JOHANNESBURG (miningweekly.com) – During gold mining’s years of prosperity, the industry was able to harvest and feed off itself.
But in recent years, it has lost $100-billion worth of value, with increasing revenue streams being consumed by lower reserve grade.
During the period of declining trading volumes on global stock markets and investment in gold mining losing relevance, Randgold Resources, with Dr Mark Bristow as CEO, managed to scurry to safety by ensuring that it had a good margin at $1 000/oz.
This made Randgold a standout performer, which resulted in Bristow being the obvious choice to be president and CEO of merged Randgold-Barrick companies, with Randgold’s Graham Shuttleworth becoming the combined entity’s chief financial officer.
Randgold shares have climbed by 29% and Barrick shares by 26% since the deal was announced in September.
The new company is expected to have a market capitalisation of $18-billion, yearly revenue of $9.7-billion and aggregate adjusted earnings before interest, taxes, depreciation and amortisation of $4.7-billion.
It houses five of the ten top tier gold assets by total cash cost in Cortez, Goldstrike, Kibali, Loulo-Gounkoto, Pueblo and two with the potential to achieve tier-one status in Goldrush/Fourmile and Turquoise Ridge. It will have the lowest total cash position among gold majors and a diversified asset portfolio positioned for growth in many of the world’s most prolific gold districts.
It also highlights the reality of tier-one assets being discovered where the geology is, and not being restricted to infrastructurally endowed countries, which emphasises the essential need for a management team that has a proven ability to deal successfully with such complexity.
Bristow will focus on leveraging the strength of this one-of-a-kind gold company to make it the gold investment vehicle of choice.
The Randgold management team is being joined by Barrick’s relatively young employee complement. There are no resistance forces because Barrick executive chairperson John Thornton has been preparing the ground for some time.
Barrick pays quarterly dividends and Randgold pays yearly dividends above the $500-million level, so there has been a lot of pre-merger debate on what level of dividend payment is fair and proper.
With the transaction to complete at year-end and against the background of a higher gold price and good third-quarter Randgold performance, it made sense for pre-closure agreement to be reached for Randgold shareholders to receive an elevated dividend for the 2018 financial year.
What is more, 70% of Randgold shareholders are also Barrick shareholders and the promise of the creation of a standout combined gold company has also meant a slightly higher pre-closure dividend for Barrick shareholders.
The market likes the transaction but a lot of work needs to be done to get the new gold combination up and running in the manner broadcast.
The small technicality that often gets in the way of transactions has been removed through the unconditional clearance the merger has received from the South African Competition Tribunal. What triggered the need to apply to South African competition authorities is that both Barrick’s Acacia and Randgold refine gold at South African’s Rand Refinery, Mining Weekly Online can today report.
THIRD-QUARTER RANDGOLD RESULTS
In the three months to September 30, Randgold’s gold production of 308 628 oz was kept in line with that of the previous quarter, despite the strike at Tongon, which meant that activities only returned to normal in the last month. Kibali posted another set of record results and Loulo-Gounkoto delivered increases across the board to offset the shortfall.
Randgold’s Massawa project, in Senegal, is beginning a public participation process, feasibility studies are moving ahead at Loulo, Kibali’s Kalimva-Ikama project is showing promise, brownfield exploration at Loulo-Gounkoto indicates that depleting reserves will be replaced by ounces of the same quality, underground extension drilling at Yalea has returned strong results and ongoing work along the Badenou structure is showing opportunities for adding ounces at Tongon.
When Randgold Resources arrived in Mali’s Loulo district in 1996, there was only one known gold deposit – the one-million-ounce Gara resource. Subsequent discoveries, notably Yalea, then the underground potential at Gara and Yalea, followed by Gounkoto and Loulo 3, have raised its total endowment of 19-million ounces and confirmed its status as one of the world’s most prolific goldfields.
Randgold’s permitting straddles the Mali-Senegal border and covers 70 km of strike across a 10-km-wide corridor. Ongoing exploration is designed to sustain and extend Loulo-Gounkoto’s production profile, which grew from 365 000 oz in 2012 to 730 000 oz in 2017. Total Randgold output passed the six-million-ounce mark last quarter along with the finding of new multimillion-ounce deposits in the district.
Even though Kibali has only moved into full underground production this year, it has already made a major contribution to the economy of the Democratic Republic of Congo. To date, its in-country contribution amounts to almost $2.5-billion in the taxes, permits, infrastructure development, salaries and payments to local suppliers. In the third quarter of this year alone, Kibali spent more than $40-million on local contractors.
Driving power cost down is essential to delivery of Randgold’s business plans. Its integrated energy plans ensure that current and future energy needs can be met in the most cost effective, efficient and beneficial manner while also reducing environmental impacts by investing in renewable energy as an integral component of the power strategy. Renewable power makes up a third of total power consumption.
With its abundant water resources, Kibali maximises the use of hydropower from three run-of-river plants, which provide 42 MW of power. Tongon draws on a connection to Côte d’Ivoire’s national grid, which is 50% hydropower and 50% gas power sourced. A back-up thermal station of high-speed generators is available at the mine to cover the intermittent grid instability.
At Loulo, the current thermal station consists of more efficient medium-speed heavy fuel oil generators with some high-speed generators to support the baseload units. However, with the excellent solar irradiance levels in West Africa, the mine is seeking to incorporate a solar component in its microgrid. While solar power can rarely provide the sole energy solution it can be an important part of the overall power supply strategy. The feasibility for the mine’s solar photovoltaic supply is well advanced.
As well as reducing cost, this will cut fuel consumption, further reducing the carbon footprint and presenting a sustainable power solution locally at the end of the life-of-mine. The integration of the solar power in combination with battery storage should allow Loulo to ensure a stable power supply from its microgrid during periods of cloud cover when the daily peak solar window is impacted. It has also recently invested in a further two medium-speed heavy fuel oil fuelled generators replacing high-speed diesel units to improve power generation efficiency as part of Loulo’s fully integrated power solution.
Solar integration is also key to reducing thermal generation at the proposed Massawa mine. The thermal power solution is planned to rely on solar power and battery grid stabilisation to offset the fuel usage, making the best use of the daily six-hour window of solar energy contribution.
With rising power costs foremost in mind, Randgold is looking to move its operations down the power cost curve, while at the same time realising opportunities to utilise more environment-friendly power generation and improve its carbon footprint.
Randgold’s workers and communities enjoy a wide range of company-sponsored recreational activities designed to make their leisure time rewarding and promote interaction between villages.
There is a strong emphasis on sport, particularly soccer, with the mines hosting regular inter-district and regional tournaments. Forty-four schools competed in Kibali’s interschool challenge, aimed at developing football talent, with the winning schools receiving cash prizes for sport equipment and teaching materials.
National holidays are celebrated at events featuring barbeques and traditional dances, and attended by community leaders.
“We care deeply for our people, not just at work but at home. Our extensive community development programmes provide them with properly planned infrastructures and villages, health and education facilities, and economic opportunities. But we also want them to have fun and to increase social cohesion, and that is what the leisure activities are designed to do,” Mining Weekly Online was told.
The Dow Jones Sustainability Index has included Randgold – a constituent of the FTSE4Good Index for the past four years – in its index of top sustainability performers at a time when Randgold’s Morila is pioneering an agribusiness project to provide communities with a sustainable source of economic activity after the mine’s closure.