resolute valued at 3.80, page-6

re: minesite article Courtesy of www.minesite.com :

December 21, 2006

Resolute Mining Gets Ready to Re-Launch Syama

By Our Man In Oz

When a goldmine has proved to be a little too tricky for two previous owners it is reasonable to ask the third owner why it will be any different for him. Which is precisely what Minesite asked Resolute Mining chief executive, Peter Sullivan, when quizzing him about recent work on the Syama mine in the central African country of Mali. “We certainly know the history, and some people are wary,” was Sullivan’s reply. “But we’re very confident that we know how to make Syama perform much more efficiently.” If he’s right then Australian-based Resolute will have cracked a puzzle which has foxed bigger companies in the past, including the biggest of them all, BHP Billiton (in its pre-Billiton merger days when trading simply as BHP), and the African goldmining specialist, Randgold Resources.

Difficult metallurgy has been the core issue at Syama, especially the need for large amounts of heat to roast the sulphide ore. It wasn’t a big issue when BHP treated the oxide material at Syama, but it certainly gave Randgold a headache, especially as it was the owner in the mid-1990s, during the cyclical gold-price low point. Sullivan told Minesite from his office in Perth that preliminary design work on revamping Syama has been completed, the team working on the project has relocated to Johannesburg to complete engineering and equipment procurement ahead of a full investment commitment. “We’re looking at a New Year start on construction,” he said. “The construction team which will work on Syama is currently wrapping up another job and will move across to us as soon as that’s finished.”

If all goes to plan first gold from Syama’s new life will be poured in the second half of 2008, after allowing for an 18 month construction period, adding 250,000 ounces of gold a year to Resolute’s output at an estimated US$340 an ounce, and lifting the company into the eye-catching ranks of a plus 500,000ozs a year goldminer. Once operating, Syama will join Resolute’s existing mines - Golden Pride in Tanzania and Ravenswood in Australia - which provide Resolute with 3.3 million ounces of gold in the reserve category, and 10.7 million ounces in resources.

It is the prospect of Resolute becoming a three-mine operator, plus the fact that it is debt-free after a high-priced exit of uranium assets, and a bit of strength in the gold price which has seen the company easing its way higher on the Australian Stock Exchange with a 16 per cent (A23 cent) rise since November 20 to sales at A$1.63, a price which capitalises the business at an un-taxing A$373 million – a value weighed down somewhat by issues relating to tax treatment in Tanzania, and the need to finalise the Syama paperwork with the government in Mali before the final investment commitment. Sullivan said issues relating to tax in Tanzania had been resolved and there were no major stumbling blocks in Mali. “It’s down to the bureaucratic process in Mali, which we’re going through now,” Sullivan said. “In Tanzania, we’ve made some concessions to lift revenue to the government, and we see that as fair enough.”

Sullivan told Minesite that most of the “i’s and t’s” had been, or would soon be crossed with Syama shaping as the key “company driver” for the next few years. “Syama is the major asset for us to build on,” he said. “Golden Pride and Ravenswood are receiving fresh investment to prolong their lives, but it won’t be new production.” At Syama, Sullivan said he was “comfortable” with the process of securing equipment and skilled staff to handle construction which has a notional capital cost price tag of US$100 million. Dollars and ounces to one side, the key question which nags away whenever Syama is mentioned is that while it is undoubtedly a major asset, why will Resolute succeed when others have failed. To understand that it’s time to dabble in the technical world.

“Syama was a BHP development in the early 1990s, essentially as an oxide operation but with a start made on the deeper sulphide ore,” he said. “This second phase involved installation of a roaster to treat the primary ore, but the ore had a high refractory and carbonaceous component that needed roasting to recover the gold. That original BHP design didn’t work too well, so it sold the project to Randgold and they made a number of modifications to try and make it better. But Randgold’s changes also didn’t work very well, and to make things worse the gold price fell into the sub-US$300/oz mark, and they shut it in 2001.” Enter Resolute, which took an option to buy Syama in 2003, invested time and money to take a close look at what went wrong, emerging with the current plan – and that plan looks like this:

“It’s fairly simple,” is Sullivan’s ominous start to a technical talk. “Essentially the plant was designed for whole-of-ore roasting, but the problem was that the energy content of the ore ,mainly from sulphur, was insufficient for the roaster to run auto-thermally by generating its own heat and had to be boosted by using diesel. What we’re doing is installing a float plant, and turning it into a concentrate roaster, and the concentrate will have sufficient energy to run auto-thermally. If you don’t roast it, you don’t get the gold.”

If the technical conversion sounds straight forward, the money side of Resolute is even more simple. It is generating good cashflows from the 300,000ozs of gold coming from Golden Pride and Ravenswood, and has raked in a rather handsome A$173 million from the sale of shares in the uranium start-up Paladin Resources. To come is the 250,000ozs a year from Syama, plus this little thought starter from Sullivan about future growth options: “We have balance sheet capacity not only to fund Syama, but to look for other opportunities as well.” Are you looking, asks Minesite? “Yes, we certainly are, both in exploration and in acquisition, and possibly by farming in to advanced projects.”