Comments

30 June 2005

Profit from mining activity for the six months ended June 2005 compared to the comparative period ended June 2004 improved by 208%, mainly as a result of increased revenues from higher grades and better recoveries.  The lower recoveries in 2004 were due to the commissioning of the plant expansion at Morila in 2004.  The quarter on quarter decrease in profit from mining is attributable to higher ounces sold in the March quarter resulting from sales from gold that was in inventory at December 2004.

Profit from mining activity for the current quarter of US$16.3 million was significantly higher than the corresponding quarter in 2004 and down US$2 million from the previous quarter.

Production costs of US$6.9 million in the current quarter were down compared to the quarter ended 31 March 2005 mainly as a result of an over provision for diesel consumption at Morila in the previous quarter which was corrected in the current quarter.

Exploration and corporate expenditure for the six months is US$10 million, up from US$7 million for the corresponding period in 2004 and is a reflection of increased exploration activity in 2005, particularly drilling.

The other expenses of US$1.6 million in the current quarter relate to the correction of a previous misallocation at Morila.

Main balance sheet movements for the quarter ended 30 June 2005 are increases in property, plant and equipment, which relate to costs incurred on the development of the Loulo mine, an increase in ore stockpiles, and an increase in receivables.  The increase in receivables is due to further payments in advance relating to the Loulo construction contract to ensure that the contract stays on track.  A provision for the Loulo closure cost obligation and matching closure cost asset has also been recognised.

The decrease in cash and cash equivalents also relates to the continued funding of the Loulo project.  Increases in long-term borrowings result from the drawdown of the Loulo project finance loan amounting to US$15 million in the first quarter and a further US$10 million in the second quarter, as well as a partial draw down on the Caterpillar finance facility.  The Loulo project finance loan is now fully drawn.

Working capital changes on the cash flow statement reflect an increase in the ore stockpile at Morila, in line with the mine plan, as well as an increase in receivables such as reimbursable fuel duties at Loulo.  The financing of contractors relate to the advances made to Loulo contractors.