• Net profits increased
• Dividend increased for the third year in a row
• Drop in fourth quater costs bodes well for the year ahead

Total revenue for the group of US$338.6 million increased by 20% on the previous year on the back of a higher average gold price received of US$792 per ounce. Attributable production of 428 426 ounces was slightly lower than the previous year’s 444 573 ounces, following the drop in the average grade of ore mined at Morila. Net profit for the year was US$47.0 million, an increase of 3% compared to the previous year.Higher revenues were partially offset by higher mining costs at both operations, due to the impact of higher diesel prices, the effect of the weak US dollar on the euro-based component of the operational costs, increased royalties payable resulting from the higher average gold price received and general cost increases in other commodities and consumables. Profit would have been US$57.4 million (up 26%) had it not been for a non-cash provision of US$10.3 million against investments in auction rate securities, explained below. Earnings per share of 54 cents were down on the 60 cents of 2007, following the increase in the number of shares outstanding in 2008 and increased earnings attributable to minority shareholders.

Cash operating costs for the group were US$421 per ounce, up from US$315 per ounce in 2007. After royalties, total cash costs for the group were US$467 per ounce for the year compared to US$356 per ounce in 2007. Diesel constituted approximately a third of production costs in the year, hence its significant impact on cost pressures. Unit cost showed a 25% increase to US$40 per tonne milled, reflecting the higher mining cost environment as noted above, as well as an increase in total tonnes mined at Loulo. In the fourth quarter, the drop in the oil price and other input costs did begin to result in lower unit costs, notwithstanding the mines’ long supply chains.

The lower grade processed at Morila also affected the cost per ounce. Grades at Morila decreased from 3.7g/t in 2007 to 3.4g/t, while Loulo’s grade remained relatively consistent at 3.2g/t (2007: 3.3g/t). The drop in grade at Morila was in line with the mine plan as the mine nears the end of in pit mining. At Loulo, mined grades were slightly lower than expected due to the slower than planned ramp-up in the Yalea underground development.

Expenditure on exploration and corporate costs increased by US$9.3 million. Drilling programmes were undertaken in all six African countries where we are active, but especially at the Massawa project in Senegal. Since the company was listed in 1997, it has discovered over 17 million reserve ounces which, when divided by the exploration and corporate costs over this period, equates to less than US$15 per ounce of gold.

Morila’s five year corporate tax holiday ended in November 2005 and the accounts include a charge of US$24.6 million for the tax payable compared to US$21.3 million the previous year. Loulo continues to benefit from exoneration from corporate tax for five years from the date of first commercial production, which was 8 November 2005, as will Tongon when it comes into production.

The company’s cash position is very healthy with US$257.6 million of cash (2007: US$294.2 million) on the balance sheet and borrowings of US$5.8 million (2007: US$9.5 million). Net cash has remained at a significant level despite the substantial expenditure on capital expenditure and exploration and corporate costs: US$85.0 million was spent on capital projects, mainly on the Loulo underground project, including the development of the twin declines, as well as upgrades to the crushing plant and expenditure on the overland conveyor and power plant expansion. Expenditure related to the Tongon project amounted to US$22.7 million and consists primarily of down payments on the mills and motors, as well as site establishment costs, infrastructure improvements and advanced grade drilling.

As disclosed in the 2007 accounts, subsequent to the third quarter of 2007 the company transferred US$49.0 million from cash and cash equivalents to available for-sale financial assets. This related to its portfolio of auction rate securities (ARS). The trading market for these instruments has become substantially illiquid as a result of the unusual conditions in the credit markets. During the third quarter of 2008, following the deterioration of the underlying credit ratings of the collateral of certain of the ARS, the company decided to provide US$8.8 million against these assets, and provided an additional amount of US$1.5 million in the fourth quarter, calculated on a similar basis. We are monitoring this situation closely and to date we have continued to receive interest on all of the ARS investments. We have also commenced arbitration proceedings against the individual brokers and the investment bank who sold us these products, on the grounds of what we believe to be fraud and gross misrepresentation of the nature of these investments. Arbitration of these proceedings should be concluded by the end of 2009. There can be no assurance that we will be successful in our actions against the individual brokers or the investment bank, and consequently we have not relied upon this for the determination of the provision.

Property, plant and equipment increased significantly year on year, mainly due to investments made on the underground development at Loulo and the Tongon development project. Long term receivables decreased by US$13.4 million over the year due to a recoupment of the TVA (VAT) balance at Morila. The non-current receivables of US$9.4 million are those parts of the receivables from MDM Ferroman (Pty) Ltd (in liquidation) (“MDM”) and the Malian government which, while legally payable immediately, are expected to be paid after more than 12 months. The company continues to believe it will receive the amounts accrued as owing to it by MDM (US$12.1 million).

Short term receivables increased partly due to an increase in the TVA balance at Loulo, since the end of the three-year custom duties and TVA exoneration period on 8 November 2008, as well as advances made to contractors and an increase in insurance prepayments. The increase in inventories and ore stockpiles is due to the additional demand for supplies and strategic spares at Loulo with the development of the underground mine and improved production, as well as an increase in the stockpiles at Morila in line with the Life of Mine plan. Mining at Morila will stop during the second quarter of 2009, after which the lower grade stockpiles will be processed until 2013. During this time, cash costs as defined are expected to rise as the stockpile asset is expensed through the income statement. However, cash flow from the operation is still expected to be strong as a large portion of the costs had already been paid for when the stockpiled material was mined.

The financial liability in respect of forward gold contracts decreased significantly to US$53.1 million during the year, following a 39% reduction in the ounces still to be delivered, and reflects the marked-to-market valuation of the hedged ounces at the year end spot price of US$865 per ounce (2007: US$836 per ounce). The remaining 126 744 ounces all relate to Loulo and are scheduled to be delivered until 2010, representing approximately 11% of the group’s attributable production over this period.

Looking forward to 2009, notwithstanding the additional noncash adjustments relating to the Morila stockpiles, total cash costs per ounce for the group are forecast to be lower than the costs reported in 2008, depending on the actual oil price and euro/dollar exchange rates received.

Capital expenditure at Loulo for this year is estimated at US$60 million, after which the Yalea underground will be fully operational. The Gara underground development is planned to start in early 2010. The development of the Tongon project has started with significant capital expenditure anticipated in 2009 (US$138.7 million). The increased mining cost environment experienced during the year also impacted on capital cost estimates, but the global economic downturn resulted in a decrease in these costs in the fourth quarter. Based on our current forecasts, the group has sufficient cash resources to fund all its existing capital projects and ongoing exploration programmes.

In view of the strong cash flows from operations and the company’s robust balance sheet, the board again decided to declare an increased annual dividend of 13 cents per share (US$9.9 million). Shareholders have also enjoyed substantial capital appreciation in the year with the share price rising 18% from US$37.13 to US$43.92 despite the turmoil experienced in global equity markets. Since 2000 the share price has risen by more than 2 000%.

/s/Graham Shuttleworth
Financial director