Resolute Mining (Sydney:RSG) looking for acquisitions
By: Liezel Hill
4th March 2011
TORONTO (miningweekly.com) – Resolute Mining, which has operations in Mali, Australia and Tanzania, will look at potential acquisitions, mainly in Africa, CEO Peter Sullivan said this week.
Resolute will produce 330 000 oz in the current financial year, and expects output of more than 400 000 oz in 2012.
The company's main assets are the Syama mine in Mali, which it bought in 2004 from Randgold Resources, and the Ravenswood mine in Australia.
A third operation, Golden Pride in Tanzania, will likely end production in a couple of years unless new resources are found.
This year is an important one for Resolute because it will have paid off all its debt by the end of 2011, leaving the company both debt- and hedge free after its hedgebook was eliminated in 2010, Sullivan said.
At the same time, high gold prices and increasing production mean that both revenue and cash flow will be on the rise.
“And we've got some organic growth that we will be able to fund from that cash flow, but the balance will be 'where is the new project'?” he said in an interview in Toronto.
“We've already started on that process, just sussing out the market and getting a good look at all the opportunities that are out there.”
Mines or projects that become available in Australia are often “mature” or tend draw heated competition from other firms in the region under pressure to grow, so the company is most likely to do a deal in Africa, he said.
“Africa is much more open, even though there is a bit more of a rush on now.”
But Sullivan added that high gold prices, and a focus on assets in West Africa in particular, mean that companies with operations in the region are generally highly priced.
“There's no bargains out there, so we may have to bide our time if we want to look at that.”
Resolute itself has drawn a lot of interest, especially as it is relatively cheap compared with some peers, Sullivan said.
“We do get lots of people knocking on the door wanting to have a look.”
Resolute is the number-two ASX-listed gold producer by volume, after Newcrest Mining.
INTERNAL GROWTH OPTIONS
Syama is still ramping out, but the company is targeting 250 000 oz/y once a steady state is achieved, and Sullivan said that plant issues experienced during the commissioning process have generally been resolved and the mechanical consistency is improving.
Beyond that, the firm said recently it is reworking the pit design at Syama to reflect a higher gold price assumption, and also plans to install a new oxide circuit at the operation to process ore from satellite resources the company has drilled up to the north and south of the main Syama pit.
The oxide circuit will add about 70 000 oz/y and cost around $38-million to complete, Sullivan said.
Feasibility studies on the pit expansion and oxide circuit are both expected this year, and the company is continuing drilling in the area to add to the existing resources.
The company will also need to revise plans for an underground operation at Syama, that it plans to develop after mining ends in the pit.
Cash costs at Syama are still pretty high – Resolute is forecasting $ 1045/oz for the first half of 2011, but will come down as the mine ramps up, Sullivan said.
The firm is also planning a project to connect the operation with new grid power being installed in the region, which promises to bring costs down further in a few years.
Resolute owns 80% of Syama and the government of Mali holds the balance.
In Australia, Resolute had been transitioning to underground mining only at the Ravenswood mine, after ending production at the Sarsfield openpit in 2009.
But after running the numbers at higher gold price assumptions, the company now plans to restart mining below the current pit, although it will need permission for a new tailings dam first.
Edited by: Liezel Hill
