Positive value of Randgold Resources, with large increases projected gold production as the West African operations continued to expand despite the unrest in Cote d'Ivoire.

Despite the ‘civil war' in Cote d'Ivoire, Randgold Resources is maintaining its gold production forecasts for the current year and is still operating at its new, and important, Tongon gold mine in the north of the country. In a meeting on the sidelines of the PDAC in Toronto at the beginning of the month, Randgold CEO, Mark Bristow, told Mineweb that operations at the mine has hardly been affected by the unrest in the country and supplies to the mine had faced little disruption as they could be brought in cross-border from Mali in the north, where it has its other major operating mines at the moment, even though the Abidjan route from the south would face much more difficulty. It seems little has changed in this respect.

Randgold's experience to date is contrary to that of Australia's Newcrest whose Bonikro gold mine in the central-southern part of the country, being nearer to the fighting, has been suspended as a precautionary measure, although Newcrest said in a statement today that its staff there had not been threatened..

Back to Randgold Resources. The company is going through a bit of a transition phase at the moment as operations are being wound down at its old flagship operation, Morila, in Mali, but these are being replaced by its Loulo area mines and new developments (also in Mali), of which Gounkoto is the most exciting. And then it is busy bringing into full production and developing major gold mines in the Cote d'Ivoire (Tongon) and in the Democratic Republic of Congo (Kibali - potentially its biggest mine of all and where developments are proceeding ahead of schedule.) It also has a significant exploration project on the go in Senegal (Massawa) as well as some exciting exploration targets in the region of its existing mines in Mali. Its exploration activities in Tanzania, at one time another target area for the company, have been put on the back burner in favour of what it sees as better prospects in West Africa, while its Kibali project in the DRC is thought to have the potential to become one of the world's great gold mines.

The broadening of the company's activities in West and Central Africa is, of course, not without its risks - and Kibali in particular, is viewed with a certain amount of apprehension by some analysts and investors - as is Tongon at the moment. However it should be noted that Randgold has had great success to date in negotiating the sometimes difficult path of dealing with African political factions - which is probably in part why AngloGold Ashanti has agreed to let Randgold have operating control of Kibali.

Overall, Randgold has thus just reported a 5% increase in its attributable mineral resources and reserves after mining depletion and adjustments based on ongoing exploration and evaluation programmes.

This has proved to be the eighth successive annual increase in the company's attributable resources and reserves and Bristow commented that this escalation had again underlined the effectiveness of the company's key strategy of achieving organic growth through exploration success and creating value through the development of profitable mining projects. He cited the recent discovery of Gounkoto and the continued expansion of mineral reserves at its Kibali joint venture project with AngloGold Ashanti as major contributors to the increased size and enhanced quality of the company's asset base.

Thus Randgold's annual mineral resource and reserve declaration, published as part of its 2010 annual report, shows that at the attributable level, measured and indicated mineral resources rose from 20.64 million ounces to 21.77 million ounces over the year, while inferred mineral resources increased from 6.69 to 7.00 million ounces. In the higher reserve category, attributable proven and probable reserves grew from 15.56 million ounces to 16.39 million ounces without reducing the overall mineral reserve grade year on year.

"Excluding Morila, which is now only processing stockpiles and Massawa which is still at feasibility study stage, the average grade of our reserves remained above 4g/t, with Loulo, Gounkoto and Kibali all comfortably above that mark. This means that we not only managed to increase the size of our reserve and resource base during a challenging phase in the company's development, but were able to maintain and enhance the quality of our mineral assets. This is real growth, framed within realistic parameters and based on viable business plans," said Bristow.

What this increase in resources and reserves does not show, however, is the massive potential for substantial further resource expansion in breadth and depth at and around existing operations - notably the Malian mines and Kibali in the DRC. Assuming Randgold can stay on the right side of the various African administrations in which its projects are located, then its future growth potential looks pretty assured bar domestic unrest in any of the countries in which it operates impacting directly on its operations..


2010 was not an easy year for Randgold. Despite an increase in headline profits of 43% the true figure was not quite as rosy as this might suggest with the increase achieved due to higher gold prices and despite a worrying rise in unit costs. Net cash also diminished, but the company is anticipating strong gold production growth in the current year.

The anticipated good production increases, and corresponding reductions in unit costs are due to come about through its expanding mining developments in Mali - and assuming Tongon in Cote d'Ivoire continues without serious interruption. Indeed Bristow reckons that group production for 2011 will increase by more than 70% over that of 2010 to between 750,000 and 790,000 ounces of gold, and management is targeting total cash costs, after royalties and taxes, of less than US$600/oz.

Tongon, in particular, is scheduled to produce 260,000 to 270,000 ounces against only around 28,000 in the 2010 start-up year while the Loulo complex's production is expected to be 420,000 to 440,000 ounces, of which some 120,000 ounces will be contributed by the new Gounkoto mine development in the latter half of the year. Last year Loulo production totalled some 316,500 ounces. The Morila joint venture, which is now only processing stockpile and dump material should produce 200,000 to 210,000 ounces down from 238,000 ounces in 2010.

Bristow cautioned, however, that this forecast was subject to exchange rates and input costs remaining at last year's levels, and to the political impasse in Côte d'Ivoire not impacting to a greater extent on the Tongon mine. He also said that the company's focus on efficiencies and costs would have to be even tighter than usual, particularly in the first half of the year.


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