Randgold surges ahead

Allan Seccombe | Mon, 08 Feb 2010 17:46
[miningmx.com] -- IT wasn’t that long ago that results presentations by Randgold Resources were over pretty quickly. Nowadays they take a good while longer as CEO Mark Bristow runs through an impressive list of projects and exploration prospects and can boast of record gold output and financial data.

The transition from a partner in one producing asset, the Morila gold mine shared in Mali with AngloGold Ashanti, to other gold generating mines and development projects has been a relatively quick one, but there was a lot of work laying the ground for this change.

LSE-listed Randgold is now targeting one million ounces of gold in 2013 and 1.2 million ounces a year later as its development projects are steadily brought into production.

Bristow described 2009 as the most challenging year in its 15-year existence as it kept its Tongon project in Cote d’Ivoire on track for production in the fourth quarter of this year and continued work on its Loulo gold mine, carried on exploration work at its Massawa in Senegal to complete a pre-feasibility study and advance it into a definitive study.

It also acquired the Congolese Moto project, now called Kibali, in a partnership with AngloGold Ashanti, which will play a part in ramping gold output to above a million ounces, a figure that will thrust Randgold into the league of major players.

“It was a very good year for us. In fact, it was a great year as we set profit and production records,” Bristow said. Randgold posted a 79% increase in annual profit at $84m and group attributable gold production was up 14% at 488,255 oz.

Randgold declared a dividend of 17 cents per share (cps), above the expectations of some analysts.

“RRS (Randgold) has declared a strong dividend of 17cps whereas we had expected a more conservative div of 7cps given the busy expansion and new-project programme,” Citi said in a research note.

The results were boosted by record output of 352,000 oz at the Loulo mine.

There was one off note in the results and that was the performance of Loulo’s underground mine where ore tonnages slipped by a quarter in the three months to end-December against the previous three months, said Numis Securities.

“Behind this strong performance, we remain concerned that the underground development is not proceeding well and note that ore mined at Yalea of 112,439 tonnes is around 24% down on Q3,” Numis said.

“The NPV (net present value) of the Loulo project depends heavily on the successful development of the underground mines at Yalea and Gara and we therefore view the apparent progress as both positive and critical-to-maintain,” the brokerage said.

Bristow conceded the point, saying there had been “daunting challenges” in the year, expanding the plant and ramping up underground output. “There’s still a lot of work to be done at Loulo,” he said. “The underground ramp up is still a critical path for the group and the mine. I’m convinced it’s in good and capable hands.”

One of the factors offsetting the underground hiccups was the discovery and bringing into production of Loulo 3 as an opencast mine.

“This deposit has come as something of a saviour to Randgold’s performance at Loulo in the last year and, with limited reserves in the open pits, we remain cautious until the company can put in a full quarter of solid progress,” Numis said.

Loulo is forecast to produce 410,000 oz this year as Yalea ramps up to full production. A second underground mine at Gara will deliver ore by the end of 2010.

At Morila, production came in three percent higher than management’s expectations at 341,661 oz. The project, which is treating surface stockpiles as it winds down, will produce 225,000 oz this year.

Tongon will come into production this year and add 75,000 oz to the group.

At Kibali, Randgold and AngloGold have mine permits in place. There were four issues identified when they took over the project. These were security, logistics and access to the site, hydropower and the relocation of people living there.

Security has been agreed with the government, logistics will be addressed by a three-year programme to upgrade the road and on the power side, a hydro permit has been secured. A regional power plan has been drawn up by the partners and state miner Okimo.

The relocation programme started by Moto will be continued by the partners. The critical path is moving people and it's critical to get it right because of the political fall out if it's mishandled. This process could take 18 months.

The cost of the project depends on the size of the plant, which at this stage is planned to be a 3.6 million tonnes/year plant. The underground rate of mining is seen at 300,000 tonnes/month. Preliminary capital cost estimates are put around $800m.