-alone operations. 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 2014, the exploration strategy and management system was thoroughly reviewed to ensure that the team was properly equipped and motivated. Consequently, there were a number of changes within the team, including a number of internal promotions. The group’s portfolio of mineral rights was expanded through the acquisition of new permits as well as additional joint ventures.
| - 25 - |
OWNERSHIP OF MINES AND SUBSIDIARIES
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. Responsibility for the day-to-day operations rests with us.
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% interest, the State of Côte d’Ivoire 10% and 1% 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 Kibali. The remaining 10% of the shares are held by SOKIMO, the parastatal mining company of DRC. We thus have an effective 45% interest in the Kibali mine. Our interest in this mine was acquired 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.
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 balance held by our Senegalese joint venture partner.
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.
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
Only those reserves which qualify as proven and probable reserves for purposes of the SEC’s Industry Guide Number 7 are presented. Pit optimization is carried out at a gold price of $1,000/oz, except for Morila which is reported at $1,300/oz. Underground reserves are also based on a gold price of $1,000/oz.
The Morila, Loulo, Gounkoto, Tongon and Massawa open pit ore reserves were calculated by Mr. Shaun Gillespie, an officer of the company and competent person. The Kibali open pit ore reserves were calculated by Mr. Nicholas Coomson, an officer of the company and competent person, while the underground ore reserves were calculated by Mr. Tim Peters, an independent consultant and competent person. The Loulo underground ore reserves were calculated by Mr. Andrew Fox, an independent consultant and competent person. The Gounkoto underground ore reserves were calculated by Mr. Tim Peters, an independent consultant and competent person. All reserves were verified and approved by Mr. Rodney Quick, our Group General Manager of Evaluation and Lead Competent Person. Total reserves as of December 31, 2014 amounted to 201Mt at an average grade of 3.6g/t, for 24Moz of gold of which 15Moz are attributable to us.
In calculating proven and probable 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.
All reserves are based on 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.
| - 26 - |
The following table summarizes the declared reserves at our mines as of December 31, 2014:
| Proven Reserves | Probable Reserves | Total Reserves | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | Tonnes | Grade | Gold | Tonnes | Grade | Gold | ||||||||||||||||||||||||||||
| Operation/Project2 | (Mt) | (g/t) | (Moz) | (Mt) | (g/t) | (Moz) | (Mt) | (g/t) | (Moz) | |||||||||||||||||||||||||||
| Morila1 | 0.02 | 4.0 | 0.003 | 13 | 0.7 | 0.3 | 13 | 0.7 | 0.3 | |||||||||||||||||||||||||||
| Loulo1 | 2.2 | 1.8 | 0.1 | 31 | 4.8 | 4.7 | 33 | 4.6 | 4.9 | |||||||||||||||||||||||||||
| Tongon1 | 7.1 | 2.2 | 0.5 | 23 | 2.4 | 1.7 | 30 | 2.3 | 2.2 | |||||||||||||||||||||||||||
| Gounkoto1 | 4.4 | 3.8 | 0.5 | 18 | 4.6 | 2.6 | 22 | 4.4 | 3.2 | |||||||||||||||||||||||||||
| Massawa1 | - | - | - | 21 | 3.1 | 2.0 | 21 | 3.1 | 2.0 | |||||||||||||||||||||||||||
| Kibali1 | 5.4 | 1.8 | 0.3 | 78 | 4.3 | 11 | 83 | 4.1 | 11 | |||||||||||||||||||||||||||
| Total | 19 | 2.4 | 1.5 | 182 | 3.8 | 22 | 201 | 3.6 | 24 | |||||||||||||||||||||||||||
| 1. | Our attributable share of Morila is 40%, Loulo 80%, Gounkoto 80%, Tongon 89%, Massawa 83.25% and Kibali 45%. The figures stated above represent the 100% values. |
| 2. | The reporting of ore reserves is in accordance with SEC Industry Guide 7. Open pit reserves are calculated at a weighted average cut off of 1.0g/t and within an $1,000/oz open pit designs except for Morila which are reported within a $1,300/oz pit design. Underground reserves are reported at a weighted average cutoff of 2.4g/t, calculated at $1,000/oz gold price. Dilution and ore loss are incorporated into the calculation of reserves. Addition of individual line items may not sum to sub totals because numbers are reported to the second significant digit. |
At Loulo, Gounkoto, Kibali and Massawa open pit reserves, a 10% mining dilution at zero grade and an ore loss of 3% has been incorporated into the estimates of reserves and are reported as mill delivered tonnes and head grades. At the Tongon project a dilution of 13% at zero grade and an ore loss of 2% has been modeled for the Southern Zone and 10% dilution and 2% oreloss for the Northern Zone. Kibali underground dilution varies between 1% and 6.7% depending on stope design and ore loss of 3%. Metallurgical recovery factors have not been applied to the reserve figures since these are the estimates of the material to be delivered to the mill. Operating costs, metallurgical recovery, royalties, dilution and ore loss factors are used to determine the cut off grade at which to report ore reserves. The weighted average metallurgical recovery factors used are 60.5% for the Morila mine, 93.5% for the Loulo open pit material and 91.6% for Loulo underground material, 87.5% for the Tongon mine, 91.8% for the Gounkoto underground material, 89% for the Massawa open pit material and 87.9% for the Kibali mine.
MINING OPERATIONS
Loulo-Gounkoto Mine Complex
The Loulo and Gounkoto mines, known as the Loulo-Gounkoto complex, are located in the west of Mali, bordering Senegal, adjacent to the Falémé River. The complex lies within the Kedougou-Kéniéba inlier of Birimian rocks which hosts a number of major gold deposits in Mali, including Gara, Yalea and Gounkoto, Sadiola, Segala and Tabakoto as well as Sabodala across the border in Senegal. The Loulo mine officially opened in November 2005 with the approval for an underground feasibility study in the same year and underground mine development started in 2006. Gounkoto was discovered in 2009. Open pit mining commenced in January 2011 and first ore was delivered to Loulo plant, under a toll treating agreement in June 2011.
The complex is effectively owned 80% by us and 20% by the State of Mali. In 2010, an application was made to split the Loulo and Gounkoto permits, and a separate company was created for Gounkoto in December 2010 with the same corporate structure and shareholding as Loulo. A new mining convention, which dictates the fiscal and regulatory environment applicable to the mine, was negotiated with the State of Mali and signed in March 2012. The convention includes an initial two year corporate tax holiday starting from the date of first production, and a further tax holiday, up to a maximum of five years in total, in the event of further investment such as an underground mine. It also includes royalties of 6% of revenues and a 10% priority dividend payment for the State of Mali.
In 2014, gold sales totaled $799.7 million for the year. Total royalties paid to the state amounted to $47.9 million and cash operating costs totaled $376.8 million, resulting in profit from mining activities of $375.3 million. Gounkoto’s corporate tax holiday ended in June 2013, which contributed to the group’s higher overall tax charge of $81.9 million in 2014 compared to $76.7 million in 2013.
Capital expenditure amounted to $142.6 million at the Loulo-Gounkoto complex spent primarily on the underground development, backfill project, the plant upgrade (including four carbon-in-leach (CIL) tanks), the power plant expansion and the completion of the Gounkoto infrastructure together with work undertaken on the underground feasibility study.
| - 27 - |
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 27,025 | 33,188 | ||||||
| Ore tonnes mined (000) | 4,539 | 5,165 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 4,396 | 4,463 | ||||||
| Head grade milled (g/t) | 5.0 | 4.6 | ||||||
| Recovery (%) | 90.2 | 88.4 | ||||||
| Ounces produced | 639,219 | 580,364 | ||||||
| Ounces sold | 631,124 | 587,550 | ||||||
| Average price received ($/oz) | 1,267 | 1,376 | ||||||
| Cash operating costs1 ($/oz) | 597 | 621 | ||||||
| Total cash costs1 ($/oz) | 672 | 704 | ||||||
| Gold on hand at period end2 ($000) | 9,708 | – | ||||||
| Profit from mining activity1 ($000) | 375,293 | 394,633 | ||||||
| Gold sales1 ($000) | 799,718 | 808,311 | ||||||
| 1. | Refer to explanation of non-GAAP measures provided in the section “Non-GAAP Measures” above. |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
LOULO
Mining and Operations
Gold production at Loulo increased 24% year on year to 382,263oz while the head grade milled increased 9% to 4.9g/t, in line with the plan. The increase in ounces, together with a higher recovery of 90.1%, resulted in a decrease in total cash costs to $713/oz.
Gold sales amounted to $475.9 million resulting in profit from mining activities (before interest, tax and depreciation) of $207.5 million.
Capital expenditure for the year of $142.6 million included the continued development of the Yalea and Gara underground mines as well as the construction of the Yalea and Gara paste backfill plants. Expenditure also covered the installation of an additional secondary crusher to improve availability of the crushing circuit, and expansion of the power generating station with the addition of two medium speed CM32 generators (7MW), capable of operating on cheaper heavy fuel oil (HFO).
The Yalea and Gara underground mines are now in full production and paste backfill plants at both mines have been commissioned and are operational. During 2014, 16,432 development meters were completed and 2,699kt of ore at 5.3g/t was hoisted to surface. In line with plan, development meters decreased during the course of the year as backfill production increased.
Ventilation in the mines was considerably improved, with two additional primary ventilation shafts at Yalea and one at Gara completed in 2014.
Following a review of the underground mining activities, the mine has taken a decision to take over the mining and development activities that were previously managed by the underground mining contractor. Consequently, the mine is working with the contractor to agree to an orderly change over which is expected to be completed over the course of 2015. The mine is reviewing its operating and capital expenditure estimates to incorporate this change, which will be updated in due course.
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 2,819 | 4,251 | ||||||
| Ore tonnes mined (000) | 2,699 | 2,541 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 2,711 | 2,432 | ||||||
| Head grade milled (g/t) | 4.9 | 4.5 | ||||||
| Recovery (%) | 90.1 | 88.0 | ||||||
| Ounces produced | 382,263 | 308,420 | ||||||
| Ounces sold | 376,490 | 312,748 | ||||||
| Average price received ($/oz) | 1,264 | 1,397 | ||||||
| Cash operating costs1 ($/oz) | 637 | 692 | ||||||
| Total cash costs1 ($/oz) | 713 | 776 | ||||||
| Gold on hand at period end2 ($000) | 6,922 | – | ||||||
| Profit from mining activity1 ($000) | 207,496 | 194,190 | ||||||
| Gold sales1 ($000) | 475,861 | 436,950 | ||||||
| - 28 - |
Randgold owns 80% of Loulo with the State of Mali owning 20%. The State's share is not a free carried interest. Randgold has funded the State portion of the 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 show the non-controlling interest separately.
| 1. | Refer to explanation of non-GAAP measures provided in the section “Non-GAAP Measures” above. | |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
Ore Reserves
| Attributable | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | gold2 | |||||||||||||||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||||||||||||
| (Mt) | (Mt) | (g/t) | (g/t) | (Moz) | (Moz) | (80%) | (80%) | |||||||||||||||||||||||||||
| at December 31 | Category | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
| Ore reserves1 | ||||||||||||||||||||||||||||||||||
| ☐ Stockpiles | Proven | 2.2 | 2.2 | 1.8 | 1.9 | 0.1 | 0.1 | 0.1 | 0.1 | |||||||||||||||||||||||||
| ☐ Open pits | Proven | – | – | – | – | – | – | – | – | |||||||||||||||||||||||||
| Probable | 4.2 | 2.9 | 2.5 | 2.9 | 0.3 | 0.3 | 0.3 | 0.2 | ||||||||||||||||||||||||||
| ☐ Underground | Probable | 27 | 29 | 5.1 | 5.3 | 4.4 | 4.9 | 3.5 | 3.9 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES | Proven and probable | 33 | 34 | 4.6 | 4.9 | 4.9 | 5.3 | 3.9 | 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 calculated by Mr. 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 2.5g/t for Yalea underground and 2.2g/t for Gara underground, and include dilution and ore loss factors. Underground ore reserves were calculated by Mr. Andrew Fox, an independent consultant and competent person. Addition of individual line items may not sum to sub totals because of numbers being reported to second significant digit. |
| 2. | Attributable gold (Moz) refers to the quantity attributable to ourselves based on our 80% interest in Loulo. |
Processing Plant and Engineering
A total of 4,396kt (including 1,686kt from Gounkoto) at 5.0g/t was treated and milled, compared to 4,463kt at 4.6g/t in 2013.
Overall gold recovery and plant utilization for the year were 90.2% and 91.7% respectively. While recovery increased year on year, it was still slightly below target. Given the capital projects undertaken during the year, including the upgrade of the oxygen plant and the new REA-400 generator installed in the CIL process section, gold recovery is expected to improve further in the year ahead.
The plant feed contribution for the year was 61% from Loulo (28% Gara underground, 33% Yalea underground) and 39% from Gounkoto in line with the 60:40 plan to balance the mines’ respective reserves.
In the metallurgical plant, the availability of the mills and crusher was 93.2% (2013: 93.9%) and 88.9% (2013: 89.3%) respectively. Mill availability was impacted by the replacement of the secondary drive and motor as well as the installation of the new upgraded cyclone pumps. However, crusher availability was sustained during the year due to the commissioning of another secondary crusher unit at the plant.
The power plant produced a total of 287.7GWh of electricity (2013: 258.3GWh), an 11% increase mainly reflecting the increased underground demand and usage including the paste backfill plants and primary ventilation upgrades.
Power stability and management systems are planned to be implemented over the next two years to manage the increases in load and capacity. Ten medium speed generators can now run on cheaper HFO which together with the lower diesel price towards the end of the year contributed to a significant improvement in power costs during the fourth quarter.
| - 29 - |
GOUNKOTO
Mining at Gounkoto started in January 2011, although first ore was fed to the Loulo plant in June 2011 and 2012 represented the first full year of production from the mine. Total material mined during 2014 was 24.2Mt compared to 28.9Mt in 2013.
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| MINING | ||||||||
| Tonnes mined (000) | 24,206 | 28,936 | ||||||
| Ore tonnes mined (000) | 1,841 | 2,624 | ||||||
| MILLING | ||||||||
| Tonnes processed (000) | 1,686 | 2,032 | ||||||
| Head grade milled (g/t) | 5.3 | 4.7 | ||||||
| Recovery (%) | 90.2 | 88.8 | ||||||
| Ounces produced | 256,957 | 271,943 | ||||||
| Ounces sold | 254,634 | 274,802 | ||||||
| Average price received ($/oz) | 1,272 | 1,351 | ||||||
| Cash operating costs1 ($/oz) | 537 | 541 | ||||||
| Total cash costs1 ($/oz) | 613 | 622 | ||||||
| Gold on hand at period end2 ($000) | 2,786 | – | ||||||
| Profit from mining activity1 ($000) | 167,797 | 200,444 | ||||||
| Gold sales1 ($000) | 323,857 | 371,361 | ||||||
Randgold owns 80% of Gounkoto with the State of Mali owning 20%. Randgold consolidates 100% of Gounkoto and show the non-controlling interest separately.
| 1. | Refer to explanation of non-GAAP measures provided in the section “Non-GAAP Measures” above. | |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
Mining and Operations
Gounkoto produced 256,957oz of gold, 6% fewer than the previous year in line with the plan to balance production from Loulo and Gounkoto according to their reserves. Tonnes processed decreased during the year but head grade milled increased by 13% to 5.3g/t, in line with the mining plan. Improved recovery at 90.2%, together with the increase in head grade milled, resulted in a decrease in total cash costs to $613/oz.
Gold sales amounted to $323.9 million resulting in profit from mining activities (before interest, tax and depreciation) of $167.8 million. Capital expenditure totaled to $8.7 million, most of which was related to the underground feasibility study and exploration.
During the year, Gounkoto paid a total of $50.6 million in dividends to its shareholders.
A total of 24.2Mt was mined, including 1.8Mt of ore at an average grade of 5.3g/ t, compared to 28.9Mt including 2.6Mt of ore at 4.7g/t in 2013. The increase in grade reflects the current improved grade profile in the pit. The strip ratio was 12.2 in 2014 compared to 10.0 in 2013, higher than the life of mine (LoM) strip ratio of 10.2. A total of 1,686kt of ore was fed from Gounkoto to the Loulo plant at an average head grade of 5.3g/t compared to 2,032kt of ore at 4.7g/t in 2013.
Gounkoto Underground Project
The underground feasibility study on Gounkoto was completed at the end of the year. Work on the portal in the south of the pit is planned to start in 2018 with access of ore anticipated in 2019. A ramp up in stoping is scheduled for 2020, as the mining in the south of the pit comes to an end. The mining method proposed comprises longhole open stoping with backfill to support a 60 to 70ktpm operation.
Capital expenditure has been minimized by the following:
| · | Ore handling method to be decline and truck with no underground crushing, alleviating the need for expensive capital excavations and underground engineering; | |
| · | Portal position to be located in the south of the pit to ensure a straight decline route to the top of the ore, reducing the requirement for spiral declines; | |
| · | Ventilation raised to hole into the open pit with preparation of the holing positions during the pit development; and | |
| · | Backfill to be a combination of CAF and cemented rock fill (CRF) by using batching and CAF facilities available at Loulo, which will be transferred to Gounkoto. |
| - 30 - |
An economic assessment on the financial viability of the Gounkoto project underground reserve has been carried out based on the parameters summarized below:
· |
Total ore mined of 4.7Mt containing 0.9Moz of gold at an average grade of 6g/t; | |
| · | Average mining costs of $83.84/ore tonne delivered to the Gounkoto RoM pad; | |
| · | Average crush and haul costs of $5.90/t ore; | |
| · | Average mill throughput of 657,000t per year to be treated at the Loulo plant over eight years of production; | |
| · | Average plant processing costs of $20.60/ore tonne; | |
| · | G&A cost at $9.30/ore tonne processed over LoM, including engineering services costs; and | |
| · | Capital cost of $137.5 million, including underground development, surface capital, sustaining capital and project management. |
A financial model using a $1,000/oz gold price together with a 30% tax rate and 6% royalty, produced a nine year project with a total after tax cashflow of $107 million and an internal rate of return of 31%.
Integrating the Gounkoto underground mine schedule into that of Loulo-Gounkoto should enable the complex to produce over 600,000oz per year until 2024 on current reserves. This excludes further opportunities currently being explored to expand the mineralized material at the three principal orebodies of Yalea, Gara and Gounkoto.
| - 31 - |
Ore Reserves
| Attributable | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | gold2 | |||||||||||||||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||||||||||||
| (Mt) | (Mt) | (g/t) | (g/t) | (Moz) | (Moz) | (80%) | (80%) | |||||||||||||||||||||||||||
| at December 31 | Category | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
| Ore reserves1 | ||||||||||||||||||||||||||||||||||
| ☐ Stockpiles | Proven | 1.7 | 1.5 | 1.9 | 2.4 | 0.1 | 0.1 | 0.08 | 0.09 | |||||||||||||||||||||||||
| ☐ Open pits | Proven | 2.7 | 0.4 | 4.9 | 2.5 | 0.4 | 0.03 | 0.3 | 0.03 | |||||||||||||||||||||||||
| Probable | 13 | 15 | 4.0 | 4.5 | 1.7 | 2.1 | 1.4 | 1.7 | ||||||||||||||||||||||||||
| ☐ Underground | Provable | 4.7 | — | 6.0 | — | 0.9 | — | 0.7 | — | |||||||||||||||||||||||||
| TOTAL ORE RESERVES1 | Proven and Probable | 22 | 17 | 4.4 | 4.3 | 3.2 | 2.3 | 2.5 |
| 1.8 | ||||||||||||||||||||||||
| 1. | Open pit ore reserves are reported at a gold price of $1,000/oz and 1.3g/t cut-off and include dilution and ore loss factors. Open pit ore reserves were calculated by Mr. Shaun Gillespie, an officer of the company and competent person. Underground ore reserves are reported at a gold price of $1,000/oz and 3g/t cut-off and include dilution and ore loss factors. Underground ore reserves were calculated by Mr Tim Peters, an independent consultant and a competent person. Addition of individual line items may not sum to sub totals because of reporting to the second significant digit. | |
| 2. | Attributable gold (Moz) refers to the quantity attributable to ourselves based on our 80% interest in Gounkoto. |
Health, safety and the environment
Loulo
The Lost Time Injury Frequency Rate (LTIFR) decreased from 0.82 per million hours worked in 2013 to 0.62 in 2014. The safety management system was fully implemented as per OHSAS 18001 requirements and recertified during the year.
Counseling and voluntary testing (VCT) of 924 volunteers for HIV was conducted with a positivity rate of 1.08%, 42% lower than in 2013.
The Malaria incidence rate (MIR) of 33.6% was down 1% on the previous year.
An Ebola prevention policy, which includes an implementation plan, was developed and, following the confirmed case of the virus in Mali, further control measures were introduced together with Randgold’s other West African operations as part of an industry-wide private initiative in partnership with state and regional health authorities. Mali was officially declared Ebola-free at the beginning of 2015 by the United Nations Mission for Ebola Emergency Response.
The mine retained its environmental management system (EMS) certification for ISO 14001 following the recertification audit during the year, while management reviews and inspections were also undertaken. A water balance action plan was implemented to optimize existing water usage in the circuit.
Completion of the sludge treatment plant at Gara in the first quarter of 2015 will support further water saving initiatives. In terms of biodiversity actions, 3.8ha of land were cleared and 5ha rehabilitated during the year while 6 478 trees were planted in partnership with the Kenieba forestry department.
Gounkoto
As in 2013, no LTIs were recorded during the year. Consequently the LTI frequency rate was zero and the mine achieved over 5 million LTI free hours. Compared to the previous year, the MIR decreased by 7% to 51.3%. VCT of 315 volunteers for HIV was conducted resulting in a positivity rate of 0.32%, a 56% decrease from 2013.
An Ebola prevention policy was developed with a response and implementation plan in conjunction with Randgold’s other West African operations as part of an industry-wide private initiative in partnership with state and regional health authorities.
The OHSAS 18001 surveillance audit was successfully completed and the mine retained its certification. The mine retained its environmental management system certification to ISO 14001 following the surveillance audit carried out. A management review forum was held where 32 environmental inspections were undertaken to ensure continued improvement.
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Human Resources
Loulo
The operational labor complement at Loulo comprises 945 personnel (excluding persons employed by contractors and temporary laborers) of which 93% are Malians. The increase in nationals and the decrease in expatriate staff are mainly due to the localization program implemented in collaboration with all contractors to increase the number of national workers. The program included the underground mining, capital projects, engineering and procurement departments. Total manpower decreased during 2014 as most capital project activities reached completion.
Industrial relations at mine level were stable during the year. Although both the UNTM and SECNAMI unions called for national strikes in October 2014 and November 2014 respectively, these strikes did not affect any of our mines in Mali.
The personnel representatives received capacity building training in their key company roles, including workplace conflict resolution and social dialogue. During 2014, union representatives from Tongon made a benchmark visit to the Loulo site.
Gounkoto
Operational employees decreased to 151, excluding contractors, after a rightsizing exercise was undertaken at Gounkoto’s opencast mining operation. Similar reductions were also made with respect to contractors. The total mine operational complement is now 1,013, including persons employed by contractors.
Industrial relations were stable at the mine during the course of the year. Training of senior staff and union representatives was undertaken to increase awareness of compulsory health insurance. Union representatives from Tongon made a benchmark visit to the Gounkoto site.
| 2014 | 2013 | |||||||||||||||||||||||
| At December 31 | ||||||||||||||||||||||||
| Expats | Nationals | Total | Expats | Nationals | Total | |||||||||||||||||||
| Loulo | ||||||||||||||||||||||||
| Employees | 68 | 877 | 945 | 82 | 865 | 947 | ||||||||||||||||||
| Contractors | 133 | 1,783 | 1,916 | 158 | 2,128 | 2,286 | ||||||||||||||||||
| Total Loulo | 201 | 2,660 | 2,861 | 240 | 2,993 | 3,233 | ||||||||||||||||||
| Gounkoto | ||||||||||||||||||||||||
| Employees | 7 | 144 | 151 | 6 | 157 | 163 | ||||||||||||||||||
| Contractors | 28 | 834 | 862 | 24 | 1,057 | 1,081 | ||||||||||||||||||
| Total Gounkoto | 35 | 978 | 1,013 | 30 | 1,214 | 1,244 | ||||||||||||||||||
Exploration
At Loulo, drilling confirmed strong mineralization at the margins of the Yalea and Gara orebodies with exploration drillholes highlighting significant potential up to 400m from the existing block models as part of a broader conversion program. Greenfields exploration continued to generate targets across the Loulo permit and a gradient array survey was carried out to add a new layer of data for new target generation. Work on a number of targets, including Waraba, Gara South and Yalea Ridge South, resulted in their removal from the resource triangle.
At Gounkoto, drilling during 2014 delivered 4.69Mt at 6.0g/t for 910,000 reserve ounces in the underground feasibility study. Drill results around the underground project also highlighted considerable potential for additional underground mineralized material which will be further evaluated in 2015. Exploration across the Gounkoto permit continued to generate new models and targets. During the year, work on the targets of Sahnou, Djiguibah and Findogoleh and the follow-up target of Toronto confirmed only limited potential for mineralization and they were removed from the resource triangle.
MORILA
The Morila mine is situated 280km south-east of Bamako, the capital of Mali. The Morila mine is owned by a Malian company, Morila, which in turn is owned 80% by Morila Limited and 20% by the State of Mali. Morila Limited is jointly owned by ourselves and AngloGold Ashanti Limited and the mine is controlled by a 50:50 joint venture management committee. Responsibility for the day-to-day operations rests with us. Under its stewardship the mine was successfully converted from open pit mining to a stockpile treatment operation during 2009.
Closure of operations at Morila was originally scheduled for 2013 but, together with the Pit 4S pushback and the tailings treatment projects, processing of the marginal ore and mineralized waste should extend its life to 2017.
| - 33 - |
Operations
2014 gold production of 110,272oz was 22% down on the prior year due to lower grade ore milled and lower throughput as the mine progressed through remaining stockpiles. The reduction in throughput resulted from the planned change in the milling configuration with the shutdown of the SAG mill in July 2013.
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| Mining | ||||||||
| Tonnes mined (000) | 18,405 | 6,803 | ||||||
| Ore tonnes mined (000) | 1,035 | — | ||||||
| Milling | ||||||||
| Tonnes processed (000) | 3,242 | 3,576 | ||||||
| Head grade milled (g/t) | 1.2 | 1.4 | ||||||
| Recovery (%) | 89.8 | 91.3 | ||||||
| Ounces produced | 110,272 | 141,822 | ||||||
| Ounces sold | 110,272 | 141,822 | ||||||
| Average price received ($/oz) | 1,258 | 1,408 | ||||||
| Cash operating costs1 ($/oz) | 1,109 | 679 | ||||||
| Total cash costs1 ($/oz) | 1,143 | 763 | ||||||
| Profit from mining activity1 ($000) | 12,631 | 91,418 | ||||||
| Attributable (40%) | ||||||||
| Gold sales1 ($000) | 55,489 | 79,870 | ||||||
| Ounces produced | 44,109 | 56,729 | ||||||
| Ounces sold | 44,109 | 56,729 | ||||||
| Gold on hand at period end2 ($000) | — | — | ||||||
| Profit from mining activity1 ($000) | 5,052 | 36,567 | ||||||
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 measures provided in the section “Non-GAAP Measures” above. | |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
Ore Reserves
Marginal stockpiles and open pit material along with the higher grade portion of the TSF are reported in ore reserves and form the bulk of the feed for the current life of mine plan.
| Attributable | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | gold2 | |||||||||||||||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||||||||||||
| (Mt) | (Mt) | (g/t) | (g/t) | (Moz) | (Moz) | 40% | 40% | |||||||||||||||||||||||||||
| at December 31 | Category | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
| Ore reserves1 | ||||||||||||||||||||||||||||||||||
| ☐ Stockpiles | Proven | 0.02 | — | 4.0 | — | 0.003 | — | 0.001 | — | |||||||||||||||||||||||||
| Probable | — | 0.6 | — | 1.0 | — | 0.02 | — | 0.01 | ||||||||||||||||||||||||||
| ☐ Open pit | Probable | 0.6 | 0.9 | 3.0 | 2.9 | 0.06 | 0.08 | 0.02 | 0.03 | |||||||||||||||||||||||||
| ☐ TSF | Probable | 12 | 13 | 0.5 | 0.5 | 0.2 | 0.2 | 0.08 | 0.09 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES1 | Proven and probable | 13 | 14 | 0.7 | 0.7 | 0.3 | 0.3 | 0.1 | 0.1 | |||||||||||||||||||||||||
| 1. | Open pit ore reserves are located within the $1,300/oz pit shell, but reported at $1,000/oz cut-off grade of 0.9g/t. Stockpile orel reserves are reported at a $1,000/oz cut-off grade of 0.9g/t. TSF ore reserves are reported at a $1,000/oz cut-off grade of 0.5g/t. Ore reserves were calculated by Mr. Shaun Gillespie, an officer of the company and competent person. | |
| 2. | Attributable gold (Moz) refers to the quantity attributable to ourselves based on our 40% interest in the Morila gold mine. |
Processing
In 2014, the throughput rate decreased to 402tph from 436tph in 2013, after taking the SAG mill offline in July 2013, as per the business plan. The milling and crushing circuits were reconfigured along with an upgraded three stage crushing plant. The current oxygenation plant production is sustaining the recovery rate despite the lower grade ore processed. The installation of a new oxygen
| - 34 - |
unit including the Aachen reactors, designed to improve recovery rates as well as cyanide consumption during the TSF treatment, is expected to be completed early in 2015.
An incinerator has been ordered and will also be installed. This will be used as part of a project to recover gold from stockpiled fine carbon which is planned to start in 2015.
Engineering
Engineering availability for the year was 80.3% for crushing and 94.2% for milling, slightly below plan. The vertical vibration of the ball mill gearbox increased between 10.83mm/s and 12.28mm/s depending on the load. The spare drive was rebuilt and ready for use in November 2014 but a decision was taken to continue to run the mill until the end of the year while managing and monitoring vibrations.
Total power consumption of 101.9GWh was 20% lower than the prior year and generated at an efficiency of 0.238l/kWh, resulting in a total power cost of $0.303/kWh (2013: $0.284/kWh).
Pit 4S pushback project
During 2014, the pit 4S pushback mining operation continued with waste stripping and ore mining. Waste was hauled and dumped in both Pit4N and Pit5, the designated in-pit dumping areas, while ore was fed to the plant. Tonnes mined of 18.4Mt was 8% above plan. This included 1.0Mt at 2.26g/t of ore and 17.4Mt of waste material. Ore grade mined was lower than plan due to the low grade gains achieved during the year and the inability to achieve the plan in the final quarter of the year due to flooding of the pit. This, however, will result in more ore being available for mining in the first quarter of 2015.
TSF Project
In 2014, the TSF project model and feasibility study were updated to reflect a selective mining approach. A mining schedule, using a gold price of $1,000/oz, was produced by Fraser Alexander, the specialist TSF contractors, who envisage that the main mining and processing of the TSF will start in October 2015 and end in the third quarter of 2017.
The plan includes:
| · | 44.1Mt at 0.24g/t of very low grade material stripped and pumped directly into the pit; and | |
| · | 11.9Mt at 0.53g/t (204koz) of higher grade material mined and processed through the plant, with the tailings also being deposited in the pit. |
It is envisaged that all the TSF material will ultimately be reclaimed and deposited in the pit, reducing the long term environmental impact and liability. The civil work relating to the decapping and sluicing station, as well as the water tank, was completed in December 2014. A total of 750kt of TSF material at 0.48g/t from the TSF wall B was mined and fed to the plant during 2014.
Agribusiness
As per the mine closure strategy, Morila is continuing to establish a viable agricenter by 2017.
This aims to:
| · | Provide an alternative income source to former mineworkers and the surrounding communities; | |
| · | Contribute towards ensuring food security in the community and the country; | |
| · | Promote local economic development; and | |
| · | Improve the community’s economic welfare. |
The poultry project comprises 7,000 laying chickens in a facility which has the capacity to house 10,000 chickens. Six new fish ponds have been constructed to breed tilapia in addition to the seven existing tilapia ponds. One test floating cage has been installed in the Morila fresh water dam and an additional 11 floating cages are planned.
This focus is on:
| · | Expanding the current poultry project; | |
| · | Expanding the current fish project; |
| - 35 - |
| · | Expanding the current mango project; | |
| · | Establishing a honey producing unit with a partner; | |
| · | Establishing a juice/pulp producing unit with a partner; | |
| · | Investigating the possibility of ecotourism with a partner; | |
| · | Establishing greenhouse tomato production with a partner; and | |
| · | Improving community food production. |
Health, safety and the environment
During the year the mine was recertified in accordance with OHSAS 18001 requirements. Three LTIs were recorded and the LTIFR was 1.11 compared to 0.49 in 2013. The MIR increased slightly during the year to 26.25% compared to 23.49% in the prior year, but was still well contained. Morila health workers joined other Randgold operations in managing the Ebola virus threat during the latter part of the year.
Morila’s environmental management system successfully completed its ISO 14001 annual surveillance assessment. The conformity assessment found that the mine’s EMS is being implemented effectively and that there is a clear and extensive evidence of continual improvement in the mine’s pollution prevention and environment management programs.
The mine closure plan was updated in November 2014 to meet the requirements of the government and the communities and to prevent or minimize any adverse long term environmental impact while creating a self-sustaining natural ecosystem.
Human resources
Total manpower recorded at the end of the year was 1,280 (including 978 persons employed by contractors) of which 99% are Malian. The growth in manpower from year to year relates primarily to the mining contractor and the pit pushback project. During the year the industrial relations climate was stable. Several training and employee capacity building activities took place.
| 2014 | 2013 | |||||||||||||||||||||||
| At December 31 | ||||||||||||||||||||||||
| Expats | Nationals | Total | Expats | Nationals | Total | |||||||||||||||||||
| Employees | 7 | 295 | 302 | 10 | 387 | 397 | ||||||||||||||||||
| Contractors | 11 | 967 | 978 | 11 | 760 | 771 | ||||||||||||||||||
| Total | 18 | 1,262 | 1,280 | 21 | 1,147 | 1,168 | ||||||||||||||||||
Tongon
The Tongon mine is located within the Nielle exploration permit in the north of Côte d’lvoire, 55km south of the border with Mali. The Tongon mine is owned by an Ivorian company, Tongon, of which Randgold has an 89% interest, the government of Côte d’lvoire 10% and 1% is held by a local company. Tongon is an open pit mining operation and employs the four standard mining practices of drill, blast, load and haul.
Operations
The mine produced 227,103oz of gold in 2014, 3% less than the prior year as a result of the lower head grade milled, despite a 3% improvement in mill throughput and a 1% improvement in recovery. The mine successfully completed the hydrocone crushing circuit upgrade in the fourth quarter following repeated breakdowns due to mechanical deficiencies of the vibrocone crushers.
The mine also continued to engineer out key process deficiencies and improve operator skills and plant maintenance. The electricity grid supply issues which challenged the mine in previous years were resolved, resulting in a grid to generated power ratio of 97:3 in the fourth quarter. By year end the mine had completed Phase 1 of the flotation circuit upgrade, designed to increase recoveries into the upper 80s percentile, and is forecasting completion of the full project by the end of the first quarter of 2015.
Gold sales amounted to $287.0 million at a total cash cost of $872/oz, resulting in a profit from mining activity (before interest, tax and depreciation) of $89.0 million.
Capital expenditure for the year totaled $19.2 million, which related primarily to the crusher and flotation circuit upgrades.
| - 36 - |
Mining and production
Mining continued in the SZ pit where development was based mainly on hard ore mining to supply the plant. As in 2014, mining activities for 2015 will focus primarily on the SZ pit although mining of both ore and waste in the NZ pit will start to ramp up from the second quarter of 2015. The LoM schedule is broadly categorized as follows:
| • | Mining in SZ pit, which started in 2010, will continue to 2019 to the final pit bottom; | |
| • | Mining in the NZ pit, started in 2011, will start ramping up in the second quarter of 2015 - consisting mainly of waste stripping. Mining will, however, be suspended during the rainy season and start again in the fourth quarter of 2015 with an increasing proportion of ore being mined. Ore mining will continue to 2020; and | |
| • | SZ and NZ satellite pits have been introduced into the plan and the SZ oxide pit will be mined from 2016 and the NZ east pit from 2019. |
Total material mined in 2014 at 26.1Mt, was 4% below the prior year. Total ore mined at 3,566kt was 13% below the previous year, mainly as a result of difficulties experienced in mining multiple thin orebody sections, predominantly found in the SZ pit, and controlling dilution. The strip ratio for the year of 6.3 was up 11% on the prior year, in line with the LoM plan. SZ pit mining activity centered on hard rock mining (ore and waste) with an oxide/saprolite pushback which started in the second quarter of 2014 in the northern side of the pit.
Mining production improved in the second quarter, reducing in the rainy season in the third quarter as per plan and picking up once more in the fourth quarter. Groundwater and surface water management received continued attention and was well controlled during the year. The SZ pit 260RL stage pumping installation, including pipes and tanks, was completed in the third quarter of 2014.
Preparation for the 2015 rainy season will start in the first quarter of 2015, with deep sumps being developed in the northern and southern parts of the SZ pit. In the NZ pit, eight borehole pumps were installed in the perimeter of the pit together with an upgrade of the in-pit dewatering system. Dewatering forms an integral part of the mining strategy in Tongon as the pit lies in the catchment area of the old river system and is downstream of the water storage dam.
Mining schedules and plans are developed with a view to ensuring two low spots (sumps) in the pit at any time in the mining cycle, to allow mining to take place in dry ground while the water is pumped away in the sumps.
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| Mining | ||||||||
| Tonnes mined (000) | 26,126 | 27,237 | ||||||
| Ore tonnes mined (000) | 3,566 | 4,081 | ||||||
| Milling | ||||||||
| Tonnes processed (000) | 3,984 | 3,866 | ||||||
| Head grade milled (g/t) | 2.3 | 2.4 | ||||||
| Recovery (%) | 78.0 | 77.0 | ||||||
| Ounces produced | 227,103 | 223,591 | ||||||
| Ounces sold | 227,103 | 236,279 | ||||||
| Average price received ($/oz) | 1,264 | 1,394 | ||||||
| Cash operating costs1 ($/oz) | 834 | 786 | ||||||
| Total cash costs1 ($/oz) | 872 | 828 | ||||||
| Gold on hand at period end2 | - | - | ||||||
| Profit from mining activity1 ($000) | 88,963 | 133,907 | ||||||
| Gold sales1 ($000) | 287,026 | 329,448 | ||||||
Randgold owns 89% of Tongon with the State of Côte d’lvoire and outside shareholders owning 10% and 1% respectively. Randgold funded all the investments in Tongon by way of shareholder loans and therefore control 100% of the cash flows from Tongon until the shareholder loans are repaid. Randgold consolidates 100% of Tongon and show the non-controlling interest separately.
| 1. | Refer to explanation of non-GAAP measures provided in the section “Non-GAAP Measures” above. |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
| - 37 - |
Ore Reserves
| Attributable | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | gold2 | |||||||||||||||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||||||||||||
| (Mt) | (Mt) | (g/t) | (g/t) | (Moz) | (Moz) | (89%) | (89%) | |||||||||||||||||||||||||||
| at December 31 | Category | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
| Ore reserves1 | ||||||||||||||||||||||||||||||||||
| ☐ Stockpiles | Proven | 3.0 | 3.3 | 1.3 | 1.4 | 0.1 | 0.2 | 0.1 | 0.1 | |||||||||||||||||||||||||
| ☐ Open pits | Proven | 4.2 | - | 2.8 | - | 0.4 | - | 0.3 | - | |||||||||||||||||||||||||
| Probable | 23 | 28 | 2.4 | 2.3 | 1.7 | 2.1 | 1.5 | 1.8 | ||||||||||||||||||||||||||
| TOTAL ORE RESERVES1 | Proven and probable | 30 | 31 | 2.3 | 2.2 | 2.2 | 2.2 | 2.0 | 2.0 | |||||||||||||||||||||||||
| 1. | Open pit ore reserves are reported at a gold price of $1,000/oz and 0.8g/t cut-off and include dilution and ore loss factors. Open pit ore reserves were calculated by Mr. Shaun Gillespie, an officer of the Company and competent person. Addition of individual line items may not sum to sub totals because of reporting to second significant digit. | |
| 2. | Attributable gold (Moz) refers to the quantity attributable to ourselves based on our 89% interest in Tongon. |
Processing
Year on year mill availability and throughput increased by 1% and 3% respectively with 3,984kt of fresh sulphide ore being treated in 2014.
The change-out of the old hydrocone crushers to vibrocone crushers was completed in the first quarter of 2014 as planned. Although the vibrocone crushers delivered an improvement in crusher throughput and fineness of crushed product, this improvement could not be sustained due to repeated mechanical failures. Consequently, it was agreed with the supplier to replace the vibrocone crushers with upgraded hydrocone crushers within a new circuit configuration, which was completed in the fourth quarter of 2014.
The mine is currently optimizing the new crushing circuit installation and is expecting to ramp up mill tonnage throughput to 4.3mtpa in 2015 with an eventual target of 4.8mtpa. Year on year, gold recovery improved by 1% to 78%, and by the fourth quarter of 2014, had improved to 80%, mainly as a result of improving and sustaining the existing flash flotation concentrate mass pull and its treatment, while sustaining previous improvements and gains made in operating parameters and management of the process plant. Despite the increase in mill throughput and recovery, gold production decreased by 3% year on year to 227,103oz due to the lower head grade milled.
The strategy for increasing gold production is to improve mill throughput and gold recovery. The first 2% gain in recovery has been achieved by optimizing most aspects of the existing recovery circuit. The next recovery gain, to the targeted upper 80s percentile, requires the installation of a rougher flotation plant with upgraded ultrafine grinding facilities.
Gold and arsenopyrite deportment studies of the Tongon plant feed have confirmed that a rougher flotation circuit together with ultrafine grinding facilities will effectively recover arsenopyrite associated gold thus increasing overall gold recovery to the original feasibility specifications.
Phase 1 of the new flotation circuit was completed in the fourth quarter of 2014 and consists of one rougher cell, dewatering cyclones and related pumping and control facilities. The final phase of the flotation installation and additional ultrafine grinding capacity is scheduled for completion by the end of the first quarter of 2015.
Engineering and power supply
Overall mill availability for 2014 was 91.4%, an improvement of 1% on 2013 and 14% on 2012.
Continued engineering improvements and uplifting of local workforce skills contributed positively to the overall increase in engineering mechanical availability and subsequent overall mill availability improvement. This positive trend in plant availability was attributable to more efficient planned maintenance, less controllable downtime stemming from mechanical failures in the milling circuit and improved power management.
Improved maintenance of key recovery related equipment, such as regeneration kilns, acid wash pumps and the elution circuit, also contributed to the overall recovery improvement. Power supply management and stability improved during 2014, and in the fourth quarter the targeted 97:3 ratio of grid and generated power was achieved, with power supply costs reaching an all-time low.
| - 38 - |
Regarding the national grid supply, critical repairs and maintenance work was carried out at the AZITO power plant in the second quarter and the third quarter of 2014, following the failure of a turbine and transformer which resulted in a national grid reduction of 300MW. The mainline transformer situated at Man was also replaced. Lower grid availability was absorbed by increased usage of generated power.
The close cooperation between the CIE national supply authority and Tongon mine was enhanced during the year to ensure effective utilization and smooth synchronization during extended power outage periods and to improve power stability and reduce the effect of outages. The completion of the 225kV ringline passing from Leboa to Ferkessedougou is a high priority and the replacement of the Leboa transformer and powerline is scheduled for completion by the end of 2015.
The power generation plant achieved overall mechanical and electrical availability of 96% in 2014. Power demand consumption from the grid increased from 18.7MW to an average 21.8MW for the year. Total mine consumption increased in line with the raised operational availability and utilization and an increase in the number of process units demanding power as new projects were installed during the year. The cost of power at $0.099/kWh was down by 24% on 2013 and by 48% on 2012.
Health, safety and the environment
Continued focus on effective occupational health and safety management paid dividends and enabled the mine to achieve 401 days without a LTI, equivalent to 5,030,453 LTI free hours. Attention to safety remains a priority and the workforce continues to conduct risk assessments prior to starting each task. The LTIFR decreased from 0.45 in December 2013 to nil in December 2014. Tongon mine maintained its OHSAS 18001 accreditation.
The mine introduced and set up an Ebola awareness and preparedness campaign together with Randgold’s other West African operations as part of an industry-wide private initiative in partnership with state and regional health authorities.
The mine continued with the implementation and maintenance of malaria control programs which resulted in the number of malaria cases reducing 17% year on year and a consequent decrease in the MIR by 16% from 2013.
Tongon mine maintained its ISO 14001 accreditation. One Class 1 environmental incident occurred two weeks before year end when a ruptured tailings pipeline caused process water to leave the mine perimeter along a stream causeway. The mine responded effectively and the environmental impact was assessed as negligible to zero.
Human resources
The operational labor complement for Tongon comprises 449 personnel, excluding persons employed by contractors and temporary laborers. Of this, 95% are Ivoirians. All recruitment has been based on the company’s policy of giving preference to nationals of its host countries. Locally the policy of spreading recruitment between the villages, according to agreed percentages, has been applied. To date, 75% of the operational labor is from local villages. This same recruitment approach has been applied to all operational contractors.
Open and continuous engagement between Tongon’s workforce, union and management ensured a constructive work environment was maintained and a Mine Closure Fund convention was concluded and approved.
As part of Tongon’s succession plan, training workshops were held for 249 workers. These consisted mainly of engineering employees identified for promotion to higher levels of responsibility and in some cases to replace expatriates in the medium term.
| 2014 | 2013 | |||||||||||||||||||||||
| At December 31 | ||||||||||||||||||||||||
| Expats | Nationals | Total | Expats | Nationals | Total | |||||||||||||||||||
| Employees | 23 | 426 | 449 | 39 | 494 | 533 | ||||||||||||||||||
| Contractors | 46 | 1,208 | 1,254 | 56 | 1,168 | 1,224 | ||||||||||||||||||
| Total | 69 | 1,634 | 1,703 | 95 | 1,662 | 1,757 | ||||||||||||||||||
Exploration
Exploration in the Nielle permit comprised a drill program below the $1,000/oz pit of the SZ pit with six priority holes totaling 1,007m drilled to validate the conceptual model. Wider zones of mineralization with higher grades are being targeted at the intersections between flat and steeper structures. The new drilling focused on testing areas where the pit is highly flexible to changes in depth at gold prices between $1,000/oz and $1,300/oz.
This drilling has the potential to add to the current pit reserves and extend the LoM as indicated by the results of the most recent drill intersections of 8.20m at 3.20g/t and 12.90m at 3.03g/t, including 10.20m at 3.72g/t obtained in the northern portion of the pit.
| - 39 - |
Infill RC drilling in near mine targets provided a better understanding of the continuity and the geometry of the mineralized zones at Sekala and Seydou North with indications of favorable metallurgical recoveries. Greenfields work focused on the 15km Bladonon target in a belt parallel corridor in the southwest of the Nielle permit which has not received much attention in the past but is an area of belt margin structures and elevated soil anomalism.
Kibali
The Kibali mine is a gold development property which covers an area of 1,836km2 on the Moto Goldfields in the north east of the DRC. It is located some 560km north east of the city of Kisangani and 150km west of the Ugandan border town of Arua. Kibali is a joint venture between Randgold (45%), AngloGold Ashanti (45%) and a Congolese parastatal, SOKIMO (10%).
The mine is being operated by Randgold. The mine comprises an integrated open pit and underground operation with the core capital program scheduled to run until early 2016. It is planned that the mine will ultimately be supplied by four hydropower stations supported by a thermal power station for low rainfall periods and back-up.
Open pit mining started in July 2012 and commissioning of the oxide 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.
Operations
The Kibali mine is being developed in two phases. Phase 1, which includes 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 comprises the underground mine development and two additional hydropower stations. The mine is expected to produce an average of 600,000oz of gold per annum over the first 12 years of its life, which currently extends to 2031.
Open pit mining started in July 2012 and commissioning of the oxide 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 started at the end of the first quarter of 2014 and, by year end, the mine had ramped up to design levels.
Kibali produced 526,627oz at a total cash cost of $573/oz in 2014. Gold sales amounted to $650.3 million resulting in a profit from mining activity (before interest, tax and depreciation) of $354.2 million.
The capital estimate for Phases 1 and 2 of the project was updated at the end of the second quarter of the year and is currently estimated at $1.83 billion, excluding mining preproduction expenses. In 2014, capital expenditure totaled $386.5 million.
Open pit mining
The total volume of rock of 2.6 million BCMs which was mined from the open pit exceeded the plan, and ore tonnes of 5.6Mt mined were in line with plan.
At the end of the year, tonnes stockpiled totaled 370,000t at 3.1g/t of medium and high grade material and 3.35Mt at 1.2g/t of low grade ore.
Mofu, the first satellite open pit, was successfully established during the year and included the construction of a haul road which will also service the Mengu Hill open pit, where mining is scheduled to begin in 2015. The dewatering of Mengu Hill was initiated in preparation for mining.
Underground mining
During 2014, 90,839t of ore was mined from underground. Although this was mostly from development, stoping started in December 2014 in the C5630mL _XC 2 stope as per the mine schedule. A total of 8,103t of ore was trammed from the stope to the ROM pad with 10,583t of blasted stocks underground by December 2014. Stoping is planned to ramp up during 2015 and is scheduled to produce 700,000t of ore for the year.
Processing
A key achievement in 2014 was the commissioning of the sulphide circuit and subsequent ramp up to design production levels by the end of the year, including the rougher flotation, ultra-fine grind (UFG) and pumpcell carbon-in-pulp (CIP) circuits.
Flash flotation and gravity recovery units were also commissioned during the year. The plant treated 5.6Mt, comprising both oxide and sulphide material, at an average grade of 3.7g/t. Although the average recovery for the year was 79%, optimization of the processing facility in the latter half of the year resulted in a steady improvement in performance, with December averaging 86%.
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Engineering and power supply
Due to improvements in planned maintenance, plant availability increased throughout the year, reaching 90% in December.
A major milestone for Kibali during 2014 was the commissioning of the Nzoro II hydropower station which consists of four turbines with a capacity of 22MW. After all four turbines were commissioned, a breaker failure resulted in only three turbines operating in the last quarter with a steady supply of 16.8MW and a 55/45% split between hydropower and thermal power.
Further optimization of the hydropower and synchronization of power produced from Nzoro II with the diesel power plant via a power management system (PMS) is expected to increase the contribution from hydropower in 2015 and beyond.
Before Nzoro 2 was successfully commissioned, the cost of power was $0.46/kWh reducing to $0.21/kWh after its commissioning. We expect a further reduction in power cost in 2015 due to lower fuel prices and better synchronization between the hydro and thermal power stations.
Once construction of the planned hydropower stations is completed and they are running as intended, the cost is expected to reduce to between $0.10/kWh and $0.12/kWh.
Construction and underground mine development
The project team kept the construction program on schedule during the year, completing the metallurgical facility, all associated infrastructure and the Nzoro II hydropower station. Construction of Ambarau, the second 11MW hydropower station, started as well as Phase 2 of the Concentrate Tailings Storage Facility (CTSF), both of which remain on schedule for completion in 2015.
Construction highlights achieved during 2014 include:
| • | Sulphide metallurgical circuit including full flotation, UFG and pumpcells commissioned; |
| • | All metallurgical plant contractors demobilized; |
| • | CTSF Phase 2 initiated; |
| • | Nzoro II hydropower station commissioned; |
| • | Ambarau hydropower station construction started; |
| • | Mengu Hill open pit haul road completed; |
| • | First phase of the junior village completed; and |
| • | Main project relocation action plan (RAP) completed and infrastructure handed over to the community. |
Vertical shaft system
Under the leadership of Randgold’s team, the main contractor continued to sink ahead of schedule, ending the year at 720 vertical meters, 40m from the bottom of the shaft. Lateral development for the production and crusher levels also progressed ahead of target, resulting in the shaft being ahead of schedule at year end.
Decline development
The mining team consistently achieved decline and underground development targets during 2014 and at a better advance rate than planned in the feasibility. An average of 300m/month per jumbo was reached in development with the decline contractor now ramped up to 900m/month.
To date, a total of 12.1km has been developed, including 8km in 2014. The underground pump chambers and ventilation required for the current production levels were also all completed.
| Production results for the 12 months ended December 31, | 2014 | 2013 | ||||||
| Mining | ||||||||
| Tonnes mined (000) | 30,470 | 25,004 | ||||||
| Ore tonnes mined (000) | 5,632 | 4,335 | ||||||
| Milling | ||||||||
| Tonnes processed (000) | 5,568 | 808 | ||||||
| Head grade milled (g/t) | 3.7 | 3.7 | ||||||
| Recovery (%) | 79.3 | 91.3 | ||||||
| Ounces produced | 526,627 | 88,200 | ||||||
| Ounces sold | 516,902 | 88,200 | ||||||
| Average price received ($/oz) | 1,258 | 1,238 | ||||||
| Cash operating costs1 ($/oz) | 528 | 433 | ||||||
| Total cash costs1 ($/oz) | 573 | 464 | ||||||
| Profit from mining activity1 ($000) | 354,220 | 68,282 | ||||||
| Attributable (45%) | ||||||||
| Gold sales1 ($000) | 292,627 | 49,153 | ||||||
| Ounces produced | 236,982 | 39,690 | ||||||
| Ounces sold | 232,606 | 39,690 | ||||||
| Gold on hand at period end2 | 5,248 | - | ||||||
| Profit from mining activity1 ($000) | 159,399 | 30,727 | ||||||
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We own 45% of Kibali with the DRC State and joint venture partner owning 10% and 45%, respectively. The group equity accounts for its 45% joint venture holding in Kibali.
| 1. | Refer to explanation of non-GAAP measures provided in the section “Non-GAAP Measures” above. | |
| 2. | Gold on hand represents gold in doré at the mines multiplied by the prevailing spot gold price at the end of the period. |
Ore Reserves
| Attributable | ||||||||||||||||||||||||||||||||||
| Tonnes | Grade | Gold | Gold2 | |||||||||||||||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||||||||||||
| (Mt) | (Mt) | (g/t) | (g/t) | (Moz) | (Moz) | (45%) | (45%) | |||||||||||||||||||||||||||
| at December 31 | Category | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||
| Ore reserves1 | ||||||||||||||||||||||||||||||||||
| ☐ Stockpiles | Proven | 3.8 | 3.6 | 1.4 | 2.2 | 0.2 | 0.2 | 0.08 | 0.1 | |||||||||||||||||||||||||
| ☐ Open pit | Proven | 1.6 | 1.9 | 2.6 | 2.5 | 0.1 | 0.2 | 0.06 | 0.07 | |||||||||||||||||||||||||
| Probable | 33 | 40 | 2.4 | 2.5 | 2.5 | 3.2 | 1.1 | 1.4 | ||||||||||||||||||||||||||
| ☐ Underground | Probable | 44 | 44 | 5.7 | 5.7 | 8.2 | 8.0 | 3.7 | 3.6 | |||||||||||||||||||||||||
| TOTAL ORE RESERVES1 | Proven and Probable | 83 | 89 | 4.1 | 4.0 | 11 | 12 | 4.9 | 5.2 | |||||||||||||||||||||||||
| 1. | Open pit ore reserves are reported at a gold price of $1,000/oz and an average cut-off of 0.9g/t cut-off and include dilution and ore loss factors. Open pit ore reserves were calculated by Mr. Nicholas Coomson, an officer of the company and competent person. Underground ore reserves were reported at a gold price of $1,000/oz and a cut-off of 2.4g/t and include dilution and ore loss factors. Underground ore reserves are calculated by Mr. Tim Peters, an independent consultant and competent person. Addition of individual line items may not sum to sub totals because of reporting to two significant digits. | |
| 2. | Attributable gold (Moz) refers to the quantity attributable to ourselves based on our 45% interest in the Kibali gold mine. |
Health, safety and environment
The LTIFR continued to decrease year on year from 0.59 in 2013 to 0.51 in 2014, following sustained efforts to increase safety awareness.
Although the labor complement decreased substantially with the completion of most of the construction, there were still around 5,000 people working at Kibali during the year, with 11.7 million man hours worked, making the continued improvement in the safety record, from the already low levels of 2013, commendable.
Unfortunately, there was one fatality in the vertical shaft development. While blowing over in the shaft bottom, a contractor employee who was removing rocks from the footwall was struck on the head by a stage-jack extension that fell down the shaft from an unknown position.
The Environmental and Social Impact Assessment (ESIA) was updated during 2014 to include the additional satellite pits and scope changes to the infrastructure according to IFC performance standards. In line with DRC legislation, the environmental management plan (EMP) successfully underwent an annual independent audit.
Kibali’s environmental management was enhanced through the takeover of the operational team in 2014, resulting in a 16% reduction in reported environmental incidents. Formal awareness sessions on site, inspections and environmental training and inductions contributed to the better performance.
Biodiversity management was also incorporated into the site EMPs during the year, with over 1,450 trees successfully transplanted in the eco-center and camps. Fauna conservation was also enforced following the completion of the exclusion zone fence.
Kibali donated over $250,000, as well as JetA-1 fuel, tents and containers, to African Parks as part of a biodiversity offset strategy and an agreement to help combat poaching in the Garamba National Park. This also included the funding of elephant collaring and pilots for aerial counts and patrols.
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Kibali is aiming to achieve ISO 14001 certification by the end of 2015.
Human resources
With the majority of construction activities ending during the year and contractors demobilizing, there was a corresponding decrease in labor with 4,744 contractor and permanent employees remaining at year end. This reduction will continue, eventually stabilizing during 2015.
The employee ratios are in line with Randgold’s policy of recruitment prioritization, sourcing primarily from local villages, then regionally followed by nationally and lastly looking for candidates outside the country. 84% of employees are Congolese nationals and the intention is to continue localizing the labor force during 2015.
As construction and commissioning of the processing and power generation facilities were completed, the mines’ operational team was established and key positions were filled during the year. These included the plant, engineering, supply chain and financial managers as well as a general manager.
Constructive labor relations were maintained directly and with the union, without any industrial action taking place during 2014. Agreement was reached on the downsizing of the construction workforce which, in many instances, included the transfer of labor between contractors.
| At December 31 | 2014 | 2013 | ||||||||||||||||||||||
| Expats | Nationals | Total | Expats | Nationals | Total | |||||||||||||||||||
| Employees | 95 | 606 | 701 | 54 | 462 | 516 | ||||||||||||||||||
| Contractors | 651 | 3,392 | 4,043 | 1,561 | 5,324 | 6,885 | ||||||||||||||||||
| Total | 746 | 3,998 | 4,744 | 1,615 | 5,786 | 7,401 | ||||||||||||||||||
Exploration
Exploration continued to focus on extensions to the known deposits, especially KCD, where mineralization has been confirmed down plunge of the current orebody model, while the up plunge continuity of the 5,000 lode into Durba Hill offers additional open pit ore.
On a regional level, the greenfields exploration focus was shifted to the KZ structure which extends over 35km and hosts multiple orebodies. It is a line of anomalous gold in soil values which are coincident in places with interpreted district scale structures that may form part of a larger regional scale feature. The feature runs from Kalimva in the north, through Mengu Hill, Pakaka, KCD, Kibali South, Aindi Watsa and onto Zambula in the south.
Significant mineralization is located along or near to this feature and more than 50% of the strike length has no deeper data further than 50m below surface.
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EXPLORATION REVIEW
For projects to meet Randgold’s development and investment criteria, they need to have the potential for 3 million minable ounces and offer an internal rate of return (IRR) of 20% at a long term gold price of $1,000/oz. Although no new discoveries were made during the past year, the team was able to replace the ounces mined through ongoing brownfields exploration which included the completion of the underground feasibility study at Gounkoto.
Over the past year, the exploration strategy and management structure was thoroughly reviewed to ensure the team was properly equipped and motivated. Consequently, there were a number of changes within the team, including a number of internal promotions. As part of this process, the targets contained in the resource triangle were reduced from 160 to 115. The group’s portfolio of mineral rights was expanded through the acquisition of new permits as well as additional joint ventures. The current portfolio covers an area of 12,213km2 over the continent’s most prospective gold belts with a further 2,796km2 under application.
Mali
Loulo
Exploration work at Loulo focused on the evaluation of identified targets within the permit, defining drill programs to generate reserves and to identify new brownfields opportunities at both Gara and Yalea.
Work on the Gara South, Yalea Ridge South, Loulo 4, Samaba and Sansamba West targets during the year determined that they have little potential to add significant ounces to the project with only limited surface exposure to mineralization and they were removed from the resource triangle.
Waraba
A new target named Waraba returned encouraging early results from shear hosted mineralization over a 400m strike in an area of artisanal mining in the north of the Loulo permit where 43 samples returned an average gold grade of 2.97g/t from a narrow north-south striking structure hosted in quartzite and brecciated hematitic greywacke to the West of the Baboto target.
Three follow-up trenches were excavated and returned results of: WTR01 – 3.85m at 2g/t including 1.10m at 3.24g/t; WTR02 – 3.40m at 1.65g/t including 1.30m at 3.93g/t; and WTR03 – 3.90m at 2.15g/t including 1.60m at 4.83g/t. While narrow, these intersections were thought to be significant because they occur at a structural discontinuity which has focused fluid flow. This structure was tested with a diamond drillhole which intersected four zones of mineralization totaling 30m downhole true width around the target structure. Of note included the results from WDH001 which returned 6.0m at 5.07g/t from 153m and 15.8m at 1.43g/t from 189m in a 75m wide zone of variably sheared, carbonate-chlorite-silica altered greywacke, heterolithic breccia and limestone.
Further trenching along the +2km strike length of the Waraba shear zone was then executed with the aim of extending the target along strike. However, results from the program were weak, with only one trench out of 11 returning a mineralized intersection with a result of 5.2m at 2.38g/t.
The work at Waraba defined a narrow system of 4.7m true width over a strike of 1.2km with limited potential of any economic mineralized material at surface and the main target has therefore been removed from the resource triangle. However, the structure does have the potential to dilate at depth and will be included in an assessment of deep, conceptual targets around the Loulo deposits.
New targets
After many years of exploration along several key structures on the Loulo permit, a 380 line km induced polarization (IP) geophysical survey was completed to provide a new data layer across the most prospective and most underexplored parts of the permit where only limited surface outcrop is available and transported soils are thought to partially mask underlying mineralization.
The integration of this new layer of data with updated mapping data and other layers produced a new geological interpretation and identified 12 preliminary targets. As part of this program, a district-wide initiative to improve the lithological and structural understanding of the Loulo area was progressed. Fieldwork confirmed a number of existing observations and, more significantly, defined the eastern margin of the coarser shelf sediments in a conglomeratic unit to the immediate east of Baboto.
Field mapping showed that the pervasive north-northeast trending lineaments highlighted by the geophysics represent faults, shears and intrusives rather than bedding, and also that the spatial distribution of sinistral verging ‘Gara Style’ folds are more widespread than previously recognized. This has regional implications for locating blind fold related mineralization or areas where high grades are developed as fold trains intersecting major structural trends.
Following the testing of the Waraba target, the exploration team has now moved onto the Yalea North target area which features several targets which lie under transported material along strike to the North of the Yalea and P125 deposits.
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Underground exploration
A total of 282 DDH for 50,325m was drilled into the Gara and Yalea ore bodies during the year with various aims. Firstly, the establishment of advanced grade control coverage 12 months ahead of the rolling mine plan with infill grade control coverage six months ahead of the plan.
Secondly, to either help convert or identify areas of mineable reserves in order to support a 10 year mine plan. Drilling also targeted to better delineate profitable ore.
As the mining of high grade ounces continues from underground at Loulo, it is critical that the exploration team continues to replace this depletion through the identification and conversion of new mineralized material to reserves. In addition to the program noted above, exploration also tested models projected out to 400m beyond the limits of the existing block models at both deposits with encouraging results.
At Yalea, 127 holes for 22,261m were drilled comprising 113 holes (14,749m) for grade control infill drilling and 12 holes (7,512m) for conversion drilling. Of these 12 holes, four targeted the potential for conversion and eight were conversion infill holes. The infill drilling generally reported higher grades and widths than the 2013 model and allowed the weathering surfaces to be updated.
The 4 conversion holes were drilled to test the geological potential of the Yalea zone at depth. Results confirmed the modeled grade but a 10% decrease in width is thought to be due to the steepening of the Yalea Shear Zone where it passes into a different host lithology, the argillaceous quartzite, at depth. Hole YADH16 returned 7.00m at 5.22g/t from 657m including 2m at 16.75g/t, beyond the limits of the current block model and indicates that the system is open with scope for further high grade. The style of mineralization at this depth is very different to the rest of the deposit with virtually no sulphides seen in the main altered zone but with fine particles of visible gold occurring in very thin chloritic shears. Other results from the central area include: YaDH11 – 6.30m at 1.99g/t; and YaDH13 – 41m at 3.59g/t.
In Yalea South, there are narrow, very high grade zones where the shear is seen to anastomose around resistant albitized blocks. The high grade material, which looks similar to the Purple Patch material with strong sulphides and chlorite overprinting strongly albitized breccias, may have the potential to be mined selectively underground. Additionally, the infill drilling in the south of the deposit has shown the depth of weathering to be deeper than previously modelled. Results include: YaDH06 – 42.10m at 8.16g/t; YaDH09 – 32.75m at 5.66g/t; and YaDH05 – 29.49m at 8.71g/t. The immediate hanging wall in this area is consistently a limestone unit which is believed to have acted as a seal to the mineralizing fluids.
Our geological understanding of the Yalea orebody has advanced significantly this year with the definition of three styles of mineralization which overprint one another throughout the orebody and explain the sharp contacts to the mineralized domains without any significant structural control to their boundaries. Substantial thickness variations have been observed within the Purple Patch at Yalea as the mineralizing system moves from the rheologically contrasting greywacke/argilaceous quartzite contact which permits the development of a strong shear, into the finer grained argilaceous quartzite unit where shearing is less focused and more diffuse over a larger rock volume. This results in a larger package of sub-economic mineralization and a thinner zone of economic grade.
Exploration continues to focus on a number of targets around the Yalea deposit based on the plunging intersections of structures believed to control the high grade within the deposit. Hole YDH270 was drilled to test the plunging intersection of two ore controlling structures and returned 11.05m at 2.02g/t from 1,106.05m, including 3.18m at 4.81g/t from 1,106.05m, 400m south of the deposit. This result points to considerable untested potential around the deposit with several areas highlighted for further testing in 2015.
At Gara, 155 diamond core boreholes were drilled (28,064m) during the year comprising 125 holes (12,900m) for grade control (GC) drilling and 30 holes (15,164m) for infill or conversion drilling. A total of 9 holes (4,018m) were drilled in the southern area between -400 and -500m level to upgrade the status. These holes reduced the average width of the orebody by about 35% compared to the model but increased the grade by 50% with an average intersection of 6.89m at 5.46g/t. High grade mineralization is associated with the hinge of a south plunging anticline which remains open down plunge and presents further opportunity for reserve growth. Individual drill results include: LOCP161 – 4.7mat 7.71g/t from 332.7m; LOCP162 – 4.1m at 22.00g/t from 473.10m; LOCP165 – 4.65m at 17.83g/t from 465.85m; L0CP173 – 9.00m at 6.16g/t; and L0CP167 – 6.25m at 6.01g/t.
The infill drilling was undertaken to increase the confidence level in the indicated zone. Overall the intersections returned a lower grade and width compared to the block model. However, holes along the base of the deposit confirmed that the system is open, strongly altered and intensely mineralized, highlighting potential for step-out drilling around the block model to incrementally add to mineralized material. Results from this area this quarter include: LOCP176 – 8.5m at 6.74g/t from 370.65m; L0CP177 – 4.55m at 5.63g/t from 370.65m; and L0CP175 – 16.2m at 5.96g/t from 180.2m.
Additionally, exploration targeting to the south of Gara predicts further high grade along the hinges of tight south-plunging s-type folds, especially where they cross through the axis of a sub-horizontal warp in the Gara orebody. The wavelength of s-type folds within the orebody suggests that the target area would be 300-500m south of the existing model. This model was tested with
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LOCP187 which returned an intercept of 2.93m at 7.44g/t from 544.60m 400m south of the existing block model and confirmed strong mineralization and alteration is open along the system. This, when combined with the strong results at depth at Gara, confirms an exciting potential for further growth.
Gounkoto
The main highlight of the work at Gounkoto this year has been the completion of the underground feasibility study in the Jog Zone (JZ). This project targeted the high grade mineralization in the MZ2 and MZ3 zones beneath the pit, a large portion of which was drilled out in previous years. As part of the feasibility program, work focused on improving the understanding of the controls on mineralization in the JZ, infill drilling and step out drilling in MZ3 where high grade rods of mineralization plunge to the north of the current underground project for a total of over 12,000m of core drilled during the year. The conclusion of this work was the delivery of a reserve of 4.69Mt at 6.00g/t for 910,000 reserve ounces with good potential to increase this through further exploration drilling.
The high grade plunge in the Gounkoto deposit is thought to be controlled by the intersection of the east-dipping hangingwall shear and steeper west-dipping footwall structures which exhibit different alteration suites and may represent zones of fluid mixing and gold precipitation. Drilling shows that the highest grades are either related to carbonate, silica/albite and hematite alteration in the hangingwall, or in a ferruginous, chlorite rich, footwall shear. Highlights of the drilling program targeting the high grade mineralization in the MZ3 zone this year include infill hole GKDH418 which returned 14.5m at 31.59g/t where the block model was predicting a grade of 18g/t, GKDH414 drilled 200m down plunge from 418m which intersected 23.65m at 6.45g/t and GKDH412 drilled a further 300m down plunge which intersected 13.65m at 5.34g/t.
Work on the extensions of the Gounkoto orebody was completed this year, with holes testing and eliminating deep targets both in the footwall and down plunge to the south of the deposit. Work continued to define MZ4 and explore its relationship with P64 and has confirmed it to be a relatively small lens of mineralization in the footwall of MZ3. This zone of mineralization is interpreted to be the continuation of the left-stepping Gounkoto system to the north-northwest which continues towards and now incorporates the old P64 target.
In addition to the JZ underground project, there is also high grade mineralization located beneath the southern MZ1 pit where, similarly to the JZ, the high grade mineralization is controlled by the north-plunging intersection of west dipping footwall shears with the main east dipping orebody. A number of holes have intersected strong mineralization in the target including: GKDH200 – 11.8m at 6.05g/t; GKDH205 – 17.2m at 11.04g/t; and GKDH218 – 40.3m at 3.03g/t.
P64
P64 is an old exploration target immediately to the north west of the Gounkoto deposit where a short strike length of high grade mineralization was discovered over 10 years ago. This year a review of all the data for P64 was completed along with further trenching which led to the identification of new controls to the mineralization and the updated model was then further tested by infill drilling in the fourth quarter. The existing model at P64 interpreted the high grade mineralization to be hosted in the eastern limb and south plunging hinge zone of a synformal fold in tourmaline altered greywackes. The new structural model at P64 shows that mineralization is controlled by the intersection of north-south and northeast trending structures, similar to that observed in Gounkoto Pit at MZ1 and MZ3. Implications of this new model for exploration are that the high grade northeast trending mineralization at P64 is open down plunge, rather than having a depth extent that is limited by folding. Additionally, intersections between north-south and northeast striking structures can be targeted for follow-up work, particularly in the Gounkoto North area between P64 and Toronto. A model of north-south and northeast trending structures matches the general pattern of soil anomalism in this area, and preliminary target areas have been identified for further work.
Gounkoto region
Around Gounkoto, several targets were tested and rejected from the resource triangle. The team returned to the old Toronto target which has remained in the resource triangle over many years due to its structural complexity and high grade results from shallow orpaillage workings. The work highlighted a 2km long anomalous system striking north-south with the main Toronto target at its core and the Toronto Gap target in the south. Encouraging lithosample results were returned from the Toronto Gap (33g/t and 7g/t) to the south of Toronto and an extensive trenching program was carried out around the existing mineralization at Toronto itself, the best result of which was 13.2m at 3.64g/t from the main artisanal pit in the target.
This work over the target area confirmed the structural model of a main north to north-northwest striking, silica-carbonate altered, anastomozing shear zone developed in quartzite and greywackes which is intersected by ductile northeast striking cross-structures with chlorite-sericite alteration. Higher grades are localized at the intersections of these structures, a relationship which has also been observed at P64 and MZ3 at Gounkoto. However, most of the target is very narrow with artisanal miners targeting high grade vein related mineralization along the full strike.
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A coherent mineralized zone with a maximum 300m strike length and average true width of 5.19m was identified at Toronto does not meet Randgold’s filters in terms of size and grade for a satellite deposit. The exploration work to date points to limited near-surface mineralization potential and, consequently, Toronto was removed from the resource triangle.
The exploration team has again focused on the thickness of the transported alluvium over the Gounkoto area and the Gounkoto southwest target and were able to look through the cover using remote exploration techniques, specifically targeting the 1.2km southwest strike extension to the main Gounkoto deposit. It features limited work in the form of drilling which returned wide zones of alteration: GSWRC11 – 12m at 1.12g/t from 40m; GSWRC03 – 28m at 0.82g/t from 152m, including 2m at 4.61g/t; and GSWRC13 – 4m at 1.59g/t from 248m, and is the next priority area for exploration on the permit.
Mali greenfields
The Senegal Malian Shear Zone (SMSZ) on the Mali- Senegal border is one of the most prospective goldfields in the world with a +50Moz gold endowment along its 200km of strike. The structure is an essential control on the Sadiola/Yatela, Loulo/Gounkoto, Fekola/Boto mineralized systems and a significant percentage of its strike remains unexplored. It is one of the two key structures in the Kedegou-Kenieba inlier, the other being the Main Transcurrent zone (MTZ) where Massawa is located.
As a result, the structure and its surrounding formations - the Kofi and the Keniebandi - form a key part of our exploration strategy in West Africa and our groundholdings along the structure give us access to approximately 70km of strike. This year, we have completed programs over the Bakolobi project on the SMSZ in the south of the inlier. The Bakolobi project is a joint venture with Taurus Gold Limited (Taurus Gold). We have signed a new joint venture with Legend Gold Corporation (Legend Gold) (Djelimangara project) which lies along the SMS to the immediate south of the Sadiola mining concessions and we have renewed permits at Bena, south of the Gounkoto mining concession and Bambadji in Senegal, which is a joint venture with Iamgold Corporation (Iamgold).
Bena
The Bena permit has been granted again to our partner, New Mali Mining, and Randgold is the operator under the terms of the joint venture. A review of the existing targets and data on the permit has concluded that the Boulandissou target has the greatest potential to host a major system and the model has been updated, incorporating elements of the Gounkoto model with intersecting northwest and north-south structures over an extended strike compared to the original model, which is now 3km.
Historical work on the target identified a 50m wide alteration envelope with best intersections including: 26m at 3.53g/t from trench BNT02 in the north and 13m at 1.57g/t from reconnaissance RC in the south. These results occur within the overall northwest trending target area and the strongest soil anomalies within this trend are interpreted to be at the intersections of northwest and north-south structures. The target lies on the western margin of a thick laterite plateau, which is composed entirely of transported alluvial material.
Prior to the year end, 1 trench (BNT11) out of 5 planned was completed in the south of the target and intersected a series of quartzite, argillite, breccias, argillaceous quartzite, quartzite and greywacke intruded by albitite and mafic intrusives. Results received for trench BNT11 included 1.80m at 0.66g/t from 55.45m on the contact between albitite and breccia. This result is from a narrow zone of silica-albite alteration with sulphide boxworks observed in the trench and, despite being narrow, the structural readings from the trench confirmed the north-northwest structural interpretation for the target.
Further mapping and sampling are progressing along the target, with recent lithosample results of 1.33g/t and 4.02g/t.
Bakolobi permit (Taurus Gold joint venture)
Following initial field mapping and ground geophysical programs completed in late 2013, a priority corridor for detailed soil sampling was established within the Kofi formation on strike between the Fekola and Gounkoto deposits. This work led to the generation of 11 targets where soil anomalism occurs over dolomites, siliciclastic rocks and narrow intermediate to felsic intrusive dykes, which have been overprinted by intense brittle ductile deformation related to movement on the SMSZ.
Historical work from this corridor on the Bakolobi permit included trench results of 27m at 2.23g/t, including 9m at 5.67g/t in quartzites, and 10.4m at 1.98g/t, including 4.4m at 4.25g/t, in a porphyry. Auger holes returned: BaA221 – 15m at 1.28g/t; and BaA228 – 22m at 2.34g/t in quartzite.
Regolith mapping over the area highlighted a more erosional regime in the north of the target area with the majority of the priority area overlain by extensive paleao-alluvial gravels in the flood plain of the nearby Falémé River which have been lateritized in situ and can be up to 6m thick.
Geologically, the N-S corridor is interpreted to represent a terrain boundary between a thrusted, less deformed package of rocks in the east and a more complex, folded sequence of sediments in the west. Early lithosampling across this area returned an average grade of 3g/t from 15 samples.
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A reconnaissance RC drilling program was carried out to fast-track the location of mineralized structures through the transported material in the area and this identified a number of mineralized zones within the target corridor with results including: 14m at 2.47g/t, including 5m at 4.56g/t; 17m at 1.55g/t, including 1m at 8.9g/t; 31m at 1.01g/t, including 7m at 2.37g/t; and 9m at 1.31g/t, including 1m at 4.09g/t. These define a system of sub-parallel N-S structures with Silica-Albite-Carbonate alteration and strong sulphide mineralization.
A program of trenching along these structures, to understand their geometry, controls and the extent of overlying transported material, is in progress but has been slow due to the layer of transported gravels at surface. The structures have been exposed, however, and results include: BKTR003 - 16.15m at 2.23g/t from 25.70m, including 3.47m at 1.53g/t from 25.70m and 5.10m at 5.33g/t from 33.5m; and BKTR002 - 10.40m at 2.41g/t from 23.60m, including 3.35m at 5.92g/t, from steeply west dipping shears. The team will move to infill trenching in the most prospective areas once the Phase 1 trenching is complete and the results have been fully analyzed to generate follow up targets.
Djelimangara project (Legend Gold joint venture)
As part of the strategy to consolidate the mineral rights portfolio around Randgold’s key footprints in the West and Central African goldfields, a new joint venture agreement was signed with a subsidiary of Legend Gold who hold the rights to six permits (363km2) which straddle the SMSZ directly south of the Sadiola gold mine. Subject to results, Randgold will fully fund exploration as far as completion of a prefeasibility study to acquire a 51% interest in the project. Legend Gold has the option to cofund the feasibility study to retain 49% or dilute to 35% with Randgold increasing its stake to 65%. Both parties would fund development. The ground has previously been worked by Barrick Gold Corporation.
A comprehensive dataset has been received from Legend over the portfolio of permits including: airborne electromagnetic and magnetic data, ground Mag and IP and resistivity, geology, regolith, soil geochemistry, drilling (auger, rotary airblast (RAB), RC and DDH, pitting and trenching. The results highlight anomalism coincident with the SMSZ.
Four targets were generated over a narrow band of limestones and greywackes to the east of the SMSZ and a program of mapping pitting and trenching began in the fourth quarter.
Initial results from the work have been encouraging, with trench MAT001 returning 4.40m at 0.41g/t from 24.20m of altered medium grained sheared silicified greywacke and a main zone of 6.25m at 2.03g/t from 38.10m, including 4.85m at 2.52g/t. However, we have yet to see evidence of a large system of alteration and work is continuing along the SMSZ which exists over 18km strike within the permit area.
Morila
Exploration was halted at Morila some years ago after exhaustive work failed to locate any economic mineralization outside the main deposit. However, the team is having a last look as the mine prepares to close. Pit mapping and a core review highlighted or reinforced some of the key features associated with mineralization at Morila, such as flat faulting, the presence of magnesium rich biotite associated with arsenopyrite and leucocratic plagioclase veins around felsic intrusive bodies. Two conceptual targets were generated and have been reviewed with one of the targets hosting all the above mentioned features. Further work is now in progress to map the distribution of these features around the deposit to further reinforce the observations and potentially generate a target which, due to the existing deep drilling over the area, would be significantly deeper than 500m.
SENEGAL
Massawa
The Massawa deposit lies within one of the largest continually mineralized systems in Africa, located on a major geological discontinuity, the Main Transcurrent Zone (MTZ), in Eastern Senegal. The MTZ is a major terrain boundary structure which marks the contact of the Mako Volcanic Belt and the Diale Dalema sedimentary basin to its east.
There are two main zones of mineralization in the deposit, Northern and Central. They are part of the same northeast trending mineralized structure, which extends over 8km and has been offset by north-south belt discordant structures. The mineralized system occurs at a volcanic/sedimentary contact, where a prominent and continuous lapilli tuff unit acts as a marker horizon. The host sequences have been intruded by felsic dykes, gabbros and granitic bodies, particularly in the Central Zone (CZ) and mineralization is hosted in a variety of rocks including greywackes, volcanoclastics and both mafic (gabbros) and felsic intrusives. The mineralized system features pyrite and arsenopyrite sulphides within an alteration assemblage composed of sericite, silica and carbonate in a zone of strong brittle-ductile deformation.
A large component of the northern portion of the Massawa ore is refractory, with microscopic gold locked in the sulphide lattice of arsenopyrite. Efficient extraction of this gold requires an oxidation processes such as pressure oxidation (POX) or BIOX and the power costs associated with such metallurgical processes impact negatively on the project returns. Reserves at Massawa are currently 21Mt at 3.1g/t for 2Moz.
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Ongoing evaluation of the phases and controls of the mineralization points to a set of narrow, high grade shears containing quartz stibnite veins and coarse gold that overprints an early disseminated arsenopyrite-gold phase in the CZ. Recent close spaced drilling as well as ongoing trenching programs have confirmed these vein filled structures are more continuous than previously interpreted. This work highlighted a significant potential for gravity recoverable and free leaching gold within the Massawa CZ deposit.
Following the recognition of a significant coarse gold fraction in the CZ, the sample and assay methods employed at Massawa were reviewed. This program included the re-assaying of existing NQ drill core and larger samples from grade control RC drilling by Leachwell and screen fire assay methods. Additionally, 6 RC/DDH twin pairs were drilled in the south of the CZ to compare the assay results from RC and larger HQ core samples in fresh rock. The results of this work indicate that sample size and the orebody’s high variability are the keys to the accurate estimation of the Massawa orebody. It also confirmed that RC drilling was a suitable method to collect a large sample from the deposit, thereby reducing the cost and time of additional drilling. As the majority of the CZ is sampled by NQ core at a 50m x 50m spacing, further work is required to accurately estimate the contained gold within the overprinting coarse-gold event. Our analysis, based on the close spaced drilling completed in the oxides of the CZ, shows that a spacing of 15m x 10m is required to accurately estimate the grade of the mineralized lodes and the completion of a close spaced orientation program in the fresh rock of the CZ is in progress before a decision is made on progressing to a phased infill drilling program across the CZ.
Exploration
On the Kanoumba permit around Massawa there are 4 satellite deposits (Sofia, Bambara, Tina and Delya) mineralized material with 2 further satellite targets of Kawsara and Tombo. During the year, the team tested and rejected a number of targets within the Mako belt where results from lithosampling, pitting and trenching failed to identify the potential for a large hydrothermal system. The West KA target, 20km to the south of Massawa, yielded some interesting results with values of up to 15.4g/t returned from the sampling of a set of multiple shear zones in a corridor of approximately 200m width over a 2km strike. However, the ongoing feasibility work at Massawa has been prioritized and exploration will resume pending the conclusion from a prospectivity study of the Mako belt.
Bambadji
Work on the Bambadji permit was paused for a significant part of the year because the permit had expired. It has now been renewed and granted to a subsidiary of Iamgold Corporation, our joint venture partner, for a further three years. A review incorporating all historical data was carried out during the wet season which identified twelve second and third order soil anomalies which have received limited follow-up work. They are located within favorable geological and structural settings. However, the regolith is complex with transported cover being a significant factor over the eastern limits of the permit.
Randgold continues to believe that the Bambadji permit is prospective and hosts the lithologies, alteration and structures required to generate world-class orebodies. However, after seven years of exploration without significant success, it represents too high a risk under our current agreements and we are therefore renegotiating terms with both our joint venture partner and the Senegalese government.
Côte d’Ivoire
In the Tongon SZ pit, infill drilling targeting an updated and improved geological model incorporating the Skarn type alteration added 475,000oz to the reserve which replaced the 2014 depletion from mining, while a number of additional opportunities were identified within the Tongon deposit for further orebody conversion. A program to convert the remaining mineralized material within the pit is underway. At the same time, 6 holes (1,007m) were drilled to test for higher grades or wider zones of mineralization at the intersections between flat and steeper structures below the base of the $1,000/oz pit. Due to the structural complexity of the Tongon SZ, it is believed that the model can be upgraded, particularly where the drill spacing is relatively wide at depth. The drilling intersected zones of intense alteration associated with strong sulphides and occurrences of crosscutting structures in most of the holes, which confirmed the targeted model. In a number of cases mineralization was stronger or wider than the existing model and additional mineralization was intersected on structures outside the current model, all pointing to the additional exploration potential.
Two main styles of alteration are readily observable in the mineralized zones: strong silicification almost completely overprinting the original lithology and strong pervasive biotite alteration. Both domains host strong disseminated to patchy sulphides with a strong association between biotite alteration and arsenopyrite mineralization.
Potential gains are thought to be most likely in the northern limits of the southern zone pit where higher grades exist and one hole returned 8.2m at 3.2g/t and 12.9m at 3.03g/t where the model predicted 6.5m at 2.44g/t and 6.5m at 2.39g/t respectively.
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Satellites
As Tongon moves towards repaying its capital in 2015 and with the mine being supplied by low cost grid power, a number of low grade opportunities around the deposit can provide optionality to the operation. Four satellite targets within 10km of the Tongon deposit were further drill tested during the year. The most advanced of these is Sekala. In addition to the work at Sekala, further modelling of the Seydou south, Seydou north and Tongon east targets to determine their potential was completed. At Seydou north and south, it is interpreted that higher grade lodes are linked to crosscutting structures between the brittle northeast structures and northsouth shears. Further work is required to fully understand this.
At Tongon east, RC drilling returned narrow zones of low grade mineralization and failed to extend the previously modeled anomalism. Therefore, no further work is suggested at this target.
Skarn
Tongon was identified as a skarn gold deposit in 2013 and well-developed spatial and temporal mineral zonation patterns, typical of gold skarns, are evident in both the SZ and NZ. Zonation is classified based on garnet: pyroxene ratios, chemistry of the major calc-silicate phases, the skarn color and grain size, and the degree of retrograde replacement (epidote-clinozosite, prehnite-pumpellyite).
Relogging of the Tongon orebody was completed to create a detailed model of the skarn system, which can be used to improve the reserve estimate through the modeling of the alteration and garnet fronts as well as for exploration targeting around the pit. Skarn mineral zonation could be useful as a mineralization vector, as gold is largely confined to the intermediate skarn zone at Tongon. A 3D model of the various alteration assemblages (clinopyroxene-garnet skarn and retrograde alteration zones) is being completed and this model will be used to redefine the structural model of the Tongon orebody and identify potential targets for further testing.
Satellite targets within a 15km radius of Tongon have been investigated and seen to be unrelated to Skarn alteration. More regionally the Ouobolo granodiorite at Fapoha was shown to closely match the generalized composition of gold Skarn related intrusions and is very similar to the Tongon granodiorite, a relatively reduced high-K to calcalkaline granodiorite.
Further afield across the Nielle permit, the team is working on a review of all historical exploration data. This will lead to an updated geological interpretation and prospectivity analysis for the Nielle permit which will be used to direct exploration work going forward. Early stage fieldwork has started over the Bladonon-Bodonon corridor, which is a relatively untested anomalous trend over 15km in the southwest of the permit. The targets of Coucal, Nafoun E, Forrest, Calao and Nielle S were all further tested during the year with the Coucal and Calaou being rejected. The remaining targets are still in the resource triangle and will be reprioritized with the completion of the permit scale prospectivity review.
Greenfields
The Côte d’Ivoire exploration strategy was reviewed early in the year and, as a result, we decided to concentrate resources and skills on the most promising parts of a large groundholding of 4,500km2 across the north of the country. Intensive exploration work over Diaouala during the past 4 years failed to find any indication of a large mineralized system and a decision was taken to drop the permit.
Mankono permit
The Mankono permit lies 160km to the southwest of Tongon on the intersection of the Senefou belt (which hosts the Tongon deposit) and the Boundiali belt. The permit features a northeast striking volcanic/sedimentary contact along its axis intruded by mafic, and felsic intrusions.
The permit features 4 large gold in soil anomalies prioritized for follow-up work. Infill soil sampling over the priority 1 anomaly, Bafretou, confirmed the 21km long regional soil anomaly with a significant number of high values of up to 4g/t within a high tenor anomaly of over 50ppb on residual soils close to the contact between volcanic and sedimentary rocks. Pitting, trenching and reconnaissance aircore drilling over the anomaly returned weakly anomalous results from narrow altered zones around dioritic dykes within a wide package of relatively homogenous andesites and failed to explain the surface anomaly. Intersections from the drilling include: 15m at 0.21g/t from 0m; 6m at 1.08g/t from 15m; 21m at 0.95g/t from 9m, including 3m at 5.13g/t from 9m; 26m at 0.33g/t from 21m; 12m at 0.62g/t from 0m; 3m at 1.06g/t from 12m; and 3m at 2.01g/t, and the target’s priority was downgraded. However, it remains in our resource triangle and further work is planned including the completion of a ground magnetic survey and further interpretation leading to a phase of pitting and trenching.
Meanwhile, the team has been progressing the second priority target, Gbongogo, in the northwest of the permit, which features an interesting regional fold axis with a coincident 3.5km long soil anomaly returning values up to 2.3g/t. Pitting and trenching over the hinge of the fold exposed schistose sediments, which have undergone silicasericite, moderate carbonate and magnetite alteration and are a higher metamorphic grade than surrounding rocks.
Trench intersections include: BGTR001 – 23m at 1.25g/t, including 7m at 3.05g/t; and BGTR003 – 103m at 1.30g/t, including 26m at 1.82g/t and 34m at 1.33g/t. Both trenches, however, include a number of sub-parallel Quartz vein sets which are
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mineralized and inevitably influencing results. The team is now investigating whether these veins represent a stockwork in the brittle deformed sediments in the fold hinge.
Fapoha permit
The Fapoha permit is located along the southern strike extension of the Senefou belt to the South of the Nielle permit. The permit features a sheared volcanic/sediment contact over the full 40km strike with a number of large (+15km) gold in soil anomalies along the belt. Work this year on the southern anomaly adjacent to the Oubolo Granodiorite, a Tongon type intrusion, has identified a +4km long anomalous corridor with results from aircore drilling including: 39m at 1.54g/t including 12m at 3.86g/t; 33m at 0.51g/t; 27m at 0.45g/t; and 12m at 0.53g/t. Trenching over this corridor for more structural information has returned results of: 25m at 0.43g/t, including 3m at 1.12g/t; and 21m at 1.55g/t, including 8m at 3.50g/t, along with a number of mineralized samples from pits along the same trend hosted in sheared volcanics and greywacke with silica, sericite and carbonate alteration. We believe that zones of high grade mineralization could be located within this mineralized corridor and continue the infill work to test this concept. Additionally, several large untested anomalies remain to be investigated.
Boundiali
At Boundiali, promising results, interpreted as a thrust at the Fonondara target, have been received from trenches across an east dipping structure. This target was discovered through a reconnaissance drilling program two seasons ago where results of 30m at 1.43g/t and 19m at 0.88g/t were received beneath a large regional soil anomaly.
Encouraging results from early Fonondara trenching (16m at 2.87g/t including 9m at 4.92g/t) over these drill intersections were followed up by further trenches this year which have confirmed the strike of the mineralized structure over 1.5km with an average grade of 2g/t within moderately silicified volcanics. Trench intersections include: 17.26m at 2.16g/t, including 5.48m at 4.59g/t; 14.10m at 1.56g/t, including 1.30m at 3.18g/t; and 16m at 2.50g/t including 11m at 3.49g/t. Trench intersections do not represent true widths due to the shallow dipping nature of the mineralized structure but the target represents a significant mineralized structure which may dilate at depth or along strike and will be the focus of further work in 2015.
Regional
As part of Randgold’s long term strategy in Côte d’Ivoire, we have upgraded our understanding of the geology through a program of regional mapping across the country. This resulted in a reinterpretation of the countryscale geological map with notable changes, mainly to the extent of the intrusive bodies and the delineation of new areas of greenstones. Subsequently, ten permit applications were submitted in priority areas in the south of the country.
We have also been granted two new permits through old applications, Tengrela South and Kouassi Detekro North. Currently, Randgold and its Ivorian partners hold a portfolio of eight permits for 4,500km2 which provides the flexibility to prioritize permits as well as targets within the portfolio.
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Democratic Republic of Congo
Kibali
The Kibali project is located over a world-class gold belt in the Archean of northeast DRC where Randgold holds ground over 35km strike of the KZ structure, a regional mineralized trend which which hosts the giant 17Moz KCD deposit with a banked LoM of over 10 years. Brownfields exploration this year focused on drilling of Gorumbwa and Mofu. Follow-up work on early stage targets at the base of the resource triangle continued as part of a wider initiative along the KZ structure, which is believed to be a major transcrustal discontinuity that has focused deformation and fluid flow along its strike.
KCD
The focus of the brownfields exploration work moved from KCD to Gorumbwa and other satellite deposits in 2014. Limited work was completed at KCD as the geology teams have been busy with the start of underground operations. A target generation exercise around the development at KCD identified 7 targets immediately beneath the base of the $1,000/oz pit. Four holes were drilled into a gap on the 3000 lode where a 250m x 50m by 50m gap in drilling between 5600 and 5720 levels existed. Results failed to highlight significant high grade continuity with the exception of hole DDD598 which intersected 59.15m at 4.07g/t from 103.85m (including 20m at 9.01g/t from 103.85m) compared to the model prediction of 71.19m at 1.53g/t. The hole also intersected 16.05m at 2.35g/t from 223.25m and 10.9m at 3.05g/t and the potential for mineralization continuing further to the west is being reviewed.
The team also started a trenching and mapping program over Durba Hill to test for the extension of mineralized lodes between Gorumbwa and KCD. Anomalous results had been received from one trench and one road cutting including 4m at 1.14g/t, including 2m at 1.35g/t within a foliated, silicified metaconglomerate with boxworks.
Mofu
Mofu is located approximately 3km northwest of the Mengu Hill deposit and features a mineralized zone at surface of 12.2m average width at 7.8g/t extending over 300m strike. However, strong grades pinch out approximately 50m down plunge. This shallow mineralization was further investigated by a combination of 69 close spaced exploration and advanced grade control RC holes (3,062m). The drilling produced a revised geological model. Following a technical and economic assessment the deposit was subsequently added to reserves as a satellite pit and was being mined by the end of the year.
Gorumbwa
Gorumbwa is an old Belgian mine located approximately 800m west of KCD. Mineralization is hosted in 8 vertically stacked, northeast plunging lenses which are hosted within a fine grained meta-arenite package overlain by coarser grained conglomeratic units, and cut by bedding sub-parallel dolerite dykes. Drilling of 69 diamond holes (15,012m), 47 RC holes (4,467m) and sonar surveys of underground and historic open pit workings were completed as part of a feasibility study during the year. The results contributed to the development of revised geological and mineralization models This pit contains a small amount of mineralized material that requires infill drilling which is the current focus of further conversion work. The Gorumbwa open pit will require the relocation of 650 households and carries an appreciable capital cost. The team is also reviewing the Megi opportunity, which is 6.5km from the plant. Further work will be conducted to increase our knowledge of this opportunity and complete a full trade-off between the profitability of Gorumbwa and Megi.
KZ Structure
The Kibali project is located on a major transcrustal structure or set of structures, which is strongly anomalous compared to anything else on the project and is our priority target for greenfields exploration. The KZ structure is an anomalous trend, which extends over 35km and may represent a deep mantle tapping structure, in many ways comparable to the SMSZ in Western Mali. These features are known to propagate through the crust and often mark major breaks in the sub continental lithospheric mantle where giant orebodies are more likely to form.
The feature runs from Kalimva in the north, through Mengu Hill, Pakaka, KCD, Kibali S, Aindi Watsa and onto Zambula in the south. Currently, all of the reserves at Kibali are located along or near to the feature. Analysis of the historical work along the structure shows over half the strike to be untested below 50m.
Ongoing analysis of the structure has confirmed it to be a complex, multiply reactivated zone of folding and faulting with at least three pre- to syn-mineralization phases of folding and faulting and at least three post mineralization deformation events. The lack of continuity of stratigraphic units along the KZ structure, at least as planar features parallel with the foliation measurements, reinforces the observation that tight localized folding is a key part of the KZ structure beyond the immediate vicinity of KCD pit.
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Exploration at Kibali is concentrated along this structure. In the KCD area a gradient array surface IP survey over the Agbarabo, Rhino, Kombokolo to Kanga Sud target areas highlighted features in both the chargeability and resistivity data which are interpreted as being ironstone units and carbonaceous shales respectively. Surface work to test these anomalies is ongoing and has returned weak results, such as 4m at 0.68g/t from trench KKTR0002 at Rhino southeast and 10m at 1.4g/t in trench KKTR0001 at Kombokolo southwest in weakly, silica-altered sediments.
Aindi Watsa
At Aindi Watsa, located approximately 6km south-southwest of KCD, mapping, lithosampling, pitting and trenching activities defined low order gold mineralization trending ENE associated with a ridge of hemetiticchert-BIF unit that dips moderately to the N. Sixteen trenches excavated over 850m of strike length returned an average intersection of 7.9m at 1.51g/t with mineralization open to the W and down plunge. Lineations and small scale fold hinges plunge to the northeast, and host high grades of up to 14.1g/t. This target has now been reprioritized within the KZ structure portfolio.
Ikamva-Kalimva
During the last quarter of the year, work resumed at the Ikamva-Kalimva target which is considered to be one of the more prospective parts of the KZ structure, in a folded area with structural similarities to the KCD area. The target features a number of old Belgian workings within an area where northeast striking structures disrupt the northwest-southeast striking ironstone units. Mineralization is hosted in plunging folds close to the ironstone contact and in close proximity to the northeast structures. Historical drilling at Kalimva-Ikamva has returned a number of intersections from these shoots of mineralization including: KVDD0001 – 73.65m at 3.41g/t from 20.4m; KVDD0002 – 26.03m at 2.57g/t from 50m; and IVDD0006 – 31.4m at 2.65g/t from 31.7m. Recent work has focused on an area of 800m x 300m which features prospective geology of BIF, banded chert, metaconglomerate, metasandstone, metasiltstone and carbonaceous shale with results from pits of between 0.6g/t and 3.9 g/t with lithosamples grading up to 4.3g/t and trenching is in progress to evaluate this mineralization.
Isiro (Kilo Goldmines joint venture)
Randgold has entered into a joint venture with a subsidiary of Kilo Goldmines Limited (Kilo Goldmines) in the DRC which provides Randgold with access to 1,920km2 of prospective Archaen age geology over the Northern Ngayu and Isiro greenstone belts in northeast DRC (Kilo Goldmines joint venture). Work on both belts continued through the year.
Ngayu belt
Work this season has progressed the Yambeda/Yasua, Bonzuzu and Mbese targets, with results from Yambenda confirming the regional soil results, revealing a 9.6km WNW trending 50ppb anomaly including seven pods of +100ppb measuring up to 750m x 300m in strike. The anomaly sits in residual soils overlying a WNW trending ridge of banded iron formation. The banded iron formation is haematite rich in the ESE and more magnetite rich in the WNW possibly reflecting the lateral facies changed in the environment or possible demagnetization along the structure. Litho sampling has returned values up to 1.71g/t in the BIF.
The results from an infill pitting program over the target have identified a wide anomalous corridor beneath the strongest soil anomalies. The width of anomalism varies between 65m and 120m with saprolite values reaching 2.77g/t. The anomalous corridor coincides with the topographic ridge and structural readings have produced an interpretation of a parallel antiform-synform pair with hinges plunging gently to the ESE.
Trench YBTR001 excavated within the anomalous corridor intercepted 11.30m at 1.02g/t from 28m (including 4m at 1.30g/t and 4m at 1.50g/t) within a 76.1m wide anomalous zone.
Further pitting and trenching are planned to confirm the fold model and the continuity of the anomalous zone while also extending its strike. The team is working on the identification of controls on the higher grades within the anomalous corridor to identify targets for follow up work in 2015.
Isiro belt
A regional soil sampling and mapping program has been completed over the southern part of the Isiro belt. The soil results generally reported a low background value over the permit with only five +70ppb anomalies identified in the southern part of the belt which features wide sequences of thrusted BIFS in a regional scale, open fold.
Follow up mapping and sampling over the targets has not returned any significant results this year and our work indicates that parts of the belt are of a relatively high, low to mid amphibolite metamorphic grade. Further work is planned over the targets, as well as a review of the more linear western extension of the belt.
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Generative work
The ongoing turmoil in the gold mining industry continues to generate potential opportunities and the generative team is continuously reviewing these projects. Randgold’s focus remains on the identification of new world class gold districts within Africa, specifically around the West African and Congo/Tanzanian Cratons with the potential to meet our investment criteria of a 20% return at a $1,000/oz gold price with a minimum deposit size of 3Moz. Our four principal target areas are the Mako Belt in eastern Senegal, the SMSZ in western Mali, Ivory Coast and northeast DRC, with further research being conducted across Cameroon, South Sudan and Tanzania.
Randgold continues to maintain its focus on organic growth through the discovery and development of world-class orebodies, and has a pipeline of high quality projects and exploration targets. Notwithstanding this core strategy, given the increased balance sheet stress across the industry and our view that the industry needs to reinvent itself, the company’s routine review of corporate and asset acquisition and merger opportunities is receiving additional attention.
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MINERAL RIGHTS AND ORE RESERVES
Table of mineral rights at December 31, 2014
| Country | Type | Area (km2) | Area (miles2) | Equity (%) | ||||||||||||
| Mali | ||||||||||||||||
| ■ Loulo | EP | 263 | 101 | 80 | ||||||||||||
| ■ Gounkoto | EP | 100 | 35 | 80 | ||||||||||||
| ■ Morila1 | EP | 200 | 77 | 40 | ||||||||||||
| ■ Bena West | EEP | 22 | 8 | 90 | ||||||||||||
| ■ Bakolobi1 | EEP | 120 | 46 | 51 | ||||||||||||
| ■ Djelimangara1 | EEP | 55 | 21 | 51 | ||||||||||||
| ■ Djelimangara West1 | EEP | 48 | 19 | 51 | ||||||||||||
| ■ Kanda | EEP | 75 | 29 | 51 | ||||||||||||
| ■ Kata | EEP | 64 | 25 | 51 | ||||||||||||
| ■ Keniebandi | EEP | 65 | 25 | 51 | ||||||||||||
| ■ Sebesounkoto | EEP | 29 | 11 | 51 | ||||||||||||
| ■ Sebesounkoto Sud | EEP | 28 | 11 | 51 | ||||||||||||
| ■ Djidian | EEP | 325 | 125 | 90 | ||||||||||||
| Cȏte d’Ivoire | ||||||||||||||||
| ■ Nielle | EP | 751 | 290 | 89 | ||||||||||||
| ■ Boundiali | EEP | 1,320 | 510 | 81 | ||||||||||||
| ■ Dabakala | EEP | 191 | 74 | 81 | ||||||||||||
| ■ Mankono | EEP | 704 | 272 | 81 | ||||||||||||
| ■ Tiorotieri | EEP | 86 | 33 | 89 | ||||||||||||
| ■ Kouassi Datekro N | EEP | 350 | 135 | 89 | ||||||||||||
| ■ Kouassi Datekro C | EEP | 396 | 153 | 89 | ||||||||||||
| ■ Kouassi Datekro S | EEP | 400 | 154 | 89 | ||||||||||||
| ■ Fapoha North | EEP | 387 | 149 | 81 | ||||||||||||
| ■ Fapoha South | EEP | 398 | 154 | 81 | ||||||||||||
| ■ Tengrela South | EEP | 400 | 154 | 81 | ||||||||||||
| Senegal | ||||||||||||||||
| ■ Kanoumba | EEP | 621 | 240 | 90 | ||||||||||||
| ■ Miko | EEP | 61 | 24 | 90 | ||||||||||||
| ■ Dalema | EEP | 401 | 155 | 90 | ||||||||||||
| ■ Tomboronkoto | EEP | 225 | 87 | 90 | ||||||||||||
| ■ Bambadji1 | EEP | 236 | 91 | 51 | ||||||||||||
| Democratic Republic of Congo | ||||||||||||||||
| ■ Kibali | ||||||||||||||||
| □ 11447 | EP | 227 | 88 | 45 | ||||||||||||
| □ 11467 | EP | 249 | 96 | 45 | ||||||||||||
| □ 11468 | EP | 46 | 18 | 45 | ||||||||||||
| □ 11469 | EP | 92 | 36 | 45 | ||||||||||||
| □ 11470 | EP | 31 | 12 | 45 | ||||||||||||
| □ 11471 | EP | 113 | 44 | 45 | ||||||||||||
| □ 11472 | EP | 85 | 33 | 45 | ||||||||||||
| □ 5052 | EP | 302 | 117 | 45 | ||||||||||||
| □ 5073 | EP | 399 | 154 | 45 | ||||||||||||
| □ 5088 | EP | 292 | 113 | 45 | ||||||||||||
| ■ Kilo1 | ||||||||||||||||
| □ 2226 | EEP | 137 | 53 | 51 | ||||||||||||
| □ 2227 | EEP | 137 | 53 | 51 | ||||||||||||
| □ 2229 | EEP | 126 | 49 | 51 | ||||||||||||
| □ 2230 | EEP | 154 | 59 | 51 | ||||||||||||
| □ 2231 | EEP | 196 | 76 | 51 | ||||||||||||
| □ 2285 | EEP | 196 | 76 | 51 | ||||||||||||
| □ 2286 | EEP | 184 | 71 | 51 | ||||||||||||
| □ 2287 | EEP | 182 | 70 | 51 | ||||||||||||
| □ 2288 | EEP | 172 | 67 | 51 | ||||||||||||
| □ 2289 | EEP | 194 | 75 | 51 | ||||||||||||
| □ 2290 | EEP | 189 | 73 | 51 | ||||||||||||
| □ 2291 | EEP | 190 | 73 | 51 | ||||||||||||
| Total area | 12,213 | 4,713 | ||||||||||||||
| EP | – Exploitation Permit | |
| EEP | – Exclusive Exploration Permit | |
| 1 | Subject to a joint venture agreement |
| - 55 - |
Annual ore reserve declaration at December 31, 2014
| Attributable | ||||||||||||||||||||||||||||||||||
| At December 31 | Category | Tonnes (Mt) | Grade (g/t) | Gold (Moz) | gold (Moz) | |||||||||||||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||
| PROVEN AND PROBABLE RESERVES | ||||||||||||||||||||||||||||||||||
| Kibali | 45 | % | 45 | % | ||||||||||||||||||||||||||||||
| Proven | 5.4 | 5.5 | 1.8 | 2.3 | 0.3 | 0.4 | 0.1 | 0.2 | ||||||||||||||||||||||||||
| Probable | 78 | 84 | 4.3 | 4.1 | 11 | 11 | 4.8 | 5.0 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 83 | 89 | 4.1 | 4.0 | 11 | 12 | 4.9 | 5.2 | |||||||||||||||||||||||||
| Loulo | 80 | % | 80 | % | ||||||||||||||||||||||||||||||
| Proven | 2.2 | 2.2 | 1.8 | 1.9 | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||||||||||||||||||||
| Probable | 31 | 31 | 4.8 | 5.1 | 4.7 | 5.1 | 3.8 | 4.1 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 33 | 34 | 4.6 | 4.9 | 4.9 | 5.3 | 3.9 | 4.2 | |||||||||||||||||||||||||
| Gounkoto | 80 | % | 80 | % | ||||||||||||||||||||||||||||||
| Proven | 4.4 | 1.9 | 3.8 | 2.5 | 0.5 | 0.1 | 0.4 | 0.1 | ||||||||||||||||||||||||||
| Probable | 18 | 15 | 4.6 | 4.5 | 2.6 | 2.1 | 2.1 | 1.7 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 22 | 17 | 4.4 | 4.3 | 3.2 | 2.3 | 2.5 | 1.8 | |||||||||||||||||||||||||
| Morila | 40 | % | 40 | % | ||||||||||||||||||||||||||||||
| Proven | 0.02 | — | 4.0 | — | 0.003 | — | 0.001 | — | ||||||||||||||||||||||||||
| Probable | 13 | 14 | 0.7 | 0.7 | 0.3 | 0.3 | 0.1 | 0.1 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 13 | 14 | 0.7 | 0.7 | 0.3 | 0.3 | 0.1 | 0.1 | |||||||||||||||||||||||||
| Tongon | 89 | % | 89 | % | ||||||||||||||||||||||||||||||
| Proven | 7.1 | 3.3 | 2.2 | 1.4 | 0.5 | 0.2 | 0.4 | 0.1 | ||||||||||||||||||||||||||
| Probable | 23 | 28 | 2.4 | 2.3 | 1.7 | 2.1 | 1.5 | 1.8 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 30 | 31 | 2.3 | 2.2 | 2.2 | 2.2 | 2.0 | 2.0 | |||||||||||||||||||||||||
| Massawa | 83 | % | 83 | % | ||||||||||||||||||||||||||||||
| Probable | 21 | 21 | 3.1 | 3.1 | 2.0 | 2.0 | 1.7 | 1.7 | ||||||||||||||||||||||||||
| Sub total | Proven and probable | 21 | 21 | 3.1 | 3.1 | 2.0 | 2.0 | 1.7 | 1.7 | |||||||||||||||||||||||||
| TOTAL RESERVES | Proven and probable | 201 | 205 | 3.6 | 3.6 | 24 | 24 | 15 | 15 | |||||||||||||||||||||||||
The reporting of ore reserves is in accordance with Industry Guide 7. Pit optimizations are carried out at a gold price of $1,000/oz, except for Morila which was carried out using a $1,300/oz pit optimization. Ore reserves are reported at a cut-off grade based on $1,000/oz gold price within the pit designs. Underground reserves are also based on a gold price of $ 1,000/oz. Dilution and ore loss are incorporated into the calculation of reserves.
Addition of individual line items may not sum to sub totals because of rounding.
| - 56 - |
Mineral Rights and Permits
The following map shows the position of our current permits in West Africa:
| - 57 - |
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.
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SOCIAL RESPONSIBILITY AND ENVIRONMENTAL SUSTAINABILITY
sustainability governance
This section explains how sustainability is managed within the company. This includes the policies and procedures we have in place to ensure we engage effectively with our stakeholders and for identifying and reporting on sustainability risks and opportunities.
Management of sustainability
Sustainability governance flows from the top down at Randgold, with our board holding ultimate responsibility for all our efforts in this area. The board is supported by the environmental and social (E&S) committee, which meets quarterly and is chaired by our CEO. Although ultimate responsibility for our sustainability work rests at the top, we avoid a hierarchical structure by enabling a bottom-up approach as well. That is why, for example, our CEO attends regular mass meetings with employees, community leaders and other local representatives or why community grievances may be discussed at the E&S committee.
Day to day executive responsibility for implementing our sustainability policies and for achieving the sustainability targets and KPIs outlined in this report rests with the group environmental, community and safety managers. They report directly to the chief operating officers (sitting above the general managers), providing an important layer of independent sustainability oversight. In 2014, the corporate and sustainability reporting function was contracted to an independent, external consultant, reporting directly to the E&S committee and the board of the company.
The key role of this governance structure is to ensure we identify all sustainability issues and opportunities at an early stage, and have in place the right people and policies to deal with them. This risk-based approach is at the root of our ability to deliver good value.
A key part of our management approach is to ensure that sustainability is considered at all stages of a mine project. For example, even at the earliest stage of a mine project (the exploration phase), Randgold will put a formal grievance mechanism for the local community into operation. During the feasibility phase of a project we conduct detailed ESIAs to understand what sustainability risks exist; and when a mine begins production (the operational phase) we put in place detailed management structures, targets and performance assessments, including an environmental management system, to ensure these risks are controlled. From day one of operation, each mine is therefore focused on ensuring that it does not create any long term environmental liabilities and that it puts in place a viable strategy for postclosure economic growth.
Corporate governance
Our Code of Conduct helps ensure our values are applied throughout the company and defines the standards of behavior expected of all directors, employees and contractors. It sets out our standard on a range of issues including bribery, whistle blowing, record-keeping, fraud, interactions with governments and sustainable development. Contravention of this code would lead to disciplinary action and the potential termination of employment. The importance of complying with our Code of Conduct is explained to all new employees as a central part of their induction training.
Where appropriate, we include achievement of sustainability targets as a component of bonus-based remuneration packages. We also build succession planning in every executive management position, including our CEO, to ensure that our sustainability work is built into the DNA of our company.
As part of our tendering procedure we also encourage all contractors and service providers to implement our human rights, environmental and social standards, anticorruption and anti-bribery policies in their organizations. As detailed throughout this sustainability report, Randgold has a comprehensive set of policies and practices in place to deal with all our sustainability challenges. We rely on our people to effectively implement these policies, which have evolved through years of experience and are crafted to comply with host country legislation. This means that we tend not to officially adopt or endorse specific international charters or sustainability initiatives, even though we often agree with them and work to support them.
Examples of international standards or initiatives that fall into this description include the IFC Performance Standards, World Bank Operational Guidelines, OECD Convention on Combating Bribery and the Voluntary Principles on Security and Human Rights.
Anti-corruption measures
The group’s Code of Conduct requires all our personnel, and the personnel of our contractors, suppliers and partners not to engage in any form of bribery or corruption. Randgold undertakes due diligence on the parties it does business with. Our personnel are also trained in anti-bribery and corruption measures to ensure the group’s Code of Conduct is fully adhered to.
The group operates a whistle blowing policy where all our personnel and the personnel of our suppliers, contractors and partners are encouraged to report any breach or suspected breach of the group’s anti-corruption and antibribery policies to the group’s
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compliance officer. Our anti-bribery and anti-corruption policies and practices are regularly audited to assess the adequacy of and compliance with our Code of Conduct.
We believe in full transparency in our dealings with governments and we fully encourage our host governments’ efforts to establish procedures to ensure revenue transparency in accordance with international standards.
Stakeholder engagement
Ongoing discussion with our stakeholders is at the heart of our approach to sustainability. It allows us to understand their needs and therefore to build the deep partnerships that enable us to succeed. Our stakeholder engagement program aims to facilitate these discussions.
Our engagement program categorizes our stakeholders into eight specific groups: shareholders, employees, local communities, governments, relevant NGOs, trade unions, suppliers/contractors and the media. It ensures we communicate with all eight groups regularly throughout the year. Some of the elements included in this are:
| § | Quarterly results presentations to local authorities, and an annual presentation of results and performance to local communities; | |
| § | Monthly updates with local chiefs and community committees;. | |
| § | The attendance of trade union representatives at mine-level board meetings and strategic planning sessions; | |
| § | Community grievance mechanisms in place at all sites; | |
| § | Annual materiality assessment; | |
| § | Mass meetings with our CEO which are open to all mine employees, community leaders and other representatives. |
This year our program has also included formal public meetings with community leaders and local authorities to receive feedback on last year’s sustainability report. There were also a total of three public participation programs (PPPs) this year linked to ESIAs around proposed new pits and hydropower stations at Kibali, DRC and the underground development at Gounkoto, Mali.
Materiality assessment
In 2013, Randgold conducted a ‘materiality assessment’, surveying both internal and external stakeholders to ask what they perceived our most critical sustainability risks to be.
This exercise helped us to compare what both internal management and external stakeholders perceive to be our most pressing sustainability issues and gives our executive management a useful tool to help ensure we are better aligned with all our stakeholders’ needs.
At the conclusion of the process we were able to identify the sustainability issues were assessed to be of highest priority by all stakeholders combined. We refer to this materiality assessment in this section.
The data on environmental, safety and economic impacts presented covers all six of our operational and development sites situated in Mali, Côte d’Ivoire, Democratic Republic of Congo and Senegal. With the exception of GHG emissions, it excludes our offices and guesthouses.
The data for previous years is provided in certain instances for comparative purposes. A selection of the sustainability information has been assured by an independent assurance provider, Environmental and Sustainability Solutions (ESS).
In terms of our value chain, all our gold (100%) is sold to the South African based refinery, Rand Refinery (Pty) Limited (Rand Refinery), which has an internationally respected reputation for integrity and ethics. Rand Refinery certified that its entire chain of custody is responsible and ‘conflict free’ and this certification is independently audited. Rand Refinery is also a member of the World Gold Council and the Responsible Jewellery Council. Randgold does not buy any minerals from artisanal miners.
Economic development
Our materiality assessment highlighted several ‘economic development’ issues to be managed including the need to create jobs and value in our host countries, to source products and services from local suppliers, to improve skills and to be transparent about revenue flows. We see all these issues as not only important risks to be managed but also a crucial pillar of our business strategy. We make significant contributions to host government revenues through taxes, royalties and dividends; and we create gold mines that act as a commercial engine to power local economic growth. Our strategy is that this combination helps to turn remote corners of some of the world’s poorest countries into robust economic dynamos, in turn helping us form the strong relationships that enable our business to succeed.
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Our policies and performance
Randgold has a set of policies that aims to ensure that our mine projects are genuine partnerships with our host countries. These include joint ownership structures for all our respective mines (the states of Mali, Côte d’Ivoire and the DRC all have stakes of at least 10% in our respective mines), investments in major infrastructure, a commitment to transparency and long term agreements within our mining code obligations. Infrastructure is widely lacking across much of sub- Saharan Africa, where we operate, and is estimated to limit the continent’s GDP growth by two percentage points each year. For this reason, the creation of roads, power stations and telecommunication networks plays an important role in our contribution to national economic development.
Our infrastructure projects are by nature mutually beneficial: they both enable the construction and efficient operation of our mines and also ensure the ongoing ability of the local community to thrive and prosper.
Revving up local economic engines
An important part of our contribution to national economic development is our preferential procurement policy which commits us to buying products and services from local companies whenever possible. This helps foster a thriving local economy around each of our mines.
To support local small and medium sized enterprises (SMEs), we also provided business mentoring and training to a set of community companies in 2014 – including those working in areas such as borehole management, gardening, jam making and waste management.
We actively encourage wider economic activity and wealth creation that is not directly linked to the mine.
Knowledge transfer
When local suppliers do not have the right level of quality or expertise to meet our procurement requirements, we try to facilitate skill training or mentoring support from leading international companies in order to build local capacity. We believe this is an important contribution to national economic development as it helps world-class skills to enter and stay in the local workforce.
Our policy of requiring all suppliers to respect our sustainability and human rights policies also helps improve the quality and standards of local businesses and builds their capacity to access opportunities with other multinational companies in the future.
With over 90% of our workforce comprised of nationals, we are helping to improve skills and knowledge levels for each host country’s mining sector.
Prepared for crisis: Managing the Ebola risk
The outbreak of the Ebola virus in West Africa in 2014 was one of the most widely reported stories of the year. Randgold is no stranger to crises having managed our gold mines at times of civil wars and coups d’état, and this has been a situation that we continue to manage with high levels of alertness, preparedness and in partnership with relevant local authorities in each country of operation.
Preparedness and prevention
The Ebola virus is a serious infectious disease that can be easily transmitted through contact with body fluids, traditional burial services or as a result of handling bushmeat. We continue to apply the medical protocols for the identification, treatment and containment of the virus that we established in 2014.
These include a prevention program that means all mine personnel are screened for fever with contactless temperature monitors outside the mine entrance, and has seen all mines equipped with Ebola personal protective equipment (PPE), disinfection kits and mobile isolation units. Should any cases of the virus be detected, we have worked with international medical experts to establish a strict protocol for tracing and disposing of infected or potentially infected materials.
In 2014, we also formed a crisis team that includes all our senior medical officers who met weekly, and continue to do so, and who remain in constant contact with host governments, the World Health Organization and other NGOs to ensure that we are fully up to speed with the state of the epidemic and the measures being taken to contain it.
Partnerships in health
The key to Randgold’s crisis management approach is to integrate our responses with those of our host countries. In the case of the Ebola virus outbreak, this has included working with the Malian authorities in October 2014 to act swiftly to identify and contain the country’s first confirmed case of the Ebola virus. Randgold provided medical supplies to the hospital where the young victim was taken and was in close contact with the regional health director and national director of health. We have also been working closely with the Ivorian minister of health and the wider mining industry to coordinate our efforts against the disease throughout the year.
| - 61 - |
It is a great advantage that most of Randgold’s medical officers are West African and consequently very familiar with local practices and tropical diseases. In addition, the group’s chief medical officer, Dr. Haladou Manirou, has become the only West African on the Ebola Private Sector Mobilisation Group (EPSMG) – one of the main international bodies leading the medical response to the virus. As it did to rescue the region’s failing tropical disease control program of a few years ago, Randgold mobilized industry support through EPSMG for the Malian health authorities in their effort to contain the spread of the virus after the first case was reported. EPSMG meets weekly to share information on best practice in dealing with the disease. Due to the additional medical expertise, capacity and funding the private sector provided, Mali was officially declared Ebola-free at the beginning of 2015 by the United Nations Mission for Ebola Emergency Response.
Working with local NGOs has been crucial to our partnership approach. In 2014, our health teams have worked with local Malian NGO SOMAPIT to help train community healthcare workers on Ebola management and have worked with the National Program of Hygiene at Borders to raise awareness and screening levels at Doko airport in the DRC.
Alertness and awareness
Continued alertness and awareness is the key to continuing our successful response to the virus so far, and ensuring it does not spread to currently uninfected areas. Randgold is continuing an intensive drive to raise awareness among our employees and local communities about the manifestation and treatment of the Ebola virus symptoms.
Community development
Engagement with, and investment in, the local community both ranked very highly in our materiality assessment in 2013; and they sit alongside other community based issues such as artisanal mining, grievance management, resettlement and human rights as vital areas of our sustainability work.
Our policies and performance
We believe that the people who are best equipped to shape community development are the local community themselves. That is why we have established elected community development committees (CDCs) at the heart of our community investment.
CDCs consist of local leaders and women and youth group representatives who become responsible for the allocation of a community investment budget. Each community investment budget is designed to reflect a mine’s production levels and is spent on local projects that fall within five broad sustainable development categories: primary healthcare, education, food security, potable water and local economic development.
Each Randgold mine works closely with its CDCs to ensure that the projects they invest in can be maintained after the mine has closed. For example, if the CDC invests in drilling boreholes, we ensure there is also training for villagers to maintain and repair those water sources in the future. Where possible, we partner with local NGOs to harness their knowledge and expertise too.
Community development committee activity in 2014
Tongon
The Tongon CDC increased its spending by over 70% in 2014, investing over $580,000 in community projects. Among other initiatives, this helped fund two new maternity wards, the Korokara water project and the construction of five school classrooms in the town of M’bengue. There was also support for the creation of a community radio station for the region, following successful work to support Radio Sanso in Mali.
Morila
Spending by the Morila CDC increased by over 23% in 2014 reaching $182,862. Morila is the longest-standing CDC and projects last year included fixing a solar-powered borehole, financial support to local schools, training for community members in tractor management and the creation of a major new youth complex. A fund established for the sale of scrap metal also enabled a new health care center to be built at Figola, a nearby village.
Loulo
Spending by the Loulo CDC decreased by 45% in 2014, but the committee still invested over $238,000 in local projects. This included training in new economic sectors for local women; financial assistance to a local committee to help prevent the spread of the Ebola virus, assistance to the elderly, teacher salary payments and work to improve the profitability of several businesses in the local community. During 2015, the construction of infrastructure for the agribusiness project, to the value of $1.3 million, will be completed
| - 62 - |
Gounkoto
The Gounkoto committee benefited from a large increase in spending in 2014, due largely to the upfront costs required to construct a new agribusiness center in the community. In total, committee spending increased by 81% on 2013 levels to over $735,000. Other projects that the committee funded included the distribution of Ebola-prevention kits, the equipping of a high school computer laboratory in the town of Kenieba and the drilling of a new water borehole.
Kibali
At Kibali, the committee is now entering its second year and increased its spending by over 200% in 2014. The committee helped fund the construction or maintenance of several local facilities including Surur School, road and bridge repair and the handover of the local health clinic to the provincial government in the Orientale Province. We believe that passing the ownership and management of assets such as health clinics to local control is key to ensuring that development is locked in for the long term.
Hearing and resolving grievances
Creating and sustaining an open, two-way channel of communication between each mine and its surrounding community is at the heart or our community development approach. Our grievance mechanism is therefore a key tool for Randgold. The mechanism is based on guidance laid out in the IFC Performance Standards and the Equator Principles and aims to be an approachable, transparent and fair way for community members to register any non-employment related worries or complaints they have on the impacts of the mine. It is a mechanism that we set up at a very early stage and which we advertise widely using local radio, posters and local notice boards. We commit to responding to all grievances within one week.
Peaceful and progressive resettlement
We strive to avoid resettling households when we create our mines, but when resettlement does need to take place our policy is to make sure that the affected person is at the center of the process. Affected households are engaged at an early stage and throughout the process in order to create an agreed RAP, and our process commits to ensuring that their standard of living is improved or at the very least restored.
Resettlement Figures
| 2014 | 2013 | 2012 | ||||||||||
| Number of households resettled | 29 | 4,216 | 1,208 | |||||||||
| RAP expenditure | $0.4 million | $92.4 million | $51.0 million | |||||||||
Respecting human rights
Randgold published a detailed update of our human rights policy in 2012, outlining our commitment to upholding fundamental human rights wherever we do business. The policy covers all aspects of our business including, but not limited to, areas of employment, resettlement, engagement of private security forces and our work with suppliers and contractors.
Finance for development
As part of our efforts to catalyze sustainable economic development, Randgold has begun to increasingly use microfinance as a tool. This fosters entrepreneurialism in areas where there have historically been no banks or access to other kinds of credit.
Our policy is to support existing appropriately accredited institutions to lend where possible rather than doing so directly. This is because we want to harness their expertise but also to ensure that we foster a culture of independence and not reliance on the mine. We also encourage the institutions to lend at a low interest rate.
There was particularly encouraging progress in Côte d’Ivoire where, in its first full year of operation, the microfinance facility proved popular and recorded a 98% recovery of loans with approximately 30% of loans going to women. In 2015, we will work with appropriately accredited institutions to establish a microfinance facility for Kibali.
Separate to Randgold’s core work, we were delighted that the newly created charitable foundation Nos Vies en Partage Foundation (which roughly translates as ‘sharing prosperity’) enjoyed its first full year of operation in 2014.
The foundation aims to spread the benefits of development beyond the surroundings of Randgold’s mines including in countries such as Angola, Benin, Gabon and Ghana. One of the foundation’s focuses is on projects supporting women and children - who typically benefit the least from economic growth.
Already Nos Vies en Partage Foundation has supported projects across 11 sub-Saharan African countries. These include assistance to orphanages, a center for physically and mentally disadvantaged children, a home caring for the elderly, a number of NGOs providing assistance to women and ill or neglected children and a charity supporting children with cancer.
| - 63 - |
The foundation is funded partly from the money raised by the sponsored motorbike tour from Abidjan in Côte d’Ivoire to Cape Town, South Africa, that Randgold’s CEO Mark Bristow, his son Craig, and a number of friends completed in 2014.
Meeting the development challenge together
We want to ensure that by building world-class gold mines, in partnership with our host countries, we create tangible and lasting development benefits for local communities. However, the challenges on the ground every day are very real and very extensive, so the question of where to ‘draw the line’ on community investment is one that is regularly discussed.
On the one hand, our commercial interests lead us to invest significantly in areas such as primary healthcare, drinking water and education. Yet on the other hand, as a business, a limit has to be placed on our role so that more permanent, publicly-owned entities can take over and ensure the social development we foster lasts long after our mines have closed.
From outputs to outcomes
To constantly improve our impact in the communities where we operate, we have also committed to monitor the ‘outcomes’ of our community development work more closely, instead of just the ‘outputs’.
This year, therefore, instead of only measuring how many schools or classrooms are built, we have also looked at areas such as class sizes because smaller class sizes are commonly regarded to lead to better overall educational outcomes for the student. We have also monitored the provision of basic resources to schools.
The new schools built by Randgold are delivering smaller than average class sizes in DRC and Mali and higher than average connectivity to drinking water and, in Mali only, electricity. However it is clear that more work needs to be done to reduce class sizes in Côte d’Ivoire and to improve access to electricity and water both in Côte d’Ivoire and DRC.
We believe that our partnership approach is not only central to our commercial success but crucial to ensuring that our mines act as a catalyst for genuinely sustainable development.
Protecting and empowering our workforce
It was no surprise that, in our 2013 materiality assessment, ‘safety’ was selected as the most pressing sustainability issue by both internal and external stakeholders. It sits alongside the need to maximize local and national employment, the need to develop skills to meet the demands of the organization and the need to protect workers from occupational hazards – as a key set of human capital risks we must manage.
Simply put, our business depends on the skills and passion of our workforce so these issues are our top priority. We aim to create an engaged and motivated team led by host country nationals and with each individual taking responsibility for delivering our business goals and a safe environment. We believe that all occupational injuries and fatalities can and should be prevented and we work towards that target.
Our workforce
Randgold mines created employment for a total of 11,822 people in 2014 of which 91% were nationals from our host countries of operation.
The total workforce of 11,822 is a significant contraction from over 15,000 persons in 2013. This reflects the conclusion of the major construction phase of the Kibali gold mine.
Hiring and upskilling host country nationals is central to Randgold’s human resources approach. Competent management is arguably the biggest business asset for any gold mine and by recruiting outstanding candidates from host countries and training local people to world-class standards, we develop cost effective, accountable management that deliver highly productive gold mines.
Our target in this area is to maximize the number of host country nationals in senior roles. In 2014, it was therefore an important achievement that 91% of our mining workforce were nationals and that localization efforts moved forward at mines such as Loulo and Tongon.
At Loulo, expatriate numbers were reduced by 10% and all but one of the entire management team is now Malian. In total, nine senior international employees were replaced by trained nationals in 2014. This is a relatively low number but is an indicator that we hope to increase over the medium term reflecting the time needed to transition skilled senior workers.
In terms of gender diversity, Randgold is an equal opportunity employer. We have transparent nondiscrimination policies and strive to employ the best people at each site, especially from local communities.
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Safety as our top concern
Sustainability begins at home and Randgold’s primary commitment is to the safety of its employees. We have a wide range of measures in place across all our mines to protect employees in all parts of our operations.
We view safety as a continuous and constant program of work and every day our employees meet for “toolbox” morning sessions on safety, engage in regular safety training, check personal protective equipment and are encouraged to speak out should they see any risks not being dealt with appropriately.
We take a preventative approach to safety and use the internationally recognized OSHAS 180001 standard as framework for our health and safety management. In 2014, all our mines were certified to the OHSAS 18001 standard with the exception of Kibali which will, as a newly operational mine, be applying for its accreditation in due course. Our policy is to combine both the top-down approach that flows from constant supervision and the bottom-up approach of asking every individual employee to be their ‘brother’s keeper’ i.e. to take responsibility for the safety of themselves and those around them. Other measures include, but are not limited to, the wide use of signage in multiple languages, the use of rotating monthly safety themes and a fast response protocol for when a LTI occurs that can include safety stand downs, the issuing of flash reports and detailed analysis by supervisors.
We were pleased to record an 18% reduction in our LTIFR for 2014, reducing the rate for the third year in succession to a historic low. This is particularly gratifying at a time when the scale and complexity of our operations continues to grow, including reaching the highest level of production in our history.
At group level, LTIs were reduced to 13 this year, a reduction of 35% on 2013, and a decrease of 65% on 2012. The teams at Tongon and Gounkoto both achieved zero LTIs throughout 2014 and there have been significant improvements at Kibali with a 50% reduction in the number of LTIs compared to 2013.
We also seek to introduce new technology where it has been shown to add proven and tangible benefits for the safety of our workforce. In 2014 we upgraded the ventilation systems to improve temperatures underground.
2014 Safety performance
| 2014 | 2013 | 2012 | ||||||||||
| Total labor2 | 12,341 | 15,373 | 1 | 11,990 | 1 | |||||||
| Person hours | 27,583,588 | 35,246,261 | 25,327,309 | |||||||||
| LTIs3 | 13 | 20 | 38 | |||||||||
| LTIFR4 | 0.47 | 0.57 | 1.5 | |||||||||
| Fatalities | 1 | 1 | 1 | |||||||||
| Near misses | 189 | 128 | 120 | |||||||||
| Individual mine level | ||||||||||||||||||||||||||||||||||||||||
| Loulo | Gounkoto | Morila | Tongon | Kibali | ||||||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||||||
| Person hours | 6,410,729 | 6,103,322 | 2,152,358 | 2,408,290 | 2,697,840 | 2,035,248 | 4,628,717 | 4,480,840 | 11,693,944 | 20,218,560 | ||||||||||||||||||||||||||||||
| LTIs3 | 4 | 5 | 0 | 0 | 3 | 1 | 0 | 2 | 6 | 12 | ||||||||||||||||||||||||||||||
| LTIFR4 | 0.62 | 0.82 | 0 | 0 | 1.11 | 0.49 | 0 | 0.45 | 0.51 | 0.59 | ||||||||||||||||||||||||||||||
| Fatalities | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | ||||||||||||||||||||||||||||||
| Near misses | 29 | 34 | 36 | 40 | 6 | 2 | 34 | 37 | 84 | 0 | ||||||||||||||||||||||||||||||
| 1. | Restated from last year due to slightly updated recalculation. | |
| 2. | Including persons employed by our contractors. | |
| 3. | Defined as injuries that occur in the execution of duties that mean the person is unable to perform those duties for at least one day. | |
| 4. | Number of LTIs per million man hours worked. |
Training
We are constantly investing in training to improve the performance of our employees so that Randgold meets its business goals. With such a large number of employees coming from local communities, many of whom had never worked in the sector before, training is central to our working culture. We use psychometric testing to identify local people with the aptitude for skilled positions and then require each worker to learn their position through shadowing a mentor, often on one of our other mines. Such informal training continues until a line manager certifies them to be able to undertake the role to the required standards themselves.
To help develop the leaders of tomorrow, we also invest informal training for our most talented employees, including courses and diplomas at leading international universities. In 2014, a total of 210 employees received formal training at a total investment cost of $543,225.
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Industrial relations
Our employees are a core stakeholder in our business and that belief forms the cornerstone of our industrial relations policies. All employees are free to join unions and our countries of operation are strongly unionized with the right to freedom of association enshrined in law.
We estimate that approximately 85% of our employees are union members with the remaining 15% set apart due to a long term incentive program we introduced for senior employees. This program effectively moves participating employees into management and out of the employee side of negotiated work conditions.
We recognize all groups that legitimately speak for our workers and meet with union representatives at each mine site on a monthly basis; they also attend quarterly board meetings. There are also other initiatives such as the general manager’s weekly safety meetings to encourage open and constant dialogue.
Our strategy of continuous meetings with worker representatives, sub-contractor management and all stakeholders continued to drive a calm industrial relations climate in 2014.
In Mali, there were numerous calls from unions in other sectors in the country for the Mali mines to join them in sympathy strikes but there was only one occasion when they agreed to - at Morila, when less than 15% of the workforce followed the strike for two days.
There was also one industrial relations stoppage at Tongon in the second quarter when our mining subcontractor TOMI experienced a wild-cat five-day strike without warning.
In total, 11 days’ work were lost to strike action over the course of the year across the whole group.
Mine Level Agreements (MLAs) are the basis of our industrial relations policy. These are collective agreements with the unions at each mine. They are designed to complement national labor laws and to establish the way each mine operates with regards to detailed items such as salary increments or acceptable behavior in a strike situation. MLAs are reviewed every three years, and no MLAs were due for review in 2014.
Managing health risks
Our mines are located in isolated parts of Africa where access to basic healthcare tends to be extremely limited and where infectious diseases can create significant human and business risks. That is why health issues, such as malaria and HIV/AIDS, appeared prominently in our materiality assessment in 2013. We believe that a healthy workforce and the security of knowing their immediate family are healthy are critical to the productivity and functioning of our mines.
Access to healthcare
As part of our sustainability policies, we provide free basic medical services to employees, their immediate family and to community members within a 10km radius of each of our mines. Our policy is to establish health clinics both on the mine and in nearby villages, with the aim of the latter being to transfer control to local authority over the medium-term. In 2014, the community clinic in Kibali was transferred to the provincial authority. In 2014, we operated seven clinics across our five mines and their communities. This resulted in just over 100,000 medical consultations of which around 70% were for employees. The total number of consultations is down slightly on last year, reflecting the contraction in the size of the workforce as a whole.
Net benefits in our fight against malaria
As well as our core provision of basic healthcare, Randgold also runs a focused program at each of our mine sites to combat malaria. This disease kills around 25,000 people in our three countries of operation each year but it is preventable and we are glad to report zero deaths from the disease among our host communities in 2014.
We believe that the battle against the disease is one of our best investments. Over 4,000 sick leave days were recorded due to malaria in 2014 – around 28% of total absenteeism – and reducing these losses helps make a strong business case for our anti-malaria program. More than this, however, we also find that the productivity and morale of our workforce is boosted enormously when they know that they, their family and friends need not live in fear of this disease.
The total number of malaria cases across the group reduced from 8,102 in 2013, to 6,163 in 2014 – a reduction of 24%. This brought group level malaria incidence below 50% for the first time, and puts incidence at all mines at least 30% below the initial baselines set before the mine started. While this is encouraging, it does not meet our ambitious target to reduce incidence of the disease by 25% year-on-year and we were disappointed by slight increases in the rate at both Kibali and Morila.
Helping prevent and live with HIV/AIDS
HIV/AIDS is widespread across sub-Saharan Africa, particularly in the DRC. Our HIV/AIDS program aims to help stop the spread of the disease by encouraging safe sex, raising awareness and promoting VCT.
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The target for our HIV program is no new infections among our employees.
In 2014, we spent over $27,000 on our HIV/AIDS program. Among other measures, this helped to enable the distribution of over 161,000 condoms, funded mobile video education units in the communities and AIDS awareness month in December, and supported training for peer educators. Our peer educators are members of the community, including employees and sex workers, who are trained in counseling about HIV and communicating the risks and tend to have more resonance with their peers than others can.
It was very encouraging that the number of employees and sub-contractors tested for HIV on a voluntary basis at our mine clinics rose by 10% in 2014, rising to 3,207 people in 2014, from 2,908 in 2013. This is important because early awareness of the disease helps to arrest its spread and makes treatments generally more effective.
We were disappointed by a slight increase in the HIV prevalence rate in 2014 and in the number of positive cases among employees – which rose from 95 in 2013 to 109 in 2014. However, it is encouraging to see the prevalence rate at Kibali drop after an increase last year and that, at 11.3%, it is now some way below the baseline recorded in 2010.
Occupational health
The business of gold mining presents a number of health hazards and we undertake a wide range of healthcare programs to fit the specific circumstances of each department and operation.
At group level, there were 27 new cases of occupational health conditions in 2014. These were all related to hearing impairments and all from two specific sites, Tongon (9) and Loulo (18).
Our occupational health work aims to both reduce exposure to risks and to pro-actively spot potential health issues through regular medical consultations for employees. These consultations monitor for issues such as heavy metal in the blood, silicosis, tuberculosis and hearing issues and include biological and radiation testing for those departments with exposure to chemicals or other hazards. Our employees must all pass minimum fitness standards.
Each workplace undertakes a risk assessment to identify occupational health issues and we use appropriate equipment and engineering controls to minimize risk. All staff are provided with relevant personal protective equipment from high visibility vests, safety glasses, and ear defenders to helmets and safety boots. Our occupational health processes are certified against the OHSAS 18001 health and safety standards.
First aid training is also regularly provided and our underground projects have two specially trained mine rescue teams on site with specialist equipment.
We also seek to use the latest technology where possible and improvements to equipment in 2014 have included the introduction of quieter fans to reduce the risk of industrial deafness.
Environmental management
Our policies and performance
The focus of our environmental practices on each mine is defined by the detailed environmental impact assessment that we conduct at the feasibility phase of any project. This sets a baseline for our understanding of environmental risks and defines our approach to energy, water, waste and biodiversity management.
Once the mine is operational these findings become the basis of an EMS that is drawn up in line with IFC Performance Standards, national regulations and local community input. Ultimately, our aim is to keep our negative environmental impact to a minimum and to ensure we do not leave any long term environmental liabilities.
All our sites, with the exception of the newly-opened Kibali, are ISO 14001 certified, which helps us to identify and deal with any environmental risks and thereby comply with international best practice. We also conduct independent audits to check our compliance with the IFC Performance Standards. We had no significant environmental fines or non-monetary sanctions in 2014 and Morila’s ISO certification was reviewed and recertified.
Our environmental management systems track three types of environmental incidents ranging from major class 1 incidents (such as incidents resulting in destruction of community property), to moderate (class 2) and more minor class 3 incidents (such as release of effluents within the boundary fence).
In 2014, there was one major and 20 moderate environmental incidents across the group. This was the first class 1 incident in three years. The incident occurred at Tongon in December 2014 when a tailings pipeline burst and, although initially contained in a small dam, was accidentally pumped into a diversion trench linked to the river. While the leaked slurry was contained in the dam it was treated with an iron sulphate, to neutralize chemicals such as cyanide. However, the incident caused the death of some fish and required remedial action to be taken including water sampling to test levels of sulphates and toxins in the local water supply and information and awareness sessions with communities downstream and along the river. A formal report was submitted to the minister
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of mines in Côte d’Ivoire who also undertook their own investigation as is the standard for such incidents. We will continue to monitor closely for any negative effects in 2015.
In 2014, the Kibali ESIA was updated to include new satellite pits. This entailed completing numerous specialist studies as well as public consultation, all of which was in line with IFC standards.
Energy use and greenhouse gas emissions
Gold mining is an energy intensive operation but we strive to reduce our energy use using measures that are appropriate for each site. For example, at Kibali there is an abundance of water so we are working to maximize use of hydropower; while in Tongon most of our energy savings come from connections to the national grid. We also seek to instigate energy efficiency measures at all operations.
| Environmental Incidents | Class 11 | Class 22 | Class 33 | |||||||||||||||||||||||||||||||||
| 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||
| Loulo | - | - | - | 10 | 8 | 5 | 47 | 61 | 63 | |||||||||||||||||||||||||||
| Gounkoto | - | - | - | - | - | 2 | 21 | 22 | 18 | |||||||||||||||||||||||||||
| Morila | - | - | - | - | - | - | 1 | 2 | 2 | |||||||||||||||||||||||||||
| Tongon | 1 | - | - | 1 | 4 | 2 | 10 | 18 | 29 | |||||||||||||||||||||||||||
| Kibali | - | - | - | 9 | 5 | 1 | 17 | 24 | 15 | |||||||||||||||||||||||||||
| Total | 1 | - | - | 20 | 17 | 10 | 96 | 128 | 127 | |||||||||||||||||||||||||||
| 1. | Major incident resulting in death or injury or destruction of community property or husbandry. |
| 2. | Medium incident involving material disruption to production or uncontrolled release of contaminated effluent outside the boundary fence of the operation. |
| 3. | Minor incident involving controlled or uncontrolled release of effluent or pollutants within the boundary of the operation. |
Overall, our energy usage across the group this year was 764,140MW, an increase of around 30% on our 2013 usage and reflecting the increase in production levels. Encouragingly, our energy efficiency improved from 44.5kWh/tonne for each tonne of ore milled in 2013 to 37.4kWh/tonne ore milled, meaning we used around 4% less energy for each tonne milled.
Some of the biggest increases in energy use in the early part of 2014 were at our Loulo mine and, towards the end of the year, we commissioned an independent audit into power efficiency at the site to identify where energy could be better managed. This resulted in a number of innovations for power saving that are now being implemented including running the CAT machines and spinning reserves at more optimum levels, improving underground efficiency by installing a single pump and by stopping the underground conveyors running continuously. By the end of 2014, the overall milling system at Loulo had already observed significant improvements in power efficiency.
One of the highlights of 2014 in this area was the bringing online of the Nzoro 2 hydropower station at Kibali. Our increased use of hydropower last year has been one of the contributing factors in our improvements in emission intensity from 50.47 tonnes CO2-e/kt milled in 2013 to 42.43 tonnes of CO2-e/kt milled in 2014. Also in 2014, solar panels were introduced at Loulo to generate power for the offices and administrative buildings. In 2015, we may consider commissioning feasibility studies into where further use of renewables may be viable, especially in Mali where return on investment is likely to be highest.
Water management
Our individual operations develop site-based action plans on water management due to the variations in climate in each country. In Mali and Côte d’Ivoire, which are prone to drought, security of water supply and efficient use of water are our most critical concerns whereas our Kibali mine receives nearly two meters of rainfall each year so does not have such issues around security of supply.
The amount of water that we take from freshwater sources such as rivers is governed by permit restrictions set by the relevant, governing authority.
At the center of our water management policy is our ambitious group target to recycle 85% of process water. Water recycling helps to reduce overheads, ensures security of supply in drought prone areas and mitigates the potential of environmental incidents. It also reduces energy use as less electricity is needed to pump from freshwater sources.
Our water recycling levels reached 75% in 2014. Although this total did not meet our group target, it was still a relatively high level of recycling. Water saving measures that helped achieve this figure included measures to maximize return water from tailings dams and the creation of water champions in some teams. The commissioning of Kibali’s TSF was a big factor in lowering levels of return water recycling in 2014, as the return water line was only operational some six months after the commissioning of the TSF. With this now in place we are confident of achieving the group recycling target of 85% in 2015. Efforts at Loulo were also
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notable in 2014 as improvements in water efficiency there reduced abstraction from Mali’s Falémé River by around one million cubic meters, the equivalent of 13 million bath tubs of water.
Water monitoring
We regularly monitor surface and groundwater quality and test drinking water on and off site for the risk of water pollution. In line with international standards and local legislation, we test for over 30 chemical elements including various heavy metals, cyanide and arsenic. In the DRC, a government agency conducts an independent audit of our monitoring processes every two years.
There are also regular checks and reinforcements made to our TSFs where the waste products from our processing plant are deposited. An independent auditor regularly checks the management of these facilities. This year we took remedial action at Loulo when a borehole near the TSF showed elevated levels of iron and sulphates. We have commissioned a survey to look carefully at what the source of this pollution might be and to present the best options to deal with it including updating the TSF model. This will be enacted in early 2015.
A new innovation that is being piloted at Loulo in 2014 has been to introduce a wetlands system below the water treatment plant for underground water. The wetlands remove sediments and pollutants such as nitrates from the water. Nitrates can appear in the water system due to residue from the use of explosives, however the wetlands feed on them, using them as nutrients and removing them from the water cycle.
Waste and cyanide management
We have site-specific waste management plans in place at each site covering the variety of wastes that we produce including organic, inorganic and hazardous materials. Each plan details how each type of material should be handled, stored, separated, recycled or disposed of. We strive to recycle and reuse waste wherever possible and to ensure all materials are dispatched safely.
When required, we bring in outside expertise such as using geotechnical engineers to ensure that waste rock dumps are stable with correctly angled slopes. Arguably the most important part of our waste management is the handling of hazardous waste including acids, chemicals and, in particular, cyanide.
In 2013, we reviewed our cyanide management and introduced a new internal cyanide code to ensure we are aligned with international best practice for its production, transportation, storage and use. This includes conducting annual cyanide audits at each site.
In 2014, we continued to ensure that all staff are trained in our new cyanide standard, including extra training and supervision for those transporting cyanide and burning waste packaging and increasing the frequency of monitoring at tailings dams.
Protecting biodiversity
Our mines have a major impact on the flora and fauna present on the original sites but we go to great lengths to minimize our negative effects and to repair damage done wherever possible. No habitats of any endangered species are affected by Randgold mines.
Detailed records of the full range of biodiversity present on a site are taken during the initial ESIAs on any project and each site has a large and detailed biodiversity action plan, detailing various habitats across the site to help restore our sites to match the original ecosystems as much as possible.
Land restoration is an on-going process and we are continually working to replant indigenous plants throughout the life of the mine.
Dust Management
Management of ambient air quality, and in particular the suppression of dust, is an important part of our environmental policy. Most of our countries of operation are dusty, particularly during the dry season, and many of the processes of mining such as blasting, dumping and crushing can combine with this climate to create significant amounts of dust.
Throughout 2014, Kibali, Morila and Tongon mines recorded low to moderate dust levels at all monitoring stations. However, dust management around our Loulo and Gounkoto mines (and particularly on the Loulo- Gounkoto service road) has been a particular area of focus for us in 2014 as monitoring stations returned dust levels in excess of the 500mg/m2/day level set as high by IFC guidelines.
In response to the high dust levels around Loulo-Gounkoto, we have run a pilot program trialing the application of different substances including polymers, molasses and bitumen to roads to consider which is most effective. Results will be analyzed and the most effective dust suppression method rolled out in 2015.
Workers in areas such as the pit, which are inevitably very dusty due to the nature of the processes taking place, are provided with personal protective equipment to protect their eyes and lungs and receive regular medical checks and if necessary to allow for appropriate action taken.
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Throughout November and December 2014 Randgold undertook an exercise to update and build on its materiality assessment, and so understand which sustainability issues might need to be prioritized in 2015.
Our process
To carry out the update to our materiality assessment we presented both internal and external stakeholders with a long list of over 40 potential sustainability topics and asked them to score the potential impact on Randgold’s business of each of these issues.
For internal stakeholders, we asked heads of key departments and the executive management team to update their assessment of the priority issues for the business, discounting last year’s results. For external stakeholders, we combined survey responses from 2013 with an additional set of external stakeholders that were approached for the first time this year. The complete group of over 100 external stakeholders included local and regional authorities, local businesses, external contractors, staff, worker’s unions and police.
The results were reviewed and agreed internally by Randgold management to ensure they provided balanced coverage of the company’s most material issues wherever they occur in the value chain.
Our emerging findings
The results of the update to our materiality assessment showed that 80% of our highest-impact issues remained in this top category, but there were also some notable movement around which issues both internal and external stakeholders placed in their top third of priorities.
Among internal stakeholders, the top two issues of ‘safety’ and ‘cyanide management’ remained the same as in 2013 but the issues of ‘water pollution’, ‘corporate governance’ and ‘community grievance resolution’ all rose considerably up the internal priority list to complete the top five in 2014.
Among external stakeholders, the top three issues (‘safety’, ‘community engagement’ and ‘community investment’) all remained the same. Below that there were eleven issues that moved between five and ten places in the priority list. The fastest rising issue among external stakeholders in 2014 was ‘artisanal mining’, which rose eleven places and entered the top third of priorities for external stakeholders.
One of the most useful outcomes of the materiality assessment exercise is that it helps the Randgold team to identify where gaps in perception exist between internal and external stakeholders. The 2014 results showed nine issues where comparative rankings showed a difference of 15 places or more. These included issues such as ‘HIV/AIDS’, ‘corporate governance’ and ‘bribery and corruption’ where a gap of over 20 places existed between the internal and external rankings.
The Randgold team will work to address these gaps in 2015 and ensure that the issues of importance to each group are adequately attended to.
Priority issues
In order to draw a threshold for our reporting, we set boundaries to identify ‘high’ and ‘medium’ impact issues. We define high impact issues as those that appear in both internal and external stakeholders’ top 10 most important issues, while medium impact issues are defined as those appearing in the top 3rd (13) of either internal or external stakeholder lists.
As listed below, the 2014 assessment showed four ‘high priority’ issues and 16 medium-impact issues. This compares to five high impact issues in 2013 - ‘local and national employment’ being the issue that slips back. The results also introduced five new issues within the medium impact category, these are: ‘air pollution’, ‘artisanal mining’, community grievance mechanism’, ‘corporate governance’ and ‘indigenous populations’.
There are also three issues that dropped below this medium impact line in 2014 they were: ‘resettlement’, ‘energy use & efficiency’, and ‘local procurement & partner development’.
High impact issues:
| § | Safety |
| § | Cyanide management |
| § | Community engagement |
| § | Water pollution |
Medium impact issues:
| § | Air pollution |
| § | Artisanal mining |
| § | Bribery and corruption |
| § | Community development and investment |
| § | Community grievance mechanism |
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| § | Corporate governance |
| § | Environmental incidents |
| § | HIV/AIDS |
| § | Indigenous populations |
| § | Legal compliance |
| § | Local economic development |
| § | Local and national employment |
| § | Malaria |
| § | Revenue transparency |
| § | Staff training and skills transfer |
| § | Waste management |
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. Unlike other precious metal producers, gold mines do not compete to sell their product given that the price is not controlled by the producers.
PROPERTY
Our 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.
LEGAL PROCEEDINGS
As at December 31, 2014, the group had received claims for various taxes from the State of Mali totaling $313.0 million, in particular with respect to the Loulo, Gounkoto and Morila mines. The claims have increased by $190.0 million in the year, substantially representing $201.3 million of additional claims received in respect of Loulo and Gounkoto following the tax audits during the year, offset by foreign exchange movements. Having taken professional advice, the group considers the material claims to be without foundation and is strongly defending its position, including following the appropriate legal process for such disputes in Mali. Loulo, Gounkoto and Morila have legally binding Establishment Conventions which guarantee fiscal stability, govern the taxes applicable for the companies and allow for international arbitration in the event that a dispute cannot be resolved in the country. On November 25, 2013, Loulo instigated arbitration proceedings against the State of Mali pursuant to the terms of Loulo’s Establishment Convention at the International Center for Settlement of Investment Disputes in respect of $57 million of claims. Management continues to engage with the Malian authorities at the highest level to resolve this issue and the other unresolved tax claims. The arbitration process is ongoing, with hearings being held in the first quarter of 2015. The outcome of the process is expected to be concluded during 2015. However, it may be necessary to instigate additional arbitration proceedings to resolve these disputes.
Other than as disclosed above we are not party to any material legal or arbitration proceedings, nor is any of our property the subject of pending material legal proceedings.
HEALTH AND SAFETY REGULATIONS
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); |
| • | 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); |
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| • | Code de la Sécurité (INPS—Institut National de Prévoyance Sociale); |
| • | Sécurité Sociale du Mali (Social Security Code); and |
| • | Convention Collective (National Collective Agreement for the Mining Industry). |
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 12 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), Personal Protective Equipment or PPE, safety guide, emergency procedure, means of education and sensitization, 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. |
Code de la Sécurité (INPS – Institut National de Prévoyance Sociale)
The Code de la Sécurité 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 Hygiene and Security Committee made up of elected labor and specialist management representatives, as outlined in the respective labor code. This committee designates, from its members, a consultative technical sub-
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committee charged with the elaboration and application of a concerted policy of improvement of health and security conditions at work. Its composition, attributions and operational modalities are determined by legal provisions and regulations.
The chairman of this committee coordinates monthly committee meetings, sets the agendas with his secretariat, monitors resolutions and signs off on committee determinations.
The committee’s secretariat ensures under the supervision of the chairman that:
| • | 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 Hygiene and Security Committee 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 Hygiene and Security Committee 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. |
All employees are covered by the state’s social security scheme and our medical reimbursement scheme, that reimburses a large portion of expenses related to medical treatment and medicines. Dental and optical expenses are also covered to 50%.
No post-employment medical aid liability exists for the group.
Côte d’Ivoire
The primary laws, regulations and standards governing Safety and Health in our Côte d’Ivoire operations is the Mining Code (95-553) of July 15, 1995.
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. |
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DRC
The Mining Code, Law No. 007/2002 signed into law on July 11, 2002, and its ancillary Mining Regulation, adopted in 2003, is the primary statute forming the legal basis for mining activities in the DRC. 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 |