Randgold Resources

African based miner Randgold Resources (RRS) delivered another robust operating result in early August, with first half net profits nearly doubling to US$19.2 million. We were also particularly encouraged to learn that a long-awaited underground study indicates the potential of the Loulo deposit is even greater than first expected.

Mining profit for the first 6 months of the year surged ahead 208 percent to US$35 million due to higher ore grades and better recovery rates. The result was also boosted by strong second quarter production from the Morila mine which delivered 165,359 ounces at a cash cost of US$176 per ounce.

Management fully expects the Loulo mine in Mali to deliver production of 100,000 ounces this year. Meanwhile, the results of an underground development study have exceeded previous expectations. Independent consultants have estimated reserves to total 2.52 million ounces.

Randgold plans to commence underground development in 2006, ramping up to full production in 2009.

Elsewhere RRS has made solid progress at the Tongan project in the Cote d'Ivoire. The update of an earlier pre-feasibility study has lifted resources to 3.2 million ounces. Conflict in the region has caused field work to grind to a halt, but the situation may well stabilise following elections in October.

We remain encouraged by the pace of the miner's exploration activities across East and West Africa. In total, RRS now have access to 11,537 square kilometres in six African countries and a portfolio of 141 targets. Besides Loulo, Morila and Cote d'Ivoire, Randgold is also active in Senegal, Burkina Faso, Tanzania and Ghana.

We remain highly upbeat about Randgold's production and earnings profile. Morila is back on track and will continue to be a source of robust cash flows and the onset of production at Loulo will lift near term earnings. Meanwhile the development of underground operations at the deposit will greatly bolster long term earnings growth.