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Randgold sets out $267m project Posted: Thu, 01 Nov 2007 [miningmx.com] -- RANDGOLD Resources said its Tongon project in Cote d'Ivoire would cost $267m to develop based on findings of a recently released prefeasibility scoping study. It also raised the prospect of enlarging the underground section of its Loulo project in Mali. Total resources at Tongon increased 41% to 4.39 million oz which would support 50% higher mill throughput of about 300,000 tonnes/month. The life of mine is currently estimated at 10.5 years. "The project will produce 290,000 oz in its first year," said Mark Bristow, Randgold Resources CEO in an interview. "For the next three years it will produce 250,000 ounces per year." In total, the enlarged resource results in one million ounces more gold production, a 20% increase in previously forecast annual average production. Bristow said the company was now considering financing the project over the next couple of months. He said he was watchful of hedging having suffered a $4.7m opportunity loss on the company's current hedging strategy in the quarter. (Randgold has 15% of production sold into contracts of about $435/oz over the next three-and-a-half years). "If we go for debt there will be guarantees which will involve hedging," said Bristow. An equity financing of the project was also possible, with part of the project financed from cash flow, he said. Of the $267m cost, $38m was for mobile plant and the remainder for sustaining capital. Randgold Resources, announcing its September quarter financial and operating results, also said it was thinking about factoring in 286,000 oz in additional gold production from the underground section of its Mali project, Loulo. This would be achieved by mining the Yalea South section. "We're quite conscious of things like NPV (net present value) so we would look at increasing production over life of mine," he said of the possible expansion. "Next year will be the big transition year when we decide these things." Morila, a joint venture with AngloGold Ashanti, is mined out by 2012 by which time Randgold Resources hopes Loulo, its underground mine (Yalea) and Tongon will be producing 600,000 oz/year of attributable gold. Cash costs Randgold Resources reported an $11.47m profit in the September quarter, an improvement on the $5.8m in the previous. Gold production was 5% higher and costs were contained at Morila. But total cash costs were up heavily to $342/oz compared to $285/oz in the nine months to September 2006. Bristow said he'd warned the market of a 10% to 15% cost hike at the beginning of the year. "Oil comprises 25% of our total costs," he said. A 6% royalty (on gold price achieved) was also being paid to the Mali government equal to about $40m. Cash flow from the mines was also considerably lower but Bristow said this was purely owing to timing issues. "You can put $20m back into cash generated," he said of some $10m in gold shipments, $6m in lockup at Morila and $5m in early creditor payments. At the three quarter stage, Randgold had posted net profit of $31.1m compared to $40m at the same stage in the 2006 financial year. "At this rate, we think we can afford a flat dividend," he said. Cutifani Mark Bristow has a new opposite partner in Mark Cutifani, CEO of AngloGold Ashanti which owns 40% of Morila since it last reported quarterly results. Of the appointment, he said: "I've had a few telephone conversations but I haven't had the privilege of meeting him yet. "I only know Mark by repuation. But I hear he's got a strong operational background," he said. Click Here to subscribe to our daily newsletter
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