As filed with the Securities and Exchange Commission on July 27, 2009

Registration No. 333-          

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM F-3

 

REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OF 1933

 

 

RANDGOLD RESOURCES LIMITED

(Exact name of Registrant as specified in its charter)

 

Not applicable

(Translation of the Registrant’s name in English)

 

 

 

La Motte Chambers

La Motte Street

St. Helier, Jersey JE1 1BJ

Channel Islands

+44 1534 735 333

(Address and telephone number of Registrant’s principal executive offices)

 

 

CT Corporation System

111 Eighth Avenue

New York, New York 10011

(212) 894-8940

(Name, address and telephone number of agent for service)

 

 

Copies to:

 

 

Approximate date of commencement of proposed sale to public:

From time to time after this Registration Statement becomes effective.

 

If only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box.  o

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  þ

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

 

If this Form is a registration statement pursuant to General Instruction I.C. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box.  þ

 

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.C. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box.  o

 

CALCULATION OF REGISTRATION FEE

 

 

 

 

SUBJECT TO COMPLETION, DATED JULY 27, 2009

 

PROSPECTUS

 

5,000,000 Ordinary Shares

in the form of ordinary shares or American Depositary Shares

 

 

RANDGOLD RESOURCES LIMITED

(organized under the laws of Jersey, Channel Islands)

 

We are offering ordinary shares in the form of ordinary shares or American Depositary Shares, or ADSs. Each ADS represents the right to receive one of our ordinary shares. The offering of ADSs is part of a global offering of 5,000,000 ordinary shares, including          ordinary shares being offered for sale in the United States and          ordinary shares being offered for sale outside of the United States. The price per ordinary share and ADS will be identical for both offerings. Our ADSs are listed on the Nasdaq Global Select Market under the symbol “GOLD.” Our ordinary shares are listed on the Official List of the United Kingdom Listing Authority and traded on the London Stock Exchange under the symbol “RRS.” On July 24, 2009, the last reported price for our ADSs on the Nasdaq Global Select Market was $65.48 per share.

 

Investing in our ordinary shares or ADSs involves a high degree of risk. See “Risk Factors” beginning on page 11.

 

 

We have granted the underwriters a 30-day option to purchase up to a total of 750,000 additional ordinary shares, including ordinary shares in the form of ADSs, to cover over-allotments, if any. If this option is exercised in full, the proceeds before expenses to us will be $          .

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

HSBC Bank plc, on behalf of the underwriters, expects to deliver the ordinary shares and ADSs to purchasers on or about     , 2009.

 

Sole Global Coordinator

 

HSBC

 

Joint Bookrunners

 

 

          , 2009

TABLE OF CONTENTS

 

 

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”) using a “shelf” registration process. As Randgold Resources Limited is a “well-known seasoned issuer,” as defined in Rule 405 of the Securities Act of 1933, as amended (the “Securities Act”), the registration statement became automatically effective once filed with the SEC, allowing Randgold Resources Limited to issue ordinary shares under this prospectus.

 

This prospectus provides you with a general description of our ordinary shares and ADSs. We may provide a prospectus supplement which details further information about the terms of the offering or adds, updates or changes information contained in this prospectus. If there is any inconsistency between the information in this prospectus and any prospectus supplement, you should rely on the information in the prospectus supplement.

 

The registration statement containing this prospectus, including the exhibits to the registration statement, provides additional information about us and the securities able to be offered under this prospectus. The registration statement, including the exhibits, can be read at the SEC website or at the SEC office mentioned under the heading “Where You Can Find More Information.”

 

You should rely only on the information incorporated by reference or provided in this prospectus and any accompanying prospectus supplement. We have not authorized anyone to provide you with different information. We are not making an offer or soliciting a purchase of these securities in any jurisdiction in which the offer or solicitation is not authorized or in which the person making the offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make the offer or solicitation. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of such document. Our business, financial condition or results of operations may have changed since that date.

 

In connection with the offering, HSBC Bank plc or its affiliates acting on its behalf (including HSBC Securities (USA) Inc.) (the “Stabilizing Person”), each acting on behalf of the underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of our ordinary shares. These transactions may include stabilization transactions effected in accordance with Rule 104 of Regulation M under the Securities Exchange Act of 1934 (the “Securities Exchange Act”), pursuant to which the Stabilizing Person may make a bid for, or purchase, ordinary shares for the purpose of stabilizing the market price. The Stabilizing Person also may create a short position by selling more ordinary shares in connection with the offering than the underwriters are committed to purchase from us, and in such case may purchase ordinary shares in the open market following completion of the offering to cover all or a portion of such short position. In addition, the Stabilizing Person may impose “penalty bids” whereby the underwriters may reclaim from a dealer participating in the offering the selling concession with respect to the ordinary shares that the underwriters distributed in the offering, but which was subsequently purchased for the accounts of the underwriters in the open market. Any of the transactions described in this paragraph may result in the maintenance of the price of the ordinary shares at a level above that which might otherwise prevail in the open market. None of the transactions described in this paragraph is required and, if they are undertaken, they may be discontinued at any time.

 

In connection with the offering, each of the underwriters and any of their respective affiliates, acting as an investor for its own account, may take up ordinary shares or ADSs in the offering and in that capacity may retain, purchase or sell for its own account such securities and any ordinary shares, ADSs or related investments and may offer or sell such ordinary shares, ADSs or other investments otherwise than in connection with the offering. Accordingly, references in this document to ordinary shares and ADSs being offered or placed should be read as including any offering or placement of ordinary shares and ADSs to any of the underwriters or any of their respective affiliates acting in such capacity. None of the underwriters intends to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so.

 

In making an investment decision, each investor must rely on their own examination, analysis and enquiry of our company and the terms of the offering, including the merits and risks involved. Neither the underwriters nor we, or any of our or their respective representatives, is making any representation to any offeree or purchaser of our ordinary shares or ADSs regarding the legality of an investment in the ordinary shares or the ADSs by such offeree

or purchaser under the laws applicable to such offeree or purchaser. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of our ordinary shares and ADSs.

 

No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the ordinary shares and ADSs offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

 

A copy of this document has been delivered to the registrar of companies in Jersey in accordance with Article 5 of the Companies (General Provisions) (Jersey) Order 2002, as amended, and the registrar has given, and has not withdrawn, consent to its circulation. The Jersey Financial Services Commission has given, and has not withdrawn, its consent under Article 2 of the Control of Borrowing (Jersey) Order 1958, as amended, to the issue of shares by Randgold Resources Limited. It must be distinctly understood that, in giving these consents, neither the registrar of companies in Jersey nor the Jersey Financial Services Commission takes any responsibility for the financial soundness of Randgold Resources Limited or for the correctness of any statements made, or opinions expressed, with regard to it. If you are in any doubt about the contents of this document, you should consult your stockbroker, bank manager, solicitor, accountant or other financial advisor.

 

Randgold and its directors accept responsibility for the completeness and accuracy of the information contained in this prospectus. To the best knowledge and belief of the members of our board of directors, who have taken all reasonable care to ensure that such is the case, the information contained in this prospectus is accurate and complete in all material respects and no material facts, the omission of which would make misleading any statements of fact or opinion herein, have been omitted. No representation or warranty, express or implied, is made by the underwriters as to the accuracy, completeness or verification of the information set forth in this prospectus, and nothing contained in this prospectus is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. The underwriters assume no responsibility for its accuracy, completeness or verification and accordingly disclaim, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this document or any such statement.

 

HSBC Bank plc, Merrill Lynch International and the other underwriters are acting exclusively for us and no one else in connection with the offering. They will not regard any other person (whether or not a recipient of this document) as their respective clients in relation to the offering and will not be responsible to anyone other than Randgold for providing the protections afforded to their respective clients nor for giving advice in relation to the offering or any transaction or arrangement referred to herein.

 

We are incorporated under the laws of Jersey, Channel Islands with the majority of our operations located in West Africa. Our books of account are maintained in US dollars and our annual and interim financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS”). Our annual report on Form 20-F for the year ended December 31, 2008, or 2008 20-F, which is incorporated by reference in this prospectus, includes our audited consolidated financial statements for the years ended December 31, 2008, 2007 and 2006 and as at December 31, 2008 and 2007. Those financial statements are prepared in accordance with IFRS and, except where otherwise indicated, are presented in U.S. Dollars. We have also included in the 2008 20-F the audited financial statements of Société des Mines de Morila SA, or Morila SA for the years ended December 31, 2008, 2007 and 2006 and as at December 31, 2008 and 2007. The financial statements of Morila SA included in the 2008 20-F have been prepared in accordance with IFRS and in addition, except where otherwise indicated, are presented in US dollars.

 

This prospectus, including the sections herein and in our 2008 20-F, which is incorporated by reference in this prospectus, entitled “Prospectus Summary,” “Risk Factors,” “Operating and Financial Review and Prospects” and “Business,” contains forward-looking information. In some cases, you can identify forward-looking statements by

phrases such as “in our view,” “we cannot assure you,” or “there is no way to anticipate with certainty” as well as by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “objectives,” “goals,” “aims,” “projects,” “forecasts,” “possible,” “seeks,” “could,” “might,” “likely,” “enable,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of these terms or other comparable terminology. These statements are subject to risks and constitute statements of expectation, intent and anticipation, and may be inaccurate as a number of factors could cause actual events or results to differ, in some instances, materially. In evaluating these statements, you should specifically consider various factors, including the risks outlined under “Risk Factors.” These factors may cause our actual results to differ materially from any forward-looking statement. Although we believe that the expectations reflected in the forwarding-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.

 

Except as required by law, or unless required to do so by the Listing Rules of the UK Listing Authority, we undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

 

PROSPECTUS SUMMARY

																																						Attributable
		Proven Reserves												Probable Reserves												Total Reserves												Gold*
		Tonnes				Grade				Gold				Tonnes				Grade				Gold				Tonnes				Grade				Gold				Gold
Operation/Project		(Mt)				(g/t)				(Moz)				(Mt)				(g/t)				(Moz)				(Mt)				(g/t)				(Moz)				(Moz)
Morila *			13.74				2.02				0.89				6.88				1.14				0.25				20.62				1.72				1.14				0.46
Loulo +*			7.08				3.38				0.77				43.51				4.60				6.43				50.59				4.42				7.20				5.76
Tongon *			—				—				—				38.25				2.57				3.16				38.25				2.57				3.16				2.66
Total:																																							8.87

*		Our attributable share of Morila is 40%; Loulo, 80%; and Tongon, 84%.
+		Includes Loulo underground mine.

	•	A flat gold price of $800 per ounce has been used for modelling purposes, with sensitivities applied from $600 to $1,000 per ounce.
	•	Total ore mined of 38.25 Mt at a strip ratio of 4.3:1 to give total tonnes mined of 203 Mt and total contained gold of 3.16 Mozs.

	•	Mining costs average of $3.03 per tonne over the Life of Mine.
	•	Mill throughput of 300,000 tonnes per month.
	•	Plant costs average of $12.55 per tonne.
	•	General and administrative costs of $2.90 per tonne over Life of Mine.
	•	Capital cost of $280 million.

	•	Following the successful consolidation of a 1,400 km2 land package in the Loulo district — straddling the highly prospective Senegal-Mali shear zone — a helicopter-borne VTEM electromagnetic and magnetic survey has been flown. This work has improved the geological and structural framework of the district and has highlighted large intrusive bodies, extensive folding and large scale boudinage structures. Weak anomalies were also detected over the orebodies and a number of look-alike responses along the known structures in the area are being studied. The interpretation also provided more information on the nature of the extensive iron alteration system in Senegal and across the border in Mali.
	•	In Côte d’Ivoire, the exploration emphasis has shifted to the discovery of new ounces close to the existing orebodies, as well as the development of targets further afield.
	•	We are expanding our exploration horizons to encompass the prospective rocks of the Congo Craton, which ranges from the well known deposits of Tanzania through the east of the Democratic Republic of Congo (“DRC”) and the Central African Republic to Cameroon.
	•	The current financial crisis and its associated credit squeeze have generated potentially value-accretive opportunities in the Congro Craton as well as in West Africa as companies, particularly juniors, run short of funds to develop their projects. We are considering a number of these with a view to possibly acquiring or participating in assets which meet our investment criteria. Such external opportunities will be rated against our own organic growth prospects.

The global offering		5,000,000 ordinary shares, in the form of ordinary shares or ADSs, consisting of the US offering and the international offering.
The US offering		ordinary shares, in the form of ordinary shares or ADSs.
The international offering		ordinary shares, in the form of ordinary shares or ADSs.
Offering prices		The offering prices for the US offering and the international offering are $      per ordinary share and $      per ADS, respectively.
Over-allotment option		750,000 ordinary shares, in the form of ordinary shares or ADSs.
Lock-up		We have agreed with the underwriters, subject to specified exceptions, that for a period of 90 days after the date of this prospectus, we will not, without the prior written consent of HSBC Bank plc, issue or sell any of our ADSs or ordinary shares or share capital or any securities substantially similar to our ADSs or ordinary shares or share capital. Our executive directors have also agreed with the underwriters that, for a period of 90 days after the date of this prospectus, they will not, other than in specified circumstances, dispose of any ADSs or ordinary shares that they own without the prior written consent of HSBC.
The ADSs		Each ADS represents the right to receive one ordinary share. The ADSs are evidenced by American Depositary Receipts, or ADRs, executed and delivered by The Bank of New York Mellon, as depositary.
Use of proceeds		We expect to use the net proceeds from this offering to fund the feasibility studies for our Gounkoto and Massawa projects; to develop the Gounkoto and Massawa projects following approval by our board; and for other organic and corporate opportunities, including possible acquisitions.
		In addition, if we enter into the Arrangement Agreement and consummate the acquisition of Moto, some of the net proceeds of this offering could be used to fund the development of the Moto Gold Project.

Listing and trading		The ADSs are listed and traded on the Nasdaq Global Select Market and our ordinary shares are listed on the Official List of the United Kingdom Listing Authority and traded on the London Stock Exchange.
Symbol of the ADSs on the Nasdaq Global Select Market		“GOLD”
Symbol of the ordinary shares on the London Stock Exchange		“RRS”
Securities outstanding after the offering		81,788,150 ordinary shares. These amounts do not include:
		• outstanding options to purchase 2,393,770 ordinary shares;
		• 2,727,456 shares available for issuance under our share option scheme;
		• an additional 750,000 shares available for issuance under our share option scheme after giving effect to this offering;
		• shares to be issued pursuant to our Restricted Share Plan; or
		• ordinary shares or ADSs that would be issued if we enter into the Arrangement Agreement and consummate the acquisition of Moto.
Risk factors		For a discussion of some factors that you should carefully consider in connection with an investment in the ordinary shares or the ADSs, see “Risk Factors.”

		Six Months				Six Months
		Ended				Ended
		June 30,				June 30,				Year Ended				Year Ended				Year Ended
		2009				2008				December 31,				December 31,				December 31,
		(Unaudited)				(Unaudited)				2008				2007				2006
		(In thousands, except per share and per ounce data)
Consolidated Statement Of Comprehensive Income Data:(3)
Amounts in accordance with IFRS
Revenue		$	190,830			$	182,232			$	338,572			$	282,805			$	258,304
Profit attributable to owners of the parent			25,998				33,877				41,569				42,041				47,564
Basic earnings per share($)			0.34				0.44				0.54				0.60				0.70
Diluted earnings per share($)			0.33				0.43				0.54				0.60				0.69
Weighted average number of shares used in computation of basic earnings per share *(1)			76,676,161				76,194,674				76,300,116				69,588,983				68,391,792
Weighted average number of shares used in computation of diluted earnings per share *(1)			78,029,053				77,933,863				77,540,198				70,271,915				69,331,035
Cash dividends declared per ordinary share#		$	—			$	—			$	0.13			$	0.12			$	0.10
Other data
Profit from operations(2)		$	48,240			$	46,805			$	75,937			$	63,539			$	71,616
Total cash costs per ounce(2)		$	469			$	449			$	467			$	356			$	296

*		Reflects adjustments resulting from the sub-division of shares.
#		There were no dividends declared in respect of the years ended December 31, 2005 and December 31, 2004.

		At June 30, 2009				At December 31,				At December 31,
		(Unaudited)				2008				2007
		(In thousands)
Consolidated Statement of Financial Position Data:(3)
Amounts in accordance with IFRS
Total assets		$	857,959			$	821,442			$	780,719
Long-term borrowings			797				1,284				2,773
Share capital(3)			3,841				3,827				3,809
Share premium			459,829				455,974				450,814
Retained earnings(3)			262,013				245,982				213,567
Other reserves			(13,075	)			(31,387	)			(69,391	)
Equity attributable to owners of the parent(3)			712,608				674,396				598,799

1.		Effective June 11, 2004, we undertook a split of our ordinary shares, which increased our issued share capital from 29,273,685 to 58,547,370 ordinary shares. In connection with this share split, our ordinary shareholders (owners of the parent) of record on June 11, 2004 received two $0.05 ordinary shares for every one $0.10 ordinary share they held.
2.		Randgold Resources has identified certain measures that it believes will assist understanding of the performance of the business. As these measures are not defined under IFRS (“non-GAAP”), they may not be directly comparable with other companies’ adjusted measures. Such non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures or 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 further explained below. Profit from operations is a non-GAAP measure. We calculate profit from operations as profit before income tax, excluding finance (costs)/income-net and profit on the sale of Syama. Total cost of producing gold is a non-GAAP measure. We calculate the total cost of producing gold as total costs less exploration and corporate expenditure and other expenses. Total cash costs and total cash costs per ounce are also non-GAAP measures. We have calculated total cash costs and total cash costs per ounce using guidance issued by the Gold Institute. The Gold Institute was a non-profit industry association comprised of leading gold producers, refiners, bullion suppliers and manufacturers. This institute is now 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.
3.		As discussed in Note 2 to our unaudited condensed consolidated interim financial statements, contained elsewhere in this prospectus, as a consequence of adopting “Amendments to IAS 1 Presentation of financial statements: A revised presentation”, amendments have been made to affect the presentation of owners changes in equity and of comprehensive income. The names of the primary statements have also been amended. The “Consolidated income statement” is now called the “Consolidated statement of comprehensive income”, the “Consolidated balance sheet” is now called the “Consolidated statement of financial position” and the “Statement of consolidated cash flows” is now called the “Consolidated statement of cash flows”. The following balance sheet items have also been renamed: “Accounts payable and accrued liabilities” is now “Trade and other payables”, “Ordinary shares” is now “Share capital” and “Accumulated profits” is now “Retained earnings”. IAS 1 does not change the recognition, measurement or disclosure of specific transactions and other events required by other IFRSs. All financial data disclosed herein, of prior periods, has been renamed using the terminology in IAS 1.

		Six Months				Six Months
		Ended				Ended
		June 30,				June 30,				Year Ended				Year Ended				Year Ended
		2009				2008				December 31,				December 31,				December 31,
		(Unaudited)				(Unaudited)				2008				2007				2006
		(In thousands, except ounce and per ounce data)
Mine production costs		$	85,986			$	92,952			$	186,377			$	136,312			$	115,217
Movement in production inventory and ore stockpiles			1,600				(12,754	)			(21,865	)			(11,534	)			(13,373	)
Depreciation and amortization			13,311				11,390				21,333				20,987				22,844
Other mining and processing costs			8,635				6,490				13,675				13,638				13,006
Transport and refining costs			778				1,234				2,053				1,595				711
Royalties			11,171				10,503				19,730				18,307				16,979
Elimination of inter-company sales			749				—				—				—				—
Total cost of producing gold (total production cost)			122,230				109,815				221,303				179,305				155,384
Less: Non-cash costs included in total cost of producing gold:
Depreciation and amortization			(13,311	)			(11,390	)			(21,333	)			(20,987	)			(22,844	)
Total cash costs using the Gold Institute’s guidance		$	108,919			$	98,425			$	199,970			$	158,318			$	132,540
Ounces produced*			231,998				219,248				428,426				444,573				448,242
Total cash cost per ounce		$	469			$	449			$	467			$	356			$	296
Total production cost per ounce		$	527			$	501			$	517			$	403			$	347

*		40% share of Morila and 100% share of Loulo.

 

In addition to the other information included or incorporated by reference in this prospectus, you should carefully consider the following factors, which individually or in combination could have a material adverse effect on our business, financial condition and results of operations. There may be additional risks and uncertainties not presently known to us, or that we currently see as immaterial, which may also harm our business. If any of the risks or uncertainties described below or any such additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected. In this case, the trading price of our ordinary shares and American Depositary Shares, or ADSs, could decline and you might lose all or part of your investment.

 

Risks Relating to Our Operations

 

The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely.

 

Substantially all of our revenue and cash flows have come from the sale of gold. Historically, the market price for gold has fluctuated widely and has been affected by numerous factors, over which we have no control, including:

 

 

The volatility of gold prices is illustrated in the following table, which shows the approximate annual high, low and average of the afternoon London Bullion Market fixing price of gold in US dollars for the past ten years.

 

 

If gold prices should fall below and remain below our cost of production for any sustained period we may experience losses, and if gold prices should fall below our cash costs of production we may be forced to curtail or suspend some or all of our mining operations. In addition, we would also have to assess the economic impact of low gold prices on our ability to recover from any losses we may incur during that period and on our ability to maintain

adequate reserves. Our total cash cost per ounce of gold sold was $467 in the year ended December 31, 2008, $356 in the year ended December 31, 2007, and $296 in the year ended December 31, 2006. We expect that Morila’s cash costs per ounce will rise as the life of the mine advances as a result of expected declining grade, which will adversely affect our profitability in the absence of any mitigating factors. The high grades expected from the underground mining at Loulo will, in the absence of any other increases, have a positive impact on unit costs.

 

Our mining operations may yield less gold under actual production conditions than indicated by our gold reserve figures, which are estimates based on a number of assumptions, including assumptions as to mining and recovery factors, production costs and the price of gold.

 

The ore reserve estimates contained in this prospectus are estimates of the mill delivered quantity and grade of gold in our deposits and stockpiles. They represent the amount of gold that we believe can be mined, processed and sold at prices sufficient to recover our estimated total cash costs of production, remaining investment and anticipated additional capital expenditures. Our ore reserves are estimated based upon many factors, including:

 

 

Because our ore reserve estimates are calculated based on current estimates of future production costs and gold prices, they should not be interpreted as assurances of the economic life of our gold deposits or the profitability of our future operations.

 

Reserve estimates may require revisions based on actual production experience. Further, a sustained decline in the market price of gold may render the recovery of ore reserves containing relatively lower grades of gold mineralization uneconomical and ultimately result in a restatement of reserves. The failure of the reserves to meet our recovery expectations may have a materially adverse effect on our business, financial condition and results of operations.

 

The profitability of operations and the cash flows generated by these operations are significantly affected by the fluctuations in the price, cost and supply of inputs.

 

Fuel, power and consumables, including diesel, steel, chemical reagents, explosives and tires, form a relatively large part of our operating costs. The cost of these consumables is impacted to varying degrees by fluctuations in the price of oil, exchange rates and a shortage of supplies.

 

Such fluctuations have a significant impact upon our operating costs and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for mining projects, new and existing, and could even render certain projects non-viable.

 

Any appreciation of the currencies in which we incur costs against the US dollar could adversely affect our results of operations.

 

While our revenue is derived from the sale of gold in US dollars, a significant portion of our input costs are incurred in currencies other than the dollar, primarily Euro, South African Rand and Communauté Financière Africaine franc. Accordingly, any appreciation in such other currencies could adversely affect our results of operations.

 

Our results of operations have been adversely affected by increases in fuel prices, and we would be adversely affected by future increases in fuel prices or disruptions in the supply of fuel.

 

Our results are significantly affected by the price and availability of fuel, which are in turn affected by a number of factors beyond our control. Fuel prices are volatile and increased significantly in 2008. While prices have decreased significantly in 2009, they remain higher than historical standards. In the year ended December 31, 2008,

the cost of fuel and other power generation costs comprised 35% of our operating costs and the annual price increase of our landed fuel was 38%.

 

Historically, fuel costs have been subject to wide price fluctuations based on geopolitical factors and supply and demand. While we do not currently anticipate a significant reduction in fuel availability, factors beyond our control make it impossible to predict the future availability of fuel. If there are additional outbreaks of hostilities or other conflicts in oil producing areas or elsewhere, or a reduction in refining capacity (due to weather events, for example), or governmental limits on the production or sale of fuel, or restrictions on the transport of fuel, there could be reductions in the supply of fuel and significant increases in the cost of fuel.

 

We are not parties to any agreements that protect us against price increases or guarantee the availability of fuel. Major reductions in the availability of fuel or significant increases in its cost, or a continuation of current high prices for a significant period of time, would have a material adverse impact on us.

 

Our business may be adversely affected if the Government of Mali fails to repay Value Added Tax, or TVA, owing to Morila and Loulo.

 

Our mining companies operating in Mali are exonerated by their Establishment Conventions from paying TVA for the three years following first commercial production. After that, TVA is payable and reimbursable. TVA is only reclaimable insofar as it is expended in the production of income. A key aspect in TVA recovery is managing the completion of the Government of Mali’s audit of the taxpayer’s payments, at which time the Government of Mali recognizes a liability.

 

By December 2007, Morila had successfully concluded a reimbursement protocol with the Government of Mali for all TVA reimbursements it was owed up to June 2005. Morila was unable to conclude a second protocol subsequent to December 2007, however, and pursuant to its establishment convention, began offsetting TVA reimbursements it was owed against corporate and other taxes payable by Morila to the Government of Mali. As a result of the offsets, the TVA owed by the Government of Mali to Morila declined by $7.2 million between December 31, 2008 ($12.3 million) and June 30, 2009 ($5.1 million). Morila is in discussions with the Malian fiscal authorities in order to ensure that the tax offsets are accurately recorded and recognized, although we cannot assure you that the Government of Mali will ultimately recognize the tax offsets.

 

At December 31, 2008, TVA owed by the Government of Mali to Loulo stood at $1.8 million. This amount has increased by $14.4 million to $16.2 million at June 30, 2009 due to the end of the exoneration period on November 8, 2008.

 

If Morila and Loulo are unable to recover these funds, or if the tax offsets are not recognized, then their results of operations and financial position would be adversely affected, as would their ability to pay dividends to their shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends are not paid.

 

Our business may be adversely affected if the Government of Mali fails to repay fuel duties owing to Morila and Loulo.

 

Up to June 2005, Morila was responsible for paying to diesel suppliers the customs duties which were then paid to the Government of Mali. Our operations at Morila and Loulo could claim reimbursement of these duties from the Government of Mali on presentation of a certificate from Société Générale de Surveillance. During the third quarter of 2003, the Government of Mali began to reduce payments to all the mines in Mali due to irregularities involving certain small exploration companies. The Government of Mali has since given full exoneration from fuel duties to the mining industry so that fuel duties are no longer payable. However, a portion of previously paid duties remain outstanding, principally the duties paid for the period June 2005 to December 2005. Our share of the amounts owing to Morila was $2.1 million on December 31, 2008 and $4 million on December 31, 2007. Amounts owing to Loulo were $0.7 million on December 31, 2008 and $0.7 million on December 31, 2007. At June 30, 2009, amounts owing to Loulo were $0.7 million. At June 30, 2009, Morila’s outstanding fuel duties were offset in full against corporate and other taxes payable by the mine.

If Morila and Loulo are unable to recover these amounts, or if the amounts offset are not recognized, then their results of operations and financial position would be adversely affected, as would their ability to pay dividends to their shareholders. Accordingly, our business, cash flows and financial condition will be adversely affected if anticipated dividends are not paid.

 

Certain factors may affect our ability to support the carrying value of our property, plant and equipment, and other assets on our balance sheet.

 

We review and test the carrying amount of our assets on an annual basis when events or changes in circumstances suggest that the net book value may not be recoverable. If there are indications that impairment may have occurred, we prepare estimates of expected future discounted cash flows for each group of assets. Assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units) for purposes of assessing impairment. Expected future cash flows are inherently uncertain, and could materially change over time. Such cash flows are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditures.

 

During 2008, we recorded impairment charges against our auction rate securities, or ARS, which is described in the following paragraph.

 

We have invested in debt instruments for which the market has become substantially illiquid.

 

We have invested in debt instruments for which the market has become substantially illiquid. We had cash and cash equivalents of $220.0 million as of June 30, 2009. In addition, we had available-for-sale financial assets with a carrying value of $33.6 million as of June 30, 2009. The available-for-sale financial assets consist of auction rate securities, or ARS. In the third quarter of fiscal year 2007, ARS with a cost value of $49 million failed at auctions due to the sudden and unusual deterioration in the global credit and capital markets, and have since experienced multiple failed auctions. Consequently, the funds associated with these investments will not be accessible until a successful auction occurs, a buyer is found outside of the auction process or the underlying securities have matured.

 

We made provisions against these ARS of $10.35 million in the second half of 2008 and an additional $5.0 million in the first six months of 2009, in each case following the deterioration of the underlying credit ratings of the collateral of certain of the ARS. The trading market for these instruments has become substantially illiquid as a result of unusual conditions in the credit markets. As these investments have been illiquid for more than twelve months and there is no certainty that they will become liquid within the next twelve months, the assets have been reclassified into the non-current section of available-for-sale financial assets to more accurately reflect their nature. Management estimates the fair value of these investments at each reporting period. Management applies a mark to model valuation method. Continued uncertainties in the credit and capital markets may result in additional impairment provisions, which could adversely impact our financial condition, current asset position and reported earnings. Furthermore, there can be no assurance that we will be successful in our actions against the bank or the individual brokers that we have commenced.

 

We may not be able to recover certain funds from MDM Ferroman (Pty) Limited.

 

In August 2004, we entered into a fixed lump sum turnkey contract for $63 million for the design, supply, construction and commissioning of the Loulo processing plant and infrastructure with MDM Ferroman (Pty) Ltd, or MDM. At the end of 2005, after making advances and additional payments to MDM totaling $26 million in excess of the contract, we determined that MDM was unable to perform its obligations under the MDM Contract, at which time we enforced a contractual remedy which allowed us to act as our own general contractor and to complete the remaining work on the Loulo project that was required under the MDM Contract.

 

We believe that we are entitled to recover certain amounts from MDM, including advances of $12.1 million (December 31, 2007: $12.1 million) included in receivables as at December 31, 2008. Of this latter amount, $7.0 million is secured by performance bonds and the remainder is secured by various personal guarantees and other assets. In January 2009, the liquidator declared and paid the first dividend of $0.1 million from the insolvent estate, leaving an outstanding balance of $12.0 million as at June 30, 2009.

As part of our efforts to recoup the monies owed to us, MDM was put into liquidation on February 1, 2006. This resulted in a South African Companies Act Section 417 investigation into the business and financial activities of MDM, its affiliated companies and their directors. The investigation was completed and summons has been issued against those MDM creditors deemed as preferential creditors. These legal proceedings are continuing with pleadings having been closed and court dates been set in the South African courts.

 

Our ability to recover in full the $12.0 million included in receivables is dependent on the amounts which can be recovered from the performance bonds, personal guarantees and other assets provided as security. Any shortfall is expected to be recovered from any free residue accruing to the insolvent estate. The aggregate amount which will ultimately be recovered cannot presently be determined. The financial statements do not reflect any additional provision that may be required if the $12.0 million cannot be recovered in full. Our results of operations may be adversely affected if we are unable to recover the amounts advanced by us to MDM. Any part of the $12.0 million included in accounts receivable which cannot in fact be recovered will need to be charged as an expense. The ultimate outcome of this claim cannot presently be determined and there is significant uncertainty surrounding the amount that will ultimately be recovered.

 

We may incur losses or lose opportunities for gains as a result of our use of our derivative instruments to protect us against low gold prices.

 

We use derivative instruments to protect the selling price of some of our anticipated gold production at Loulo. The intended effect of our derivative transactions is to lock in a fixed sale price for some of our future gold production to provide some protection against a subsequent fall in gold prices. No such protection is in place for our production at Morila.

 

Derivative transactions can result in a reduction in revenue if the instrument price is less than the market price at the time the hedged sales are recognized. Moreover, our decision to enter into a given instrument is based upon market assumptions. If these assumptions are not met, significant losses or lost opportunities for significant gains may result. In all, the use of these instruments may result in significant losses which will prevent us from realizing the positive impact of any subsequent increase in the price of gold on the portion of production covered by the instrument.

 

Our underground project at Loulo, developing two mines at Yalea and Gara, is subject to all of the risks associated with underground mining.

 

Development of the underground mine at Yalea commenced in December 2006 and first ore was mined in April 2008. These planned mines represent our entry into the business of underground mining. In connection with the development of the underground mines, we must build the necessary infrastructure, the costs of which are substantial. The underground mines may experience unexpected problems and delays during their development and construction. Delays in the commencement of gold production could occur and the development costs could be larger than expected, which could affect our results of operations and profitability. Since the commencement of the underground operations at Yalea, we have experienced a number of technical challenges, principally the availability of the underground fleet and the ability to drill and blast up holes. The development and operation of the underground mine will be negatively impacted should these issues continue.

 

The business of underground mining by its nature involves significant risks and hazards. In particular, as the development commences the operation could be subject to:

 

 

 

We are at risk of experiencing any and all of these hazards. The occurrence of any of these hazards could delay the development of the mine, production, increase cash operating costs and result in additional financial liability for us.

 

Our success may depend on our social and environmental performance.

 

Our ability to operate successfully in communities will likely depend on our ability to develop, operate and close mines in a manner that is consistent with the health, safety and well being of our employees, the protection of the environment, and the creation of long-term economic and social opportunities in the communities in which we operate. We seek to promote improvements in health and safety, environmental performance and community relations. However, our ability to operate could be adversely impacted by accidents or events detrimental (or perceived to be detrimental) to the health, safety and well being of our employees, the environment or the communities in which we operate.

 

In July 2009, the Loulo mine experienced some disruption, caused by a small group of disaffected people unable to secure long term employment at the mine. The disruption resulted in some damage to the tailings pipeline as well as to some accommodation units and other property. All operations were suspended for 36 hours, following which all mining and processing operations were restored and operating back at normal capacity. We cannot assure you that similar events will not happen in the future, or that such events will not adversely affect our results of operations and properties.

 

Actual cash costs of production, production results and economic returns may differ significantly from those anticipated by our feasibility studies and scoping studies for new development projects, including Tongon.

 

It can take a number of years from initial feasibility studies of a mining project until development is completed and, during that time, the economic feasibility of production may change. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, metallurgical recoveries, capital and operating costs and future gold prices. The capital expenditures and time required to develop new mines or other projects are considerable, and changes in costs or construction schedules can affect project economics. Thus it is possible that actual costs and economic returns may differ materially from our estimates.

 

In addition, there are a number of uncertainties inherent in the development and construction of any new mine, including:

 

 

At our Tongon project in Côte d’Ivoire, our board approved the development of the new mine based on the strength of a feasibility study. A final draft of the proposed mining convention has been submitted to Côte d’Ivoire’s Ministry of Mines and Energy and we expected to sign the convention during the third quarter of 2009. Construction of the mine commenced at the end of 2008 with first gold production scheduled for the fourth quarter of 2010. We cannot provide any assurance that the project will ultimately result in a new commercial mining operation, or that a new commercial mining operation will be successful.

We conduct mining, development and exploration activities in countries with developing economies and are subject to the risks of political and economic instability associated with these countries.

 

We currently conduct mining, development and exploration activities in countries with developing economies. These countries and other emerging markets in which we may conduct operations have, from time to time, experienced economic or political instability. It is difficult to predict the future political, social and economic direction of the countries in which we operate, and the impact government decisions may have on our business. Any political or economic instability in the countries in which we currently operate could have a material and adverse effect on our business and results of operations.

 

The countries of Mali, Senegal, Burkina Faso, Ghana, Tanzania and Côte d’Ivoire have, since independence, experienced some form of political upheaval with varying forms of changes of government taking place. Côte d’Ivoire has experienced several years of political chaos, including an attempted coup d’état. The political situation in that country is normalizing and national elections are anticipated in the fourth quarter of 2009.

 

Goods are supplied to our operations in Mali through Ghana, Burkina Faso and Senegal, which routings have, to date, functioned satisfactorily. Our operations at Morila have been adversely affected by the higher transportation costs for diesel that now has to be delivered via Senegal. Any present or future policy changes in the countries in which we operate may in some way have a significant effect on our operations and interests.

 

The mining laws of Mali, Côte d’Ivoire, Senegal, Burkina Faso, Ghana and Tanzania stipulate that, should an economic orebody be discovered on a property subject to an exploration permit, a permit that allows processing operations to be undertaken must be issued to the holder. Except for Tanzania, legislation in these countries currently provides for the relevant government to acquire a free ownership interest, normally of at least 10%, in any mining project. For example, the Malian government holds a 20% interest in Morila SA and Somilo SA, and cannot be diluted below 10%, as a result of this type of legislation. The requirements of the various governments as to the foreign ownership and control of mining companies may change in a manner which adversely affects us.

 

If we assume operations of the Moto Gold Project, we will be subject to varying degrees of political and economic uncertainties associated with operating in the DRC.

 

If we enter into the Arrangement Agreement and consummate the acquisition of Moto, we will be subject to risks associated with operating the Moto Gold Project in the DRC. The Moto Gold Project is located in the north-east region of the DRC and is subject to various levels of political, economic and other risks and uncertainties associated with operating in the DRC. Some of these risks include political and economic instability, high rates of inflation, severely limited infrastructure, lack of law enforcement, labor unrest, and war and civil conflict. In addition, the Moto Gold Project is subject to the risks inherent in operating in any foreign jurisdiction including changes in government policy, restrictions on foreign exchange, changes in taxation policies, and renegotiation or nullification of existing concessions, licenses, permits and contracts.

 

The DRC is an impoverished country with physical and institutional infrastructure that is in a debilitated condition. It is in transition from a largely state-controlled economy to one based on free market principles, and from a non-democratic political system with a centralized ethnic power base to one based on more democratic principles. There can be no assurance that these changes will be effected or that the achievement of these objectives will not have material adverse consequences for the Moto Gold Project.

 

Any changes in mining or investment policies or shifts in political attitude in the DRC may adversely affect operations and/or profitability of the Moto Gold Project. Operations may be affected in varying degrees by government regulations with respect to, but not limited to, restrictions on production, price controls, export controls, currency remittance, income taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local people, water use and mine safety. These changes may impact the profitability and viability of the Moto Gold Project.

 

Furthermore, the Moto Gold Project is located in a remote area of the DRC, which lacks basic infrastructure, including sources of power, water, housing, food and transport. In order to develop any of the mineral interests, facilities and material necessary to support operations in the remote locations in which they are situated must be established. The remoteness of the mineral interests would affect the potential viability of mining operations, as we

would also need to establish substantially greater sources of power, water, physical plant and transport infrastructure than are currently present in the area.

 

Moreover, the north-east region of the DRC has undergone civil unrest and instability that could have an impact on political, social or economic conditions in the DRC generally. The impact of unrest and instability on political, social or economic conditions in the DRC could result in the impairment of the explorations, development and operations at the Moto Gold Project.

 

Under our joint venture agreement with AngloGold Ashanti, we jointly manage Morila Limited, and any disputes with AngloGold Ashanti over the management of Morila Limited could adversely affect our business.

 

We jointly control Morila Limited with AngloGold Ashanti under a joint venture agreement. Since February 15, 2008, we have been responsible for the day-to-day operations of Morila, subject to the overall management control of the Morila Limited board. Substantially all major management decisions, including approval of a budget for Morila, must be approved by the Morila Limited board. We and AngloGold Ashanti retain equal control over the board, with neither party holding a deciding vote. If a dispute arises between us and AngloGold Ashanti with respect to the management of Morila Limited and we are unable to amicably resolve the dispute, we may have to participate in arbitration or other proceeding to resolve the dispute, which could materially and adversely affect our business.

 

The use of mining contractors at certain of our operations may expose it to delays or suspensions in mining activities.

 

Mining contractors are used at Loulo and Morila to mine and deliver ore to processing plants. These mining contractors rely on third-party vendors to supply them with required mining equipment, many of which have been adversely affected by the global economic slowdown. Consequently, at these mines, we do not own all of the mining equipment and may face disruption of operations and incur costs and liabilities in the event that any of the mining contractors at these mines, or any of the vendors that supply them, has financial difficulties, or should there be a dispute in renegotiating a mining contract, or a delay in replacing an existing contractor.

 

We may be required to seek funding from the global credit and capital markets to develop our properties, and the recent weaknesses in those markets could adversely affect our ability to obtain financing and capital resources.

 

We require substantial funding to develop our properties, and may be required to seek funding from the credit and capital markets to finance these activities. Our ability to obtain outside financing will depend upon the price of gold and the market’s perception of its future price, and other factors outside of our control. We may not be able to obtain funding on acceptable terms when required, or at all.

 

The credit and capital markets experienced significant deterioration in 2008, including the failure of significant and established financial institutions in the US and abroad, and may continue to deteriorate in 2009 and beyond, all of which will have an impact on the availability and terms of credit and capital in the near term. If uncertainties in these markets continue, or these markets deteriorate further, it could have a material adverse effect on our ability to raise capital. Failure to raise capital when needed or on reasonable terms may have a material adverse effect on our business, financial condition and results of operations.

 

We may not pay dividends to shareholders in the near future.

 

We paid our third dividend since 2007 to ordinary shareholders in March 2009. It is our policy to pay dividends if profits and funds are available for that purpose. Whether or not funds are available depends on a variety of factors, including capital expenditures. We cannot guarantee that dividends will be paid in the future.

 

If we are unable to attract and retain key personnel our business may be harmed.

 

Our ability to bring additional mineral properties into production and explore our extensive portfolio of mineral rights will depend, in large part, upon the skills and efforts of a small group of management and technical

personnel, including D. Mark Bristow, our Chief Executive Officer. If we are not successful in retaining or attracting highly qualified individuals in key management positions our business may be harmed. The loss of any of our key personnel could adversely impact our ability to execute our business plan.

 

Our insurance coverage may prove inadequate to satisfy future claims against us.

 

We may become subject to liabilities, including liabilities for pollution or other hazards, against which we have not insured adequately or at all, or cannot insure. Our insurance policies contain exclusions and limitations on coverage. Our current insurance policies provide worldwide indemnity of £50 million in relation to legal liability incurred as a result of death, injury, disease of persons and/or loss of or damage to property. Main exclusions under this insurance policy, which relates to our industry, include war, nuclear risks, silicosis, asbestosis or other fibrosis of the lungs or diseases of the respiratory system with regard to employees, and gradual pollution. In addition, our insurance policies may not continue to be available at economically acceptable premiums. As a result, in the future our insurance coverage may not cover the extent of claims against us.

 

It may be difficult for you to affect service of process and enforce legal judgments against us or our affiliates.

 

We are incorporated in Jersey, Channel Islands and a majority of our directors and senior executives are not residents of the United States. Virtually all of our assets and the assets of those persons are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon those persons or us. Furthermore, the United States and Jersey currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Consequently, it may not be possible for you to enforce a final judgment for payment rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon United States Federal securities laws against those persons or us.

 

In order to enforce any judgment rendered by any Federal or state court in the United States in Jersey, proceedings must be initiated by way of common law action before a court of competent jurisdiction in Jersey. The entry of an enforcement order by a court in Jersey is conditional upon the following:

 

 

Furthermore, it is doubtful whether you could bring an original action based on United States Federal securities laws in a Jersey court.

 

We are subject to significant corporate regulation as a public company and failure to comply with all applicable regulations could subject us to liability or negatively affect our share price.

 

As a publicly traded company, we are subject to a significant body of regulation. While we have developed and instituted a corporate compliance program based on what we believe are the current best practices in corporate governance and continue to update this program in response to newly implemented or changing regulatory

requirements, we cannot provide absolute assurance that we are or will be in compliance with all potentially applicable corporate regulations. For example, we cannot provide assurance that in the future our management will not find a material weakness in connection with its annual review of our internal control over financial reporting pursuant to Section 404 of the US Sarbanes-Oxley Act of 2002. If we fail to comply with any of these regulations, we could be subject to a range of regulatory actions, fines or other sanctions or litigation. If we must disclose any material weakness in our internal control over financial reporting, our share price could decline.

 

Risks Relating to Our Industry

 

The exploration of mineral properties is highly speculative in nature, involves substantial expenditures, and is frequently unproductive.

 

We must continually seek to replenish our ore reserves depleted by production to maintain production levels over the long term. Ore reserves can be replaced by expanding known ore bodies or exploring for new deposits. Exploration for gold is highly speculative in nature. Our future growth and profitability will depend, in part, on our ability to identify and acquire additional mineral rights, and on the costs and results of our continued exploration and development programs. Many exploration programs, including some of ours, do not result in the discovery of mineralization and any mineralization discovered may not be of sufficient quantity or quality to be profitably mined. Our mineral exploration rights may not contain commercially exploitable reserves of gold. Uncertainties as to the metallurgical recovery of any gold discovered may not warrant mining on the basis of available technology. Our operations are subject to all of the operating hazards and risks normally incident to exploring for and developing mineral properties, such as:

 

 

If we discover a viable deposit, it usually takes several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change.

 

Moreover, we will use the evaluation work of professional geologists, geophysicists, and engineers for estimates in determining whether to commence or continue mining. These estimates generally rely on scientific and economic assumptions, which in some instances may not be correct, and could result in the expenditure of substantial amounts of money on a deposit before it can be determined whether or not the deposit contains economically recoverable mineralization. As a result of these uncertainties, we may not successfully acquire additional mineral rights, or identify new proven and probable reserves in sufficient quantities to justify commercial operations in any of our properties.

 

If management determines that capitalized costs associated with any of our gold interests are not likely to be recovered, we would recognize an impairment provision against the amounts capitalized for that interest. All of these factors may result in losses in relation to amounts spent which are found not to be recoverable.

 

Title to our mineral properties may be challenged, which may prevent or severely curtail our use of the affected properties.

 

Title to our properties may be challenged or impugned, and title insurance is generally not available. Each sovereign state is the sole authority able to grant mineral property rights, and our ability to ensure that we have obtained secure title to individual mineral properties or mining concessions may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. In addition, we may be unable to operate our properties as permitted or to enforce our rights with respect to our properties.

Our ability to obtain desirable mineral exploration projects in the future may be adversely affected by competition from other exploration companies.

 

We compete with other mining companies in connection with the search for and acquisition of properties producing or possessing the potential to produce gold. Existing or future competition in the mining industry could materially and adversely affect our prospects for mineral exploration and success in the future.

 

Our operations are subject to extensive governmental and environmental regulations, which could cause us to incur costs that adversely affect our results of operations.

 

Our mining facilities and operations are subject to substantial government laws and regulations, concerning mine safety, land use and environmental protection. We must comply with requirements regarding exploration operations, public safety, employee health and safety, use of explosives, air quality, water pollution, noxious odor, noise and dust controls, reclamation, solid waste, hazardous waste and wildlife as well as laws protecting the rights of other property owners and the public.

 

Any failure on our part to be in compliance with these laws, regulations, and requirements with respect to our properties could result in us being subject to substantial penalties, fees and expenses, significant delays in our operations or even the complete shutdown of our operations. We provide for estimated environmental rehabilitation costs when the related environmental disturbance takes place. Estimates of rehabilitation costs are subject to revision as a result of future changes in regulations and cost estimates. The costs associated with compliance with government regulations may ultimately be material and adversely affect our results of operations and financial condition.

 

If our environmental and other governmental permits are not renewed or additional conditions are imposed on our permits, our financial condition and results of operations may be adversely affected.

 

Generally, compliance with environmental and other government regulations requires us to obtain permits issued by governmental agencies. Some permits require periodic renewal or review of their conditions. We cannot predict whether we will be able to renew these permits or whether material changes in permit conditions will be imposed. Non-renewal of a permit may cause us to discontinue the operations requiring the permit, and the imposition of additional conditions on a permit may cause us to incur additional compliance costs, either of which could have a material adverse effect on our financial condition and results of operations.

 

Labor disruptions could have an adverse effect on our operating results and financial condition.

 

Our operations in West Africa are highly unionized, and strikes are legal in the countries in which we operate. Therefore, our operations are at risk of having work interrupted for indefinite periods due to industrial action, such as strikes by employee collectives. Should long disruptions take place on our operations, the results from our operations and their financial condition could be materially and adversely affected.

 

AIDS poses risks to us in terms of productivity and costs.

 

The incidence of AIDS in Mali and Côte d’Ivoire, which has been forecast to increase over the next decade, poses risks to us in terms of potentially reduced productivity and increased medical and insurance costs. The exact extent to which our workforce is infected is not known at present. The prevalence of AIDS in the countries in which we operate and among our workforce could become significant. Significant increases in the incidence of AIDS infection and AIDS-related diseases among members of our workforce in the future could adversely impact our operations and financial condition.

 

Risks Relating to this Offering

 

The market value of our ordinary shares and ADSs may fluctuate due to the volatility of the securities markets.

 

The securities markets in the United States and other countries have experienced significant price and volume fluctuations, and investors may receive less than the full amount of their investment on disposal of the shares or

ADSs. Volatility in the price of our ordinary shares and ADSs may be caused by factors beyond our control and may be unrelated to, or disproportionate to changes in, our results of operations. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been instituted against that company. Litigation of this kind could result in substantial costs and a diversion of our management’s attention and resources.

 

Holders of ADSs have fewer rights than shareholders and have to act through the depositary to exercise those rights.

 

Holders of ADSs do not have the same rights as shareholders and accordingly cannot exercise rights of shareholders against us. The Bank of New York Mellon, as depositary, or the custodian, is the registered shareholder of the deposited shares underlying the ADSs, and therefore you will generally have to exercise your shareholder rights through The Bank of New York Mellon. In certain cases, we may not ask The Bank of New York Mellon to ask you for instructions as to how you wish the shares underlying the ADSs evidenced by your ADRs voted. The Bank of New York Mellon will not ask you for voting instructions in the absence of written instructions from us to do so. In the event that we did not so instruct The Bank of New York Mellon, you could still instruct The Bank of New York Mellon how to vote if you otherwise learn of our upcoming shareholders’ meeting or vote by surrendering your ADSs, withdrawing your underlying shares, and then voting as ordinary shareholders. Even if we ask The Bank of New York Mellon to ask you for such instructions, it may not be possible for The Bank of New York Mellon to obtain these instructions from you in time for The Bank of New York Mellon to vote in accordance with such instructions. If The Bank of New York Mellon does not receive instructions from you, it may give a proxy to vote your underlying ordinary shares or other deposited securities to our designated representative. This means you may not be able to exercise your right to vote and there may be nothing you can do if your underlying ordinary shares or other deposited securities are not voted as you instructed.

 

In some cases, The Bank of New York Mellon may not make rights or other distributions available to ADS holders.

 

If we make a rights offer to holders of securities, The Bank of New York Mellon may make these rights available to you after we instruct it to do so and provide it with evidence that it is legal to do so. If we fail to do this and The Bank of New York Mellon determines that it is impractical to sell the rights, it may allow these rights to lapse. In that case, you will receive no value for them.

 

Additionally, The Bank of New York Mellon is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holder and we have no obligation to take any other action to permit a distribution. This means that you may not receive the distribution we make on ordinary shares or any value for them if it is illegal or impractical for us to make them available to you.

 

We expect to use the net proceeds from this offering to fund the feasibility studies for our Gounkoto and Massawa projects; to develop the Gounkoto and Massawa projects following approval by our board; and for other organic and corporate opportunities, including possible acquisitions.

 

In addition, if we enter into the Arrangement Agreement and consummate the acquisition of Moto, some of the net proceeds of this offering could be used to fund the development of the Moto Gold Project.

 

We paid our third dividend since 2007 to ordinary shareholders in March 2009. It is our policy to pay dividends if profits and funds are available for that purpose. Whether or not funds are available depends on a variety of factors, including capital expenditure requirements. We cannot guarantee that dividends will be paid in the future.

 

Subject to the provisions of the 1991 Law and of the Articles of Association, we may, by ordinary resolution, declare dividends to be paid to shareholders according to their respective rights and interests in our profits. However, no dividend shall exceed the amount recommended by us. Subject to the provisions of the 1991 Law, we may declare and pay an interim dividend, including a dividend payable at a fixed rate, if an interim dividend appears to us to be justified by our profits available for distribution.

 

The following table sets forth our actual short-term and long-term indebtedness, equity attributable to owners of the parent and total capitalization on a consolidated basis at June 30, 2009, and as adjusted to give effect to this offering and the application of the net proceeds of this offering at an assumed offering price of $65.48 per ordinary share, or $65.48 per ADS, as described in “Use of Proceeds.” The following table should be read in conjunction with “Use of Proceeds” and our unaudited condensed consolidated interim financial statements, including the related notes, appearing elsewhere in this prospectus.

 

 

If you invest in our ADSs, your interest will be diluted to the extent of the difference between the public offering price per ADS and our net tangible book value per ADS after this offering. Dilution results from the fact that the public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

 

Our consolidated net tangible book value as of June 30, 2009 was $732 million, or $9.54 per ordinary share. Consolidated net tangible book value per share represents the total amount of our consolidated tangible assets reduced by the amount of our consolidated liabilities and divided by the number of ordinary shares outstanding on June 30, 2009. Our consolidated net tangible book value at June 30, 2009, after giving effect to the sale of 5,000,000 ordinary shares or ADSs in this offering at an assumed offering price of $65.48 per ordinary share, and after deducting underwriting discounts and estimated offering expenses, would be $1,048 million or $12.82 per share.

 

Without taking into account any other changes in such consolidated net tangible book value after June 30, 2009 except for the issuance and sale of ordinary shares in the form of ADSs offered by us in this offering at the assumed offering price of $65.48 per ADS, and after deduction of underwriting discounts and estimated aggregate offering expenses of this offering payable by us, our pro forma net tangible book value as of June 30, 2009 would have increased to $1,048 million or $12.82 per ordinary share and per ADS, assuming no exercise of the underwriters’ over-allotment option to purchase additional ordinary shares, in the form of ordinary shares or ADSs, from us. This represents an immediate increase in net tangible book value of $3.28 per ordinary share and per ADS to the existing shareholder and an immediate dilution in net tangible book value of $52.66 per ordinary share and per ADS to investors purchasing ADSs in this offering.

 

The following table illustrates such per share dilution:

 

 

The following table presents the differences between the total consideration paid to us and the average price per share paid by existing shareholders and by new investors purchasing ordinary shares and ADSs in this offering:

 

 

The above tables do not reflect any ordinary shares or ADSs that would be issued if we enter into the Arrangement Agreement and consummate the acquisition of Moto.

 

The following discussion provides information that our management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations.

 

This discussion should be read in conjunction with the more detailed information contained in “Operating and Financial Review and Prospects” included in our 2008 20-F incorporated by reference in this prospectus (which includes the audited consolidated financial statements) and the unaudited condensed consolidated interim financial statements that appear in this prospectus, including the notes hereto. The following unaudited information for the six month period ended June 30, 2009 and 2008 and as of June 30, 2009, have been derived from our unaudited condensed consolidated interim financial statements, including the related notes that appear elsewhere in this prospectus.

 

General

 

We earn substantially all of our revenue in US dollars and a large proportion of our costs are denominated or based in US dollars, excluding the Morila mining contract which is partially denominated in Euros. We also have South African Rand, Communauté Financière Africaine franc and Pound Sterling denominated costs, which are primarily wages and material and capital purchases.

 

Revenue

 

Substantially all of our revenue is derived from the sale of gold. As a result, our operating results are directly related to the price of gold. Historically, the price of gold has fluctuated widely. The gold price is affected by numerous factors over which we have no control. See “Risk Factors — Risks Relating to Our Operations — The profitability of our operations, and the cash flows generated by our operations, are affected by changes in the market price for gold which in the past has fluctuated widely”.

 

We have followed a hedging strategy the aim of which is to secure a minimum price which is sufficient to protect us in periods of significant capital expenditure and debt finance, while at the same time allowing significant exposure to the spot gold price. Accordingly, we have made use of hedging arrangements. Under the terms of the Morila project loan, we were required to hedge 50% of approximately 36% of Morila’s first 5 years of production. The last remaining hedges were closed out during 2004.

 

Our prior financing arrangements for the development of Loulo included provisions for gold price protection. Although the facility was fully repaid in December 2007, these instruments are still in place. At June 30, 2009, 79,248 ounces had been sold forward at an average price of $466 per ounce. This represents approximately 12% of planned production at Loulo for the period ending December 2010.

 

Significant changes in the price of gold over a sustained period of time may lead us to increase or decrease our production, which could have a material impact on our revenue.

 

Our Realized Gold Price

 

The following table sets out the average, the high and the low afternoon London Bullion Market fixing price of gold and our average US dollar realized gold price during the six months ended June 30, 2009 and 2008.

 

 

 

 

Costs and Expenses

 

Our operations currently comprise two operations mined by contractors. Milling operations are undertaken by the group’s own employees. Open pit mining activities ceased at Morila in April 2009 and the mine began the treatment of low grade stockpiles. Total cash costs in the six months ended June 30, 2009 as defined by guidance issued by the Gold Institute made up approximately 75% of total costs and expenses and comprised mainly mining and milling costs, including labor and consumable stores costs. Consumable stores costs include diesel and reagent costs. Contractor costs represented 38% of total cash costs, with diesel and reagent costs making up 27% of total cash costs. Direct labor costs accounted for approximately 5% of total cash costs. A definition of total cash costs, as defined by the Gold Institute, is included in “Summary Consolidated Financial and Operating Data.”

 

Total costs increased by 6.6% from $136.3 million for the six months ended June 30, 2008 to $145.3 million for the six months ended June 30, 2009. The price of diesel acquired for Morila and Loulo has declined during 2009. The average price of fuel for the six months ended June 30, 2009 was $0.72 per liter, compared to $1.04 per liter for the six months ended June 30, 2008. Should these prices increase again in future, this could significantly impact total cash costs mainly as a result of the high volume of diesel consumed to generate power and to run the mining fleet. Increased costs were in large part the result of movements in stockpiles at both Loulo and Morila. Ore was added to the stockpiles during the six months ended June 30, 2008 at both operations, while ore was taken from the stockpiles during the six months ended June 30, 2009 at both operations, in line with the mine plans.

 

The remainder of our total costs and expenses consists primarily of amortization and depreciation, exploration costs, exchange losses, interest expense and general administration or corporate charges.

 

Loulo benefited from a three-year duty exemption period, which ended on November 8, 2008. Duties became payable in accordance with the Malian duty regime on all imported goods. On average, it is anticipated that this has the effect of increasing the costs of imported goods by 7%, which equates to an overall increase of 1% on total costs.

Operating results for six months ended June 30, 2009 and 2008

 

 

Product Sales

 

Total revenue increased by 4.7% from $182.2 million for the six months ended June 30, 2008 to $190.8 million for the six months ended June 30, 2009. Gold sales on spot (net of inter-company sale eliminations) increased by 6.5% from the six months ended June 30, 2008, compared to the six months ended June 30, 2009. This was due mainly to a 5% increase in attributable ounces of gold sold. The average gold price received of $830 per ounce during the six months ended June 30, 2009 was consistent with the average gold price received of $833 per ounce during the six months ended June 30, 2008.

The loss incurred on matured hedges increased by 34% from $17 million for the six months ended June 30, 2008 to $22.7 million for the six months ended June 30, 2009. The increased loss was due to more ounces delivered into the hedge book during the six months ended June 30, 2009 (47,496 ounces), compared to the six month period ended June 30, 2008 (34,998 ounces), as well as a small increase in the average spot gold price.

 

The non-cash profit on roll forward of hedges of $1.3 million for the six months ended June 30, 2009, compared to $nil for the six months ended June 30, 2008, relates to the recycling of amounts accumulated in equity where losses were previously recognized on hedges that were rolled and have now been delivered into.

 

Other Income

 

Other income was $2.7 million for the six months ended June 30, 2009, compared to $0.9 million for the six months ended June 30, 2008. Other income includes management fees received from Morila (net of eliminations) since we assumed operatorship of the mine from February 15, 2008. Other income also includes net exchange gains on operational expenditure.

 

Cost and Expenses

 

Total Cash Costs per ounce

 

The following table sets out our total ounces produced and total cash cost and production cost per ounce for the six months ended June 30, 2009 and 2008 (for a definition of total cash costs, please see footnote 2 “Summary Consolidated Financial and Operating Data”):

 

 

 

 

Our total cash costs per ounce increased $20 per ounce, or 4%, from $449 per ounce for the six months ended June 30, 2008 to $469 per ounce for the six months ended June 30, 2009. The increases in our costs were mainly the result of movements in stockpiles at both Loulo and Morila. Total cash cost per ounce includes these stockpile adjustments. Ore was added to the stockpiles during the six months ended June 30, 2008 at both operations, while ore was taken from the stockpiles during the six months ended June 30, 2009 at both operations, in line with the mine plans. The principal reason for this change results from the transition of in pit mining to stockpile treatment at Morila with the cessation of in pit mining in April 2009. The overall effect was a stockpile charge to costs of $3.2 million for the six months ended June 30, 2009 and a corresponding credit of $12.6 million to costs for the six months ended June 30, 2008.

 

The increase in costs was further due to higher mining rates following the new open pit mining agreement at Loulo entered into with effect from April 1, 2009, as well as higher use of reagents as a result of the higher copper content ore from Yalea opencast at Loulo during the second quarter of 2009. The increase in total cash costs per ounce was partially offset by the increase in ounces produced of 6% from 219,248 ounces for the six months ended June 30, 2008 to 231,998 ounces for the six months ended June 30, 2009.

 

Royalties increased by $0.7 million, or 7%, from $10.5 million for the six months ended June 30, 2008 to $11.2 million for the six months ended June 30, 2009. The increased royalties reflect increased gold sales.

 

We incur other mining and processing costs consisting of expenses associated with providing for mine administration support services to the Morila and Loulo mine. These charges increased to $8.6 million for the six

months ended June 30, 2009 from $6.5 million for the six months ended June 30, 2008. The increase relates to an increase in insurance cost at Loulo, as well as an increase in duty taxes at Loulo following the end of the exoneration period on November 8, 2008.

 

Depreciation and Amortization

 

Depreciation and amortization for the six months ended June 30, 2009 was $13.3 million, compared to $11.4 million for the six months ended June 30, 2008. This includes depreciation charges for both operations, and the increase reflects the capital expenditures for the underground development at Loulo, as well as capital expenditure to increase processing capacity at Loulo.

 

Exploration and Corporate Expenditure

 

Exploration and corporate expenditure was $23.8 million for the six months ended June 30, 2009, compared to $26.5 million for the six months ended June 30, 2008. The six months ended June 30, 2008 reflects a higher level of executive bonuses as a result of the substantial growth in our share price during the first quarter of 2008. The reduction in corporate and exploration expenditure of $2.7 million in the six months ended June 30, 2009 is furthermore the result of changes in executive director’s employment contracts as well as amendments in the formulae for the calculation of executive bonuses.

 

Finance Income

 

Finance income consists primarily of interest received on cash held at banks, as well as exchange gains on financing activities. Finance income of $1.0 million for the six months ended June 30, 2009 decreased from $6.9 million for the six months ended June 30, 2008. Finance income for the six months ended June 30, 2008 included an exchange gain of $2.1 million relating primarily to the appreciation of euro denominated cash investments against the dollar. The effective interest rate for the six months ended June 30, 2009 of 1.1% was lower than the 2.6% which was achieved during the six months ended June 30, 2008.

 

Finance Costs

 

Finance costs for the six months ended June 30, 2009 were $1.5 million compared to the finance costs for the six months ended June 30, 2008 of $1.4 million and consisted mainly of interest on the Morila power plant and oxygen plant finance leases, as well as the Loulo CAT finance lease. The Loulo CAT finance lease was fully repaid in May 2009. Finance costs for the six months ended June 30, 2009 also include an exchange loss of $0.6 million on financing activities, as a result of the movements of cash investments denominated in currencies other than the dollar.

 

Provision for Financial Assets

 

At the end of 2007, we transferred $49.0 million from cash and cash equivalents to available-for-sale financial assets which was attributable to our portfolio of ARS. The trading market for these instruments has become substantially illiquid as a result of the unusual conditions in the credit markets. During the second half of 2008 and the first six months of 2009, following the deterioration of the underlying credit ratings of the collateral of certain of the ARS and as a result of applying the mark-to-model valuation methodology as at June 30, 2009, a further impairment of $5.0 million was made during the first six months ended June 20, 2009 ($10.4 million was provided during the second half of 2008). As previously disclosed, we believe that we have been the subject of a fraud committed by brokers working for a large investment bank through material misrepresentations of the nature of the ARS in which we were invested. Consequently, we have engaged legal counsel and in October 2008 we commenced arbitration proceedings against the bank and the brokers for their misconduct. These individuals are the subject of criminal proceedings instigated by the US government, in which we have co operated with the U.S. Department of Justice, and regulatory proceedings instigated by the SEC, which we believe reinforce our position. There can be no assurance that we will be successful in our actions against the bank or the individual brokers, and consequently we have not relied upon this for the determination of the provision.

Income Tax Expense

 

The income tax expense amounted to $10.7 million for the six months ended June 30, 2009 and $13.9 million for the six months ended June 30, 2008. The decrease in the tax expense was the result of the decrease in profit before tax at Morila SA for the six months ended June 30, 2009 compared to the corresponding period in 2008. Morila SA benefited from a five year tax holiday until November 14, 2005. Loulo SA also benefits from a five year tax holiday in Mali which commenced on November 8, 2005. Under Malian tax law, income tax is based on the greater of 35% taxable income or 0.75% of gross revenue.

 

Non-controlling interest

 

The non-controlling interests for the six months ended June 30, 2009 and June 30, 2008 represents the 20% minority share of the profits of Loulo.

 

Liquidity and Capital Resources for Six months ended June 30, 2009 and 2008

 

An analysis of the cash flows for the six month periods ended June 30, 2009 and June 30, 2008 is set out below:

 

 

Operating Activities

 

Net cash generated from operating activities was $45.9 million for the six months ended June 30, 2009, compared to $28.3 million for the six months ended June 30, 2008. The $17.6 million increase was due mainly to changes in stockpiles at Loulo and Morila for the six months ended June 30, 2009, compared to the six months ended June 30, 2008, as well as closer management of trade payables at Loulo for the comparative periods.

 

The increase in the adjustment for non-cash items is attributable to a $5 million non-cash impairment to ARS during the six months ended June 30, 2009 (2008: $0.0), as well as a $2.0 million increase in the non-cash adjustment of share-based payments due to the increase in the cost of options granted to employees.

Receivables increased by $14.8 million during the six months ended June 30, 2009 due mainly to the increase in TVA balances at Loulo following the end of the exoneration period on November 8, 2008.

 

Inventories and ore stockpiles increased by $17.6 million during the six months ended June 30, 2008 as a result of increases in stockpiles at both Morila and Loulo in line with the life of mine plans.

 

Inventories and ore stockpiles increased by $2.6 million during the six months ended June 30, 2009 due to increases in mining strategic stocks, reagent and grinding media at Loulo, due to increased demand for supplies and insurance spares resulting from the expansion of operations .

 

Trade and other payables decreased significantly by $12.7 million during the six months ended June 30, 2008 due to the accounts payable balances in December 2007 including accruals related to the equity placing in December 2007, which was subsequently settled.

 

Trade and other payables increased by $4.4 million during the six months ended June 30, 2009 mainly as a result of the timing of payments of creditors and closer management of trade creditors at Loulo.

 

Investing

 

Investing activities for the six months ended June 30, 2009 comprised $75 million of capital expenditure compared to $37.7 million for the six months ended June 30, 2008. Investing activities for both periods relates to capital expenditure incurred on the underground development work at Loulo, power plant expansion, upgrades to the crushing plant and expenditure on the overland conveyer, stockpile and tailings facilities at Loulo, as well as expenditure related to the Tongon project. The increase of $37.3 million is mainly the result of increased capital expenditure incurred on the Tongon project during the six months ended June 30, 2009 ($28.9 million expenditure), compared to $5.7 million for the corresponding period in 2008, as well as increased expenditure on the underground projects of Yalea and Gara at Loulo during 2009.

 

We believe that based on our current cash and cash equivalents balance of $220.0 million at June 30, 2009 and expected operating cash flows, the current lack of liquidity in the credit and capital markets will not have a material impact on our liquidity, or our ability to fund our operations.

 

Financing

 

Financing activities for the six months ended June 30, 2009 utilized $8.5 million. This was mainly due to the payment of dividends to our shareholders amounting to $10.0 million.

 

Financing activities for the six months ended June 30, 2008 utilized $9.5 million. This was mainly due to the payment of dividends to our shareholders amounting to $9.2 million.

 

Credit and Loan Facilities

 

During the year ended December 31, 2000, Morila entered into a finance lease for five Rolls-Royce generators under the terms of a Deferred Terms Agreement between Morila and Rolls-Royce. The lease is repayable over ten years commencing April 1, 2001 and bears interest at a variable rate which at June 30, 2009 was approximately 25% (2008: 33%) per annum. Our attributable share of this finance lease obligation amounted to $1.4 million at June 30, 2009 and $1.8 million at December 31, 2008. We have guaranteed the repayment of the lease.

 

Morila also has a finance lease with Air Liquide relating to three oxygen generating units. The lease is payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which at June 30, 2009 stood at approximately 3.09%. (2008: 3.09%).

 

Somilo SA has a $0.6 million loan from the Government of Mali at June 30, 2009. This loan is uncollateralized and bears interest at the base rate of the Central Bank of West African States plus 2% per annum. The accrual of interest ceased in the last quarter of 2005 per mutual agreement between shareholders. This loan is repayable from cash flows of the Loulo mine after the repayment of all other loans.

The Loulo project finance loan was arranged by NM Rothschild & Sons Limited and SG Corporate & Investment Banking, who were joined in the facility by Absa Bank and HVB Group, and was repayable through September 2009.

 

The Loulo project finance facility was replaced in May of 2007 with a $60 million corporate revolving credit facility to Randgold Resources (Somilo) Limited. The facility was with NM Rothschild, Société Générale, Fortis and Barclays. It carried interest at rates of between LIBOR + 1.4% and LIBOR + 1.6%. The facility was fully repaid in December 2007. The corporate facility remains in place should it be required. The maximum amounts available under the facility are: prior to November 1, 2009 — $60 million; up to May 1, 2010 — $48 million; up to November 1, 2010 — $36 million; up to May 1, 2011 — $24 million.

 

Loulo has a Euro denominated Caterpillar finance facility relating to fifteen 3512B HD generator sets and ancillary equipment purchased from JA Delmas and financed by a loan from Caterpillar Finance. The lease is payable quarterly over 42 months commencing on August 1, 2005, and bears interest at a fixed rate of 6.03% per annum. Together with Randgold Resources (Somilo) Limited, we jointly guaranteed the repayment of this lease. The loan was fully repaid in May 2009.

 

Equity Attributable to Owners of the Parent and Gross Indebtedness as at June 30, 2009

 

The following table sets out our equity attributable to owners of the parent and gross indebtedness. The figures for June 30, 2009 have been derived from our unaudited condensed consolidated interim financial statements.

 

The following schedule sets out our net indebtedness. The figures for June 30, 2009 have been derived from our unaudited condensed consolidated interim financial statements.

 

 

Risk Management and Treasury Policy

 

Although, in general, it is not our policy to hedge our gold sales, we believe it is prudent to hedge during times of significant capital expansion and debt and we are sometimes required to do so under debt financing arrangements. The market price of gold has a significant effect on our results of operations, our ability to pay dividends and undertake capital expenditures, and the market price of our ordinary shares. Gold prices have historically fluctuated widely and are affected by numerous industry factors over which we have no control. The aggregate effect of these factors is impossible for us to predict.

 

We use hedging instruments to protect the selling price of some of our anticipated gold production. These hedging instruments have been required by the terms of our Morila and Loulo loans.

 

The Morila hedge book was closed out in 2004.

 

The Loulo project finance loan was entered into in 2004 with a consortium of financial lenders, namely, Rothschild, SG Corporate and Investment Bank, ABSA Bank and HVB Group, and had as a requirement that some hedging be put in place. The intended effect of the hedging transactions was to lock in a fixed sale price for some of our future gold production, and reduce the adverse impact of a future fall in gold prices.

 

Somilo’s hedging is administered by our finance department which acts upon the recommendations of a treasury committee within the guidelines of a policy set by our board. The hedging was entered into in terms of a requirement of the Loulo Loan. The Loulo loan and our hedging arrangements were with a consortium of financial lenders: Rothschild, SG Corporate and Investment Bank, ABSA Bank and HVB Group. The Loulo Loan had in early May 2007 been replaced by a Revolving Credit Facility.

 

The consortium of financial lenders in the Revolving Credit Facility are Rothschild, SG Corporate and Investment Bank, Barclays Bank and Fortis Bank. The Revolving Credit Facility does not require any minimum hedging levels, but all hedging contracts are assigned to the consortium of financial lenders as well as those banks we have hedging arrangements with as part of a security package.

 

All of Somilo’s derivative transactions previously had to be in compliance with the terms and conditions of the Loulo loan agreement. That agreement placed a limit on derivative transactions of 70% of Loulo’s forecast production for a given year. In terms of the Revolving Credit Facility Agreement, derivative transactions in the group are limited to 75% of group production.

 

Our board agreed as part of the financing arrangements for the development of Loulo that some gold price protection be secured. At June 30, 2009, 79,248 ounces remained, sold forward at an average forward price of $466 per ounce. At December 31, 2008, 126,744 ounces had been sold forward at an average price of $456 per ounce.

These derivatives are accounted for in accordance with International Accounting Standard 39, “Financial Instruments: Recognition and Measurement”. Under IAS 39, all these derivatives are recognized on the balance sheet at their fair value.

 

On the date a derivative contract is entered into, we designate the derivative for accounting purposes as either a hedge of the fair value of a recognized asset or liability or a firm commitment (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). The derivatives held as at June 30, 2009 and at December 31, 2008 were all being accounted for as cash flow hedges.

 

We formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking various hedge transactions. This process includes linking derivatives designed as hedges to specific assets and liabilities or to specific firm commitments or forecasted transactions. We formally assess, both at the hedge inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

 

Corporate, Exploration, Development and New Business Expenditures

 

Our expenditures on corporate, exploration, development and new business activities for the six months ended June 30, 2009 and the six months ended June 30, 2008 are as follows:

 

 

The main focus of exploration work is on our advanced projects in western Mali, around Morila, and in Senegal, Burkina Faso, Tanzania, Côte d’Ivoire and Ghana.

 

Site establishment is nearing completion at Tongon in Côte d’Ivoire ahead of the ramp-up of the main construction program, with earthworks for the water storage nearing completion, as well as the basis for the Carbon In Leach tanks having been excavated and concrete poured. Progress has been made regarding the approval of the mining convention.

Tabular Disclosure of Contractual Obligations

 

Our contractual obligations and commercial commitments consist primarily of credit facilities, as described above. The related obligations as of June 30, 2009 are set out below (unaudited):

 

 

 

 

Our Articles of Association provide that the board must consist of no less than two and no more than 20 directors at any time.

 

The address of each of our executive directors and non-executive directors is the address of our principal executive offices, La Motte Chambers, La Motte Street, St. Helier, Jersey, JE1 1BJ, Channel Islands.

 

Executive Directors

 

D. Mark Bristow (50) Chief Executive Officer. We were founded on Dr. Bristow’s pioneering work in West Africa. He has subsequently led our growth through the discovery and development of world-class assets into a major gold mining business with a market capitalization of more than $4.5 billion. He also played a significant part in promoting the emergence of a sustainable mining industry in West Africa. A geologist with more than 26 years’ experience in the mining industry and a PhD from Natal University, he has held board positions at a number of global mining companies, and is currently a non-executive director of Rockwell Resources International. Dr. Bristow was appointed a director in August 1995 and Chief Executive Officer in October 1995. Prior to this he held executive responsibility for the exploration and new business activities of Randgold & Exploration from 1992 to 1995. During the period 1995 to 1997 he also directed the re-engineering of the reserve management functions of the gold mining of the Randgold & Exploration Group and its affiliated gold mining companies.

 

Graham P. Shuttleworth (40) Chief Financial Officer; Financial Director. Mr. Shuttleworth joined us as Chief Financial Officer and Financial Director on July 1, 2007 but has been associated with Randgold Resources since its inception, initially as part of the management team involved in our listing on the London Stock Exchange in 1997, and subsequently as an adviser. A chartered accountant, he was a managing director and the New York-based head of metals and mining for the Americas in the global investment banking division of HSBC before taking his new position with us. At HSBC he led or was involved in a wide range of major mining industry transactions, including our Nasdaq listing, our bid for Ashanti Goldfields and our 2005 equity offering.

 

Non-Executive Directors

 

Philippe Liétard (60) Non-Executive Chairman; Mr. Liétard was appointed a director in February 1998. Mr. Liétard was managing director of the Global Natural Resources Fund from 2000 to 2003. Prior to July 2000, he was director of the Oil, Gas and Mining Department of the International Finance Corporation. His experience in corporate and project finance with UBS, IFC and the World Bank extends over 30 years, most of them in the minerals business and in Africa. Mr. Liétard is now an independent consultant and a promoter of mining and energy investments. He was appointed a director in February 1998 and chairman in November 2004.

 

Norborne P. Cole (67) Non-Executive Director. Chairman of the remuneration committee and member of the nomination and governance committee. Mr. Cole was appointed a director in May 2006. Mr. Cole was CEO of Coca-Cola Amatil based in Sydney, Australia until 1998. Currently he is vice-chairman of Silver Eagle Distributers of Houston, Texas and a director of Lancer Corporation and Papa John’s International Inc. Mr. Cole was appointed senior independent director on May 5, 2009.

 

Christopher L. Coleman (41) Non-Executive Director; member of the nomination and governance, remuneration and audit committees. Mr. Coleman is co-head of banking at N M Rothschild, a director of N M Rothschild & Sons, chairman of Rothschild Bank International in the Channel Islands and serves on a number of other boards and committees of the Rothschild Group, which he joined in 1989. Mr. Coleman has served as a non-executive director of the Merchant Bank of Central Africa from 2001 to 2008. He was appointed a director in November 2008.

 

Robert I. Israel (59) Non-Executive Director; Member of the nomination and governance committee. Mr. Israel was appointed a director in June 1997. Mr. Israel is a partner at Compass Advisers, LLP. Until April 2000, Mr. Israel served as a managing director of Schroder & Co. Inc. and head of its Energy Department. He has 29 years of experience in corporate finance, especially in the natural resources sector.

Karl Voltaire (58) Non-Executive Director; Chairman of the audit committee since May 5, 2009 and member of the remuneration committee. Dr. Voltaire was appointed a director in May 2006. He holds a Ph.D in finance from the University of Chicago. He is currently the CEO of The Nelson Mandela Institute and was previously a director of the African Development Bank. Dr. Voltaire was formerly with the International Finance Corporation where he was the director in charge of Global Financial Markets.

 

Jonathan K. Walden (56) Non-Executive Director; Member of the audit committee. Mr. Walden is Senior independent director of Morgan Sindall plc. He was formerly the managing director of Lex Vehicle Leasing, a subsidiary of HBOS and a main board director at RAC plc. He was appointed a director in November 2008.

 

Executive Officers

 

David Haddon (51) General Counsel and Secretary. Having overseen our administrative obligations from our incorporation in 1995, Mr. Haddon assumed full secretarial responsibility when we became listed on the London Stock Exchange in July 1997. He has over 24 years of legal and administrative experience. He assumed the responsibility as general counsel in January 2004. He is a director of Seven Bridges Trading 14 (Pty) Limited.

 

Paul Harbidge (39) General Manager — Exploration. Mr. Harbidge is a geologist with 16 years’ experience, mainly in West Africa. He joined us in 2000 and was appointed exploration manager in 2004 and general manager — exploration in November 2006.

 

Bill Houston (61) General Manager — Human Resources. Mr. Houston joined us in 1992 as group training and development manager and currently heads the human resources function. He has 28 years of human resources experience. He is a director of Morila SA, Somilo SA and Seven Bridges Trading 14 (Pty) Limited.

 

Amadou Konta (51) General Manager — Loulo. Mr. Konta has a degree in civil engineering as well as several management and project management qualifications. He was appointed mine foreman and superintendent at Syama mine and served as mine manager from 1997. In 2001 he was promoted as our construction manager in Mali and was appointed Loulo general manager on October 1, 2004.

 

Victor Matfield (44) General Manager — Corporate Finance. Mr. Matfield is a chartered accountant with 16 years’ experience in the mining industry. He was appointed corporate finance manager in August 2001, prior to that he served as financial manager of the Syama mine and of the Morila capital project. He is a director of Seven Bridges Trading 14 (Pty) Limited.

 

Chris Prinsloo (58) General Manager — Commercial and Operations. Mr. Prinsloo was appointed general manager commercial and operations in April 2009 and prior to that he was group financial manager. He has 36 years of experience in the mining industry. He is a director of Somilo SA and Morila SA.

 

Rodney Quick (37) General Manager — Project Development, Evaluation and Environment. Mr. Quick is a geologist with 15 years’ experience in the gold mining industry. Since joining us in 1996, he has been involved in the exploration, evaluation and production phases of the Morila, Loulo and Tongon deposits and was appointed the Somilo resource manager in 2006. He is now responsible for all project development, evaluation and environmental issues.

 

Mahamadou Samaké (61) General Manager — Randgold Resources West Africa. Mr. Samaké is the general manager for West Africa and is a director of our Malian subsidiaries. He was a professor of company law at the University of Mali.

 

John Steele (48) General Manager — Capital Projects. Mr. Steele has overseen the capital expansion program at the Syama mine, and at the beginning of July 1998, assumed the position of general manager capital projects for the Randgold Resources Group, overseeing the construction of Morila. He is a director of Somilo SA and Morila Limited and is currently leading the Tongon construction project.

 

Samba Touré (55) General Manager — Morila. Mr. Touré has a masters degree in chemical engineering and geochemistry and was part of the team that set up Mali’s first research laboratory for the mining and petroleum industries in 1985. As country manager for BHP Minerals, he oversaw that company’s exploration programs in West Africa. He joined Morila in 2000 and was promoted to operations manager in 2004 and general manager in 2007.

Tania de Welzim (33) Chief Accounting Officer; Group Financial Manager. Ms. de Welzim was appointed group financial manager in April 2009 and prior to that she was group financial controller. She is a chartered accountant with ten years’ experience in finance including eight years in the mining industry. She is responsible for financial reporting in the group as well as internal control procedures.

 

Luiz Correia (47): Operations Manager. A metallurgist with 21 years’ experience in the gold mining industry, Mr. Correia has BSc Eng and BCom degrees. He joined us in 2005 and in 2006 was appointed operations manager responsible for the mining, planning, processing, maintenance and engineering functions at Loulo.

 

Philip Pretorius (45): Human Resources Manager. Mr. Pretorius joined us in 2008, bringing with him 20 years of human resources experience of which the last 13 years were spent exclusively dealing with the West African gold mining industry. He has been involved in establishing various gold mining projects in Mali. He holds a post-graduate diploma in management practices from the University of Cape Town.

 

Lois Wark (54): Group Corporate Communications Manager. A member of our team since our inception who assumed management of the cartography department in 1995, Ms. Wark is responsible for the coordination of the group’s communication and investor relations programs as well as for the management of its South African subsidiary, Seven Bridges. She holds a diploma in land surveying: cadastral and topographical.

 

Our Articles of Association provide that the longest serving one-third of directors retire from office at each annual general meeting. Retiring directors normally make themselves available for re-election and are re-elected at the annual general meeting on which they retire. Our officers who are also directors retire as directors in terms of the Articles of Association, but their service as officers is regulated by standard industry employment agreements.

 

Major Shareholders

 

As of June 30, 2009, our issued share capital consisted of 76,788,150 ordinary shares with a par value of $0.05 per share. To our knowledge we are not, directly or indirectly, owned or controlled by another corporation, any foreign government or other person.

 

The following table sets forth information regarding the beneficial ownership of our ordinary shares as of June 30, 2009, by:

 

 

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Ordinary shares issuable pursuant to options, to the extent the options are currently exercisable or convertible within 60 days of June 30, 2009, are treated as outstanding for computing the percentage of the person holding these securities but are not treated as outstanding for computing the percentage of any other person.

 

Unless otherwise noted, each person or group identified possesses sole voting and investment power with respect to the shares, subject to community property laws where applicable. Unless indicated otherwise, the business address of the beneficial owners is: Randgold Resources Limited, La Motte Chambers, La Motte Street, St Helier, Jersey, JE1 1BJ, Channel Islands.

 

 

 

 

 

To the knowledge of management, none of the above shareholders hold voting rights which are different from those held by our other shareholders.

 

As of June 30, 2009, there was 1 record holder of our ordinary shares in the United States, holding an aggregate of 31,765 ordinary shares or 0.04%.

 

As of June 30, 2009, there were 38 record holders of our ADSs in the United States, holding an aggregate of 55,652,796 ADSs or 72.48%.

 

Our ordinary shares are listed on the London Stock Exchange, which currently constitutes the principal non-United States trading market for those shares, under the symbol RRS and our ADSs trade in the United States on the Nasdaq Global Select Market under the trading symbol GOLD, in the form of American Depositary Receipts. The ADSs are delivered by The Bank of New York Mellon, as Depositary. Each American Depositary Receipt represents one American Depositary Share. Each American Depositary Share represents one of our ordinary shares.

 

The following table sets forth, for the periods indicated, the high and low sales prices of our ordinary shares, as reported by the London Stock Exchange, and of our ADSs, as reported by the Nasdaq Global Select Market. Effective March 10, 2003, we changed the ratio of ordinary shares to ADSs from two ordinary shares per ADS to one ordinary share per ADS, so that each ADS now represents one ordinary share. In March 2003 we changed the currency in which the price of our ordinary shares that are traded on the London Stock Exchange are quoted. The ordinary shares are now quoted in pound sterling and not in US dollars. The ADSs continue to be quoted on the London Stock Exchange and the Nasdaq Global Select Market in US dollars.

 

 

 

 

General

 

We are a company organized with limited liability under the laws of Jersey, Channel Islands. Our registered number is 62686.

 

The authorized share capital is $5,000,000 divided into 100,000,000 ordinary shares of $0.05 each, of which 78,788,150 were issued as of June 30, 2009 and 23,211,185 were available for issue.

 

At the annual general meeting held on April 28, 2008, shareholders approved a resolution which authorized an increase in the authorized share capital of the company from $4,000,000 divided into 80,000,000 ordinary shares of $0.05 each to $5,000,000 divided into 100,000,000 ordinary shares of $0.05 each.

 

At the annual general meeting held on April 26, 2004, shareholders approved a resolution which authorized a share split which amended our authorized share capital from $4,000,000 divided into 40,000,000 ordinary shares of $0.10 each to $4,000,000 divided into 80,000,000 ordinary shares of $0.05 each. The issued share capital therefore increased from 29,263,385 to 58,526,770 ordinary shares with effect from June 11, 2004. None of our shares have any redemption rights.

 

Memorandum of Association

 

Clause 2 of our Memorandum of Association provides that we shall have all the powers of a natural person including but not limited to the power to carry on mining, exploration or prospecting.

 

Changes in Capital or Objects and Powers

 

Subject to the 1991 Law and our Articles of Association, we may by special resolution at a general meeting:

 

 

Articles of Association

 

We adopted our Articles of Association by special resolution passed on June 24, 1997. Our Articles of Association include provisions to the following effect:

 

General Meeting of Shareholders

 

We may at any time convene general meetings of shareholders. We hold an annual general meeting for each fiscal year within nine months of the end of each fiscal year. No more than eighteen months may elapse between the date of one annual general meeting and the next.

Annual general meetings and meetings calling for the passing of a special resolution require twenty-one days’ notice of the place, day and time of the meeting in writing to our shareholders. Any other general meeting requires no less than fourteen days’ notice in writing. Our business may be transacted at a general meeting only when a quorum of shareholders is present. Two persons entitled to attend and to vote on the business to be transacted, each being a member or a proxy for a member or a duly authorized representative of a corporation which is a member, constitute a quorum. Nasdaq’s marketplace rules, which apply to all companies listed on the Nasdaq Global Select Market, state in Rule 4350(f) that the minimum quorum for any meeting of holders of a company’s common stock is 33 1 / 3% of the outstanding shares. As a result, we requested, and Nasdaq granted to us, an exemption from compliance with the Rule 4350(f) requirement.

 

The annual general meetings deal with and dispose of all matters prescribed by our Articles of Association and by the 1991 Law including:

 

 

Voting Rights

 

Subject to any special terms as to voting on which any shares may have been issued or may from time to time be held, at a general meeting, every shareholder who is present in person (including any corporation present by its duly authorized representative) shall on a show of hands have one vote and every shareholder present in person or by proxy shall on a poll have one vote for each share of which he is a holder. In the case of joint holders, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders.

 

Unless we otherwise determine, no shareholder is entitled to vote at a general meeting or at a separate meeting of the holders of any class of shares, either in person or by proxy, or to exercise any other right or privilege as a shareholder in respect of any share held by him unless all calls presently payable by him in respect of that share, whether alone or jointly with any other person, together with interest and expenses, if any, have been paid to us.

 

Dividends

 

Subject to the provisions of the 1991 Law and of the Articles of Association, we may, by ordinary resolution, declare dividends to be paid to shareholders according to their respective rights and interests in our profits. However, no dividend shall exceed the amount recommended by us. Subject to the provisions of the 1991 Law, we may pay an interim dividend, including a dividend payable at a fixed rate, if an interim dividend appears to us to be justified by our profits available for distribution.