Randgold, AngloGold to JV on Moto

Allan Seccombe | Thu, 16 Jul 2009 13:53

[miningmx.com] -- RANDGOLD Resources is making a $488m bid for Moto Goldmines and AngloGold Ashanti will join it as a non-operating joint venture partner to explore and develop a gold mine at the project in Democratic Republic of Congo.

LSE-listed Randgold announced a cash and share offer for Moto, which could see it issuing 3.9 million shares and making a cash payment of $244m.

JSE-listed AngloGold said it would pay $244m in cash for a 50% stake in Moto, which could produce 400,000 oz of gold a year. The start up is pencilled in by Moto for 2012.

ФOur agreement to acquire for cash a 50% joint venture interest on closing enables Randgold Resources to present terms to Moto which make its offer clearly superior to those already offered by Red Back Mining Inc. in its offer for Moto,ТТ said AngloGold CEO Mark Cutifani.

Bringing in a big company like AngloGold takes a degree of risk out of the project, said an analyst. The DRC is regarded as a high-risk mining destination and one that is very difficult in which to work.

Mark Bristow, CEO of Randgold, said his shareholders had raised the issue of risk and how best to manage it. "For me, bringing in AngloGold deals with a lot of the risk. It doubles up on the intellectual capital, the ability to deal with and influence things. It gives a much bigger skill base to draw from. Together we have more than three times the capital base of Randgold," he told Miningmx.

"It's a very powerful balance sheet behind this if you put our companies together," he said. "Collectively, you have the gold mining powerhouses of Africa."

The cash component of this offer is different from the first overture Randgold made to the Moto board in September last year, proposing an all-share transaction. Those talks fell through.

The deal looked cheap when considered from the perspective of the partners acquiring some 20 million ounces of resources and five million ounces of reserves it appears like a cheap acquisition, but Randgold was factoring in the development and political risk of working the DRC.

"It's pretty good use of their [Randgold's] scrip at the moment," said the analyst.

Moto is subject to a takeover bid by Red Back Mining, which has made an all share offer for the company, offering 0.45 of its shares for each share held in Moto, an offer which Moto's largest shareholder Electrum Strategic Holdings has rejected.

Randgold's offer is conditional on Moto terminating its arrangement with Red Back. It wants Moto to enter a definitive agreement with itself and for the company to recommend the transaction.

Holders of 36% of Moto have irrevocably backed the Randgold proposal, and agreed to vote against the Red Back transaction. Of those shareholders, the owners of 22.4% of Moto said they would continue to back Randgold if Red Back made an improved offer or another party made an offer.

Randgold stands a good chance of succeeding in its bid, the analyst said. "They've offered a premium. They have the cash or equity component. They've been linked to this asset for some time and Bristow likes this whole region from an exploration point of view. I think the chances are it will go through."

Moto released a feasibility study in February, showing an open pit and underground operation that will produce some 2.5 million oz in the first five years of operation.

AngloGold and Randgold have worked together on the Morila mine in Mali for nine years. The appointment of Mark Cutifani as chief executive of AngloGold marked a change in relationships between the two companies, which during the time of Bobby Godsell had a fraught relationship over how AngloGold was operating Morila.

"Mark and I have been working on our relationship for some time now and we've got a significant track record on dealing with challenging things. The new AngloGold team is making headway on their challenges in Africa," Bristow said.

Randgold has since taken over the management of Morila, which is coming to the end of its life. Bristow also bid unsuccessfully against Godsell for the Ashanti assets in 2003.

Moto owns 70% of the project and the DRC state-owned mines group Okimo owning the rest. Moto has had a difficult relationship with its Congolese partner.