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Gold/Mining/Energy : SOUTH AFRICAN MINING -- Ignore unavailable to you. Want to Upgrade?

To: Bob Dobbs who wrote (146)	9/11/1998 3:50:00 AM
From: POLARBEAR	Respond to of 472

Hi Jim. Thanks for the info. Your comment "Rangy is not widely followed among analysts in the states" really hits the nail on the head. The low volume strongly suggests to me that very few people even know rangy's name, and most of those still think they manage durban and harmony. Here's a good article from my extensive collection that goes a long way in explaining the initial high costs of Syama. Warm Regards, PB September 06, 1996 RANDGOLD Expanding into Africa Mining house Randgold has secured control of BHP's Mali gold mine Syama in a deal estimated to be worth US$84m (about R376m). The effect -- applying Canadian valuations to gold-in-the-ground -- will be to increase Randgold's NAV by about a third to around R42 a share. The deal has been structured through Randgold Resources, domiciled in the Channel Islands and 92%-owned by Randgold through a holding pyramid. The purchase price is being settled through a cash payment of $30m; BHP Minerals retains a loan claim of $23m in Randgold Resources, with a further $31m loan in BHP Minerals Mali (the company it sold) repayable over six years. More interesting is that Randgold has raised $40m overseas through an issue of convertible debentures. HSBC James Capel was the lead underwriter in the issue, which was sub-underwritten by Deutsche Morgan Grenfell, the joint venture between ABN Amro and Rothschilds and Societe Generale. Commercial director Brett Kebble concedes that the premium paid is high, but points to the coupon of 6,5% -- which is unusually low. Shareholders in Syama will now be Randgold Resources (65%, through BHP Mali), the Mali government (20%) and the International Finance Corp (15%). BHP has operated the mine, about 25 km north of the Mali border with Ivory Coast and far from the other SA-owned mine in the country (Anglo's Sadiola), since 1990. It has concentrated on mining the oxide capping from which it has extracted around 700 000 oz. Since then, the mine has run into metallurgical problems, about which Resources CE Mark Bristow is frank but cheerful. Having removed the oxide reserve (the easiest to treat), BHP then geared up for the much more extensive underlying sulphides -- the mine's resource is estimated at a total 3,5m/oz at an in situ grade of 4,1 g/t; proven reserves within the total stand at 2,2m/oz at a diluted grade of 4,4 g/t. Unfortunately, some design problems resulted in serious bottlenecking, discovered only after the sulphide treatment sections were commissioned in 1994. At the same time, calculations of the natural fuel content of the ore were also incorrect, with the result that additional diesel fuel at substantial cost had to be introduced to achieve extraction efficiencies. Bristow says Resources' teams have now established ways of handling these refractory difficulties. He estimates an injection of an additional $54m over the next two years -- most of it ($32m) for mining equipment -- will resolve the problems. A Randgold mining team will take over from BHP managers in the next few weeks. Kebble says Randgold's conservative estimates suggest that Syama will achieve full rated production of about 200 000 oz a year from 1,8 Mt of material in about 18 months. After that, he believes Syama will contribute around R115m a year net to Randgold's bottom line. Assuming everything is unchanged from current circumstances, it will increase Randgold's attributable profit to about R200m a year. Randgold's present market cap is R1,12bn and this latest addition expands the company's time horizon appreciably. As its underlying SA mining assets are all considered short life and marginal, Syama's conservative life expectancy of eight years from open cast methods adds a new dimension. In addition, the BHP deal brings with it access to another exploration project in Mali (Loulo), and two further exploration permits (Yanfolila and Morila). But the deal does raise a nagging question about why BHP would want to sell a mine it has operated for only six years. This is, after all, one of the largest mining houses in the world with a long string of successes. Asked what made it possible for Randgold to buy it, Kebble says the bottom line is that Syama is simply too small to warrant BHP's full attention. Selling it to Randgold is an elegant solution to an annoying distraction. BHP's American offices were closed when the FM called. After the group's good results from its SA mines over the June quarter, the latest acquisition -- soon after its purchases of four Gencor mines -- demonstrates that there's plenty of life left in it yet. And a good indication of investor confidence is that the share price has moved from R14,75 to the current R30. David Gleason

To: Bob Dobbs who wrote (146)	9/11/1998 4:12:00 AM
From: baystock	Read Replies (1) \| Respond to of 472

Here is an old article that I dug up that comments on a $48 million debt issue. Note the following exerpt: "In five weeks flat, Randgold raised $48-million through the issue of 7% debentures convertible into Randgold ordinaries at R39,01 in 2001." If one thinks about it, the debt is almost twice the market cap of RANGY. This may be weighing on the stock price as people fear that RANGY may go bankrupt as have so many other companies in the Gold mining sector, due to the low POG. btimes.co.za Randgold's takeover team has no quitters RANDGOLD, a share I have been backing since the takeover by Peter Flack and his management team in August 1994, added 150c to R36 on the strength of another sound performance from its investments and a doubling in net asset value to R43,25 at September 30. The discount of share price to net asset value has narrowed: 12 months ago the shares were R14 against nav of R22. The big difference is materialising in Randgold Resources, the offshore exploration arm which has interests in six African countries. Now a March year-end, Randgold reported for the 12 months to September 1996. Not directly comparable with the 1995 figures, Randgold showed earnings of R49,9-million or 128,6c after exceptional items. Flack says that among the highlights were the takeover by 90%-held Randgold Resources of BHP Minerals Mali for $82-million settled in cash and through the issue of Randgold Resources shares. Now named Randgold Resources Mali, the assets include the Syama mine and other prospects. Flack says the due diligence undertaken at Syama was an excellent job. Gold has been poured, improvements are still being effected and the target is for 190 000oz of gold in 1997 at a cash cost of $250/oz. Production costs have already been reduced from $316/oz to $275/oz. Randgold Resources has identified 198 targets within Africa and R67-million has been budgeted for exploration in the next year. Randgold Resources, which will be ready for its own listing in 1998, has already established a resource base of 6-million ounces of gold. In five weeks flat, Randgold raised $48-million through the issue of 7% debentures convertible into Randgold ordinaries at R39,01 in 2001. Flack notes that the calibre of the underwriters - Capels, Rothschilds, Morgan Grenfell and Societe G‚n‚rale, was a vote of confidence in Randgold's credibility overseas. No SA company has issued paper on more favourable terms, and it was pleasing that the issue was four times subscribed. Flack says the value of the issue exceeds the entire market capitalisation of Randgold two years ago when the former management was outvoted. The grass never grows under these fleet feet: the earliest highlights of Randgold's year could almost be overlooked. It bid Gencor for three mines plus mineral rights, and now oversees Buffelsfontein, Stilfontein and Grootvlei as well as its original quartet Blyvoor, Harmony, Durban Deep and ERPM. Harmony also bought Unisel from Gencor, and West Wits was taken over by Durban Deep. Buffelsfontein was the star performer, chipping in R26,2-million of the R48,2-million profit after tax and capital expenditure earned by the seven. Grootvlei lost R10,7-million because of grade problems which have been overcome and a profit is expected this quarter. Randgold and all the mines save ERPM and Stilfontein were listed on Nasdaq this month at a cost of roughly half a million rands a company. Hold these shares: there are no quitters at Randgold.