Randgold Resources is not only focusing on immediate development of its new Kibali project in the Democratic Republic of Congo (DRC), but is also considering new developments in other countries in the east and central African region.
These two objectives emerged from a discussion with chief executive Mark Bristow, who outlined an exciting combination of growth plans in a telephone interview with Mining Review Africa from the Kibali mine site.
“In the 18 months prior to launching our Kibali bid, we conducted a comprehensive regional survey from Cameroon, through the DRC and Central African Republic (CAR) and into Tanzania,” he reveals. “We identified 184 targets in 41 permit areas covering 11,860 km2 in the most prospective gold belts of both East and Central Africa, so we have a pretty good understanding of the regional setting,” he says.
“We could well be envisaging developments in other countries in the region, apart from the Kibali project. We have always indicated that Tanzania is an interesting destination for us if we can get access to ground. The CAR is also an exciting prospect, but at a later date. We are not interested in going there yet because of the legislative and political situation,” he explains.
Turning to the Kibali project, Bristow points out that Moto had originally spoken about something of the order of US$580 million capital expenditure. “We reckon, however, that at the size that we are scoping it will work out to about US$800 million. The final figure will end up somewhere between the two,” he estimates.
“The acquisition of Kibali cost US$704 million. First we and AngloGold Ashanti purchased the full shareholding in Moto Goldmines Limited, which owned 70% of the Kibali project, for US$590 million in a company called Kibali Limited Jersey.
“The other 30% was owned by the government of the DRC through its parastatal company OKIMO, and together we then purchased an additional 20% stake in the project for US$114 million. This left AngloGold Ashanti and ourselves each holding 45% of the project, with OKIMO retaining 10%.
“The mine is scheduled to launch production in early 2014, ramping up to possibly more than 650,000 ounces a year, and we are pretty confident that we can produce gold at Kibali at under US$400/oz as a total cash price,” Bristow says.
“If you look at the size of the reserve and the orebody potential, production will definitely be somewhere between half a million and a million ounces a year. The open pit potential is really fantastic. We have got over three million ounces of opencast reserves and six million ounces of underground reserves. And both have upside potential,” he adds.
“With these figures we are looking at around five years of open pit mining plus 15 years of underground operations, and the potential could improve that figure significantly to beyond 20 years. And these figures are based on the reserves – bear in mind that the resources are much more than that,” he says.
“The best way to make money is to add reserves to a big infrastructure so that the new operations can ride on the back of the main existing infrastructure.
“We are busy with pre-production, infrastructural development and our relocation action plan, and that will take about two years,” Bristow predicts. “Once we get the footprint cleared we can start construction, which will take another two years – hence our estimated commencement of production by early 2014.
“Our immediate challenge now is to convert the roadmap we have compiled into a detailed business plan and budget. We are busy with this strategic plan, and it will certainly take us most of this year,” he says.
“It is essentially a development period. In addition to running with our relocation action plan and baseline studies, we’ll also be optimising the open pit and underground interface, and focusing on key issues such as the hydropower strategy, the water management plan, the underground portal positions and the backfill and stoping designs,” Bristow adds.
He points out that during the acquisition process Randgold identified various critical issues and developed strategies for dealing with them.
“First was logistics, and without connecting into the road works of the rest of Africa – and the only option here is Uganda – you can’t get anything in or out of our site in the DRC,” Bristow points out. “We have developed a threeyear strategy of upgrading the road on a step-by-step basis, because by year two we will be in full construction and the road will have to be at a standard that can take big equipment.”
Second is security. “We have a private security company to manage our access control and asset protection. We have concluded an agreement with the military, and we are also doing so with the police and gendarmes. We have a clear understanding with the generals that the police look after law and order outside the fence, and we look after our business on the inside. We have daily reports and meetings with the army, so we are pretty comfortable about the security procedures, and we have the process in place.”
Third, and probably most important of all, is the relocation of people. “Although there is an overall total of 15,000 people involved, the main footprint of the operation affects about 5,500,” Bristow explains. “It is our biggest single focus at the moment, and we are deeply involved in community consultation and the public participation process. We are completing the planning for this operation, and at this stage have scheduled a two-year programme to implement the project.”
The fourth critical issue is power. “If you had to transport diesel to the site to generate power, the high costs would really impact negatively on the value of the operation. Hence we are working on a plan to provide hydropower, which is going to be critical for this project,” he says.
“Fifth is the orebody, and what we have at Kibali is a resource of 19 million ounces, of which 9.2 million ounces is in reserves,” Bristow confirms.
“A big criticism of mining is that it constructs its infrastructure in a cocoon and does its normal pat on the head stuff – it donates a clinic and a school and so on. But it brings in all its own international service providers, it makes itself comfortable, it puts a fence up and excludes the community. And at the end of the mine’s life, the company simply leaves and there is no lasting legacy,” Bristow says.
“This is not the way we operate. A big mine like this requires a lot of cash to operate every month, and we are involving local businesses as much as possible to ensure that the cash circulates within the country, which can make an amazing contribution to the national economy.
“We have already made use of local contractors and we have opened up dialogue with, for instance, the Catholic church, which is very powerful in the region. We are looking to partner with the Catholic church to support and develop their good work in our relocation programme, and to enhance the services they have and would like to have in terms of things like schooling and health care,” Bristow says.
Looking ahead, as far as both surface and underground exploration for the future upside is concerned, Randgold has exploration teams completing the finishing touches to a big regional survey. “At the same time we are conducting evaluation drilling to constantly bank the reserves, and then we’ve got definition drilling which fills the gap between exploration and mine plan. Our exploration and project optimisation programme budget this year here is US$16 million, which is the same size as the rest of the group.
“The potential is enormous, and we are very excited about the opportunity to find more.” Meanwhile the absolute focus for the next couple of years will be on the development of Kibali. “After our entry into West Africa and subsequent success there, everyone is a lot more comfortable about our ability to perform in the DRC,” Bristow says.