Kinross gold deal good for Africa

Brendan Ryan | Thu, 06 May 2010 11:55

[miningmx.com] -- RANDGOLD Resources CEO Mark Bristow has welcomed the investment by gold heavyweight Kinross into junior Red Back Mining as good for Africa as well as for his own group.

“When you look at what Kinross paid for that stake, it has got to be positive for the Randgold share price,” Bristow said.

Kinross has bought a 9.4% stake in Red Back for C$600m, which capitalises the TSX-listed junior at about C$6.4bn.

Red Back owns the Chirano gold mine in Ghana as well as the Tasiast gold mine in Mauritania, and has extensive exploration operations in West Africa. The group produced 183,425oz of gold in the year to end-December.

Bristow said the deal is the latest sign of growing interest by the world’s major gold groups in investing in Africa.

Kinross’ move follows the separate listing in London of African Barrick Gold in March and the current bid by Newcrest for fellow Australian gold miner Lihir.

Lihir’s main operations are in Papua New Guinea, but the group owns an operating gold mine and extensive exploration projects in Cote d’Ivoire which it acquired in June 2008 through the takeover of Australian junior Equigold.

Bristow said the gold majors were increasingly looking towards Africa because of the need to find growth and also to reduce operating costs.

He added there was a particular focus on West African countries like Senegal, Mali, Ivory Coast and Burkino Faso.

Bristow said: “These are countries with governments which are absolutely clear on the fact that they need to attract investment.

“Their attitude is that they are starting out with a small fortune that they are trying to turn into a large one by building a real economy.

“That’s unlike the situation in South Africa, which seems intent on turning a large fortune into a small one.

“I believe in South Africa. I think it has a tremendous amount to offer the mining sector, but investor sentiment is not being helped by what’s going on in the country.

“I have noted the statements by [Minister of Mineral Resources] Susan Shabangu and President Jacob Zuma that nationalisation is not ANC policy, but I definitely do not have the impression that [ANC Youth League leader] Julius Malema has been put firmly back in his box.”

Randgold shares currently sit at a 12-month high at around ₤55, and morning trade has not been affected by the release on Thursday of worse-than-expected March quarter results.

According to Libertas analyst Roger Bade, “At over ₤50 per share there is probably some scope to absorb poor results but they remain an expensive gold counter, trading on almost 40 times prospective earnings.”