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Randgold Resources Ltd. CEO Discusses Q4 2010 Results – Earnings Call Transcript

Randgold Resources Ltd. (GOLD) Q4 2010 Earnings Call February 07, 2011 11:00 am ET

Mark Bristow

A very good afternoon to everyone in London as well. Graham Shuttleworth, our CFO is hosting the London party. I’ve got a large audience here in Cape Town. Everyone has migrated almost from London to Cape Town in the last couple of days. So again a warm welcome. Also a very special welcome to some of our colleagues from the governments of our host countries. Again, welcome to South Africa and Cape Town and most importantly, our 2010 results.

To kick off the proceedings we have also got our Chairman of the Board here today. He is going to be at the conference through the next three days. It’s part of his responsibilities to make himself available to shareholders and the like from time to time. And so should anyone want to engage with him or bring to his attention anything in particular, he’s available and you can make arrangements through our both at the conference. And without further ado I’ll ask Philippe to introduce the proceedings.

Philippe Lietard

Thank you Mark and welcome again to all of you. (Et bienvenue tout particulier a vous ministres admins). At the beginning of the year we cautioned you that the company would have to deal with a wide range of operational and developmental issues during 2010. As it continued its rapid development into a complex and multi-tasked business. That it was able to improve its profit sharply and to keep the progress of its project on track in a very difficult set of circumstances including the political unrest in Cote d’Ivoire and some technical difficulties at Loulo is first of all a tribute to the team.

Once again Randgold Resources has shown its real strength to be its people. People with skills, patience, tenacity, commitment and courage form the foundation for building a sustainable business. Over the past weeks I have personally visited all our operations including Tongon in Cote d’Ivoire. I was enormously impressed by the can do spirit of everyone I met and by the excitement and enthusiasm with which they are approaching this year, a year, which will be another challenging one.

As Tongon in particular has shown, one of the team’s special strengths is its ability to understand and manage the risk attendant upon running a resource company in Africa. Given the importance of people we paid considerable attention over the past year to expanding our top team, to strengthening our management structures and to building leadership capability at the supervisory level. We also developed what are in effect new teams to run Tongon, Gounkoto and Kibali.

Safety has also been a paramount concern and we are making good and fast progress in implementing best practice safeguards in our new operations. We have also continued to look at the composition of our board in order to maintain an optimum combination of international management experience including technical, banking and diplomatic skills with an understanding of Africa and of its people.

A full review of the board’s performance was carried out in the close of the year, which is a good practice, and it has confirmed the effectiveness of its individual members and of their contributions as a board. A few newer ideas have emerged and have been highlighted to add to the board’s performance and contributions. Before I pass it on to Mark I want to let you know also that the board decided last week to propose an increased dividend to shareholders for the fifth year in a row. And with that I hand you over to Mark who will take you through the events of 2010 and the prospects for 2011 and beyond. Thank you very much for your interest in our company and thank you for your attention.

Mark Bristow

Thank you Philippe and I think I’ve got two mics now, have I? Can you hear me now? Yeah. Looking back on the year and I’ll tell you it was a challenging year last year. Many of you in the audience have shared every step of the way with me and the team. And it’s times like this that one needs to reflect and see things in perspective. To put it in perspective, the goal for us rose another 30% during the year.

The industry as far as delivering new gold supply goes got back nearly to the 2001 level, so hard to comprehend that gold price has gone up $900 and the industry’s new gold supplies stayed very flat. And I think the other aspect of a big bull run that has lasted for so long is the hectic demands that are put on companies by the markets to continue to show performance improvements quarter on quarter. And as I pointed out, we have been very clear about detailing our voyage with specific milestones rather than quarterly promises.

And really I think looking back at the last year it’s paid dividends. We knew that 2010 was a year where we needed to consolidate as Philippe said. We needed to pull the platform, strengthen our management team, deal with the dropped catch at the earlier underground mine and be ready to continue to deliver on our growth strategy. So despite some operational and political challenges as Philippe alluded to, last year saw us post an increase in profits year on year of 43% and in the last quarter, a 14% increase.

Attributable production was up in the last quarter as forecast, but not as we originally planned but certainly in line with our revised forecasts. In the face of considerable challenges we commissioned our new mine at Tongon. We have already ramped up production on the first stream. It’s at full production and as I’ll point out to you a little later, the second stream is now also ready to start producing.

It’s also worth noting staying on Tongon that our gold sales for the last quarter would have been considerably higher had more than 23,000 answers produced at Tongon not remained unsolved because of the disruptions related to the disputed outcome of the Cote d’Ivoire elections in November. However, I am pleased to tell you today that all that gold that carried over into this year has now been sold and a little bit more on that a little later.

Pleased as we were by the successful start up of Tongon, the star performer in my mind of the past quarter was undoubtedly Gounkoto where the feasibility study confirmed a robust project that is profitable at any realistically conceivable gold price. In fact, it meets our 20% hurdle rate at any conceivably realistic gold price and which, as I’ll show you later, we can demonstrate still has enormous potential both near surface and under ground.

And a point to note and some of the people in this audience were on a recent analyst trip there is mining has already started at Gounkoto and this deposit will start delivering ore to the near Loulo plant by the middle of this year. Hats off also to the team at Kibali where predevelopment work is well underway and where the update on the feasibility study was completed on time and confirmed a much larger project and it really gave us encouragement that we will be able to meet our target of starting construction in the middle of this year.

Loulo as I alluded to, had its share of problems in 2010. But its total production for the year was in line with management’s updated forecast and a new top level team is addressing the remaining issues there. Just by the way of introduction, Loulo has – we have recently employed Ted de Villiers to lead the mining team in Randgold Resources and he is one of those members of our executive team overseeing the reestablishment of the Loulo plan and delivery.

Another point worth noting is that Loulo has now completed the last of its hedge commitments. So we’ll enjoy full exposure tot eh gold price going forward. Against this backdrop we as a group are now forecasting a 70% increase in group attributable production for 2011, which means that our growth strategy remains intact. Those watchers of our forecast would remember that we were guiding just over 50% for 2011. That was one of our hurdle rates – consolidate 2010, 50% increase in 2011.

That number has gone up slightly because the 2010 numbers were down. And really the take away from that and I’ll be able to demonstrate it in the presentation, our growth strategy is still very much intact. And then as Philippe pointed out, the board has recommended an 18% increase in dividend to shareholders and I would point out that these decisions are not made lightly. We look at profitability. We look at our cash flow and our ability to finance our future.

We have just over $400 million in the bank at the end of the year. Just to give you a sense of the profitability, we spent $420 million in capital last year. Our cash position reduced by $190 million. We’re very capable of financing our future and even without Tongon or any significant delay at Tongon, we are very comfortable that the company has enough resources to fund its own capital growth internally.

The big thing for me as a shareholder is the risk of diluting the value of a share and we don’t believe that we’re at that point at all. For those that like to watch the numbers these are the results for the year and the quarter, which largely speak for themselves. I think the point I would make is that we still have a very healthy balance sheet given the explanation that I’ve just presented on the capital spend for the last year and the balance sheet.

We have no debt in the company. I think the other point is that we are very mindful of total cash costs. We are a different company in that we don’t carry corporate G&A. We cost all our overheads either to the gold production, total cash costs, or to the discovery of gold. And we’re clear of (this) at the corporate level. So we have always had a slightly higher total cash cost. But the point I would make is go down to the bottom of the P&L and see the net profit and that’s the key for us. That’s what drives our business.

I would also point out that the profit would have been about $21 million higher had the answers I referred to you earlier in Tongon been solved. So this is going to have a positive impact rolling forward into this year. I’ll be very interested to see how many analysts pick that up when they forecast this quarter’s production and profitability. Looking further ahead on the back of anticipated higher grades, out of Loulo, Gounkoto and Kibali, the group is still forecasting a reduction in the cash costs year by year going out and our target is the lower $400 an ounce range in 2014 assuming current prevailing import costs.

As the Chairman commented, safety is a key component of our business and as we grow our operational base so it will become more of an issue. We have undertaken during last year to keep the market posted on our own targets and our performance. And as you can see we made very good progress with reducing the lost time, injury frequency rate, both at Morila, which is the world class league and with more than half the Loulo incident rate. The big challenge now is Tongon. It’s just come into production.

It’s in their transition stage and we’ve got our work cut out to show the same sort of benefits. As part of that and measuring ourselves, I’m happy to report that Morila had its ASO 18001 accreditation reconfirmed just recently. And Loulo is well down the path in getting its accreditation. It’s scheduled to do its tests towards the end of this year. And we have just embarked on the same program at Tongon and very soon we will start that preparation work at Kibali.

Turning now to the operations, Morila produced its customary excellent performance, beating all its targets and importantly, paying out a dividend to shareholders of $140 million. It’s really – we set out to bore the factory there. It operates and the nice thing about being a CEO is to let you know that the budget that the team presented to our executive team for 2011 was the same as what they had in their three-year forecast in 2009 for the year 2011. So they really got this business sorted out.

We’ve got 2-1/2 years more to go there. We are looking as our closure approaches, we’re looking at finalizing all the closure costs. We’re busy. We have a joint team with government on managing that. We just recently looked at retreating the Tinings Dam is about 200,000 answers recoverable and placing it back into the pit. It takes away a big liability as far as environmental liability and ongoing management goes and reduces our closure costs by about $22 million and it has a significant amount of revenue potential as well.

And this is in addition to the work on the agribusiness, which is really designed to leave something behind for the communities after the mine closes. Again, results speak for themselves. I would remind those people that apply their minds to our company once a year that there is a big line that you must take notice of in our P&L and that is the stockpile adjustment. You will see it makes a very big difference to the cash costs if you take that off the total cash costs.

That’s the cost of the stockpile at Morila, which we paid for in the early stages of the mine as we stockpiled the lower grade ore. And now that we’re processing it that comes back through the P&L and benefits us as far as cash flow goes because it’s an expense in the income statement but not as far as cash flow goes. As I said in the intro, Loulo had a very challenging year. But I would add that it still managed to increase its profit from mining and meet its revised production target. And I think that’s key for us.

As you know, I’ve always spoken about profitability and that’s what focuses our business. We’re interested in profitability. The increasing complexity of the operations and in particular, the challenges that we faced going back to the beginning of last year with the earlier under ground development really drove us to take a careful re-look at issues such as mining strategy and key services in the operation.

The highly experienced team led by mining team that is – we have pretty well changed the entire management at the mine and as I alluded to earlier, Ted has taken on that challenge to fix things. Really he has headed up a replanning team at the mine. He has been there pretty well full time for the last two months and it’s important that we just came back from there again, the analysts were there. They were there this time last year when we were really wrestling with the problem and there are no doubts in my mind that we have turned the corner.

We’ve still got a few challenges to get through but December we did about 95,000 tons out of Loulo, ore tons that is, which is very significant. And we have actually decided to cut and hold back on production for two months and just fix the final bits of the under ground because in Ted’s view we’re just sort of trying to catch our tail all the time. And we’re so close to getting it right we want to redesign some of the sloping layouts and really that’s where we are.

On the back of that we’re still comfortable that we’ll be accessing the purple patch as I’ll show you just now into the middle of the year and that we should be back up at our desired throughputs at the mine by midyear as well and that’s been a constant target for us for some six months now. Just on a forecast, Loulo’s production we’re forecasting a significant increase in production at Loulo this year.

We are offering a range of 420-440,000 ounces, up from the 316,000 ounces of this year. And just to put that into perspective, 120,000 ounces of that will come from Gounkoto. The first six months as I have always pointed out will remain tight operationally. And that’s because we’re forecasting slightly below three grams for the first three months and slightly above three grams for the second six months. At the second half of the year we’re planning to beat the five gram a ton feed to the plant.

That’s really on the back of the higher grades as Yalea under ground starts accessing the purple patch and Gara comes into production and of course Gounkoto starts feeding the plus five gram ore midyear. As you’ll see, Loulo’s total cash costs were impacted by the Yalea under ground development delays as well as factors such as higher fuel prices. The key driver forecasts in whole Loulo complex is great as we get into the grade and that’s really the story of Randgold Resources.

When you find your own mines, mine them to completion, the costs go up and if you are able like we are to find new ones that are better grade and lower cost, they all help in managing the profile of the group. I think that’s the key point. Another point that should be tabled is that the team despite all the challenges they had to deal with, achieved one of its key objectives in 2010 and that is to obtain the ASO 140001 accreditation for environmental management.

One of the key conditions that we put on management in all our operations is to be compliant environmentally. Turning quickly and more specifically to Yalea, as I said, made good progress last quarter and we still struggle to get the development and all production ahead of schedule. On the back of strengthening our management team we have improved and I think we can tick the box under ventilation.

We’re more than halfway there with the water handling system. As I alluded to earlier, we have a few things we wanted changed on the geotechnical, particularly on the stope and support systems really to improve the ability to draw from the stopes and reduce the risk of the stopes collapsing. And we need to really fine tune our back full strategy and implement it. As I pointed out, it’s going to take a few more months to get this all sorted out.

But we believe that we’re still on track to be able to deliver the full monty by middle of the year. I think again like everywhere in Randgold Resources we’re peddling our bicycle as far as creating traditional value and the team in Yalea has been continuing to do under ground grade control drilling as we prepare to access the purple patch. And they have found that the northern portion of this purple patch has a significant bulge towards the upper levels we show here in the purple square.

And the estimate is that it could produce as much as 200,000 ounces at better than eight grams a ton. And I think it just bears testament to something we have been cautioning the market. Purple patch hasn’t got hard boundaries. It’s really an encirculation of all the bore holes during the exploration phase that came up above ten grams and the ore body does continue after that. So we’re just putting some more definition into that gray distribution.

I think a point I’d make is that as most of our other ore bodies, the closer you look at Yalea the better it gets. Development of Gara, the second under ground at Loulo, remains on track despite a few delays at the end of last quarter caused by water ingress. Again I think the point I’d make is Gara we’ve learned from Yalea and we certainly haven’t repeated the mistakes that we we did in Yalea. And I think that’s a core DNA in our group is that we pride ourselves as a learning company.

And we’re on schedule. Ore body development should start this quarter/end of March and so the key next critical steps for Gara is the connection of the under ground infrastructure to the over land conveyor to the plant and that’s our critical part at the moment to make sure that’s all up and running as the miners start delivering ore. And also as we continue developing Yalea and Gara we also continue to evaluate the two major structures that host these ore bodies.

And it’s important I think some of you were here when we first started to announce the development of Loulo. We had 1.4 million ounces of reserves. Today we’ve got 10 attributable, 16 million ounces of resources and three plus million ounce deposits, two of them one over 5, one over 6 and one over 3 – all within 20 kilometers. And Paul and his team have been really looking at everything and I must say every time we do look at the data something else pops out.

And we’re very excited about this region. We pretty much control what we’ve often referred to as a gold province. I remember in one conversation one of our executives saying it’s so easy to find gold mines in this area. I won’t name him but he is standing at the back of the hall. But on a serious note, if you look just at these structures, we’ve just started. Loulo 3, which helped us out of our challenges last year, has just got bigger and bigger.

We recently drilled some deeper holes there and we’re now looking at the chance of really pushing the pit back and making it into a substantial pit. And so then you’ve got Gounkoto and building that knowledge. It’s on the same structures or the same corridor and I’ll come back to tying it all together in a few slides. Really Gounkoto and again I’d remind everyone we set out a challenging year last year.

We did two feasibility studies, Gounkoto was the first. We’re already mining at Gounkoto and at the same time we started up Tongon. Just some detail on Gounkoto, we have a tall treating arrangement with Loulo. We have created the new Gounkoto stand alone company and we’re currently in the process of splitting the Loulo permit into two, one in Gounkoto called the Gounkoto Permit and the other the Loulo Permit and we’re busy I think on the second or third draft with the minister’s advisers on the mining convention that will be attached to this development.

Just catching up on the feasibilities’ results, as you can see they show an extremely robust project as I referred to earlier, with very good returns driven by relatively low strip ratio given the consistency of the grade. And most significantly, you now see the benefit of that big infrastructure that we have already invested in Loulo. And we have got about $300 million of unredeemed capital in Loulo. To go and try to build a new mine of any size is going to cost you more than that.

And because of the grade putting 100,000 tons into Loulo from Gounkoto really makes currently on reserve 22 years of life at over 500,000 ounces a year. I think there is no – this is by no means the end of Gounkoto. We did the feasibility on 2.3 million ounces in the pit. You’ll see the latest drilling is starting to continue to drag the high grades down in the two main zones, the southern zone, which is the left hand on your slide. You see those little white circles and more importantly the northern pay chute, which is almost in the center of the ore body where you see there is a line of four little white circles – some very significant drill results.

We’re currently revising our reserve statement we drew out in March with new updated reserves and resources. And so we expect to be able to add to these reserves and also to the resources. And just putting it in perspective because this is a very high grade ore body, it goes – extends under ground. We’ve got enough bore hole information to do what we call a preliminary economic assessment. Just to give you a feel for the potential of this project, if you look at the NPVs, you look at returns, both with respect to the under ground as well as the open cast at gold prices of below the current spot we’re getting over 100% internal real rate of return.

Nice life and combined with Loulo, a megamine complex in the making. I think the other point that I would make and I would go back to the visitation at Morila when we had just brought it into production and people said well, that was a lucky one at that stage 3.3 million ounces at 4.8 grams a ton. And since then we have found Yalea, which is over 5 at 6 million ounces, Massawa, which is over 3 million ounces in the fours.

We added 5 million ounces in Kibali in three months and then recently Gounkoto, which is well over now a 5 million ounce resource set over 5 grams. And you put it all together and we still have a lot to do in this region as I pointed out earlier. And one of the things that Gounkoto has done is bump all the low grade out of the Loulo processing schedule. And what we’re looking at now, we’ve currently got more than a million ounces of 2 gram material in our resource, which we haven’t got a plan to process in the next 20 years.

And we’ve got a team now looking at the opportunity of heap leaching and seeing how we can bring to account the lower grade material in that area. Put it all together, Loulo and Gounkoto – this is what you get as I pointed out. There are not many gold mines around that can go so far out just on reserves. There is no assumption of any conversion in these models. And it’s got a very low cash cost profile. Its capital is largely sunk.

We’ve got 85 million odd dollars to spend to deliver on this profile and you don’t get much better than this in the mining industry. And when you look at that step out and the footprint we control, the key for us and something that has always been Paul Harbridge’s favorite target area is across the river in Bumagi, which we have got a joint venture with IM Gold Ore and there is a lot happening as you can see across the river.

So notwithstanding the prospectivity on some 80 kilometers of track on this major structure, we also have the other side of the structure in Senegal. And I know that the Ministry of Senegal are here today and I promise you we’re working very hard to find you one of those. Talking of Senegal, in just 60 kilometers west of the Loulo complex is Massawa. It’s really part of that critical mass in west Africa.

Although metalurgically challenging the main Massawa ore body, there is still an enormous amount of prospectivity and potential. We are currently busy with a feasibility study and what’s more important is that we have shown in Loulo a little bit of time and a lot more exploration energy. And you can really start getting into these deposits provided you’re in the right place and the right system and we believe we are.

And also the team has started looking at infrastructure and power opportunities with the Millennium road infrastructure that has just come through there. There are a whole lot of hydro power projects on the cards and there is a whole opportunity to drop our operating costs in that region including Loulo. Over now to Tongon where we I think the team really lived up to the Randgold reputation of delivering.

First gold was poured almost on schedule on the 8th of November, a fantastic achievement when you consider the very difficult circumstances in Cote d’Ivoire surrounding the final stages of the mine’s development. Since commissioning the first millstream has run smoothly and we have now completed the second stream. But we will only as I pointed out earlier run the first stream until such time as the political situation stabilizes in the country.

Provided that we can get back to normal operating environment by the second quarter of this year, we are comfortable that we’ll meet our forecast of 260-270,000 ounces for the year. And the reason is this, is that we have got a certain amount of oxide material and if we started the second stream up too early we’ll just consume the oxide material and then have to wait for the sulfide material, sulfide processing facility to come in.

Key being the flotation and reground circuit, which is due in April of this year so we’re very comfortable with the way we’re running. There has been a delay. With that delay, that’s the adjustment downwards from the 290 to the 270,000 ounces. And we’re very confident that there is an enormous motivation to address the political situation in that country and again, I think I would point out that as the Chairman commented, we have managed a difficult situation without getting hysterical and been able to prove to all the people involved in this project that we are serious long-term players in the region.

Whoever is the boss, they really need this investment. We’re the biggest employers in the north, we’re the biggest economic engine and we offer significant revenues for anybody who is going to be running the country in times ahead. These are the numbers. The key for this is one, there is 23,000 ounces missing and it’s going to come in quarter one of this year and that’s the last time I’m going to remind you.

And the second is and most importantly, it’s profitable and that brings to three in a row of mines that we have built that have been profitable in the first quarter of operating and that’s important. It’s very significant in my mind because we’re all about profitability so that means that you get the ramp up up and you’re actually able to deliver accounting profits in the first quarter. Just for those who are not familiar with the mine, it’s a mine that comprises two main ore bodies.

The main, main ore body is the southern ore body and has a northern ore body to the north. What drives this, it’s a relatively low strip ratio, a relatively low grade mine. But it’s got low strip ratios as well and the most significant thing, the connection to the Ivory Coast power grid, which draws power at about just under 1/3 of the cost of what we produce power for in Mali. And currently it’s a 9-10 year life. It’s very significant in building our cash position going forward.

Just on exploration front, we’ve learned that the quicker you get the geos back into exploration frame of mind after delivering a mind is the better. Because of the situation in the country we have restricted the team to immediately around the mine and they have already made some very significant progress as you can see how we’re starting to deliver you numbers already out of the targets.

And this is the (Sidu, Jambula) corridor is a continuation of the main structure that you see on the bottom right of the diagram, that dark line picks out a big fault structure, which also hosts the Tongon deposit. As I said, another significant achievement of the past quarter was the completion of the updated feasibility study at Kibali, which showed just what a golden opportunity this is for all our stakeholders.

Its rapid progress illustrates the effectiveness of our strategy and is again attributed to the commitment of our Randgold Resources team members who moved Kibali from what was little more than a promotional prospect to what is now a tangible, world class mining and infrastructure project with far reaching implications for its host country all within the space of a year. This mine is going to be one of the biggest gold mines in world.

Certainly as an under ground mine, it’s 10 million ounces of reserves, just under 20 million ounces of resources and growing as I’ll show you. We built to date about 250 kilometers of road to connect it to the real world. We’re going to build two hydro power stations probably a third in the future. It’s a significant investment. We’re moving 3800 families. We’re going to give them a house and a real title, which they don’t have today.

And we’re going to create a substantial number of jobs, more jobs than that new city that we’re creating can provide as it stands today. So we’ve done a lot of work as we do everywhere in branding this project in country and ensuring that it’s going to be developed in a real partnership with the local people, the regional authorities and the central government. This is the summary of the feasibility study.

Again I would point out that there is only reserves in this feasibility study and this is a large portion of the reserves are under ground, 6 million ounces under ground. And so if you assumed 50% of the remaining 10 million ounces of resources that we’ve got, which we haven’t got to yet, that you could convert into reserves, the economics are blistering. And the way to test this is look at the total cash costs. It’s a total cash cost of under $400.

This is an 18-year life on reserves as we speak today. So a significant asset and people who don’t know me, yes I am very excited about this project. I think the other point is the feasibility study just to touch on some technicalities, the big challenge we had was to prove to everyone that it could sustain because a lot of the ore is under ground, a substantial throughput, a big installation. The motto feasibility was a very small – assumed a very small plant and we have demonstrated to ourselves beyond doubt that this can support 4 million tons a year operation.

We have shown a preliminary economics assessment that it can support a 6 million ton a year operation. At this stage the feasibility has been done on 4 million tons. We built up a substantial stockpile at 4 million tons with this capital and the big challenge now is with our partner Anglo Gold Ashanti and ourselves is how do we fine tune and optimize the study because it’s an unoptimized feasibility study particularly on scheduling capital and final estimates on cost and things like that.

We plan to do that over the next six months and we’re confident that we’ll be ready to start construction midyear. In the meantime we’ve got by August – we will have moved over 1000 families already. So we’re well on the way to relocate the families and we have cleared the footprint of the mine. We’re busy putting up the boundary fences. Just for those who are interested, the concept, the main center of gravity for Kibali is the KCD (Susengui) open pit and under ground ore bodies.

And the way we plan to develop them is to start sinking a decline early on to get under the pit, to start the pit and then follow that with a large vertical shaft for hoisting ore. And if you do that, Rod and his team have done an enormous amount of work on the mining design. It was a multifaceted team that was charged with looking at material handling and sequencing and the practicality of being able to feed a plus 4 million ton processing plant.

And that team was led by SRK out of Perth. We had private consultants Anglo Gold involved and our contracting partners out of west Africa were also involved in helping us learn from our mistakes in the past and ensuring that we can access leading edge thinking on underground mining and optimization. Just taking a step back, Kibali as I pointed out is a huge geological anomaly with some amazing mineralization.

And the one thing I must say in my short career I’ve learned very quickly that when geologists can give you a picture on one slide that allows a layman to grasp the sort of basics of the model then you’re really starting to understand it. And I can say we have certainly achieved that at Gounkoto and for the first time because you should have seen the diagrams when we first started in Kibali. They were quite complex.

But it’s a series of cigar shaped plunging ore bodies and they lie on this thrust plane which is marked by the solid black lines of little triangles pointing down. And you’ve got these cigar shaped plunging ore bodies sitting on this big shear. And we have got so many targets that we still have to get to to really one, and some of them we haven’t got in resources because we haven’t verified the information and others are just targets with very limited Belgium era information that we have got to get to.

So again, we are very excited about that. Wrapping up the last three slides, I thought I’d share with you a lot of people always ask me how come you guys think you can continue to make discoveries and that all luck story? And I always point out one is lucky, two is maybe lucky, three has to have some strategy behind it and four means a lot of sites. And we’re at five. And the challenge that Paul and his team have now is as we grow our production how do you deal with driving the value creating part of our business to deliver slightly better or more frequently on your targets?

And one of the things that really has driven our thinking and certainly the exploration teams really put their head around this, is exploration success is a combination of science, art and frequency. The opportunity, the gambling opportunity, numbers – it’s a combination of those three points. And so how do we improve the numbers game and still keep with the science? And so we have really applied our mind to that and this is an interesting diagram which shows the number of our targets at different levels of evaluation at the end of 2009.

And you can see how we have been able to up that during 2010, up the frequency. And what’s encouraging is you can see that growing new gold mine project sitting right at the apex of the triangle. And so I’ll just leave that with you because we’re businessmen. We worry strategically and we always say we’re all about the long term. And what we do today is what’s going to deliver the Gounkotos and Kibalis of three or four years down the road.

And for those people who follow us quarterly you will have noticed last quarter we just had little dashes and arrows on our forecast because we were a little unsure about exactly we were going. Now that we’ve signed off on our plans we have solid bars again and you’ll see that we have this big step up into 2011. And for those who are looking at the diagrams we’re a year behind on that slide. There was some figure trouble and 2010 should read 2011 and 2011, 2012 and so on.

But it’s correct on the slide on the screen. And you’ll see the big step up from 416,000 ounces to just under and our range is 750-790,000 ounces. Another step up next year, both driven by Loulo grade and then we in 2014 you see Kibali coming in which really takes us over the magic figure and this is before Massawa. You’ll see it’s not in this forecast. Massawa is we’ve got to fix it properly. We don’t plan to rush into new technology as quickly as we did with the under ground at Loulo.

And when we’re ready we’ll bring it back to you. And to finish off, I have always as you know, finished off the presentation with a look at our share price performance and in recent months you have seen our share price respond to market concerns about Loulo and in particular the political problems in Cote d’Ivoire. But I would point out that over the longer term the trend clearly reflects investor confidence in our company and our strategy.

And we are one of the few companies that focus on real value creation. We don’t plan to issue any stock in this time. In fact, as I pointed out, we have enough cash to deliver on our own future the next five year program without issuing any stock. And that’s what separates us from the market. I would also point out that we are now – we always try and explain we used to have this little sign on our strategy review documents, a young and energetic team.

Well, we have been in this game now for 20 years some of us, the executives. We are bringing in the younger guys to keep up the pace. But we are relatively experienced now and if you look back on this share graph, we’ve been through these moments before. And I would leave you with the point that two things – one is I am a major shareholder and I haven’t sold my stock yet. And the second is really it’s the strategy and the fact that we really do believe in what we’re doing.

We understand African risk. We understand that there are going to be times when we’re going to have to deal with it. I firmly believe our commitment to ensure that all stakeholders benefit from the investments we make in exploiting the gold deposits of Africa is a key part of our insurability in being able to survive these situations. And really our focus remains firmly on the discovery and development of sustainably profitable gold mines in Africa.

And we’ll get through these next couple of months and as you see, the risk that we face is a timing risk rather than a development or inherent value risk in our organization. Thank you for your attention and we’ll be happy to take any questions. Maybe we should start in London. Graham.

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