moneyweb.co.za
Batepro quits Randgold Resources project
by David McKay
But project engineer MDM comes to the defence of Randgold Resources
BATEMAN Projects (Batepro), the listed project engineering firm, has withdrawn from Randgold Resources' Morila gold venture, based in west Africa's Mali, because the firm could not justify the risks to its shareholders. Batepro, which was contracted in a joint venture with Metallurgical Design and Management (MDM) to handle project engineering at Morila, said Randgold Resources wanted it to carry contingency and "growth allowance" risks. Batepro's Vincent Diesel said "there was a fundamental difference with Randgold Resources on how to do business".
The difference of opinion is that Batepro wanted to establish an open-ended agreement in which it could charge additional costs to Randgold Resources. "We know from experience that these situations can develop where initial estimates of certain input costs are exceeded," Diesel said. "They (Randgold Resources) expected us to come up with a lump sum turnkey project. But as a public company we cannot put our shareholders at risk. It would have been a loss to our shareholders," he added. Diesel acknowledged that the project was technically strong.
Batepro withdrew from the Morila project in early August, but project engineers MDM (with whom Batepro was in joint venture at Morila) said they had confidence in Randgold Resources? management team. Gordon McCrae, MD of MDM said yesterday that his company would continue with the construction of Morila?s recovery plant ? which includes the crushing and milling facilities ? as well as associated infrastructure, such as water supply.
"There is a tight schedule at Morila, but we are currently on track. Construction on the plant is ongoing," he added. MDM has a eight to nine year track record with management at Randgold Resources and worked on the bankable feasibility of Morila, a project regarded as the jewel in the crown of Randgold Resources. MDM has also moved its project team from the now completed Delta Gold-backed Eureka open cast gold project in Zimbabwe to Mali to supplement staffing during the construction phase, McCrae said.
Randgold Resources chairman Roger Kebble said the discussions with Batepro had put the project back by about a week. He confirmed Batepro wanted to operate on a fixed price basis which he believed was "pedantic", but he added that MDM?s work would be supported by management at JCI Projects who, he said, were "very professional".
The withdrawal of Batepro from Morila is, of course, a minor hiccup in the progress of the project which by all accounts appears to be robust. Randgold Resources earlier this year won the approval for the development of the $111m Morila mine enabling the London-listed group to produce its 1997 listing goal of 500 000 ounces of gold a year. But the project is being fast-tracked as the group reins in most of its other explorations and battles to bring its only operating mine, Syama which is also in Mali, into line.
Bridging finance for Morila has been arranged until a loan from Rothschilds is received, but the probability is that Randgold Resources wants as few complications and risks as possible at Morila. Morila must come on line quickly, within budget and start contributing to the group?s bottom line to support Syama which has been disappointing. The poor spot gold price has no doubt increased the need for a rapidly developed Morila (although a hedge structure has been locked in by Randgold Resources).
Syama became unprofitable in the June quarter recording a loss of $1,2m from a slender $627 000 profit in the March quarter. A gear-box failure kept the mine?s mill out of action for a month. The use of lower grade oxides to top up production depressed the grade which fell to 3,85 grammes per ton from 4,25g/t. The outcome was an uncomfortable leap in cash operating costs of $23 per ounce to $280/oz.
Morila will have a production rate of 200 000 tons a month over a 10-year life of mine. Gold output will be 500 000 ounces in the first year, higher than the average 300 000 ounces for the remainder, owing to a high grade oxide reserve that will be developed. Gold resources of 4,45-million ounces have been independently audited and reserves of 3,3-million ounces have been calculated. Morila is also expected to be low cost with average projected cash operating costs are $133/oz. |
