Randgold FY Net Profit ZAR 120M Vs ZAR 177M
12:17 PM ET April 29, 2005
Edited Press Release
LONDON (Dow Jones)--Randgold & Exploration Company Ltd. Friday announced a net profit of R120 million for the year ended 31 December 2004, which is a decrease of 32% from the net profit of R177 million for the previous year.
The profit decline was mainly as a consequence of the lesser income from Randgold Resources Limited (Randgold Resources), both in terms of the attributable earnings and sale of shares in Randgold Resources.
The lower profit stems largely from reduced gold production by Randgold Resources, where gold production dropped to 204 194 ounces in 2004 from 317 597 in 2003.
Randgold Resources attributable production declined to 204 194 ounces of gold in 2004 from 317 597 in 2003 and cash costs increased to $158/oz in 2004 from $76/oz in 2003. Randgold Resources net profit declined on the back of the poorer production results to $20.1 million in 2004 from $47.5 million in 2003.
Randgolds attributable earnings from Randgold Resources declined in line with the fall in earnings of Randgold Resources, and also because of the decline in shareholding from 37% to 31%. Randgold disposed of 3.2 million Randgold Resources shares during the year at a net profit of R134 million. Randgolds interest in Randgold Resources now stands at 31%.
As a consequence of the further appreciation of the Rand during 2004, the investment in Randgold Resources was affected by an unrealised foreign exchange loss on conversion of R57 million.
On the back of the increased funding provided to the Angolan joint venture partners, the interest earnings of Randgold have increased to R30 million relative to 2003s R9 million. Following the acquisition of Free State Development and Investment Corporation Limited (FSD) last year, FSD finalised the mineral swap with Anglogold Ashanti and realised a profit of R39 million on the transaction.
FSD is subject to tax on the transaction, but the retention of the rights is still subject to Ministerial approval under the new Minerals and Energy Bill. JCIs retention of its interest in FSD, accounts for the increased minority interest following the Anglogold Ashanti mineral right swap.
Randgold disposed of some surplus equipment acquired in Angola and is due to receive the proceeds in the third quarter of 2005, representing the bulk of the outstanding accounts receivable. In line with Randgolds strategy of investing in Angolan diamond projects, the acquisitions and loans are mirrored in the additions to fixed assets. During 2004, Randgold entered into various transactions with Aflease Gold and Uranium Resources Limited (Aflease), and on the 31 December 2004 held some 78 million shares in Aflease worth R139 million.
During the year, the Company lent 9.9 million shares in Randgold Resources to Bookmark Holdings, an Empowerment Entity. This transaction was structured to finance the purchase by Inkwenkwezi Gold (Pty) Limited (Inkwenkwezi) of 19 million shares in Western Areas Limited (Western Areas) from Anglo American Plc (Anglo). Inkwenkwezi is currently in the process of finalising this transaction with Anglo and exercising its option against Randgold for 5.3 million Western Areas shares. Bookmark Holdings is due to return the shares by June 2006. In addition to this loan, Randgold had provided funding for the Angolan initiatives of R150 million and JCIs loan to FSD is still owing, accounting for the R268 million of other assets.
The issuance of 9.4 million Randgold shares to Aflease and 2.1 million shares to Pan Palladium account for the increase in share capital and premium of R314 million during 2004. The market value of the Western Areas shares at 31 December 2004 was some R233 million less than the acquisition price. The directors are of the view that this diminution in value is not permanent, and have accounted for this against the equity reserves, in accordance with fair value accounting standards.
Despite a difficult start in Angola, the Angolan ventures are now coming on stream which will certainly benefit the bottom line. RG&E chief executive Brett Kebble said that RG&E now effectively owns a 45.5% interest in the Cassanguidi alluvial diamond mining venture, in the Lunda Norte area of Angola, a concession with a history of successful mining. Operations began in December 2004 following significant investment in infrastructure, plant and equipment by Randgold, and already profitable. In addition, work has started on further concessions at Luxinge and Dando Cuanza, which has several known kimberlite pipes. Exploration and geological work is underway to develop these high quality deposits, and both concessions are expected to start producing in excess of 10 000 carats per month by the end of 2005, said Kebble. The diamond potential of Angola is well documented and Randgold, together with its strategic partners in Angola, is ideally positioned to benefit directly in the expansion of formal mining operations in the country.
RG&Es earnings from interest increased to R30 million, up from R9- million in 2003 because of funding advanced to RG&Es joint-venture partners in Angola, Inkwenkwezi, a BEE company headed by former Transnet head Mafika Mkwanazi. RG&E has also assisted and continues to assist the acquisition by Inkwenkwezi of 19 million shares in Western Areas.
Through the funding of Inkwenkwezi which is beneficial to both the empowerment consortium and the company, RG&E continues to be exposed to Randgold Resources and Western Areas. Kebble says the South Deep mine is a long-term asset of considerable quality, nearing the end of its development stage and about to increase production. The unveiling of the South Deep Twin Shafts in February this year should see gold production double over the next few years, he said. The board is mindful of the current discount to net asset value and is examining methods of unlocking shareholder value.
Kebble said that within two weeks an announcement would be made regarding the replacement of two current RG&E directors with independent directors.
(END) Dow Jones Newswires
04-29-05 1217ET
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