Randgold plans deep drilling at Yalea (May 16, 2005)

The Yalea gold deposit in western Mali appears to be delivering on promises it persists at depth, as owner Randgold Resources (GOLD-Q) readies a new deep-drilling program.

Drill results released with Randgold’s quarterly report show intersections at vertical depths of 500-800 metres, confirming earlier assessments of Yalea’s geometry as a plunging, “shooty” gold vein deposit. The deep grades are similar to those in the known Yalea resource, though the mineralized intersections are narrower.

Three recent drill holes at depth returned intersections of:

– 6 metres grading 4.6 grams gold per tonne in hole YDH-192;

– 7 metres grading 1 gram per tonne deeper in the same hole;

– 4.8 metres grading 3.17 grams gold per tonne in hole YDH-193; and

– 1.8 metres grading 4.73 grams gold per tonne in hole YDH-184, the deepest intersection so far on the deposit.

Randgold plans to test the structure at a deeper level with a 1,000-metre drill hole.

Reserves at the Loulo project were pegged at 15.2 million tonnes grading 3.78 grams gold per tonne, all in the Loulo 0 and Yalea open pits. A development study on the underground resources at Loulo and Yalea is due by the end of June.

Yalea’s resource (in all categories) was recalculated at 34.1 million tonnes grading 4.78 grams gold per tonne.

Six deep drill holes on Loulo 0 also intersected high-grade gold mineralization while confirming structural interpretations. Hole L0-CP54 intersected 15.4 metres grading 9.17 grams gold, while L0-CP59 intersected 9.9 metres grading 7.54 grams.

Development of the Loulo property, which includes both the Yalea and Loulo 0 gold deposits, is on schedule, and mining at the Loulo 0 pit started in December 2004. The plant, scheduled to start milling in July, received the first of two ball mills in the past quarter, and its structural steel is being erected. Earthwork on the water storage dam and the tailings dam continue against the onset of the rainy season in July.

Randgold made US$12.1 million (US20 per share) on revenue of US$32 million in the three months ended March 31, 2005, compared with a loss of US$5 million on revenue of US$15.3 million in the first quarter of last year. In all of 2004, the company made US$20.1 million (US34 per share), on revenue of US$73.3 million.

The Morila mine in southern Mali, where Randgold and AngloGold Ashanti (AU-N) each own a 40% interest, produced 167,272 oz. gold in the quarter — down from 226,679 oz. in the last quarter but up from the 107,115 oz. produced in the first quarter of 2004. Morila has been mining well above reserve grade in recent quarters (6.6 grams per tonne in the first three months of 2005, and 7.5 grams in the final three months of 2004). This propped up production numbers in the last three months, even though mill throughput, at 857,000 tonnes, was well below the designed quarterly capacity of 1.05 million tonnes. The plant’s semi-autogenous grinding mill was relined and had scheduled maintenance during the quarter, but mechanical breakdowns also limited the plant’s availability. In its quarterly report, Randgold said Anglo had assured it that putting higher-grade feed through the mill at this stage would not significantly affect on the mine’s value in the long term.

Morila’s cash cost during the quarter was US$166 per oz., up from US$109 in the last quarter of 2004 and US$160 in the first quarter of last year. Still, realized gold prices have risen to US$428 per oz., from US$410 in the last quarter of 2004 and from US$369 in that year’s first quarter.

Infill drilling on the Morila shear zone extension, west of the Morila pit, has progressed far enough to allow a resource estimate and mine plan. There has also been some drilling at the Samacline target, farther west of the shear extension.

The Tongon gold project in northern Ivory Coast, which has an inferred resource of 34 million tonnes grading 2.65 grams gold per tonne, remains on hold, owing to political instability in the country. Randgold is updating a prefeasibility study of Tongon.