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Our winning strategy is all about profitable investments… Graham Shuttleworth Investor Days November 2016

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Page 1: Our winning strategy is all about profitable investments… winnin… · Our winning strategy is all about profitable investments ... Lower tonnes, especially during Q2 2016 mill

Our winning strategy is all about profitable investments…

Graham Shuttleworth

Investor Days November 2016

Page 2: Our winning strategy is all about profitable investments… winnin… · Our winning strategy is all about profitable investments ... Lower tonnes, especially during Q2 2016 mill

Changes in African mining codes…

Sources: EY, Deloitte, Randgold

Mining code legislationchangesMining codes currently under review

AFRICA

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Côte d’Ivoire Mining Code…MINING CODE SUMMARY Côte d’Ivoire (2014 Code) Tongon Convention

State participation (free carried) 10% 10%

Fiscal Stability Arrangements

The State guarantees the stability of the tax and customs regime. In the event of a

more favourable regime, the more favourable tax and customs regime may

be adopted, provided it is done in its entirety.

The State guarantees the stability of the tax and customs regime

Right to International Arbitration Yes, if provided for in Establishment Agreement Yes

Corporate tax rate 25% 25%

Tax holiday – Corporate tax 5 years subsequent to first production 5 years subsequent to first

production

Royalties

Sliding scale depending on Gold Price (GP) :

*GP < $1000/oz : 3%*GP $1000/oz to $1300/oz : 3.5%*GP $1300/oz to $1600/oz : 4%GP $1600/oz to $2000/oz : 5%

*GP > $2000/oz :6%

3%

Import duties

Exemption to first productionExemption from duties on fuel and

reagents for mine life

Exemption to first productionExemption from duties on fuel and

reagents for mine life

Withholding tax on dividends 12% 12%

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Senegal Mining Code…

MINING CODE SUMMARY Senegal (2003 Code)

State participation (free carried)10%

Fiscal Stability Arrangements

The State guarantees the stability of the tax and customs regime. In the event of a more favourable regime, the more favourable tax

and customs regime may be adopted, provided it is done in its entirety.

Right to International Arbitration Yes, if provided for in Establishment AgreementCorporate tax rate 25%

Tax holiday – Corporate tax 7 years subsequent to award of the mining permit

Royalties 3%

Import duties Exemption to up to 7 years subsequent to award of mining permit

Withholding tax on dividends 10%

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Mali Mining Codes…MINING CODE SUMMARY Mali (1991 Code) Mali (1999 Code) Mali (2012 Code)

State participation (free carried) 10% 10% 10%

Fiscal Stability ArrangementsYes, may adopt more

favourable conditions. No need to adopt in entirety

Yes. More favourable conditions can be opted for if adopted in their entirety

Yes. More favourable conditions can be opted for if adopted in their entirety

Right to International Arbitration Yes Yes Yes

Corporate tax rate45% initially. Now 30% 35% initially. Now 30%

25% for first 15 years after first production.

Then 30%

Tax holiday – Corporate tax 5 years subsequent to first production

None None

Royalties 6% 3% 6%

Import duties

Exempted first 3 years of production

Exemption fromduties on fuel for mine life

Exempted first 3 years of production

Exemption fromduties on fuel for mine life

Exempted first 3 years of production

Exemption fromduties on fuel for mine life

Withholding tax on dividends Exempt Exempt 10%

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- 40 80

120 160 200 240

2011 2012 2013 2014 2015

Supplementary taxes paid in 2016 Gounkoto Loulo MorilaAu Price

20 years of investment in Mali…$4.7 billion to economy (taxes, royalties, salaries, local suppliers and community initiatives)

Randgold has contributed between 6% and 10% of Mali GDP

Randgold has paid $2.8 billion to stakeholders over 20 years

Loulo

Exploration SyamaMorila

Gounkoto

Randgold paid $832 million in taxes and royalties from 2011 to 2015

0%

2%

4%

6%

8%

10%

2010 2011 2012 2013 2014 2015 2016Loulo Gounkoto Morila

0

400

800

1200

16002000

GDP % Gold price US$/oz

JuneSource; World Bank

0

400

800

1200

1600

2000Gold price US$/ozTaxes and royalties US$m

Royalties to State

Dividends to State

Dividends to Randgold

Direct and Indirect taxes

Randgold has invested $2.7 billion in capital since 1996

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Top ten risks facing mining industry…EY Annual Survey

2015 - 2016 2016 - 20172008

Resource Nationalism has now dropped out of the top tenCash / Capital Access now the biggest issue for the industrySocial License to Operate has remained consistently high, and is an area which has consistently received focused attention from Randgold

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Randgold country ranking…

geological opportunitypolitical stabilityeconomic and fiscal regimeinfrastructure

Dependent on a qualitative assessment combining:

MauritaniaMali

BurkinaFaso

Morocco Tunisia

EgyptLibya

CAR

Niger

Nigeria

Zambia

Namibia

Angola

Tanzania

DRC

EthiopiaS Sudan

SouthAfrica

Zimbabwe

Botswana

Kenya

Algeria

Congo

Malawi

Uganda

RwandaBurundi

Cameroon

Chad

ABCD

Senegal

Guinea Bissau

Guinea

Sierra Leone

Liberia Cote d’Ivoire

Gabon

BeninTogo

Ghana

Eritrea

Somalia

Eq Guinea

Madagascar

Mozambique

Swaziland

Lesotho

Western Sahara

N Sudan

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Key drivers of changing cost structure:

fuel price and increased reliance on non diesel generated power sources (Hydro, Grid)

Switch to owner mining at Loulo (lower UG contractors and higher employment and stores)

Increased group throughput and operational challenges at Kibali and Tongon – higher stores and reagents consumed

Group Cash Operating Cost by Element

30 000

35 000

40 000

45 000

50 000

55 000

60 000

65 000

2015 2016 YTD

Monthly Operating Cost ($'000)

0%2%4%6%8%

10%12%14%16%18%20%

Proportionate Cost Components (%)

2015

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Mines Cash Operating Costs (cont.)

0,0%

5,0%

10,0%

15,0%

20,0%Loulo Complex

2015

2016 YTD

0%

5%

10%

15%

20%

Kibali 20152016 YTD

Key Drivers:Switch to UG owner miningResulting increased UG employment and consumables use – own equipmentDecrease in oil price and fuel costOverall $ costs decreased by 8%, with further opportunities related to localisation of labour

Key Drivers:Decreased oil price and fuel cost and increased hydro utilisation driving down power costsUG mining ramping up production (increased % of costs)Multiple ore sources = increased reagent and stores consumption/additional engineering costs in plant, in H1 2016Decrease in OC Mining total tonnes vs 2015

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Mines Cash Operating Costs (cont.)

Key Drivers:Decreased oil price and fuel cost & increased grip power utilisationIncreased engineering costs (stores/other) relating to the plant to deal with crushing optimisation and the mill journal failure/repairTotal $ costs in line with 2015

Key Drivers:Reduced mining operations Increased tonnes though the plant (TSF) resulting in higher reagent consumptionDecrease in total monthly $ costs of 25% vs. 2015 (so while some of these are proportionately higher, they are down in absolute terms)

0%

5%

10%

15%

20%

25%

30% Tongon2015

2016 YTD

0%

5%

10%

15%

20%

25%

30% Morila2015

2016 YTD

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Mines Power Costs

4

5

6

7

8

9

10

11

12

0,30

0,35

0,40

0,45

0,50

0,55

0,60

0,65

0,70

0,75

0,80Loulo Power Cost - Processing

PlantDiesel Price ($c)HFO Price ($c)$/t Processed

0

1

2

3

4

5

6

7

8

9

10

-

0,20

0,40

0,60

0,80

1,00

1,20

1,40

1,60

Kibali Power Cost – Processing Plant

Diesel Price ($c) $/t Processed

Key Drivers:Decreased fuel price – HFO and LFOBetter generating efficiency and higher proportion of power from HFO (cheaper)Better power management and distribution (MV upgrade)Improved efficiency in use of power in the plant (kWh per tonne processed)

Key Drivers:Decreased fuel priceCommissioning and optimisation of hydro power stations, with another scheduled to come on line imminentlySeasonality – effect of rain on hydro availability

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2

3

4

5

6

7

8

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1Tongon Power Cost - Processing Plant

Diesel Price ($/l) $/t Processed

Mines Power Costs (cont.)

At current prices Tongon’s diesel power is roughly 50% more expensive than grid in $/kWh termsBiggest driver of cost is therefore the mix of grid to diesel power generated / consumed Targeted mix is 97% grid – however instability of the supply has resulted in greater reliance on diesel – 2016 YTD is 12% (i.e. only 88% grid) Lower tonnes, especially during Q2 2016 mill failure, resulted in higher cost / tonne –substantial improvement in Q3 2016

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Cost by Activity…group

0

2

4

6

8

10

12

14

16

18

20

Mining OC Mining UG Processing G&A Truck & Haul Royalties

Group ($/t) by Activity

$/t 2015

$/t - 2016 YTD

-2,0

8,0

18,0

28,0

38,0

48,0

58,0

68,0

2015 2016 YTD

Total Cash Cost $/t

Stockpile

Royalties

Trucking &HaulingG&A

Processing

Mining UG

Mining OC

In terms of $/t processed, costs have dropped by 6% year on yearStrong operation performance from Loulo complex partially offset by challenging operating conditions at Kibali and Tongon (1H 2016)Improved power costs and higher throughputHigher gold price increasing royalties

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Cost by Activity… by mine per tonne processed

- 5,0

10,0 15,0 20,0 25,0 30,0 35,0 40,0

Loulo Complex ($/t)

$/t 2015

$/t - 2016 YTD

- 2,0 4,0 6,0 8,0

10,0 12,0 14,0 16,0 18,0 20,0

Mining OC Mining UG Processing G&A Royalties

Kibali ($/t)

$/t 2015

$/t - 2016 YTD

-

5,0

10,0

15,0

20,0

25,0

Mining OC Processing G&A Royalties

Tongon ($/t)

$/t 2015$/t - 2016 YTD

- 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0

10,0

Mining OC / OreHandling

Processing G&A Royalties

Morila ($/t)

$/t 2015$/t - 2016 YTD

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Major Consumables…

12,8%

35,6%

22,9%

4,1%

2,2%

2,9%

6,8%

12,7%

Reagents & Grinding Media

Lime CyanideGrinding Media Caustic SodaActivated Carbon FlocculantHydrogen Peroxide Other

Reagents and grinding media made up approximately 12% of cash operating costs for 2016Since the start of 2014, these costs have dropped by approximately 25% over the key components

-

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

5,00

Cyanide Grinding Media Lime

Negotiating Better Prices

Stores Price Dec 2013 ($/kg)

Contracted Price Q4 2016($/kg)

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Effect of Oil Price and Forex…

30

35

40

45

50

55

60

65

70

2015

-06-

01

2015

-07-

01

2015

-08-

01

2015

-09-

01

2015

-10-

01

2015

-11-

01

2015

-12-

01

2016

-01-

01

2016

-02-

01

2016

-03-

01

2016

-04-

01

2016

-05-

01

2016

-06-

01

2016

-07-

01

2016

-08-

01

2016

-09-

01

Oil

Pric

e -$

/bbl

|

Fue

l Pric

e U

SD c

ents

/ l

Oil Price vs. LFO and HFO –West Africa

Brent crude $/bbl (1 monthlag)LFO Price cents / l (fullylanded)HFO Price cents / l (fullylanded)

65%

25%

7% 3%

Currency Exposure

USDEUR & XOFZAROther

Fuel made up around 16% of group costs in 2016, a decrease from 20% 2 years agoThe oil price is the key driver of the landed fuel price as can be seen aboveAt current prices ($50/bbl) a 10% change in the price of oil would result in an approximate $6/oz change in total cash cost

The group’s Euro denominated cost is approximately 25% YTDSome of the larger Euro based supplier contracts are concluded with an annually agreed rateA 10% change in the US$ / Euro exchange rate would have a $14/oz effect on total cash cost

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Looking Ahead – Unit Costs

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

-

10,0

20,0

30,0

40,0

50,0

60,0

70,0

2014 2015 2016 FOR 2017 2018 2019 2020 2021

Group Total Cash Costs - $/t

StockpileRoyaltiesTrucking & HaulingG&AProcessingMining UGMining OCGrade (g/t)

Lower costs in 2017 driven by:Fixed cost efficiencies and lower strip ratio of Gounkoto super pitSteady state processing compared with higher costs at Tongon and Kibali in H1 2016

Costs increase in 2020 as grades increase:Kibali grade increases in each year to 2020 and then Tongon starts to fall away, so the average goes up

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Looking Ahead - “All-in” group cost per ounce

-

100

200

300

400

500

600

700

800

900

1 000

2014 ACT 2015 ACT 2016ACT/FOR

2017 2018 2019 2020 2021

Cost $ / oz Breakdown

Depreciation $ /oz

Corporate Tax $ /oz

Corporate & Exploration$ /oz

Total Cash Cost $ /oz

Profile reflects the lower total cash costsDepreciation increases slightly given the assets brought into use especially related to increased UG production and lower production in 2021 (this excludes the Massawa project)

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Group consolidated production, cash cost and capital spend…

0

1

2

3

4

0

200

400

600

800

1000

1200

1400

1600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Oz actual Oz forecast Total Cash Cost/oz Capital Grade

Production Oz 000Total cash cost/ozCapex $m

Grade g/t

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A cash generative business…

0

100

200

300

400

500

600

700

2016 2017 2018 2019 2020 2021

Free cash before distributions @ $1200/oz

Total Capital Spend ($m)

Free Cash Per Year ($m)

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Group cumulative cash balance

0

500

1000

1500

2000

2500

3000

2016 2017 2018 2019 2020 2021

Cash on hand @ $1200/oz

Closing Cash Assuming Flat Dividend($62m)

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Group consolidated production, cash cost and capital spend…including Massawa

0

1

2

3

4

0

200

400

600

800

1000

1200

1400

1600

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Oz actual Oz forecast Total Cash Cost/oz Capital Grade

Production Oz 000Total cash cost/ozCapex $m Grade g/t

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Group cumulative cash…including Massawa

-

500

1 000

1 500

2 000

2 500

3 000

2016 2017 2018 2019 2020 2021

Cash on hand @ $1200/oz

Closing Cash Assuming Flat Dividend($62m)

0

100

200

300

400

500

600

700

800

900

2016 2017 2018 2019 2020 2021

Free cash before distributions @ $1200/oz

Total Capital Spend ($m)

Free Cash Per Year ($m)

A cash generative business, after capital expenditure and taxes Including funding for dividends, exploration and new projectsWith the ability to increase dividends substantiallyAnd still take advantage of any acquisition opportunities that might meet our investment filters

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Disclaimer…

Randgold reports its mineral resources and mineral reserves in accordance with the JORC 2012 code. As suchnumbers are reported to the second significant digit. They are equivalent to National Instrument 43-101. Mineralresources are reported at a cut-off grade based on a gold price of US$1 500/oz.The reporting of mineral reserves is also in accordance with Industry Guide 7. Pit optimisations are carried out at agold price of US$1 000/oz, except for Morila which is reported at US$1 300/oz. Mineral reserves are reported at acut-off grade based on US$1 000/oz gold price within the pit designs. Underground reserves are also based on agold price of US$1 000/oz. Dilution and ore loss are incorporated into the calculation of reserves.

Cautionary note to US investors: The United States Securities and Exchange Commission (the SEC) permitsmining companies, in their filings with the SEC, to disclose only proven and probable ore reserves. Randgold usescertain terms in this annual report such as ‘resources’, that the SEC does not recognise and strictly prohibits thecompany from including in its filings with the SEC. Investors are cautioned not to assume that all or any parts ofthe company’s resources will ever be converted into reserves which qualify as ‘proven and probable reserves’ forthe purposes of the SEC’s Industry Guide number 7.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS: Except for the historical informationcontained herein, the matters discussed in this presentation are forward-looking statements within the meaning ofSection 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934, andapplicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statementswith respect to the future price of gold, the estimation of mineral reserves and resources, the realisation of mineralreserve estimates, the timing and amount of estimated future production, costs of production, reservedetermination and reserve conversion rates. Generally, these forward-looking statements can be identified by theuse of forward-looking terminology such as ‘will’, ‘plans’, ‘expects’ or ‘does not expect’, ‘is expected’, ‘budget’,‘scheduled’, ‘estimates’, ‘forecasts’, ‘intends’, ‘anticipates’ or ‘does not anticipate’, or ‘believes’, or variations ofsuch words and phrases or state that certain actions, events or results ‘may’, ‘could’, ‘would’, ‘might’ or ‘will betaken’, ‘occur’ or ‘be achieved’. Assumptions upon which such forward-looking statements are based are in turnbased on factors and events that are not within the control of Randgold Resources Limited (‘Randgold’) and thereis no assurance they will prove to be correct. Forward-looking statements are subject to known and unknownrisks, uncertainties and other factors that may cause the actual results, level of activity, performance orachievements of Randgold to be materially different from those expressed or implied by such forward-lookingstatements, including but not limited to: risks related to mining operations, including political risks and instabilityand risks related to international operations, actual results of current exploration activities, conclusions ofeconomic evaluations, changes in project parameters as plans continue to be refined, as well as those factorsdiscussed in Randgold’s filings with the US Securities and Exchange Commission (the ‘SEC’). Although Randgoldhas attempted to identify important factors that could cause actual results to differ materially from those containedin forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated orintended. There can be no assurance that such statements will prove to be accurate, as actual results and futureevents could differ materially from those anticipated in such statements. Accordingly, readers should not placeundue reliance on forward-looking statements. Randgold does not undertake to update any forward-lookingstatements herein, except in accordance with applicable securities laws.