London, 2 April 2008 (LSE:RRS)(Nasdaq:GOLD) - Randgold Resources is soundly positioned to do well under all realistically foreseeable cost/price scenarios, says chief executive Mark Bristow in the company's annual report for 2007, published today.
Bristow notes that Randgold Resources has the capacity to grow its gold output through exploration in a high gold price environment - with attributable production scheduled to reach 600 000 ounces per year by 2011 - at a time when industry output is declining.
The company's Loulo complex in Mali, currently producing from two open-pit mines, is being expanded through the development of an underground mine at Yalea, where the first mining faces are due to be established by mid-year. A second underground mine, Gara, is at the final planning stage. The company is also in the early stages of developing a new mine at Tongon in the Côte d'Ivoire. In addition, it has recently taken over operational responsibility for the Morila mine joint venture in Mali.
"Certainly we're going to have to work very hard to contain the impact of costs, which we estimate will rise between 10% and 15% in 2008, depending on the oil price and currency fluctuations. Even so, we are soundly positioned to do well under all realistically foreseeable scenarios. And our strategy remains unchanged: we continue to build our business through discovery and development, while also hunting those rare external opportunities of real quality, with the objective of creating long term value," Bristow says.
Bristow noted that beyond the expansion of Loulo and the development of Tongon, Randgold Resources had a full and constantly replenished pipeline of quality projects, generated by its exploration programmes, which would provide a strong foundation for further growth.
The company has a robust balance sheet, he says, more than capable of funding its growth projects as well as possible corporate transactions. This has recently been bolstered by a successful US$240 million equity placement.
Also in the annual report, chairman Philippe Liétard says management aligned its business strategy with a scenario which anticipated a high gold price coupled to rising production costs two years ago.
"To meet this challenge, they stepped up the search for resource ounces and strengthened the company's cost controls. New business initiatives were intensified, the development of the Tongon project was accelerated, procurement policies were tightened and overhead expenses pruned," Liétard says.
"These timely measures have equipped the company uniquely well to take full advantage of the opportunities and to manage the difficulties presented by exacting operating conditions."