by David Mckay of MiningWeb (from Gold Eagle Post)
Randgold gains a quarter on possible Morila sale
The share price of Randgold & Exploration raced up almost a quarter of
its value to R8.15 a share from R6.55 on the Johannesburg Stock Exchange on Monday. Analysts speculated that the root cause is a bid
for Morila, the $85-million west African gold project owned by Randgold Resources, the London-listed junior miner which is, in turn, controlled by
Randgold & Exploration. Gold Fields Ltd has been linked with Morila in the past as part of a package which also included 50 per cent of Western Areas. But according to a report by Standard Equities, the market favours
Anglogold as the likely suitor. Anglogold's James Duncan said the company did not comment on market speculation.
Standard Equities observed that Morila, which is located in former Soviet satellite country Mali, would fit well into Anglogold's portfolio as it would
build on synergies with the company's Sadiola mine. The cost structures are similar with Anglogold mining Sadiola at $102 per ounce cash costs versus a projected $133 per ounce operating cost at Morila. In addition,
Anglogold already derives some 206 000 attributable ounces from the mine and is in line to mine an annual 1.2-million ounces from the nearby Yatela prospect from mid-2001. Morila is estimated to mill a minimum
200 000 tons of ore a month which is equal to 456 000 ounces of gold a year and giving Anglogold an attributable 1.8-million ounces a year from
Mali ? about a fifth of its annual production.
Geographical diversity is in line with Anglogold's strategy. Commenting in its recently published annual report, Anglogold said it would seek to spread its risk by diversifying its gold production into other regions. The company is already bidding for half of Ashanti Goldfields' Geita prospect in Tanzania and therefore has no fear of investing in Africa. "Anglogold is hard pressed to substitute its high cost South African production with low cost international surface ounces," Standard Equities says. It adds that South African mines Deelkraal and Savuka (both in the Free State province) are potential candidates for disposal or closure, possibly to Harmony Gold Mining Company.
Market watchers also believe other additions are on the horizon for Anglogold including a bid for Australia's Delta Gold and possibly Newcrest. All the Australian gold producers are running at a heavy discount at the moment unlike Anglogold which is rated as trading at a
20 per cent to 25 per cent premium. There is some need, then, for the South African miner to add value. Morila is billed as one of the best African gold projects with a proven and probable resource of 3.3-million
ounces and a grade in its first year of over nine grammes a ton. "This is why Morila is so attractive," BoE Securities gold analyst Piet Stoltz says; "It allows payback within the first year," he adds.
According to Randgold Resources MD Mark Bristow, Morila is 50 per cent complete and cold commissioning of the mine is expected by the end of June. Full production is scheduled for the year-end. Morila has
also begun drawing down the $90-million loan agreement that was concluded with six international banks in the previous quarter. Spare a thought for JCI Gold, however: an offer by Anglogold (or any other group for that matter) will almost certainly end plans to consolidate JCI Gold's remaining gold assets. |
