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Cash-flush Randgold in massive Côte d’Ivoire gold discovery

Randgold Resources CEO Mark Bristow

Randgold Resources CEO Mark Bristow

Photo by Duane Daws

3rd August 2017

By: Martin Creamer

Creamer Media Editor

     

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JOHANNESBURG (miningweekly.com) – The exploration team of Randgold Resources, which on Thursday reported a 53% leap in half-year profits, plus cash on hand of $572.8-million even after the $94-million dividend payout, has defined a large target in Côte d’Ivoire, which is considered to be “potentially the most exciting gold prospect in West Africa”.

The 13 000-employee London-listed, Africa-focused gold mining company, which had an exceptionally good second quarter of increased production and lowered costs, has underlined Côte d’Ivoire’s prospectivity through its latest discovery at Boundiali in the Fonondara corridor.

New drill results from Fonondara on the Boundiali permit have identified a massive system of multiple mineralised shears which could well deliver a project that meets Randgold’s investment criteria. 

Gold-in-rock mineralisation of the latest Côte d’Ivoire find extends for 50 km. To put that in perspective, Ghana’s big Obuasi gold mine extends over a considerably less 20 km distance.

Randgold is seeing the benefits of setting out to reinvent its exploration capacity two and a half years ago.

“If you look for new mines, you find them. If you don’t, you won’t,” Randgold CEO Dr Mark Bristow told Creamer Media’s Mining Weekly Online in an interview.

Outside of the big mergers and acquisitions realm, the company has interesting new business opportunities with which it is engaged, which is set to add prospectivity and exciting new entities to its asset suite.

It is cash flush given its cash in the bank after paying $59-million in cash taxes in the last quarter and $94-million in dividends.

It is on course to attain full-year production guidance of 1.3-million ounces at a total cash cost below $600/oz.

“We’ve really focused on the main Fonondara deposit and its extensions and, again, to the south of Fonondara, we’ve been hitting some very exciting drill results. This has got the makings of getting beyond our required three-million ounces and at reasonable grades,” Bristow told Mining Weekly Online in an interview.

The new find arises as Randgold’s existing Tongon gold mine, in Côte d’Ivoire, has declared its second dividend, of which the government’s share, including taxes, was $20-million. 

In total, the Tongon mine has contributed just under $1-billion to the Ivorian economy in the form of royalties, taxes, dividends, salaries, payments to local suppliers and community investments since it started production in 2010.

Bristow ascribes the success of Côte d’Ivoire’s growing gold mining industry to a mining code that is fair to parties operating in the country, where a new mining cadastre system was recently put in place by the ministry in charge of mines.

Exploration is still at an early stage in the Democratic Republic of Congo (DRC), but the geological framework has been laid out.

Infill drilling at the Kibali gold mine in the DRC has intersected some “spectacular” mineralisation in the 9 000 load close to the shaft, just beyond the shaft pillar, which lends itself to quick extraction.

Kibali has contributed $2.2-billion to the DRC economy in the form of taxes, salaries and payments to local suppliers since Kibali was launched in 2010. 

Randgold last year made payments of $173-million to the jurisdictions where it operates.

It is strong on being a corporate citizen that partners with the States and the people of the countries in which it operates and lets governments know when it perceives them as not sticking to the agreed rules.

It is also making great strides in the development of locally sourced employees. For example, Kibali’s large plant, with its daily throughput of 20 000 t of ore, is now being managed by an all-Congolese team, with virtually all the senior supervisory positions now held by Congolese.

“The Congolese are great people. They’re so innovative and entrepreneurial. We invest in creating a skills base and it pays dividends,” Bristow commented.

The company has both formal and informal development programmes and many of its employees take part in development programmes at South Africa universities, through which it also puts engineering students.

Randgold has set itself carbon footprint targets for the next ten years in support of its host countries’ own efforts to align themselves with the Paris Agreement. The company has been reporting its carbon emissions since 2009 and is a member of the international Carbon Disclosure Project.

Technical and capital projects executive John Steele reports that the use of hydropower at Kibali, the stabilisation of Côte d’Ivoire’s grid supply to Tongon and the thermal generation efficiency improvements at Loulo-Gounkoto should enable Randgold to achieve its target.

However, Randgold is also considering further emission reduction measures, including the incorporation of solar energy into Loulo-Gounkoto’s microgrid and the installation of a solar power plant as part of the proposed Massawa project’s microgrid.

Interestingly, the DRC and Côte d’Ivoire, for example, do not have net carbon emissions because their enormous forests are major carbon consumers.

"These countries have to develop, so we’ve engaged in setting proper targets, because we are major players in those economies, and so we’re going to bring down our carbon footprints on a relative basis but at the same time you can’t expect the Côte d’Ivoire, the DRC and Mali to halve their carbon emissions because they don’t have any.

“At the same time, we think it's very important to measure carbon and to show what you are doing about it and in this last quarter, 30% of our power was clean in the form of hydro and we’re putting in a solar component to our grid at Loulo-Gounkoto in Mali,” Bristow disclosed.

The company is also engaged in elephant conservation with the Randgold-funded Mali Elephant Project, one of the winners of the United Nations Development Programme’s Equator Prize for 2017. 

“Miners do a very good rehabilitation job. You can take some of that rehabilitation to make your mine closure practicable and ensure that you deliver a change in land use, but you should take some of the money, which I think some waste on the final rehab, and put it into the world’s heritage sites and pristine areas, and that’s what we are trying to do at the Garamba world heritage site in the DRC, which is completely pristine. A big challenge is managing the anti-poaching programmes because of the Sudanese crisis.

"We’ve also always been a big supporter of the Gourma National Park region of Mali, which hosts one of only two remaining desert elephant herds in the world.

“Then, in partnership with the big cat preservation charity Panthera, we help to protect one of West Africa’s last lion prides in Senegal’s Niokola Koba National Park, which is also a world heritage site.

“But to protect the lions, you have to manage their food chain and there are some very interesting antelope species in the Niokolo Koba National Park, which we'll be helping to protect through an intensified ranger patrol system. We do that as part of our business, just like we invest in my bike trip foundation.

“We’re bringing child soldiers back into society. We’re big supporters of turning around the damage that the conflicts in eastern DRC and northern Mali and even northern Ivory Coast have brought to the women and children of those regions.

“That’s the point of being a sustainably profitable gold company. We’re not just about squeezing out the last drop of profits or exploiting anything. We believe in being at all times focused on sustainable profitable,” said the head of Randgold, which since being founded in Johannesburg in the early 1990s has developed six gold mines in West Africa and the DRC.

Its second-quarter profit of $102.8-million in the three months to June 30 was 21% higher than the previous quarter and its 53% higher half-year profit totalled $187.7-million. 

The company’s main Loulo-Gounkoto complex, in Mali, delivered another robust performance, the Tongon mine in Côte d’Ivoire increased its production, and Kibali in the DRC finalised preparations for its underground ramp-up later this year while significantly improving its plant stability and recoveries. Output from the closing Morila mine in Mali, where the company began, was in line with plan and it completed the permitting process for mining the Domba satellite deposit.

The half-year production of 663 786 oz was 16% up on last year, buoyed by the 6% higher 341 316 oz second-quarter output.

Total cash cost of $572/oz for the quarter was 8% down and $595/oz for the half-year were 13% lower.

Earnings per share of $1.64 a share for the half-year were 49% up and $0.89 a share for the quarter 20% higher.

On the brownfield exploration front, extension drilling at the company’s Loulo, Gounkoto and Kibali mines should replace and, in some cases, add to the group’s reserve base at similar grades. 

On the greenfield front, progress is reported at the Fonondara and Gbongogo targets in Côte d’Ivoire and advanced drill target potential is emerging at Saba, north of Gara, and the Domain Boundary, south of Gounkoto, in Mali. 

Latest results from the Sofia satellite deposit have also confirmed its potential to increase in size and add to the Massawa project in Senegal, where a feasibility study on the project is currently under way.

The feasibility study on Randgold’s Massawa gold project, in Senegal, is scheduled for completion by the middle of next year, when a final decision on its development will be made.

Massawa has a mineable reserve of 2.6-million ounces and the project has an internal rate of return of 18% at a gold price of $1 000/oz, which is a little short of its investment criteria of a three-million-ounce reserve and a 20% internal rate of return. 

If it goes ahead, Massawa will become the sixth mine Randgold has developed and its first in Senegal. 

It will also be the first of the three new projects the company plans to deliver over the next five years.

The proven ability of the Morila team to run a high-efficiency, low-cost operation has made the mining of some satellite deposits, notably Domba, commercially viable. While Domba’s development was officially sanctioned in 2015, Randgold has spent a further two years securing the approval of the local community.

"The mining of Domba will extend Morila’s life and enable it to continue funding its community programmes, notably the development of a commercial farming hub, or agripole, as Randgold’s post-mining legacy to the region.”

Randgold’s water usage across the group continues to improve. Total water withdrawal efficiency improved in the second quarter to 1.08 m³/t milled from 1.11 m3/t milled in the first quarter of this year, and for freshwater improved to 0.31 m³/t milled from 0.53 m³/t.

The company is proceeding with the development of a super pit at Loulo-Gounkoto, which will strengthen the complex’s position as a long-life producer with a yearly output of at least 600 000 oz.

Tongon continues to ramp up production as it tracks its 2017 target of 285 000 oz.

He noted that Randgold’s $28-million contribution to a public-private partnership investment in the power infrastructure has not yet been settled despite the Ivorian power utility having earned almost $100-million from supplying the mine and surrounding communities. 

The World Gold Council on Thursday reported a 10% lower second quarter gold demand of 953.4 t than 2016 and a 14% lower first half demand to 2 003.8 t on slower exchange traded fund inflows.

Net central bank purchases of 176.7 t were also slightly lower in the first half (-3%). In contrast, bar and coin investment was positive, as was jewellery demand, although the latter remains weak in a long-term context. Technology demand also made modest gains, the council reported.

Edited by Creamer Media Reporter

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