Non-Gaap Measures

Randgold Resources has identified certain measures that it believes will assist understanding of the performance of the business.  As the measures are not defined under IFRS they may not be directly comparable with other companies’ adjusted measures.  The non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance but management has included them as these are considered to be important comparables and key measures used within the business for assessing performance.

These measures are explained further below:

Total cash costs and cash cost per ounce are non-GAAP measures.  Total cash costs and total cash costs 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.  Under the company’s accounting policies, there are no transfers to and from deferred stripping.

Total cash costs per ounce are 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 costs per ounce are calculated on a consistent basis for the periods presented.  Total cash costs and total cash costs 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, amortisation and share-based payments 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 costs per ounce, the calculation of these numbers may vary from company to company and may not be comparable to other similarly titled measures of other companies.  However, Randgold believes that total cash costs per ounce are useful indicators 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.

Cash operating costs and cash operating cost per ounce are calculated by deducting royalties from total cash costs.  Cash operating costs per ounce are calculated by dividing cash operating costs by gold ounces sold for the periods presented.

Randgold previously calculated total cash costs per ounce by dividing total cash costs, as defined above, by ounces produced, as permitted under the guidance.  Randgold previously calculated cash operating costs per ounce by dividing cash operating costs, as defined above, by ounces produced.  Given the significant difference between ounces produced and ounces sold in the current quarter, together with the fact that, under the definitions above, costs relating to ounces produced but not sold are recognised in the quarter when the ounces are actually sold, the company deemed it appropriate to change the bases for these calculations by dividing total costs and cash operating costs by ounces sold, as this would better match the timing of costs and sales recorded.  Historically, this change would not have resulted in materially different cash costs per ounce, however, in the current quarter the difference was significant and consequently the numbers have been restated on this basis.

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.

Profit from mining activity is calculated by subtracting total cash costs from gold sales for all periods presented. 

Gold on hand represents gold in dore at the mines multiplied by the prevailing spot gold price at the end of the period.

The following table reconciles total cash costs and profit from mining activity as non-GAAP measures, to the information provided in the income statement, determined in accordance with IFRS, for each of the periods set out below:

*   Refer to explanation of Non-GAAP measures provided, including the changes in the basis of the measurement of costs per ounce.