SEC Company Response from RANDGOLD RESOURCES LTD (CIK 0001175580) — Oct 26, 2005
RANDGOLD RESOURCES LTD (CIK 0001175580)
Date: Oct. 26, 2005 · CIK: 0001175580 · Accession: 0000950136-05-006717
AI Filing Summary & Sentiment
File numbers found in text: 333-127711
Referenced dates: October 20, 2005
Letter
VIA EDGAR AND FEDERAL EXPRESS Mr. H. Roger Schwall Securities and Exchange Commission Division of Corporation Finance 100 F. Street, N.E. Mail Stop 7010 Washington, D.C. 20549-7010 Annual Report on Form 20-F/A for the year ended December 31, 2004 filed on October 19, 2005 File No. 0-49888
Re: Randgold Resources Limited, Registration Statement on Form F-3/A filed on October 19, 2005 File No. 333-127711
Dear Mr. Schwall:
On behalf of Randgold Resources Limited (the "Company"), we hereby submit to you Amendment No. 4 to the Company's above-referenced Registration Statement on Form F-3 (the "F-3 Amendment") and Amendment No. 4 to the Company's above-referenced Annual Report on Form 20-F (the "20-F Amendment") reflecting changes made in response to the Staff's comment letter dated October 20, 2005, as well as the comments of Ms. Jill Davis during a conference call that took place on October 25, 2005 among myself, Ms. Davis and representatives of PricewaterhouseCoopers LLP and the .Company.
All responses to the comments set forth in this letter are submitted on behalf of the Company at its request. Set forth after each numbered paragraph, each of which corresponds to the numbered paragraphs of the October 20, 2005 comment letter, are the Company's responses to the Staff's comments.
Form 20-F for the year ended December 31, 2004
Financial Statements
Mr. H. Roger Schwall October 26, 2005 Page 2
Note 2 - Significant Accounting Policies
Property, Plant and Equipment, page F-8
1. We have reviewed your response to prior comment numbers 2 and 4. Please address each of the following:
o We note that you have relied on the definition of probable as defined in Appendix A of IFRS 3. We note that the definitions set forth in the appendix are an integral part of IFRS 3. Please explain why this definition applies to your accounting for exploration and evaluation costs.
Response: The Company advises the Staff that the definition of "probable" contained within IFRS 3 is relevant to the treatment of exploration and evaluation expenditure under IFRS because it is used in the same context: namely, to assess whether an asset should be recognized. The term "probable" is used within IFRS 3 to apply the requirements of paragraph 89 of the IAS Framework for the Preparation and Presentation of Financial Statements, under which an asset should be recognized where it is "probable that future economic benefits will flow to the entity".
In addition, the Company advises the Staff that it has not relied solely on the definition of "probable" within IFRS 3 in determining how this term should be applied. Whilst not expressly defined on each occasion, the term "probable" appears in many IFRS standards and is defined as "more likely than not" in other Standards such as IFRS 5 and IAS 37. The International Accounting Standards Board ("IASB") has also confirmed that "probable" means "more likely than not" for the purposes of IAS 12 (in connection with the recognition of an asset).
The Company also notes that the International Accounting Standards Board's 2005 edition of IFRSs contains a glossary which sets out the definition of probable as "more likely than not," and that there is no mention of any alternative meanings.
o We note your reference to a level of accuracy of +20-25%. Please explain what this level of accuracy is measuring and how it is determined.
Response:
The Company advises the Staff that this level of accuracy is measuring the possible variations in capital and operating costs. This level of accuracy is measuring the possible variations in capital and operating costs, the level of +-20
Mr. H. Roger Schwall October 26, 2005 Page 3
- 25% is in line with industry practice The cost estimates are based on designs and drawings which may be optimized but not final. Some costs estimated may be based on actual quotes but in some cases will be based on experience.
o It continues to be unclear why definition drilling performed prior to your change in accounting policy does not provide the same level of certainty as definition drilling performed after your change in accounting policy. Please provide us with a time line that describes the types of exploration and evaluation activities performed at Loulo from the time proven and probable reserves were established to the present and explain why a particular activity resulted in a greater level of certainty than another.
Response: The Company advises the Staff that the change in accounting policy is not relevant to the level of certainty provided by definition drilling. Prior to the change of accounting policy, definition drilling was carried out and formed part of feasibility studies. However, since no development decisions were taken, the drilling was not capitalized. The decision taken in December 2003 to proceed with the development of open cast operations resulted in the capitalization of those open cast costs.
TIMELINE
In the following timeline the Company refers to "feasibility studies." A feasibility study is, generally, a comprehensive study of a deposit in which all geological, engineering, operating, economic and other relevant factors are considered in sufficient detail for the purpose of evaluating the economic potential of a mineral deposit. A "final feasibility" study is a feasibility study upon which a decision to proceed with development is based.
The types of studies relevant to the Company's accounting policies are: "pre-feasibility" studies and "final feasibility" studies, which are also defined in the table below.
PRE-1996. Loulo started out as a greenfields project, and various institutions and entities conducted exploration programs at Loulo
OCTOBER 1996. RRL acquired the Loulo project, which included the Loulo 0 deposit Since this acquisition RRL has discovered the Yalea deposit, has undertaken a systematic appraisal of available data and initiated phased and focused exploration programs on Yalea, Loulo 0 and certain satellite deposits as well as building a framework of regional geological data and completing generative studies.
Mr. H. Roger Schwall October 26, 2005 Page 4
MAY 1997. Completion of a feasibility study incorporating Loulo 0 and Yalea orebodies. This was the first time proven and probable reserves were recognized. No development decision was taken and no costs were capitalized in line with the Company's accounting policy.
MAY 1998. Completion of a further feasibility study. No development decision was taken and no costs were capitalized in line with the Company's accounting policy.
OCTOBER 2002. Scoping study on a proposed Loulo 0 underground mine was completed.
MARCH 2003. - Completion of a feasibility study on the Loulo project that resulted in the estimate of proven and probable reserves. No investment decision was taken and no costs were capitalized under IFRS or US GAAP.
DECEMBER 2003. Completion of a feasibility study on the Loulo project. This study became a final feasibility study following the decision to proceed with the development of the open cast operation. The Company started capitalizing drilling costs relating to the open cast operation in terms of IFRS and US GAAP.
2004 1ST QUARTER The Company completed 25 drillholes to depths of 600m below surface relating to the underground project. These costs were expensed under IFRS and US GAAP.
2004 2ND QUARTER The Company completed 24 drillholes to depths of 640m below surface were relating to the underground project. These costs were expensed under IFRS and US GAAP
2004 3RD QUARTER
The Company completed a prefeasibility study for the underground project for the Loulo and Yalea deposits, which confirmed probable economic benefits. The Company approved the commencement of a final development study (final feasibility study) on the underground project.
Subsequent drilling focused on further defining the underground extensions and providing the required information for the final feasibility study. The Company began capitalizing such feasibility drilling costs under IFRS, but did not begin to capitalize such costs under US GAAP because a final feasibility study had not been completed.
Mr. H. Roger Schwall October 26, 2005 Page 5
2004 4TH QUARTER The Company completed 22 underground feasibility drillholes to 675m below surface.
JULY 2005 - The Company completed a final underground development study and approved the underground development project. This study resulted in the recognition of underground reserves. The Company then began capitalizing drilling costs relating to the underground operations under US GAAP, in addition to IFRS.
o As previously requested, please identify manner in which and methods you will employ to determine your thresholds of probable and high degree of confidence. It continues to be unclear what information you will require and which circumstances must be in place for you to be able to consistently and objectively apply your accounting policy.
Response: The Company advises the Staff that the term a "high degree of confidence" is intended to provide the same threshold as the term "probable" in assessing whether future economic benefits will flow to the entity and an asset should be recognized under IFRS. To avoid any potential confusion, the Company has amended the description of its policy on exploration and evaluation expenditure to use the term "probable".
In determining whether the Company has reached the required threshold of probability, or degree of confidence, the Company relies upon a cumulative amount of knowledge and information obtained from many alternative sources. The amount and nature of this information is dependent upon the specific circumstances of each exploration project.
The Company believes it is appropriate to apply different criteria to these alternative scenarios because the level of uncertainty about the outcome varies considerably. In general, there is a lot of uncertainty about the outcome of greenfields exploration until the final feasibility study has been completed. The level of uncertainty is much lower for brownfields exploration because the infrastructure already exists, which significantly reduces the capital cost, and the Company has considerable knowledge about the characteristics of the location in which the exploration is being carried out. Extension drilling carries the lowest level of uncertainty because it relates to a mineral deposit which is already being mined or developed and for which the presence of mineralization has already been demonstrated.
Mr. H. Roger Schwall October 26, 2005 Page 6
The table below summarizes, by nature of exploration, the type and level of information that the Company will require before concluding it is probable that future economic benefits will flow to the entity.
----------------------------------------------------- --------------------------------------------------- NATURE OF EXPLORATION MINIMUM TYPE AND LEVEL OF INFORMATION REQUIRED TO SUPPORT A "PROBABLE" DETERMINATION UNDER IFRS ----------------------------------------------------- ---------------------------------------------------
Greenfields exploration Final feasibility study: a comprehensive study of a deposit in which all geological, engineering, operating, economic and other relevant factors are considered in sufficient detail that serves as the basis for a final decision to proceed with the development of a deposit for mineral production
----------------------------------------------------- --------------------------------------------------- Brownfields exploration (adjacent to mineral Pre-feasibility study : deposits which are already being mined or a comprehensive study of the viability of as developed: that is, already subject to a final mineral project that has advanced to a stage feasibility study and development decision) where the mining method, in the case of underground mining, or the pit configuration, in the case of an open pit , has been established, and which, if an effective method of mineral processing has been determined , includes a financial analysis based on reasonable assumptions of technical, engineering, operating economic factors and the evaluation of other relevant factors which are sufficient for a qualified person, acting reasonably, to determine if all or part of the mineralized material may be classified as a mineral reserve
---
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CORRESP
1
filename1.htm
FULBRIGHT & JAWORSKI L.L.P.
A Registered Limited Liability Partnership
666 Fifth Avenue, 31st Floor
New York, New York 10103-3198
www.fulbright.com
STEVEN SUZZAN DIRECT DIAL: (212) 318-3092
PARTNER TELEPHONE: (212) 318-3000
SSUZZAN@FULBRIGHT.COM FACSIMILE: (212) 318-3400
October 26, 2005
VIA EDGAR AND FEDERAL EXPRESS
Mr. H. Roger Schwall
Securities and Exchange Commission
Division of Corporation
Finance 100 F. Street, N.E.
Mail Stop 7010
Washington, D.C. 20549-7010
Re: Randgold Resources Limited,
Registration Statement on Form F-3/A filed on October 19, 2005
File No. 333-127711
Annual Report on Form 20-F/A for the year ended December 31,
2004 filed on October 19, 2005
File No. 0-49888
Dear Mr. Schwall:
On behalf of Randgold Resources Limited (the "Company"), we hereby
submit to you Amendment No. 4 to the Company's above-referenced Registration
Statement on Form F-3 (the "F-3 Amendment") and Amendment No. 4 to the Company's
above-referenced Annual Report on Form 20-F (the "20-F Amendment") reflecting
changes made in response to the Staff's comment letter dated October 20, 2005,
as well as the comments of Ms. Jill Davis during a conference call that took
place on October 25, 2005 among myself, Ms. Davis and representatives of
PricewaterhouseCoopers LLP and the .Company.
All responses to the comments set forth in this letter are submitted on
behalf of the Company at its request. Set forth after each numbered paragraph,
each of which corresponds to the numbered paragraphs of the October 20, 2005
comment letter, are the Company's responses to the Staff's comments.
Form 20-F for the year ended December 31, 2004
Financial Statements
Mr. H. Roger Schwall
October 26, 2005
Page 2
Note 2 - Significant Accounting Policies
Property, Plant and Equipment, page F-8
1. We have reviewed your response to prior comment numbers 2 and 4.
Please address each of the following:
o We note that you have relied on the definition of probable as
defined in Appendix A of IFRS 3. We note that the definitions set
forth in the appendix are an integral part of IFRS 3. Please
explain why this definition applies to your accounting for
exploration and evaluation costs.
Response: The Company advises the Staff that the definition of "probable"
contained within IFRS 3 is relevant to the treatment of exploration
and evaluation expenditure under IFRS because it is used in the same
context: namely, to assess whether an asset should be recognized. The
term "probable" is used within IFRS 3 to apply the requirements of
paragraph 89 of the IAS Framework for the Preparation and Presentation
of Financial Statements, under which an asset should be recognized
where it is "probable that future economic benefits will flow to the
entity".
In addition, the Company advises the Staff that it has not relied
solely on the definition of "probable" within IFRS 3 in determining
how this term should be applied. Whilst not expressly defined on each
occasion, the term "probable" appears in many IFRS standards and is
defined as "more likely than not" in other Standards such as IFRS 5
and IAS 37. The International Accounting Standards Board ("IASB") has
also confirmed that "probable" means "more likely than not" for the
purposes of IAS 12 (in connection with the recognition of an asset).
The Company also notes that the International Accounting Standards
Board's 2005 edition of IFRSs contains a glossary which sets out the
definition of probable as "more likely than not," and that there is no
mention of any alternative meanings.
o We note your reference to a level of accuracy of +20-25%. Please
explain what this level of accuracy is measuring and how it is
determined.
Response:
The Company advises the Staff that this level of accuracy is measuring
the possible variations in capital and operating costs. This level of
accuracy is measuring the possible variations in capital and operating
costs, the level of +-20
Mr. H. Roger Schwall
October 26, 2005
Page 3
- 25% is in line with industry practice The cost estimates are based
on designs and drawings which may be optimized but not final. Some
costs estimated may be based on actual quotes but in some cases will
be based on experience.
o It continues to be unclear why definition drilling performed
prior to your change in accounting policy does not provide the
same level of certainty as definition drilling performed after
your change in accounting policy. Please provide us with a time
line that describes the types of exploration and evaluation
activities performed at Loulo from the time proven and probable
reserves were established to the present and explain why a
particular activity resulted in a greater level of certainty than
another.
Response: The Company advises the Staff that the change in accounting
policy is not relevant to the level of certainty provided by
definition drilling. Prior to the change of accounting policy,
definition drilling was carried out and formed part of feasibility
studies. However, since no development decisions were taken, the
drilling was not capitalized. The decision taken in December 2003 to
proceed with the development of open cast operations resulted in the
capitalization of those open cast costs.
TIMELINE
In the following timeline the Company refers to "feasibility studies."
A feasibility study is, generally, a comprehensive study of a deposit
in which all geological, engineering, operating, economic and other
relevant factors are considered in sufficient detail for the purpose
of evaluating the economic potential of a mineral deposit. A "final
feasibility" study is a feasibility study upon which a decision to
proceed with development is based.
The types of studies relevant to the Company's accounting policies
are: "pre-feasibility" studies and "final feasibility" studies, which
are also defined in the table below.
PRE-1996. Loulo started out as a greenfields project, and various
institutions and entities conducted exploration programs at Loulo
OCTOBER 1996. RRL acquired the Loulo project, which included the Loulo
0 deposit Since this acquisition RRL has discovered the Yalea deposit,
has undertaken a systematic appraisal of available data and initiated
phased and focused exploration programs on Yalea, Loulo 0 and certain
satellite deposits as well as building a framework of regional
geological data and completing generative studies.
Mr. H. Roger Schwall
October 26, 2005
Page 4
MAY 1997. Completion of a feasibility study incorporating Loulo 0 and
Yalea orebodies. This was the first time proven and probable reserves
were recognized. No development decision was taken and no costs were
capitalized in line with the Company's accounting policy.
MAY 1998. Completion of a further feasibility study. No development
decision was taken and no costs were capitalized in line with the
Company's accounting policy.
OCTOBER 2002. Scoping study on a proposed Loulo 0 underground mine was
completed.
MARCH 2003. - Completion of a feasibility study on the Loulo project
that resulted in the estimate of proven and probable reserves. No
investment decision was taken and no costs were capitalized under IFRS
or US GAAP.
DECEMBER 2003. Completion of a feasibility study on the Loulo project.
This study became a final feasibility study following the decision to
proceed with the development of the open cast operation. The Company
started capitalizing drilling costs relating to the open cast
operation in terms of IFRS and US GAAP.
2004 1ST QUARTER The Company completed 25 drillholes to depths of 600m
below surface relating to the underground project. These costs were
expensed under IFRS and US GAAP.
2004 2ND QUARTER The Company completed 24 drillholes to depths of 640m
below surface were relating to the underground project. These costs
were expensed under IFRS and US GAAP
2004 3RD QUARTER
The Company completed a prefeasibility study for the underground
project for the Loulo and Yalea deposits, which confirmed probable
economic benefits. The Company approved the commencement of a final
development study (final feasibility study) on the underground
project.
Subsequent drilling focused on further defining the underground
extensions and providing the required information for the final
feasibility study. The Company began capitalizing such feasibility
drilling costs under IFRS, but did not begin to capitalize such costs
under US GAAP because a final feasibility study had not been
completed.
Mr. H. Roger Schwall
October 26, 2005
Page 5
2004 4TH QUARTER The Company completed 22 underground feasibility
drillholes to 675m below surface.
JULY 2005 - The Company completed a final underground development
study and approved the underground development project. This study
resulted in the recognition of underground reserves. The Company then
began capitalizing drilling costs relating to the underground
operations under US GAAP, in addition to IFRS.
o As previously requested, please identify manner in which and
methods you will employ to determine your thresholds of probable
and high degree of confidence. It continues to be unclear what
information you will require and which circumstances must be in
place for you to be able to consistently and objectively apply
your accounting policy.
Response: The Company advises the Staff that the term a "high degree
of confidence" is intended to provide the same threshold as the
term "probable" in assessing whether future economic benefits
will flow to the entity and an asset should be recognized under
IFRS. To avoid any potential confusion, the Company has amended
the description of its policy on exploration and evaluation
expenditure to use the term "probable".
In determining whether the Company has reached the required
threshold of probability, or degree of confidence, the Company
relies upon a cumulative amount of knowledge and information
obtained from many alternative sources. The amount and nature of
this information is dependent upon the specific circumstances of
each exploration project.
The Company believes it is appropriate to apply different
criteria to these alternative scenarios because the level of
uncertainty about the outcome varies considerably. In general,
there is a lot of uncertainty about the outcome of greenfields
exploration until the final feasibility study has been completed.
The level of uncertainty is much lower for brownfields
exploration because the infrastructure already exists, which
significantly reduces the capital cost, and the Company has
considerable knowledge about the characteristics of the location
in which the exploration is being carried out. Extension drilling
carries the lowest level of uncertainty because it relates to a
mineral deposit which is already being mined or developed and for
which the presence of mineralization has already been
demonstrated.
Mr. H. Roger Schwall
October 26, 2005
Page 6
The table below summarizes, by nature of exploration, the type and level of
information that the Company will require before concluding it is probable that
future economic benefits will flow to the entity.
----------------------------------------------------- ---------------------------------------------------
NATURE OF EXPLORATION MINIMUM TYPE AND LEVEL OF INFORMATION REQUIRED TO
SUPPORT A "PROBABLE" DETERMINATION UNDER IFRS
----------------------------------------------------- ---------------------------------------------------
Greenfields exploration Final feasibility study: a comprehensive study of
a deposit in which all geological, engineering,
operating, economic and other relevant factors
are considered in sufficient detail that serves
as the basis for a final decision to proceed with
the development of a deposit for mineral production
----------------------------------------------------- ---------------------------------------------------
Brownfields exploration (adjacent to mineral Pre-feasibility study :
deposits which are already being mined or a comprehensive study of the viability of as
developed: that is, already subject to a final mineral project that has advanced to a stage
feasibility study and development decision) where the mining method, in the case of
underground mining, or the pit configuration,
in the case of an open pit , has been established, and
which, if an effective method of mineral processing
has been determined , includes a financial
analysis based on reasonable assumptions of
technical, engineering, operating economic
factors and the evaluation of other relevant factors
which are sufficient for a qualified person, acting
reasonably, to determine if all or part of the
mineralized material may be classified as a mineral
reserve
---