An earlier (May) article on Randgold Resources (GOLD)
Gold mine development and exploration steam ahead
By: Jim Jones
Posted: '05-MAY-05 10:00' GMT © Mineweb 1997-2004
JOHANNESBURG (Mineweb.com) --There can, perhaps, be fewer things more frustrating to a miner than for production targets to be missed because of technical problems. And those frustrations are all that greater when the operations in question are managed and run by a partner.
That has been Randgold Resources’ experience at the Morila mine in Mali operated by joint venture partner AngloGold Ashanti. There had been hopes that Morila’s ore production would have been quickly lifted to the monthly target of 350,000 tons after the hitches of 2004. But the problems persisted which meant that total ore processing in the three months of this year’s March quarter was only 857,000 tons, lower than the December quarter’s total and still not up to scratch.
The March quarter’s gold production was sustained by processing ore that was richer than planned. And while this short-term high-grading should not affect the mine’s lifetime overall recoveries, it is not a technique one would like to see persisting for any great length of time.
Sorting out the technical problems at Morila’s processing plant will be a gradual process. And while tonnage processing capacity constraints remain over the next several months, gold production will continue to be boosted by working some higher-grade sectors of the mine’s ore-body.
Still, the Morila joint venture might be seen as something of a sideshow for Randgold Resources. The company’s immediate longer-term future lies with its developing Loulo property, again in Mali. By end-March, Loulo’s total gold resource had exceeded 8 million ounces, and shareholders can count on significant increases as exploration drilling progresses, particularly at the Yalea orebody currently calculated at 5.2 million ounces and open-ended at depth.
So far, mineralisation has been proved to exist to a depth of 780 metres and the next drilling phase involves holes probing down to 1,000 metres. And the focus is on a high-grade pay-shoot. While open-pit operations are building up steam at Loulo, planning and design of underground mining operations have advanced based on the additional geological information. CEO Dr Mark Bristow explains that the underground development study should be completed in the current quarter, which will allow a decision on the precise details of the underground-open pit interface. Bristow expects a start on underground development next year.
Funding should present no problem as the company has not yet drawn down its funding for Loulo and Morila is paying dividends that add to cash flow. But as Bristow puts it almost wistfully, finances are not a restraint but development opportunities can be. Which, of course, explains the diversity of the company’s exploration effort. Randgold Resources will not be entering into JVs in future – it wants to develop and manage its own mining projects.
Elsewhere in West Africa, exploration work in Senegal is uncovering mineralisation at the Sofia project with potentially attractive gold and drilling is being stepped up to prove up one of the 32 exploration targets. Exploration in neighbouring Burkina Faso is less advanced than in Senegal, but one target where good preliminary results have been indicated is being prepared for more-intensive drilling.
On the other side of the continent, geological work in Tanzania is at a preliminary stage, aimed at present on understanding the geology of gold mineralisation before any decision is taken on whether to spend money on establishing the existence of payable reserves.
Inevitably, it might seem, with any company targeting a range of gold prospects there will be other problems. In Randgold Resources’s case there is the Tongon project in Côte d’Ivoire where government troops and insurgents have been in something of a stand-off. Talks aimed at bringing the two sides together in a permanent settlement have progressing satisfactorily, the generals are talking to each other and an election date has been set. And while work has stopped for the present at Tongon, exploration and feasibility studies will start moving fast once the political situation stabilizes. Bristow says that he will be meeting with Ivorian government representatives later this month and that the Togon feasibility study is being “dusted off”.
All of which underscores the basic correctness of the Randgold Resources strategy of wide geographical spread. The focus is clearly on finding new projects.
FINANCIAL
During the March quarter gold revenues from Morila slipped to $32.0 million from the December quarter’s $33.7 million and operating profit to $10.6 million from $14.7 million. Lower recovery grades and lower mill throughput meant that gold production fell to 167,272 ounces in the March quarter from the December quarter’s 226,679 ounces. The production decline was mitigated by a higher average gold price of $428 an ounce against $369 in the fourth quarter of 2004.
