[miningmx.com] – RANDGOLD Resources was weighing its options in respect of its Massawa gold project in Senegal which could involve developing the prospect itself or in a partnership, or selling the asset.
“There’s a series of opportunities to bring it to account either through our own devices or partnering, or selling it outright,” said Randgold Resources CEO, Mark Bristow. “We are not shy of options. We are determined not to let it fritter away in our portfolio.”
Bristow was commenting after the publication of the UK-listed firm’s first quarter results in which it posted record gold output of 283,763 ounces. It hoped to produce 1 million oz of gold in the 2014 financial year, a first for the group.
Profit from mining decreased by 4% quarter on quarter to $171m, due to the increase in costs, but was up 14% on the corresponding quarter in 2013. “Overall, a solid quarter and sets the standard for the year,” said UK-based brokerage Numis which added the stock was a buy.
Bristow said the company had embarked a review of its exploration portfolio in which its normally routine ongoing assessment of its prospects has been focused on establishing a 10-year bankable business plan from the current five-year plan. This would involve a shift towards more reserves conversion but greenfields exploration would continue.
As a result, it would simultaneously hunt down “the next big elephant” [large gold prospect] either in Cote d’Ivoire, the Loulo district and neighbouring Senegal, as well as the north-east Democratic Republic of Congo (DRC) which would provide reserves replacement in about 10 years time.
The possible sale of Massawa was part of this process, said Bristow. “Since we took it [Massawa] out of our five-year plan, the guys have lifted their game and advanced our understanding of the project,” said Bristow.
‘It’s by far the best undeveloped gold project in Africa; it is slightly shy on reserves at moment, but I think there is an opportunity for a smaller, more focused pit …. with a higher grade”, said Bristow.
“We have chucked out a lot [of exploration prospects] that have been in [the resource] triangle too long. We turn them over. The hit rate on finding world class deposits is very low. We try and continue to focus on ensuring business on exploration is a business with a clear objective to deliver three million oz deposits with 20% return,” he said.
Of the group’s assets, the DRC mine, Kibali, which Randgold Resources operates in joint venture with AngloGold Ashanti, has reserves supporting a life of 13 years at output of 650,000 oz/year. The Loulo mine, situated in Mali, has a 10-year life, but its production falls to 480,000 oz/year after year seven.
The Tongon mine in Cote d’Ivoire, meanwhile, has only seven years of life; however, once it has repaid its development capital next year, Randgold can assess whether the life of mine at Tongon could be extended by accessing lower grade reserves.
“We want to have 10-year banked stable business plan, so to do this we need a reserve plan. Then that will give us time to find the next elephant,” he said.
Bristow said that in the short-term, the group may well have to dip into its $200m debt facility owing to the lock-up of VAT repayments. The company is committed to paying a 50c/share full-year dividend, announced in February.
“There is a real possibility of dipping into debt. We have got a lot of money tied up in VAT in DRC and Mali. We are making a dent with the two governments, but it takes time,” said Bristow.
