Barrick Gold Corporation
Q3 2017 Earnings Call Transcript

Published: 4 Nov 2017

[Chris Coleman:]

Good morning, ladies and gentlemen, and welcome to Randgold's Third Quarter Results. In a busy and productive quarter, the main operational focus was on steering Kibali to the eminent commissioning of its fully automated underground haulage or handling and shock system, which, as Mark will explain, is a first for Africa and also one of the most sophisticated of its kind in the global mining industry. Ranking among the world's largest gold mines, Kibali is an enormous and complex enterprise built in one of Africa's most remote and least-developed regions. And it's also the latest in a long series of technological challenges that Randgold has taken on and overcome. Since the start, at the opencast Morila mine, with its simple three milling ore, the company has, with each subsequent project, introduced new mining methods and metallurgical processes. Loulo evolved into Randgold's first underground mine, with Gounkoto adding a large-scale open pit to the complex. Tongon's complex ore called for significant innovations in crushing, milling and floatation, including the introduction of ultrafine grinding. Kibali has a 20,000 tonnes per day plant, which employs a combination of processes from Randgold's other mines to treat different ore feeds from multiple sources. And looking ahead, Massawa will more than likely represent another technological advance, this time involving a bioleaching process to treat refractory ore. Now Randgold has been able to progress in this way because it has always invested substantially in the development of its human capital. It's an investment which has equipped its teams with skills levels that are at least equal to any in the worldwide mining industry. And it also developed a group information and management system that integrates every function in the business, from the analysis of exploration data, to mine planning, modeling and forecasting, all in real time. It is the expertise of its people and the effectiveness of its systems that allows this large organization, which is spread across Sub-Saharan Africa, to be run at ground level on the mines, with a corporate head office consisting of only six people. I think there are a few mining companies like that. This is all part of Randgold's long-term commitment to value creation and sustainability, and you'll see evidence of this success in Mark's presentation on a solid quarter, which points to a strong finish within guidance for the full year. And with that, I'd like to hand over to Mark, who will take you through the results in more detail. Thank you.

[Mark Bristow:]

Thank you, Chris. And good day to everyone both here and on the webcast. It's interesting as how one would just sort of just look at the summit out there with the turnout today. A ton of issues of value creation and profitability in the gold mining industry have recently come under a critical spotlight, with investors loudly, if belatedly, lamenting the fact that the sector has consistently underperformed the gold price for many years now. Those of you who have been to our presentations may recall that this is a point I have made before. The short term as a net afflicts not only the miners, but also the market and the stakeholders has led to a situation where value has not been created but destroyed by our gold mining industry. In contrast, as I will show you again today, Randgold's commitment to a long-term strategy has delivered a sustainable -- sustainably profitable business, capable of rewarding all its stakeholders, which, after all, should be the point of any commercial enterprise. The welfare of our people is an integral part of Randgold's value-creation process, hence our strong emphasis on health and safety. After a challenging first half of the year, we really looked at reinventing and implementing an intense plan to improve skills and ownership of safety programs across the group, with a particular focus on our local contractors and suppliers. Our total injury frequency rate should therefore improve again this year, and it's worth noting that our lost time injury frequency rate remains below our per -- 1 per million hours worked. Similarly, we aspire to the highest standards of environmental management. All the operations will have qualified under the new ISO specifications by the end of this year, and our water and energy efficiencies continue to improve. We also support environmental causes in our host countries. For example, we are currently planning an airborne census of the wildlife in the Niokolo-Koba Park, a world heritage site in Senegal close to our Massawa project in that country. So with that, now onto the salient features of the results. As we forecast and Chris alluded to, it was a softer quarter than quarter two, but performances across the board were in line with plan and we are still tracking the higher end of our production guidance for the year. Production and costs for the quarter were chiefly impacted by the start of the Gounkoto super pushback, which we shared with you last quarter, which limited access to the higher-grade input pit ore, and we were -- as we guided, we took some of the stockpiled lower-grade ore to blend with that, that we could mine. Loulo-Gounkoto, on the other hand, stays ahead of its guidance, and right now, it's tracking about 5% ahead of its full year guidance. Elsewhere in the group, the main excitement, as Chris alluded to, is the full commissioning of the Kibali underground operation due for completion this quarter, which features an advanced integrated automated ore handling system and as Chris mentioned, the first of its kind in Africa. On the exploration front, our Brownfield's programs continue to deliver good results, with Loulo-Gounkoto again set to replace all its depleted reserves this year as is Kibali. And our Greenfields teams continue to develop our prospective portfolio, and I'll talk a little bit more about that later. These are the results. And if you look at the two right-hand columns, you'll see that the comparison of the past nine months with the same period in 2016 shows a strong improvement in production, costs and profits. And it's really that trend that you should look at and roll it out to the end of the year. For the quarter earnings, we're lower than some people had anticipated, and this was largely due to higher depreciation, relating in part to increased throughput and a one-off review of some of the useful lives of certain of our underground mining equipment as well as an increased tax charge relating to the $100 million Tongon dividend, which we paid out in July. Turning now to the operations and starting with Loulo-Gounkoto, which is, as I pointed to, having a great quarter, another great year this year and is ahead of guidance and has been so in every quarter. As part of our community program, we continue to -- next, I think a very important and it's quite topical nowadays, but profitability allows you to continue to invest in all your other stakeholder projects. And one thing we brag about in Randgold, we've never retrenched because of the gold price, we've never cut capital, and we've never changed our CSR program and investments in our community because we plan for the long term. And Loulo, doing well operationally. It also made some good progress on its agri-college initiative. As you know, we built an agri-college between -- funded by both Gounkoto and Loulo. And this quarter, we reached a joint venture agreement with the development -- the German development agency to integrate the college into the local economic development framework, and they have committed €1 million to that program, which we're very grateful for. Also on the social license front, Loulo has rehabilitated 124 hectares of land and planted more than 15,000 trees this year so far to reduce the mine's footprint. And again, for those who are interested, when we start a mine, we've got a closure plan. And our big focus is constantly worrying about our footprint, no matter -- Loulo has still got 15, 20 years ahead, but we still worry about that footprint and measure against it. Loulo-Gounkoto numbers mirror these -- those of the group that I've just shared with you. Grades are slightly lower, but costs have been well controlled, albeit on the higher side because we've -- as you can imagine, the strip ratios are up because of the big strip on the super pit is in full swing. If you look at the nine months, however, grades are up 8%, while costs are down 12%, and that's really the game of gold mining. Loulo's underground team did really well, completing a number of significant capital projects. The most important of which was the new crusher and conveyor system in the Yalea underground, which really makes our tracking from underground more efficient. As at our other operations, brownfields exploration is continuing at Loulo and advanced grade control drilling at depth is confirmed, further extensions to the high-grade portion of the Yalea orebody to the south. Loulo's standalone results reflect an operation that continues to deliver a solid performance, with the variances against quarter 2 largely the product of more normal mining scheduling, as I noted earlier. And I think it's a feather in the cap of the Loulo underground team. We took over from the contractors two years ago, and they really have performed and continued to do so. Of the Loulo's 2 underground mines, it's interesting, Gara is operationally the more challenging, but its team is doing an excellent job, and in fact, it's more efficient. And so our big challenge is to keep working on the Yalea efficiencies. As you know, Yalea is a much bigger orebody, it's a better-grade orebody, and so that's where our focus has been. The decline in development for those mining engineers present, that's a managed process. We have some 6.5 million tonnes of developed and available ore reserves, 3.5 million in Yalea and 3 million in Gara -- or just over 3 million in Gara, and we really mine about 1.5 million a year. So we've built this inventory and now we're going to be managing that inventory, and you'll see that the development meters will flatten out. In fact, a big debate is whether we shouldn't take some of that working capital out of the mine right now, and that all depends on the -- our ability to and the confidence in the underground team. The big brownfield news, as I alluded to, for the quarter is that drilling has detected some significant intersections confirming the extension of the Yalea's Purple Patch and the potential for additional high-grade answers. And that's on this basis and the infill drilling that we're doing on the resources we converted last year, which is -- which makes us confident that we'll replace the depletion out of the complex, largely from Yalea for the year. We've also been evaluating the MZ2 high-grade underground target at Loulo 3. This has been an amazing orebody. We had -- we thought we had put in a little satellite pit, we ended up mining nearly a million ounces out of this pit. And then subsequently, the geologist have picked up this intersecting section just below the pit floor, and we've got around -- about 400,000 ounces at above 7 grams a tonne down to the 400-meter below depth level as we've indicated in the sort of reddy color. And it's still open at depth. And we haven't really constrained it on strike. So just to give you an idea, if we can increase this 230 meters strike to around 400 meters, we'd push that reserve potential to 1 million ounces down to 400 meters. So it's really a little underground satellite project. At the 400,000-ounce or 500,000-ounce target, we need a 7-plus gram. As you see, there's some higher-grade ore in the MZ1, and it's one of those that -- not a key core priority at this stage, but an ongoing work, and it will come into the mining sequence eventually. It's not what we're basing on our focus on replacement for this year. This is still going to come -- take some time to get into the reserve category. We have an overview of the main targets on our Loulo permit, and we've been working there, worth noting, for the best part of 20 years now, and there's still a wealth of untapped opportunities. This whole region and this main Senegal Malian Shear has really been productive for Randgold Resources and also for Mali in general. Over now to Gounkoto, where, as we shared with you last quarter, the start of the super pit pushback meant that because of restricted access to the orebody, we had to blend the tonnes mined with lower-grade stockpile material. And it's something Graham certainly worries about and manages with our mining engineer because we don't want to leave any low-grade ore on the stockpiles that might risk impairment. As you know, we've never impaired and we have no intention. So it was also a good opportunity to blend the ore and get it through the processing plant as part of our plan. Gounkoto nevertheless delivered a healthy set of numbers, in line with plan and continues to make an important contribution to the complex and the group. And compared to the prior year quota on the back of the increased stripping associated with the super pit project, we saw an increase in costs, and that was, as I pointed out earlier, a flag to you when we presented the results last quarter. We expect to have a similar fourth quarter, but grade is anticipated to rise, and you can see the trend still healthy if you look at the nine month on nine month. And we guided 690,000 ounces for Loulo-Gounkoto, and as I said, we're comfortable with looking to about a 5% better production, if not a little bit more because the team has just kept tracking ahead of its plans. Still in Mali, the grand old lady, Morila, is still soldiering on and making profits. The tailings retreatment operation is now being supplemented by the mining from the Domba satellite pit, which started in a small basis at the end of this quarter. And we're also working on the development plans for Ntiola and Viper satellites, which together with the TSF reserves, will take this mine out to 2020 and keep it profitable. So really, a self-financing closure plan, that's what it's all about for Morila. And talking about that, the agribusiness project and the legacy program designed to provide the community with a post-mine source of economic activity continued with its development, and we've recently had various members of the closure committee and the different departments involved in that closure committee, that's the government departments, along with some of our people to go and visit the Songhai project model down in Benin, which has been very successful in transforming subsistence farming to agribusiness units, little small agribusiness units. And that's the intention, is to take Morila to that point. We're already working on what are we going to rehabilitate, we're putting the tailings dam, as you know, back into the pit, and then we will complete our side of the rehabilitation and then, as is provided in the law, hand over that asset to the government. And our objective is to hand it over in a form that will continue as a -- what we call an agripole, so a center to develop economic agriculturalists. And it's one of the core future cornerstones of Mali's sort of economic renewal, is to really work harder at transiting subsistence farmers into the main economy. The results show gold production in line with the previous quarter and up 12% on the corresponding nine months in 2016. And increased recoveries are offset by slightly lower grade in throughput, and total cash costs were impacted by the grade and also the ability to affect the changes in the plant to take on the main ore feed from Domba. And again, we are guiding Morila ahead of guidance of 60-odd-thousand ounces for the year, not really material in our results, but still helpful for Morila because it's pulling that cash balance on the balance sheet, which will be available for funding its closure. In Senegal, work on the Massawa project made good progress. And the focus continues to be getting the project over the 3 million-ounce hurdle, and the team has put together a good-looking pipeline of satellite projects. And now just to sort of recap, if you look -- take a snapshot of Massawa today, it looks very much like what we shared with you in December or January on the back of what motivated us to move to feasibility study. But the components are different. So 2.7 million ounces. This time, they're the 20% IRR, but we've really firmed up on the Massawa main Central Zone. We've finished the first pilot scale test work, and the results were very encouraging. Sofia is -- continues to grow, and that's now sitting just under 600,000-ounce. We understand that. We've defined a lot more oxide above the refractory gold deposits, and as I pointed out now, we've got some -- a number of satellites or potential new targets that we are drilling. And we need to finish the next three bench scale tests. Those are -- if you'll recall, we had drilled out the orebody in very tight 5-by-5 meter drill patterns to collect about 2,500 tonnes out of each section of the Central Zone. And what you see as the options, the decision tree around how we are looking to integrate all these different feeds into a process. And for those who worry about capital intensity, this project looks pretty attractive on that basis, and that for those who don't follow, it is the capital per annualized production ounce. And it's looking around 2,000, 2,200, which is low for the industry. The big thing and then the other attraction is, and the focus of our processing people, John is there at the back, who leads this part of the business, is to test the ability to generate benign tails, which takes a lot of the capital. And we're quite encouraged by the test work so far. And then, of course, it's about the geologists continuing to drill these targets. As you can see here, we're very blessed with a number of targets, and there's a lot of pressure on the exploration team to continue to evaluate these targets so that we can get into -- expand that project. For those who follow the scheduling, in Denver, we pointed out that the first gold had been moved up until 2021, beginning 2021. This gives us time. It allows the decision to be made mid-year next year. It gives us -- and with that decision then, you could only start after the rain. So that still gives you a full 24 months-plus to get the mine up and running in time to meet that target. And it presents a much smoother buildup. So the yellow stars indicate the main orebodies there, and the others show the location of the key satellites and targets. And I would just point out that the Delya target is particularly interesting. It's an old target. It's refractory at depth, but it's got quite a large oxide resource, and that's one of those targets that we've never had in the mine plan and we currently -- so that target is on an infill drilling program, and the other targets are in an exploration program. We move on to the Côte d'Ivoire, where Tongon delivered on plan, with some changes to the mill as part of a general upgrade. We've -- I can say with some confidence that we've got our head around the crushing now and we're comfortable that we can exceed our nameplate. That's moved us to the mills, as we discussed last quarter, and we've now upgraded the first of the two mills, mill one, within a revised or newly designed grate and also a thinner line as that increased the volume of the mill and a new 8-megawatt motor. And we will be doing the same with the second mill, and already in the last month of this quarter, we were up at the 4.5 million-tonne rate for any last. And so we're comfortable that, that will give us enough flexibility to manage that 4.5 million tonnes throughput target next year. Now to the nine-month-on-nine-month comparison, shows a significant improvement in production costs and profits, and that's really what we've been taking you through over the last two years. And a steady increase in throughput is particularly encouraged, as I pointed out, and makes us much more comfortable with our 2018 guidance. I would just point out, quarter 4 is going to look more like quarter 2. It's almost a mirror image. If you see the production, and you look at what it looks like on a doubling-up basis, quarter 1 is similar to -- quarter 3 is similar to quarter 1. Quarter 2 is -- quarter 4 is going to be similar to quarter 2, and so you see we're on track for that 285,000-ounces guidance. Power. As you know, stability of the grid power supply remains a challenge. And it will always be a challenge until we've got the ring lines in and the security of supply, and the government is investing in that infrastructure as we speak. But what has happened is that we've become much better at managing that situation. And so we're sort of -- because this last quarter, quarter 3, is always a difficult quarter with -- as far as reliance of the grid, and it was a much better quarter this quarter. And so our team is getting a lot better, and we've changed some of the configurations of the busbar so that we can manage critical equipment that doesn't end up -- that where a blackout doesn't end up interrupting the core gold-producing components of the mine. Tongon, as you know, only has another four years of life ahead. As it stands at present, this is based on a $1,000 gold price. So if some where closer to the end of life, we'll tweak it and take a higher gold price just to sell it. We don't leave any reserves or mineable gold that's profitable behind. But the big focus is the discovery of additional satellites, and we have a -- we introduced, at the beginning of the year, a dedicated exploration team just for the Tongon license. And we've said, forget about the stuff that you've been trying to evaluate for the last 5 years. We need to generate new targets. And they've done a good job in getting there, and as you can see, a new -- these targets will now start to be evaluated. We're also looking at a small underground decline. As you know, Randgold's now very comfortable with that, it's not a big underground mine. But we've done some trade-off studies, and if you see those 2 red dots, 2 red stars, if they come good -- we need 5 grams a tonne on those holes. If they come good, it will support a small underground development project, and so we're drilling those holes this quarter and we'll report back on them next quarter. Beyond Tongon, we remain very enthusiastic about the Ivory Coast. It hosts the least explored and most prospective of West African's Birimian goldfields and has the region's best infrastructure and by far, the most attractive mining code. Our strong exploration effort in the country is driving a continuing increase in permits while advancing work on our existing targets, two of which are particularly attractive or prospective. At Fonondara, which is one of them, in the Boundiali permit, we completed an extensive drilling program, the first one we've done in that part of Africa during the rainy season. And it was -- really, we needed to get this -- this permit comes to the end of its normal renewals, and we've got one more special renewal. And so we really stepped on the gas, and it's been interrupted because of the civil war and all that over the last couple of years. And we are -- we've now confirmed mineralization of 9 kilometers, still widely spaced. The next phase is we need to -- the team to really look across the structures, get a feel for the actual framework, exploration framework, so then we can start designing evaluation drilling target, being to at least get this to a scoping study towards the end of next year. And Mankono permit, this is one of those interesting -- we've been speaking about it a lot. We've drilled the star out, a big intrusive host of gold deposit, over 2 grams, 1 million ounces. And then we started trenching down towards the south. That purple is a different intrusive, and we've just got better and better and more encouraging intersections all in trenches. We're going to drill it now. So we ran into as far as we could into the rainy season on this, and we're very excited about this. And if you look at all big deposits in West Africa, they're associated with these multiple styles of intrusions. And we also, today, announced a joint venture with Endeavour. They are on the ground to north. You can see that this project is open to the north. And we've agreed on a 70/30 joint venture in our favor, and it's -- we feel it's -- both companies feel it's wise to put our best, these assets together, and not end up with potentially something sort of sterling sets of permits and work with the government to get it consolidated into one company. And we've created a company that will own this project on a 70/30 basis. Endeavour will co-fund from the word "go" on this project. So moving across now to Central Africa. As Chris mentioned, focus has been on the underground ramp-up, which is scheduled for completion this quarter. The mine, nevertheless, just delivered a reasonable quarter given all the activity and the challenges it had to deal with. And you'll see in our reports, whilst on track to meet its year-end guidance, there's still a few challenges ahead as we ramp up. And the big ramp-up is really to get the ore out through the vertical shaft, and we need this commissioning to be successful to meet those guidance. And there's no reason why that should be, and it's just a timing issue, it's not a major issue. But that's the focus, and you can imagine, there's a lot of focus in the operation at the moment. Overall, as I said, the results are pleasing, with improved recoveries, above-plant nameplate throughput, which has been a significant achievement in this investment, and the first sign of getting back to those low costs, which we should see in the long term. Kibali's business model, as I've often shared with you, is all-around efficiencies and low-cost power. And to achieve the former, this automation is critical, and that is for the first time in Africa, we're going to have the bottom haulage fully automated along with all the ore handling procedures, the crushing and the tripping and hoisting into the skips in the shaft. And it will all be run by surface. So when it's fully commissioned, there will be no people on that level. And so again, I've always said, people think, in Africa, you need to build mines where the workers arrive, pick a shovel up from a bin and go and do some hard labor. And we've shown that you can build world-class mines with leading-edge technology and if you want to make profits, you're going to have to do that, and particularly with these big, I know Kibali's at least, very large orebodies that require, I mean, substantial technology to exploit them in every aspect. And one of the new ones that we're working on now is to be able to -- I know everyone's using drones. But no one's really ever used drones to survey inside cavities underground. And we're busy developing that. We're very far advanced in all our surveys on surface, but we're trying to get that technology to work for us underground, which is quite challenging. So we've had a few drones end up in the mud pile. I think another point, you'll recall those anxious moments when things went a little awry with our processing plant when we did the 100% sulfide test. Well, to reassure you, and we've talked about it last quarter, we're really slowly progressing to almost all 100%, all sulfide, and we're comfortable and managing it. And this is just the calculated medium of the first half and second half of the year. And you'll see that we have run many campaigns now at 100% sulfide for seven or eight or nine days, and you can see that by the averages going up to 90%. And we're pretty comfortable that we -- this part of managing this process, and it's key for us because that's what the mine was designed to do, was to mine -- run on 100% sulfide from underground. Hydropower generation, it's critical, as I pointed out. Right now, we're running at about $0.12 or tracking $0.12 for the year on a weighted average basis. You'll see we had an extended low-river period from January to June. It's not normally that long. And you can see how much, the brown bars is the thermal power station, and so that really impacts the cost. But even with that extended dry period, we're still tracking $0.12. That makes a big difference because thermal power is at like $0.44. And then the Azambi power station is on track to come in next year. It coincides with the ramp-up of our power demand, and so it will keep us at depth. And again, the team in Randgold has become particularly adept at managing power plants, so much so now we're looking to be able to take over and run our own power plants. And we're -- and more importantly, we've got so much knowledge and ability to operate microgrids, which is particularly challenging. And we're looking now at some new technology to be able to store power in a -- on a short-term basis to be able to allow the meeting of the demand from Rwanda and thereby not have to carry so much spending reserve in our thermal station, even though we've got lots of hydro. And so again, we're -- if we can get that right, the impact on unit costs is going to be significant. As is -- and the other operators I've talked about, the hunt for additional reserves continues. Once we start mining, we start exploring again because by its very nature, mining is a consumptive industry and you need to replace the mine, the gold you mine. And that's one of the big issues in our mining industry. No one's bothered to do that. Now everyone's worrying about what next. And Kibali's, we cut back on the reserves, remember, last year, because we went from a statistically modeled orebody to a well-defined, drill-defined hard-boundary orebody as we got to a stage with our knowledge of the orebody where you could do that. And we continue to migrate towards that approach to reserve calculation. At the same time, we drilled this whole -- on the left of the screen, it's a fascinating bit of geology. We modeled the ironstones based on the mine -- underground mine exposures. And we hit every single modeled ironstone within about 10 meters of where it was expected. And we think that that's really going to help us in extending these -- and these lodes that I talk to, just to remind you, they're like bundles of cigars, the 9,000 lode, the 5,000 lode and the 3,000 lode. And what's more too, we are now chasing those bundles up to surface, and there's some new opportunities that they've generated, as you see here, particularly the Sessenge pit, which we think now as the daylighting of the 9,000 lode. On the greater exploration side, we continue to evaluate, and all these little stars are part of the mining plan in the form of small satellite open pits to support the underground. The big mover this last quarter was the Ikamva-Kalimva, particularly Kalimva target, and we -- and as you can see, there are some very significant intersections in that target. And how it is in some detail. It's a big shear zone, so very different, not a bundle of cigars, a more classic shear zone, with plunging pay-shoots, and we're slowly -- and this is again a very interesting bit of geology, taking some time as we work out the geometry and get it to a point where we can test a larger model that could well -- it is 22 kilometers from the processing plant, so not a -- a bit of -- if you can continue getting some of these grades, it starts looking attractive. Moving onto the greenfields exploration, where Randgold is operating independent of its partner, AngloGold Ashanti, throughout the northeastern DRC. Our sort of most advanced project is the Moku project. And again, we see lots of similarities. If you look at the KZ zone with all the little yellow stars, and then you look at the other side, we think there's a potential for duplication of the structure across the basin, an old basin. And that we're slowly working through prioritizing selective, more prospective areas, and we haven't quite got to the point where we start drilling out a specific identified target. And up further west, at the Ngayu belt, we've got a big joint venture there. And again, it's got -- this project is on a very short rope because it's far, and so we've got to find something really big. And we are remote -- targeting has highlighted some very big structures with large big anomalies. And so we really this as a short, sharp focus we'll go in. We're just busy getting to those targets at the moment because access is quite challenging. Before I wrap up, I started this presentation about talking -- about -- talking about people, and for us, that includes those who live around our operations. And Randgold is very committed to making life better for our host communities, not only while we mine in their midst, but also after we have departed. And that's why our social initiatives, a few of which are listed here, are designed not only to uplift these communities in the here and now, but to leave them with sustainable economic and social benefits after closure of the mines. And so finishing off, it's quite strange for me to show this slide because one would imagine that as a gold miner, it's -- one of your most important priorities is to be able to deliver a business case where you can outperform the gold price. I am sure you're all aware that that doesn't happen often in the gold industry. And we, in fact, if you look at the last -- the performance against the gold prices, and just if you take 2010 to today, there are only two companies in the top 13 gold producers that beat the gold price. And we thought we would just point out that we do beat the gold price, whichever time period you'd like to select. And I think that's important with not only as you've seen a rising sort of irritation from investors in this gold space, but also, if you're not making money and you're not profitable, how do you deliver taxes and benefits to your host countries, mindful of the fact that you are mining national assets? And so I think sometimes we bring it upon ourselves, the sort of what people loosely call resource nationalization. And I think that just points to a breakdown in this very important public-private partnership, which is -- has to be able to deliver mutual benefits to all stakeholders. And so Randgold is well positioned to continue to do this. We've never impaired. Whichever way you slice or dice our business, we're profitable. We have a 10-year plan at $1,000 on bank reserves, $1,000 an ounce, to deliver value, to continue to deliver value. We've got a growing cash pile that based on $1,200 an ounce, if you just think for a moment, if we don't pay dividends, which we do, we would end up in 10 years' time with 6.5 -- just over $6.5 billion if we just accumulated it. So you assume we've said we would like to have $0.5 billion in the bank. Say we invest $2 billion in building new mines, our 3 and 5. There are still $4 billion of value left for returns to shareholders over that period. And as you can see in the cash balances, we've got a bit of way to get to that $400 million run rate on an annualized basis. So the profile and the ability for us to deliver at the current gold prices on our business plan and still afford building mines because in that test, where I might add, is -- Massawa is already expensed in that $6.5 billion. So it's an easy story. We tell it easily to you. We also tell it very easily to generalists because it's a story that works for any investor. So with that, I thank you for your attention, and I will be delighted to answer questions. As I say, we've got the heavyweight technical executive at the back there in the form of John Steele and a few other members and Graham, of course. And I'm sure we can answer any question that you throw at us.

[Dan Major:]

It's Dan from UBS. A couple of questions, firstly, it's a technical question. Throughput has been gradually increasing at Loulo and Gounkoto. Is the sort of run rate you achieved in the last quarter what we should be expecting on a...

[Mark Bristow:]

Say that again, what is...

[Dan Major:]

Throughput at Loulo and Gounkoto. Is that the sort of run rate we should be expecting on an ongoing basis?

[Mark Bristow:]

Yes, I think so. Yes.

[Dan Major:]

The second question is, you're obviously, I guess, expecting to potentially approve Massawa in the middle of next year. Could you give us a sense of how much capital that would imply for 2018?

[Mark Bristow:]

Our budget for 2018 should take us to the decision as somewhere between $12 million and $20 million.

[Dan Major:]

So that would be spend for the whole year, assuming...

[Mark Bristow:]

No, that's to just take it to a decision. And we expect that decision to happen. We're saying middle of the year. We wouldn't start building, as I said, in the rainy season. That takes us to October, November. And so that still leaves us a full -- we build mines in two years. So that still works for us. And it's mostly going to be -- by that stage, it's the real critical part is the test work, and we can't fast-track it. It's a very big pilot scale test work. And as you know, we've seen recently, for the umpteenth time, what happens when you don't do proper bankable feasibility studies and build mines. They don't work. So our big -- and I would point out, I pointed out to somebody this morning, if you take Loulo and Morila, all those mines, if you cost your mine back, even Morila, we were very diligent and cautious in taking it to the bankable stage. Loulo, we delayed for three years because we couldn't get it to fit our 20%. At that stage, it was 450 gold. At so we see this as a very big decision. We're not interested in meeting a promise of ounces of production. We're interested in getting it, that's one responsibility our board has, and that is the ownership of those filters, to keep us honest and prevent us from believing our own bullshit.

[Dan Major:]

And a final question on the dividend, just on the mechanics, you've been very clear the -- I've seen it done, the intent to hold more than 500 million. Should we think of that as, as of 31 of December this year and not the time in which the dividend is paid or decided upon?

[Mark Bristow:]

I'm sure that Graham will reserve some flexibility because we talk to you at the end of January. But the numbers are the numbers at the end of the year, and we always debate this at some length at the board. But we're all 100% aligned with the guidance. And we're in a big cash-building phase at the moment. We've also got some -- we're always chasing stuff. We're always under confidentiality agreements, hunting opportunities. And Africa's a very dynamic place at the moment, so we'll reserve all options.

[Alain Gabriel:]

Alain Gabriel at Morgan Stanley. Two questions from my side, please. Firstly, on the dividend, a follow-on on Dan's question. Do you see a change in the external environment to warrant an uplift of the 500 million that you've repeatedly talked about in terms of opportunities, either M&A or internal growth opportunities?

[Mark Bristow:]

So you guys are amazing. First of all, you don't believe that the dividend is going to come. And when it comes, you start worrying about whether it's going to be bigger or smaller. So our philosophy is 500 million gives us enough headroom to take on just about any construction program. It keeps us completely independent of the equity markets because in gold mining, from my experience, and I have been through a few of these cycles, if things go against the gold price, the equity markets give you a hard in and you end up destroying equity value because you're issuing paper because there's no other way to raise money. So we always like to be free of that. On top of that, we've got a $400 million revolver. So we've got a $900 million tank to take on challenges. At the same time, Graham has been very careful about this. When we do the dividend outlook, that's the rules and guidelines, but the debate within the board will always be what is in the near term that might put that strategy at risk because we've got a big bowl of something to do. And we had shared that with you. So -- but there's -- it's got to be big because if you look at our cash flow and the fact that we start with $500 million, it takes two years to build a mine, a big mine like Kibali, I -- depending on where it is, we would still -- we would, in a new Kibali opportunity, we would, if we had a choice again because of our financial muscle, we would run it up the value curve longer and -- but there's always buyers for our projects because they're the only projects that make 20% returns. So we are mindful of that. We're not obsessed about controlling all the ounces, but we are obsessed about controlling the operations. And so to answer your question, yes, there is a potential, but it would have to be a very exciting project. And I have no doubt that when I stack it up to our shareholders, they would find it difficult to find any other place to put that money and better that investment because of the way we look at things, and I know what other options they've got in the industry.

[Alain Gabriel:]

And another question on the CapEx budget for 2018. Do you mind reminding us of the budget and the individual components of it?

[Mark Bristow:]

Okay. You want to go have a crack at that. We are working on our budgets at the moment, so we will repeat what we've told you in the past.

[Graham Shuttleworth:]

I mean, we haven't given guidance, specifically in the detail that we normally do. As you know, we only do that in January, is when we give you the breakdown. It's around $200 million, taken at a group level. It's around $200 million taken at a group level. And that sort of split, roughly half of that is Loulo-Gounkoto. The next biggest is going to be Kibali. And then there's a little bit of money at Tongon and Massawa. So just to give you broad -- a big picture, but we'll be giving you that guidance in January.

[Mark Bristow:]

But it's coming down. And the key for us is Tongon has got a very slim sustaining capital. It really just gets better and better as the cash fell.

[James Bell:]

It's James Bell from Bank of America Merrill Lynch. I'm just wondering if you can talk a little about TBA in the DRC. Obviously, we've seen you get up to $200 million. You've been very vocal in the press. I was just wondering if you can give us an update on what's happening there.

[Mark Bristow:]

Yes, so it's a challenging environment, as you can see, and like most politicians, people look around to the wrong place to get more money rather than fix the problem, which is deal with the political impasse that the country is facing. I think we've seen progress on that. Sometimes, when you read the press, you might not think so. There's a lot of dialogue, a lot of -- there's -- and I -- and it was encouraging to see the U.S. envoy from the UN go in and not bash the table or threaten sanctions and call for election at the end of this year because that's so impractical. And that's often what the U.S. does. So much more saying when pragmatic engagement, it was good to see the U.S. arrive and meet with the opposition and a senior person from the administration and the Kibali fraction itself. So that's positive. And the Europeans have always played a productive role in this debate. It's a big challenge to transition this country -- it's had a fantastic run, if you consider where it came from pre-2003. An engagement we have is a very real and licensed engagement because if you take the top investors in the country, it's Randgold and AngloGold, in the form of Kibali, it's Glencore, and it's the Chinese with Tenke. We all have demonstrated our commitment at this phase, and we always make substantial contributions, not only to the treasury, but also in the economy itself in remote areas where there's not a lot of reach from Kinshasa. And at the same time, if you really look at it, we're one of the biggest creditors to the country. So we -- and we can demonstrate that. So there's no -- I don't think there's a single doubt in anybody's mind whether it's opposition, ruling party, civil society, that we our core and key to that economy. Now -- and politicians on social turns, sometimes, they're prepared to destroy the last golden goose, to coin a phrase. But at the same time, we've, as you've seen, made very robust statements and engagements, and we're lobbying at Parliament and every other part of the establishment to ensure that people realize. And the question that I've put forward in the last round is we've presented our case in 2014 and '15 for this mining code, and we've demonstrated that if you apply it, a normal mine, a 3 million-ounce gold mine won't work. In fact, the government will end up with 100% of the revenue and investors, zero. So that's not a good business case and definitely doesn't work to attract fixed direct investment. And so we -- and we've demonstrated why and on what basis this is not good for the country. We have -- it has been a failure from the Minister of Mines to try and defend his win-win proposal. And so we've been challenging him since 2014. He took it off the table, claiming that he didn't want to have another Zambia. But then he put it back on. And so our proposal is why don't we jointly appoint competent people, independent, that are capable of analyzing because you -- it's easy to analyze mining codes and fiscal premises. You can take a model mine and you can run through the mine. And let's analyze it and let the people of Congo, how from an independent expert, whether the proposed code is going to benefit their economy or not. And Randgold's sort of constant one is if you take the Mining Code of 2003, it's the most aggressive code in Africa, it's the most well-written. It was written by the World Bank and various investors. And you run it through a standard mine, you're still getting a bigger than 60% take of the revenues after capital as the government. So that's a good number. The reason that the government -- and they're right, they're not seeing it in the treasury because 80% of the mining industry operates outside the code. So -- and if you raise the -- if you change this code and don't change the whole basket, you don't hurt Kibali, it's got a 10-year stability clause, and you don't hurt anyone else under the code but you just destroy the future attractiveness of a country, which has always been claimed to be a breadbasket of mineral wealth, but never actually has delivered on that assumption. And so our -- and copper's up at 7,000. These guys should be celebrating. But a lot of that revenue doesn't arrive in the treasury, and we're suggesting to them that they should ask that question, why not? And we're comfortable to be able to demonstrate that we more than pay our way as partners in that country.

[James Bell:]

Okay. And just on reserves, you talked about Loulo replacing reserves most likely. I know it's a bit early, but do you have visibility on a group basis as to whether you think you're going to fully replace reserves this year?

[Mark Bristow:]

We got to get close. I mean, the key for us is every ounce we add to Tongon, it's -- that is real money for us. So that's our focus. We're pretty comfortable that -- that's not -- it's probably going to happen or get close, but it's not really the key -- Tongon, if we can add another 300,000 ounces another year, it's just -- the main -- if sustaining capital is a couple of million dollars, it's just such a good project. And it benefits everyone, including the government. I mean, we -- you heard, we paid $100 million dividend in July.

[Richard Hatch:]

Richard Hatch, RBC. A couple of questions. Firstly, Kibali, can you just remind us how that concrete gearing is going underground?

[Mark Bristow:]

Yes, it's going on plan. We're about to put the magic surface on the top now, and that is like an epoxy cement with embedded highway aggregate. And that will -- and it's 100% level. It allows the LHDs to run at high speed. It minimizes spillage because there's no bumps and that sort of thing. And so it's due for -- we're due to -- for it to cure. There is the man who should be digging deeply. What's it, John? When are you expecting it to sort of clean up?

[John Steele:]

16th.

[Mark Bristow:]

16th of?

[John Steele:]

November.

[Mark Bristow:]

Already. Okay. That's a bit earlier than I thought. Okay. So there you go. So halfway through the quarter.

[Richard Hatch:]

Okay. And delays to that, how does that impact you?

[Mark Bristow:]

Delays to that -- so not all the underground ore, as you've sort of seen here, we -- last quarter, we did, what is it, 470,000 tonnes and we're guiding somewhere between 650,000 and 700,000 -- just over 700,000 tonnes for this quarter. So that extra sort of 300,000 tonnes comes from underground, mostly through the shaft. We still -- we do have plan Bs. You know us pretty well, we don't sit there sort of hoping on one plan. And we've got -- we've been doing intra-dumping at the -- practicing at the decline head to increase our ability to rotate on the haulage up the declines in the short term while we deal with any delays. But it's all -- it just impacts gold -- impacts ore and the grade. It doesn't impact mill feed because we've got other sources. And so the potential for this to impact the group meeting its guidance for the year is relatively low, I would say. John? You would agree?

[John Steele:]

Yes.

[Richard Hatch:]

And Loulo-Gounkoto costs look like you're going to be guiding to $600, I think, for the year, and you're about 525 year-to-date. What's your feel and when are they coming for the year?

[Mark Bristow:]

So we said 580 to 630 for the group. Loulo-Gounkoto, we've said 10 years at under 600. We expect it to continue to do that. And I mean, that mine has become efficient, and we're still not fully efficient. Yes, we still have a big gap between our expatriate employees and our national employees. We measure that efficiency all the time and the drive to get those local engineers and operators up to this sort of level. We've got one drill operator now who's smiley and who's up there with the best. But they are improving every time, and there's a big debate within our team and within the unions because we've also got to change the union and ourselves have to change our relationship because there comes a time when we're 100% Malian and the union's still hammering on like an old socialist union, demanding this and that and threatening strikes with our limited services in there. And we're not -- this is a -- so gone are the days where the expatriates make all the money and keep the mine running and the labor continues. We've transformed that environment. So again, on our HR side, we had a lot of debate this last time through, in all our operations, just philosophically. And as you know, we're one of the few, if the only gold company or mining company that has the union sitting on our operating boards. So that's a big debate for us.

[Richard Hatch:]

Last one, just on Massawa, I think you talked previously about recoveries being sort of high 80% sort of range. Does that still stand? Or...

[Mark Bristow:]

If you take it, it's 80-ish. It's a Tongon look-alike as a business. As a cost business, as at 250,000 ounces, 10 years, it's around 80% recovery. John?

[John Steele:]

Yes.

[Mark Bristow:]

Remember, there's Sofia and the oxides are high, high 80s. But as a long life of mine project, the lower 80s is a good way to steer that.

[Robert Bonte-Friedheim:]

It's Robert Bonte-Friedheim with the BlueCrest. Just two questions, Mark, for me. One, I'm fiddling with the model in 2018 in Kibali and just struggling with the higher-grade ore, but harder ore, and I guess a less quantity in the grades. So at the moment, I have 7 million tonnes for the year, a grade of 3.8 and a recovery of 85 plus. Does that sound ballpark?

[Mark Bristow:]

Is that Kibali as a 100%? Or is it underground?

[Robert Bonte-Friedheim:]

That's Kibali at 100%, and that's just what goes into the mine. I mean...

[Mark Bristow:]

It sounds -- let me just check first. That sounds right.

[Robert Bonte-Friedheim:]

Is that so against the 7 million tonnes, 3.8 grade, 85-plus recovery?

[Mark Bristow:]

Yes. I think we've got -- is that 2018 you're talking about?

[Robert Bonte-Friedheim:]

2018, yes.

[Mark Bristow:]

Yes, yes. That's right.

[Robert Bonte-Friedheim:]

It's a ballpark, yes?

[Mark Bristow:]

Yes, that's right.

[Robert Bonte-Friedheim:]

Okay. And the second question I got, I wonder how should we think about what's going on in Tanzania and what -- Barrick has kind of, I mean, I don't know, rolled over and kind of -- how do we think about that and what's pressing in the sense of what risks that expose the industry as a whole across Africa, and that's just minority shareholders? And when you think about that too, what is your specific response?

[Mark Bristow:]

Yes. The only response I'll make is it's all about social license.

[Robert Bonte-Friedheim:]

So, we don’t. And I guess that is what they've done. And we know they have that social license and they've kind of tarried with that and kind of just pushed that back on the people in front of them. But what I'm worried about is, of course, is there any risk that this kind of gets used as a blueprint for other countries, say? What they did over there?

[Mark Bristow:]

Yes, I told a reporter this morning, I've never seen a landlord kick out a tenant who pays the rent. And I think that's probably the best way to comment on that.

[Robert Bonte-Friedheim:]

Okay. Thank you.

[Mark Bristow:]

That's snappy for analyst day. And we're dancing there for a while. Anything else, anyone else? As normal, refreshment is outside. You can continue with the team. Thank you again for coming. And as I always say, our business is to make sure your models are right. We don't want to get you to guess too much because otherwise you get things wrong. And so please, everyone, feel free. We're open. It's important for us. Thank you very much for coming. And have a good Christmas and a good New Year. And we'll see you -- for those of you who are lucky enough to get out of the cold, we'll see you down in Cape Town in early February.