Mark Bristow - CEO Paul Harbidge - Group GM Exploration Graham Shuttleworth - Financial Director, CFO

Josh Wolfson - Dundee Capital Markets Howie Flinker - Flinker & Company Tanya Jakusconek - Scotia Capital

Good afternoon, ladies and gentlemen, and welcome to the Randgold Q2 Results International investor call. (Operator Instructions). I will now hand you over to Dr. Mark Bristow, Chief Executive Officer, to begin. Thank you.

^ Thank you very much, and good morning, ladies and gentlemen in North America, and for those who have dialed in, in the UK, or Europe, or South Africa. Also a very warm welcome to you, and good afternoon. As you know, we presented our Q2 2014 results today at the London Stock Exchange. I think everyone has had a chance to read everyone's views on these results. So the objective of this call is just to quickly run through the highlights, and then give our North American investors and analysts a chance to ask questions. We would point to the fact that a full webcast is available on our website, for those who want to go back and check the detailed presentation, from the London Stock Exchange, earlier today. So kicking off, I think the key is that if we go back three years, we promised the market a step change, up to an annual production of 1.2 million ounces in 2015. And certainly, as you see today, and for me personally, it's gratifying to witness that target coming within reach. The past quarter brought with it some challenges, and expected in the form of the challenges that we -- one always associates with commissioning a mine of the size of Kibali. We also brought in a number of additional projects in the -- like the crusher at -- the crusher expansion at Loulo. The paste backfill plant at Yalea was commissioned. And we also made very good progress with the crushing circuit replacement at Tongon. And we're well on track to expand the float circuit, also at Tongon. We got some -- despite a very solid quarter, where if you look at the run rate, we were well in line with achieving our guidance, we've still got some…

Thank you. (Operator Instructions) The first question comes from the line of Josh Wolfson from Dundee Capital Markets. Please go ahead.

Just moving onto some of the questions. For Kibali, looking at some of the per ton costs, it seemed like things were a little bit steady this quarter at around, maybe, $50 per ton. Should we expect that to increase going forward as a greater proportion of sulfide material? Or will that stay around that level?

I'm not following you. Josh, are you talking about Kibali now?

Yes.

And you're talking about processing or all-in costs?

All in.

Okay.

Processing would be very helpful, too.

Yes. Processing was high this quarter. So these costs aren't normal. We expect to finish the year on about $550 an ounce. And the reason we sort of blew out this quarter is really because of -- it's not a quarter you should use for anything because it's a commissioning quarter. We did a lot of tie-in work, we tied in the secondary and tertiary crushers. We changed our crushers on the front-end of the plant, from rolled offsite crushers to jaw crushers. We were -- we've dealt with a lot of upgrades on managing the spillage. We commissioned the coarse ore stockpile in the circuit. So there is a very -- it was a lot -- as we guided it's a commissioning quarter. So I would -- I wouldn't say that this is a quarter that you would -- our processing costs, we expect to get down to -- once we get the full benefits of the hydro scheme down to around $15, Graham?

Yes.

And mining is about $3, thereabouts, $3.50. And underground mining, well, with the backfill -- but we've got some way to go for that, before it impacts. And $3.50, you take the strip ratio, we're nowhere near -- $50 is high, it makes -- it's not a good number for me in my head. So you should forget it, if I was you.

Okay. So then in terms, I guess, of where you expect to be towards the end of the year is that steady state, five times strip ratio, 3 to 3.2 grams--?

We're looking six -- we're looking at 6.6 million to 6.8 million tons a year run rate in the numbers that I've given you.

Okay. And then at Tongon, just looking at some of the resource upside. I guess first off with the satellite deposits, that 1.58 gram per ton material at $1,000, is that something that you're envisioning that will be economic and be in the reserve? Or that's just upside if everything is depleted at the north and south pit?

No, it's very much -- we feed some of that lower stuff ore -- grade ore as we speak. And it's all about strip ratio. But what we've said to the mine management, we've got six years life. We're pretty sure we're going to pick that up with the work we're doing around the pits at the moment. At the same time, we've proved to ourselves we can make money at two grams. We've got low cost power and some of these satellites are very shallow oxide. So that works. But having said that, we've got to prove it. Our challenge there, Josh, is to get Tongon up to 10 years. It's got six years life, we pay back the capital next year. If we can add another four years, it's a really good business for us. It's got very low sustaining capital. It's a well-run operation.

Okay. And then -- I guess similar lines to that for Gounkoto. Is the current plan -- I guess, are you leaning more towards the open pit scenario or open put and underground combination scenario, even though the gold price requirements are a little bit above the Company's typical threshold?

No. We're just doing good, sound commercial analysis. We'll make the decision -- the appropriate decision on the best returns possible. And that's what we -- I think the message here is, that's the way we run this company. We do these things properly. We're not just trying to max out on grade or tonnage or ounces or anything in one particular order. We really do drive our business. And our big debate amongst the team at the moment is, when you've paid off the capital of a mine, do you use different parameters to when you are making that initial development to -- that initial investment to get the capital back? And that's our debate. And we've become quite skilled at that open pit, underground interface. And the big drivers in that decision are risk because everyone goes for the open pit, but we can show you that the underground inflation cost pressures are much lower than an open pit where you are beholden on the diesel price and yellow plant, equipment inflation. So we are mindful of -- or we've learned a lot about these interfaces, we have three underground mines in our stable, or highly mechanized. And we've been through that interface analysis a couple of times now. And that's what we're busy doing in Gounkoto. And of course, the exploration team's still drilling Gounkoto, we're still working on some of these -- particularly the job zone. We've got -- we're by no means watertight on our model yet. And a small variation in grade changes the whole thinking in that. And if we get -- we're busy now with a line of deeper holes between -- there's a gap in the $1,000 pit and the $1,210 pit. If you get four out of five bore holes giving good results, you'll change the pit profile and the cost quite quickly.

Okay, that sounds…

It's really work in progress. But we're just keeping the market informed.

It's a breath of fresh air to see hard work going in before the actual development decision.

Yes, you see, we've always tried to drill out the ore bodies properly so that we get the stuff more than half right.

And means we're doing a lot of work on Massawa.

Yes, and Graham just points out, that's why we're spending so much time on Massawa. And I think the point that we're making -- our big debate now in Massawa is how much money would we have to spend to bank it properly? To be sure of the grade. And that's really the big debate in our team. And whether we go and just drill out a pattern or do we drill it in a phased way, just testing the impact. And that's the debate. And Rod and his team are really wrestling with that.

Okay. And just last question on the cash and debt situation. I guess you had contemplated drawing down, depending on what the gold price would be in the second quarter. Going forward, is your motivation going to be to pay down that debt as quickly as possible? Or is there still some uncertainty with VAT timing and cash taxes and so forth that could delay you paying that down in the second half of the year?

As you know, we've drawn on the RCF. As of today, we're -- have no (background noise) any more. We haven't paid it back yet but we've got more cash than what we need to pay it back. As Kibali's settled in nicely and it's really -- run-rate wise, July had a good month. And we can see the numbers, we are building cash. If they continue, both Loulo and Kibali at these levels, we're very comfortable that we will get back to be able to settle that -- to clean up on the RCF. I think for us it's been an interesting exercise. I think we're very clear in our head that we want to keep facilities in place. I think for our banking syndicate, we've shown that we manage our business well. The big challenge, as you pointed to, is the VAT issue because there's about -- a bit more than $200 million of VAT owing -- that flows back through to Randgold. On the Kibali side, on the DRC side, we've made good progress on that, albeit in that we have at least stopped it from getting bigger. And we've got an agreement on how we can eke it back up on offsets. At the same time, the government is mindful that it needs to find a way to reinvest that and, as we've said every time we've engaged with the market, we've never had any denial of that. Everyone's working on that. On the Mali side, it's grown a little bit, the VAT credit. But at the same time, the Malians have now announced the going-forward structure of VAT and trading it back, which is really going to be managed through an independent bank account and not through the treasury. So we're comfortable that they -- and they're taking it very seriously. The next shoe to drop is to finalize the funding on being able to recoup the VAT -- historical VAT. And the debate is whether they can find enough funds and get approval to pay back the whole lot or do it in a series of steps. And we know that they've deeply engaged with the IMF and their various donors, or funders. But we are engaged in constant communication with them. And again, we've -- there's no denial, there's an acceptance of that liability.

Okay, maybe just one last part, just really to what you're saying. I think on the UK presentation you had mentioned something related to DRC gold shipment delays because of something related to taxes or fees. Could you just elaborate on that a tiny bit?

Yes, we -- as we do from time to time, in Africa, you get people who become overly zealous on the collection of things that are not provided for in our investment agreements. And we had a standoff over one of these incidents from one of the [indiscernible] that are charged with collecting royalties, a royalty. It's an export type royalty, an export duty. Anyway, we resolved that but again, we don't -- we've never been a company that facilitates anything. We stick to the rule of the law and our agreements. And so it's -- that discussion resulted in a small amount of gold not being shipped at the end of the quarter.

Thank you. And the next question comes the line of Howard Flinker from Flinker & Company. Please go ahead. Howie Flinker - Flinker & Company: You guys did a very nice job collecting those charitable fees on your bike ride. Congratulations to everybody (multiple speakers).

Thank you. Yes. No, it was great fun, too. Howie Flinker - Flinker & Company: I'll bet. What is that large -- two questions. Is that large receivable the VAT or is it just something that has slightly slowed payment to you?

Yes, so Howie, it's frankly the VAT at -- in Mali as it relates to Loulo-Gounkoto and Morila. Howie Flinker - Flinker & Company: Do they have the money to pay you or is it going to be slow because they're stretched fiscally?

They're already looking for the money, Howie.

Yes, they're obviously -- Mali's been through a pretty difficult time as you can imagine with the conflict and the various other challenges. And so cash is tight. But they are busy engaged in a discussion with the IMF on increasing their budget to cater for these funds that -- amounts that are outstanding. But as Mark has alluded to earlier on in the call, there's no debate as to whether they're owing. It's just a matter of how they find the cash to repay us. Howie Flinker - Flinker & Company: All right. And one final comment.

Sorry, and Howie, I would, sorry, I would just add one more point to that. And that is, we have the right in our convention to offset taxes -- these type of taxes against other taxes that are owing. So one of the mechanisms we have to reclaim this VAT is by offsetting it against the corporate tax that's payable. So particularly in the case of Loulo. And obviously as the mine continues to produce, we will continue to offset. And there's a mechanism through -- over a period of years where we would be able to get this back. And that's why some of the receivable is sitting in short term and some of its sitting in long term. Because (multiple speakers) there's portion of it that -- yes, there's a portion of it that we recognize won't come back within a year. Howie Flinker - Flinker & Company: And I'll make one comment, which is really a favorable comment even though it may not start off that way. Your return on capital annualized is about 9% currently, at the current low price of -- or the present low price of gold. Amazingly, that stands out in the industry. Most people in the industry would dream of achieving the modest 9%. That leads me to believe that it'll be a long time before these people get money to develop really large producing mines. Even if the price of gold were $1,600 or $1,700, they could not justify spending the money on a mine. That bodes well for the products you product, namely gold, because a reduction of -- or constriction of supply points to a much higher price. And then your returns will come back to where they used to be.

Yes, but, Howie, thank you very much for that backhanded compliment. But the point I would make to you is, if you roll our business out, we don't -- our capital is coming down at -- very steeply. So that return on capital grows over the next couple of years. And that's the key. This return on capital is really a longer-term modeled equation, rather than a snapshot. Howie Flinker - Flinker & Company: Agreed.

And right now, there's a lot of capital being delivered into our balance sheet because of the Kibali commissioning, which wasn't there last quarter. So -- Howie Flinker - Flinker & Company: You and I are discussing two different things.

I don't need a higher gold price to deliver growth in my return on capital. Howie Flinker - Flinker & Company: That's right. But you're talking about plant,; I'm talking about the capital that rests on the balance sheet. It's there, it's not going away. But also (Multiple Speakers).

So I'm going to deliver more ounces against that capital, Howie. Howie Flinker - Flinker & Company: Exactly. And it also says that you have the wherewithal to find or finance or buy a new project that Jones and Smith Mining or American Barrick -- or Barrick Resources, cannot afford to buy. So while the capital is only returning 9% now, that does not mean that you will not be able to capitalize on an opportunity three days from now, three months from now, three years from now, when others cannot. So that bodes really well for your next five years.

I'll take -- basically after some persuasion, I'll take it as a compliment. Howie Flinker - Flinker & Company: You can. You can.

I still think you're low-balling us. Howie Flinker - Flinker & Company: What's that?

I said, I still think you're low-balling us. Howie Flinker - Flinker & Company: It could be. But I remember when the return on capital was in the low-20s. Why couldn't it return? Why couldn't it go back there?

[Indiscernible].

Thank you. And the next question comes from the line of Tanya Jakusconek from Scotiabank. Please go ahead.

Just I wanted to talk about Kibali, if I could, Mark. I just wanted to understand, what did the recovery do in the month of July?

Well, it went from 90% to 71%.

In the month of July?

Oh July, it's back up around 80%.

Okay, so we moved back up there. Okay.

Yes, we've got to have this, the long -- remember, Tanya, the Kibali's sulfide circuit is -- at an optimum level is 86% because we made a very specific decision not to re-treat the tailings because of the metallurgy of the ore. So the whole nameplate is designed around 86% recovery. There will be periods where it's slightly below and periods when we treat -- our oxide always will be slightly above. But it's -- because we don't -- the tailings, the floatation tailings don't get treated with cyanide, and we discharge it into an unlined tailings dam. And in fact, most of that goes down the mine as backfill.

Okay. And maybe just for my understanding from the mining standpoint, from today until 2017 when we're fully underground, I understand we have the oxide circuit, the sulfide circuit, we're going to be putting transitional ore through, we've got the stockpile, we've got the open pit. We're getting to the underground stope in Q4. How does all of this transition through 2015 and 2016 in terms of areas you're drawing from? So I can understand where the ore's coming from. That's my first question. And then secondly, where's my -- the ventilation, how's the ventilation coming?

Yes, I think that's the problem with some of the analysts who try to mine the mine. And it gets everyone in a tight spot. We don't --

I'm not trying to mine it, I'm just trying to understand it.

We don't allow you to mine our mines.

Oh, I don't want to mine your mine.

The driver now is that we mine at a -- ore tons from underground are mined at a rate higher -- quite high out to 2018 at around 5.4 million to 6 million tons a year. We build up the underground tonnage, we're planning a modest 600,000 tons next year and then 1.2 million and then 2 million and then we flatten out in 2019 at 3.5 million tons per year from underground. And then we manage those -- the feed into the plant at a rate of around 6.2 million to 6.8 million tons a year. With -- and manage the grade as well because as we go -- we stop open pit mining in 2023, under the current plan. Because we've never presented a model that has anything other than proven reserves in our life of mine plan. But we're still producing -- we are over 550,000 ounces in 2026 and 2027, just from underground, because the grades are sitting at a relatively high grade. So that's really the way we plan to manage this operation. And of course, every open pit we deliver, like Gorumbwa, which is not in this plan at the moment, and another couple of hundred thousand ounces changes the way we manage our feed profile. And the focus is to deliver 600,000 ounces out to 2017, around 600,000 ounces, the guidance then is we step up to around 650,000. And we stay above that way out to around 2023. So -- and total cash cost at this stage, we're sitting in the -- most of that period, sitting around $550 to $600 an ounce.

So is it fair to say that this transitional ore, then, will stay with us until 2017 until we go fully to the 3.5 million tons from the underground in 2018?

Yes, we have a transitional ore -- and remember, this transitional ore will be all over the place, as it has been this last quarter for a while. And slowly it'll become more what we call soft sulfide, which is easier to process. The very oxidized transitional ore is giving us very good recoveries. So the point about transitional ore is its variable. But we also have already improved the way we operate and we do -- we've got these -- at the ROM pad, we've got these finger -- we manage it on these big fingers, we blend it, we monitor the metallurgy and the [indiscernible] and we feed it in the plant. So we know, more or less, how it's going to behave. And we manage, optimize the reagents and that. So -- we're very nimble in dealing with it.

Are we always going to have some sort of sizeable stockpile on surface?

Now the mine has come up so quickly to design that -- you will have seen in our presentation, we're jumping around with some additional flexibility with open pits. We're getting -- we're under pressure on feed. We're not right now, but we are eating that stockpile very quickly. And so we're mindful -- and that's the right way to run a mine. (Multiple speakers)

At a design capacity of 7.2 million tons, we're running --

We've never fed it.

6.8 million, so yes, Tanya, it's unlikely that we will have a lot of stockpile (multiple speakers).

Yes, okay. All right, I think I have an idea of how the mining is working. What about the ventilation? The tiny little picture -- can't really see much in the tiny little pictures. But how's our ventilation coming?

We're still in the grass roots level, Tanya. We've got -- the ventilation's in good shape, it's in a part of our plans. The key thing, if you want to ask a tight question, ask about backfill. Because these stopes] we're going into, like the very wide stopes in Yalea are all wide stopes. So the backfill part is our critical part. Ventilation is definitely not something that worries us at the moment.

Nice thing about Kibali is it's got that vertical shaft.

Vertical shaft.

So right from the word go, you get very good ventilation because you've got the declines and the vertical.

No, I'm just trying.

So the backfill and the bore holes down to distribute the backfill are now critical parts.

Okay. We'll follow it along as you guys go along.

Sure.

Thank you, we currently have no more questions coming through. (Operator Instructions). We have no further questions so I will hand back to your host to conclude today's conference. Thank you.

Thank you very much, Bridgette and thank you, everyone, for making the time. We know it's summertime and everyone has got other things to do this time of the day but thank you and particularly to the London folk who pitched at our presentation. We appreciate your time. And again if there's anyone who has any follow-up questions after this call, you know our numbers. You're absolutely welcome to call, send us an email or just post the question on our website and we'll get back to you. Thanks very much.

Ladies and gentlemen, thank you for joining this call. You may now disconnect your line.