JOHANNESBURG (miningweekly.com) – The falling gold price in recent months has emphasised the need for governments of mineral-rich countries to cooperate with mining companies in the optimal development of their resources, Randgold Resources CEO Mark Bristow has urged.

At the end of June, the gold price plummeted to $1 180, its lowest level in nearly three years, as concerns over the US Federal Reserve's plans to rein in financial stimulus continued to unnerve markets.

The gold price hovered around $1 255/oz on Wednesday, with a recent survey conducted by newswire Bloomberg suggesting that prices would close the year at $1 550/oz.

"Governments are tempted to harvest the green shoots before the enterprise comes to fruition; the gold mining industry tends to exaggerate the risk without fully addressing its own internal problems," Bristow told a media briefing in Sandton.

He attributed the disconnect to the mistaken perception that gold mining companies had made extraordinary profits during the long bull run in the gold price, which started in 2000 and was predicted to come to an end later this year.

In reality, he said, most gold companies had not managed to create real value, as escalating costs cramped margins. This resulted in the industry being ex-growth at the height of the boom.

Bristow noted that the pursuit of quality assets had led gold companies away from their traditional operating areas to regions that were more prospective, but that presented a greater risk.

“All these regions are now competing with each other for mining investment and, while Africa has the advantage of great mineral wealth, its competitors generally have better infrastructure, greater skills pools and more sophisticated economies," he added.

He explained that the gold industry had, since 2011, not delivered value to investors, as the industry had exploited the rising gold price since 2000, but did not invest in value-adding projects. This resulted in an overall reduction in grade in the industry.

Bristow suggested that, for African countries to attract mining investment and benefit fully from their mining industries, they had to participate fully in the value creation process.

"Real value is created by the discovery of multimillion-ounce deposits and their development into profitable mines. Governments' role in this should be, firstly, to provide a stable, business-friendly regime that will attract investors, and then to partner the mining company in the development process, driving the project up the value curve and sharing fairly in its returns," he said.

Meanwhile, Bristow said the current pressure on the industry had created new opportunities for Randgold, as support for gold mining juniors with quality assets was no longer available from bankers and investors.

"While our core strategy remains organic growth, we have entered into a number of earn-in joint ventures (JVs) on promising projects, most recently the agreement announced last week with Taurus in Mali," he highlighted.

British Virgin Islands-based West African explorer Taurus Gold had entered into a JV agreement with Randgold to explore and potentially develop the Bakolobi gold project, 30 km south of Randgold's Loulo mine, in Mali.

Under the terms of the agreement, Randgold would fund all costs to complete a prefeasibility study for the project, and would initially own a 51% interest in the JV, which it could increase to 65% by funding a feasibility study.

Meanwhile, Bristow pointed out that Randgold’s Kibali project, in the Democratic Republic of Congo, was still on schedule to produce its first gold in October, adding that he expected the 30 000 oz target set for the year to be easily exceeded.

"With our robust operations, low costs and no debt, and Kibali on schedule to pour its first gold before the end of this year, Randgold can face any realistically foreseeable gold price scenario with equanimity."

The Kibali operation would comprise an integrated underground and openpit mine, a twin-circuit sulphide and oxide plant with a throughput of six-million tons a year, four self-constructed hydropower stations and a standby high-speed thermal power generator for back-up power during the dry season.