Randgold Resources Annual Report 2005 61
21 FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
The figures shown above (and below) relate to the derivative
financial instruments taken out as a condition of the Loulo
project financing.
FINANCIAL INSTRUMENTS
Details of the group’s on balance sheet forward gold sale contracts
as at 31 December 2004 (all treated as cashflow hedges):
Maturity dates
Year ended 2005
220 12 504
430
Year ended 2006
2 471 93 498
431
Year ended 2007
3 332 103 500
435
Year ended 2008
4 425 80 498
431
Year ended 2009
5 220 75 000
430
Total
15 668 365 000
432
Estimation of fair values
Receivables, accounts payable, bank overdrafts and cash and cash equivalents. The carrying amounts are a
reasonable estimate of the fair values because of the short maturity of such instruments.
Long term debt
The fair value of market based floating rate long term debt is estimated using the expected future payments
discounted at market interest rates. No fair value is determinable for the loans from minority shareholders as
repayment is contingent on net available cash from the projects.
Gold price contracts
The fair value of gold price forward contracts has been determined by reference to quoted market rates at year end
balance sheet dates.
Group
Group
31 Dec
31 Dec
US$000
2005
2004
22 COMMITMENTS AND CONTINGENT LIABILITIES
22.1 Capital expenditure
Contracts for capital expenditure
6 000 17 119
Authorised but not contracted for
21 253 8 011
27 253 25 130
Capital commitments relating to the Morila joint venture amount to US$0.5 million (2004: US$1.1 million). If the group
were to early terminate its mining contract at Loulo, it would have to pay a lump sum compensation depending on
the maturity of the contract. If the contract was cancelled in 2005 then the payment would have been US$8.3 million
(2004: US$10
million). See note 26 concerning a claim in
respect of the Loulo development.
23 RELATED PARTY TRANSACTIONS
The service agreement between the company and Randgold & Exploration Company Limited was terminated by
mutual agreement effective from 1 April 2004. In order to continue to source certain services from South Africa, Seven
Bridges Trading 14 (Proprietary) Limited (“Seven Bridges”), a 100 per cent subsidiary of the company, was
incorporated. A service agreement has been entered into between the company and Seven Bridges whereby Seven
Bridges will provide certain administrative services to the company who wish to prevail on the cost effective services,
expertise and materials available in South Africa. Seven Bridges derives its income from the services it provides to
the company for which it charges a monthly fee based on the total employment cost to the company plus
50 per cent. In terms of the Operator Agreement between Morila SA and AngloGold Ashanti Services Mali SA, a
management fee, calculated as 1% of the total sales of Morila, is payable to AngloGold Ashanti Mali SA quarterly in
arrears. The attributable management fees for the year ended 31 December 2005 amounted to US$1.0 million
(2004: US$0.8 million). Purchasing and consultancy services are also provided by AngloGold Ashanti to the mine on
a reimbursable basis. The attributable purchases and consultancy services for the year ended 31 December 2005
amounted to US$0.4 million (2004: US$0.5 million).
Carrying Forward Forward
amount sales sales
Hedging instruments
US$000 Ounces US$/oz
