Randgold holds course in tough quarter

Nov 07 2012 12:12
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Johannesburg - Substantial progress at the Kibali gold mine development project and Randgold’s flagship Loulo complex was offset by grid power supply problems at the Tongon mine and lower grades processed at Gounkoto‚ as Randgold Resources' third-quarter results held steady but did not match its record second-quarter performance.

Q3 profit of $121.3m was down 15% on the prior quarter‚ primarily on the back of lower sales but in line with the corresponding quarter in 2011‚ Randgold said in a statement on Wednesday.

Production was 204 475 ounces of gold against Q2’s 210 534 oz and 182 362 oz in Q3 of 2011‚ while the total cash cost per ounce was $737 (Q2: $703/Q3 2011: $747).

Ounces sold dropped by 10% quarter-on-quarter‚ affected by the timing of gold shipments at quarter end being disrupted by the annual stock take at the refinery.

The highlight of the quarter was the strong improvement at Loulo‚ which increased production by 78% and reduced total cash cost per ounce by 8%.

Tonnes mined and processed were mostly from Loulo’s two underground mines‚ Yalea and Gara‚ which are now beginning to deliver their full potential. Both mines also achieved a steady rise in stoping and development rates.

Relative to Loulo’s improved delivery‚ Gounkoto’s contribution to the complex’s results was down as forecast.

Meanwhile‚ a geotechnical review has confirmed the potential for an underground mine at Gounkoto‚ where an underground resource of more than 1 million ounces at a grade in excess of 5g/t has been identified. Infill drilling for a prefeasibility study‚ due for completion early in 2013 is under way.

Kibali’s development remained on track for first gold production by the end of 2013. All key contracts have now been agreed and the mine’s costing schedule has been finalised.

While open pit mining has already started‚ the plant foundations are being readied to receive the two giant mills currently being trucked to the site from the port of Mombasa. The site clearing programme is also on schedule‚ with more than 1 000 families already resettled in the new model village of Kokiza.

Tongon suffered from frequent outages in its national grid power supply‚ which continued to impact negatively on plant availability and recovery and hence on production and costs. Since the mine was connected to the grid last December‚ the erratic power supply has cost it some 50 000 oz in lost production.

While below plan‚ production of 56 381 oz was in line with that of the prior quarter.

“In Senegal‚ Massawa is one of the largest undeveloped orebodies in Africa at 3 million ounces. Exploration continues to find additional ounces as well as to improve Randgold’s understanding of this complex deposit.

"Pilot plant testwork to determine the project’s optimal operational parameters is scheduled for next year. Randgold is currently in discussion with the Senegalese government about the possibility of securing a hydropower supply‚” Randgold said.

Chief executive Mark Bristow described the third-quarter results as a mixed bag‚ but with the good far outweighing the bad.

“The challenges we faced are to be expected when you develop and run mines in remote parts of Africa and‚ as our record shows‚ we’re more than capable of managing them.

"They should not cloud the real achievements of the quarter‚ particularly the fine performance by Loulo’s underground mines and the rapid progress we continue to make at Kibali. Production and costs for the final quarter are forecast to again show significant improvements‚” he said.

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