(This story has been posted on The Wall Street Journal Online's Deal Journal Australia blog at http://blogs.wsj.com/dealjournalaustralia.)
By Stephen Bell
A recent civil war in Mali, a falling gold price, rising mining costs - the same forces that are weighing on Resolute Mining Ltd.'s stock are also prompting its management to step up their hunt for deals.
Prices of African assets are now at attractive levels, Resolute's Chief Executive Peter Sullivan told Deal Journal Australia, as it looks to follow an 85 million Australian dollar (US$89 million) backing of Ghana-focused Noble Mineral Resources Ltd. with new investments in the region.
Resolute mines gold in Mali and Tanzania. But the company is casting its eye even further afield to the Ivory Coast, Burkina Faso, Senegal and Mauritania where mineral deposits are largely undeveloped, Mr. Sullivan said.
Mining in West Africa is the classic risk-reward opportunity for investors. Resolute's Syama mine in southern Mali accounts for 40% of its gold output, but an insurgency by Northern Islamists that began late last year unsettled investors even though the operations were unaffected. Resolute shares are down 30% over the last six months alone.
"West Africa offers as good an opportunity as anywhere else in the world and that is where we have a pretty solid base," Mr. Sullivan said. "We've been looking at opportunities for the last couple of years, and have intensified that over the last 12 months."
Resolute generally relies on its own team to examine potential deals, but sought the assistance of Perth-based advisory Azure Capital for the Noble Minerals transaction, Mr. Sullivan said.
Gold prices have fallen 3.5% so far this year, threatening the industry's 12-year streak of gains. That's despite a renewed flare-up in the European debt crisis, with Cyprus racing to restructure its second-largest lender and enforce unprecedented restrictions on financial transactions as it seeks to preserve membership of the euro.
Resolute, which also operates a gold mine in Australia's Queensland state, expects to produce 415,000 troy ounces of gold in the year through June, making it one of the larger gold miners listed on the Australian Securities Exchange. Its current market value of A$881 million is bigger than other West Africa-focused rivals, including Perseus Mining Ltd. and Papillon Resources Ltd.
Resolute said in a presentation March 5 it had A$171 million in cash and investments, alongside debt of A$65 million.
The Perth-based company is part-way through a US$266 million expansion of Syama, where it employs around 700 people.
Mali is now relatively calm after the French army intervened on Jan. 11 to end an offensive by insurgents. Following the French intervention, there is talk in Mali that the interim government -- installed after a coup in March last year -- will hold a democratic election by mid-year, Mr. Sullivan said.
Resolute, meanwhile, holds a 19.7% stake in Noble Mineral Resources along with 706.6 million convertible notes after backing the junior's refinancing.
Noble's Bibiani project in Ghana is "potentially another new mine for Resolute", Mr. Sullivan said.
But Resolute wants to see how Noble's mine plans progress in coming months before deciding on its strategy for the junior, he said.
Noble said last week it is continuing to pay down trade creditors while trying to procure equipment and supplies for a plant refurbishment at Bibiani. Resolute is also offering technical advice on improving efficiencies at the mine.
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(END) Dow Jones Newswires
March 26, 2013 19:45 ET (23:45 GMT)
Copyright (c) 2013 Dow Jones & Company, Inc.
RSG Price at posting:
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