syama gold mine, page-5

re: syama gold mine - news articles from minesite.com :

Date : April 18, 2003



Lion Selection Group Sits At The Centre Of A Spiders Web Into Which Randgold Resources Has Been Drawn.

An interesting game of “ Ring-a-ring-a-roses” is taking place in Africa. Resolute Mining has an option to buy the Syama gold mine in Mali which has been mothballed by Randgold Resources. In turn it is selling the plant at its Obotan mine in Ghana which has just closed as well as its stake in Red Back Mining to Golden Star Resources, a Canadian company which operates the Bogoso/Prestea operation also in Ghana. Resolute owns the Golden Pride gold mine in Tanzania, but is under some pressure to replace the lost production at Obotan. It has some highly prospective exploration acreage around the Lake Victoria goldfield, some of which is in joint venture with other Aussie juniors in which it also has stakes, but none of the projects are that close to a development decision.


This is a bold stroke as both BHP and Randgold have failed to make a go of Syama. Peter Sullivan is not deterred and as he says there are not many 5 million ounce deposits with reasonable grade to be bought for the US$12.8 million he is considering paying for Syama. The plan, effectively, is that there is no plan. He is going to start from scratch and approach the project without any preconceived ideas. A lot of metallurgical testwork will be carried out and a new mining plan devised. In the next six months he expects to carry out a pre-feasibility study and as part of this will be carrying out some drilling in order to increase the resources. The option period last for 12 months which he sees as time enough to develop a new flow sheet for the recovery plant and is optimistic that solutions can be found to the metallurgy. What he visualises at this stage is a new plant which cannibalises as much as possible from the old one.

The Syama gold mine was initially brought into production by BHP in 1990 and has produced over 1.5 million ounces of gold. Following a sustained drop in the gold price and problems with power and metallurgy, operations were suspended in early
2001 and the mine was placed on care and maintenance. The option held by Resolute is actually on Randgold’s 80 per cent holding in Societe des Mines de Syama, with the government of Mali holding the balance. Mali is a West African country which is politically stable and has a positive attitude to mining. Randgold is also involved in a jv there with AngloGold at the Morila mine which is producing at a rate of around 600,000 ounces/year.


Resolute has been given a 12 month period in which to conduct a full due diligence of Syama and during that time it will pay Randgold a US$75,000 monthly option
fee and can terminate the agreement on one month’s notice. If Resolute exercises the option within the 12 month period it will pay Randgold Resources US$6 million in cash and take on up to US$7 million in liabilities at Syama. In addition there are rehabilitation expenses estimated at US$2.6 million for which Resolute will have to assume responsibility if it exercises the option. If this is the case it will have to pay Randgold an option of US$10 per ounce for the first million ounces produced at Syama and US$5 per ounce for further production up to four million ounces, subject to the average quarterly gold price being above US$350 per ounce.

Mark Bristow, chief executive of Randgold, says that interest in Syama was shown by a number of companies, but the final decision rested on whether or not the incomer could prove of benefit to the government of Mali which is a 20 per cent shareholder in Syama. Resolute fitted the bill and he hoped that the company could turn the mine into a profitable operation. If not, Randgold would rehabilitate it rather than hang on any longer. Syama has already been written off in its books and the final expenses would not make much of a dent in the cash flow rolling in from Morila. There could be a sub-text to this, however, as Bristow has made clear that he has ambitions in Tanzania and how better to obtain this than to acquire Resolute. If Randgold could pay cash it would solve the problems of Lion Selection in one fell swoop by taking it back to cash.

In fact Resolute is already trying to help in this regard by selling its stake in Red Back and the Obotan plant to Golden Star. Sullivan did not object to the conclusion drawn by Minews that he had lost interest in this play, but the fact is that Red Back is now up for sale and Golden Star is in the driving seat. Even now Peter Bradford may be talking to Lion Selection and there is not a lot Ross Ashton can do about it even though the deal ostensibly has to be approved by his shareholders. He should get a lot of credit, however, for slogging on in Ghana to put real value in the Chirano project. There will be money to be made by investors as this scenario unfolds. All that is needed is a lot of patience and the ability to anticipate the next moves by a shrewd bunch of dealers.