Joe Bavier Abidjan
Africa-focused mining firm Randgold Resources saw any further fall in the price of gold as an opportunity to expand its exploration activities cheaply, the company’s chief executive said at the weekend.
The mining firm was looking to buy stakes in exploration projects run by smaller firms likely to be hit hard if the precious metal entered a downtrend after 12 years of gains, Mark Bristow said in an interview.
Spot gold tumbled more than $125 (R1 153), or nearly 9 percent, to below $1 340 an ounce last Monday, a record one-day loss in dollar terms that sent shockwaves through the industry. And though the market bounced back above $1 400 on Friday, analysts say prices may fall further in the near term as money continues to flow out of exchange-traded funds of the precious metal.
He said the grim outlook for gold was likely to affect small mining firms the most as financing dried up, forcing them to mothball exploration plans.
But that could be an opportunity for established firms that could buy into projects at knock-down prices.
“The industry hasn’t been efficient in investing in exploration,” he said. “That’s what Randgold’s real focus is now. This is the time you can pick up the good positions.”
Bristow said the London-listed company, which operates mines in Mali and Ivory Coast, would maintain planned spending for 2013 despite the weak outlook. It plans to pour the first gold from its Kibali project in the Democratic Republic of Congo (DRC) by year-end.
Bristow said Randgold was already establishing joint ventures with cash-strapped junior mining houses to expand its exploration activities.
In December last year, Randgold acquired a majority stake in a joint venture with Canada’s Kilo Goldmines that will see it manage the junior’s exploration licences in the DRC.
It announced a similar deal with London-listed Goldstone Resources earlier this month that gives it control over the Sangola project in Senegal.
Under those two deals, which will serve as templates for future agreements, Randgold will take over the projects and fund exploration. A prefeasibility study will be completed within five years at which point the minority stakeholder will be asked to either fund its share or Randgold’s stake will grow to 65 percent.
If funding is still not available on completion of a bankable feasibility study, the minority partner’s stake will be diluted. Bristow added that mining firms with the resources and willingness to invest were likely to emerge from the gold downturn stronger than their competitors.
“From 1990 to 1999, when the gold price was so low, everyone did exactly the same as they’re doing now, cutting exploration. And we spent money then,” he said. – Reuters