South African gold mining giant Randgold has decided the bottom is in and that NOW is the time to go shopping within the gold sector.

Regards - VHF

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Randgold on the prowl
November 17, 2008

Business Report

By Daniel Magnowski

Dakar - Gold miner Randgold Resources is looking to snap up assets from rival diggers left struggling by the financial crisis as it seeks to boost its reserves, the company head said late on Sunday.

"We're looking now, we're looking very hard. We've got our eyes on a few assets. The challenge is, most of the large resources, assets and mines we would be interested in are owned by majors," chief executive Mark Bristow told Reuters.

"Other assets are located in difficult places, and none of them could be converted into mines within the next two years."

An ideal target would contain 3 million ounces of gold, have an internal rate of return of 20 percent and be viable as a mine even if the world gold price fell to $650 per ounce, almost $100 below its level at Monday's opening, he said.

Mining firm valuations have been hammered in the past few months by a worsening outlook for commodity prices, as the likelihood of a severe recession in Europe and the United States has increased.

The UK mining index has lost 56 percent this year - though Randgold itself is up 6 percent - and lower share prices would mean lower price tags.

"You've got to find the right asset to buy. There's been a massive erosion of share prices so in theory they are not as bad value as they were," Bristow said.

As well as seeking firms that have proven assets, Randgold, which sits on a pot of $260 million in cash, has been looking at expanding its footprint on the continent.

Already digging at two sites in Mali, where Bristow says his firm is the second-biggest employer after the state, the company aims to produce its first metal in nearby Ivory Coast by 2010 and Senegal by 2012.

It has been exploring in Ghana and Burkina Faso in the west and Tanzania in the east, and plans to cast an analytical eye over data collected by explorers working in central Africa.

Pointing out on a map a band of gold mineralisation that passes through parts of Democratic Republic of Congo (DRC), Tanzania, Central African Republic and Cameroon, Bristow says Randgold is moving a team into offices in Mwanza on the Tanzanian shore of Lake Victoria, which will serve as a vantage point for central Africa.

Bristow is undeterred by the near-continual unrest in the DRC, which again erupted into fierce violence earlier this month.

"It's like in Ivory Coast, where we made a bet on where we saw it going," he said. "Our view on DRC is, in the next five years it's going to be a whole lot better."


Money for nothing

Digging for gold in West Africa is an expensive business compared to countries with long mining traditions that have bought them power, transport and communications networks, Bristow said.

"The capital cost of a gold mine in Mali is twice that of South Africa, because there's nothing that comes with the country," he said. "You pay taxes and get nothing - no roads, no infrastructure."

The more Africa sells its resources in return for roads, power lines and other basic blocks of nation-building, the more developed it will become, he said.

"Go to Johannesburg or Denver to see what commodities can do for infrastructure," he said, referring to cities whose prosperity was founded on mining.

"The rest of the world cried foul when China came in (to Africa), but China is effectively trading infrastructure for natural resources - that's what this continent needs."

There soon may be fewer people searching for resources to exploit, as investors shy away from mining ventures.

"Between 50 and 70 percent of junior gold miners are going to go out of business in the next three to six months," Bristow said.

"They survived on the naive assumption that the market would always pour in more money to keep them going. An exploration company has no cash flow, and when the music stops anyone with debt in the mining industry is in deep trouble. Anyone without money and a good asset is dead." - Reuters