robin bromby

Why the Ivory Coast is the factor to watch.

Robin Bromby | September 16, 2009
Article from: The Australian.

SHARES in Perseus Mining took a big leap earlier this month when speculators thought they detected hints that Lihir Gold was after the Ghanaian explorer.

The assumption was that Lihir saw the 5 million-plus ounce gold resource at Perseus's project in Ghana as a prize worth snatching. Which it probably is - and may well be in Lihir’s mind despite its protestations of not looking for acquisitions.

But the main game may actually be in neighbouring Ivory Coast. Lihir has the Bonriko gold mine there, a property it picked up through the merger with Equigold.

Overnight the Dow Jones Newswires reports that Lihir’s chief financial officer Phil Baker said his company had its eye on increasing its assets in West Africa. "We didn't go (to the Ivory Coast) to run Bonikro at 120,000 ounces a year," said Baker. He added though that Lihir has no immediate plans for acquisitions in West Africa and is rather focusing on building its existing business.

The story also reports these words from Lihir flak Joe Dowling: "We're working hard to turn around (the perception of Lihir) as an underperformer."

Bonikro began commercial gold production in August 2008. For the first full year, production is expected to be approximately 140,000 ounces, of which LGL’s share is forecast at approximately 120,000oz. Subsequent average annual gold production is expected to be approximately 120,000oz, of which LGL’s share is expected to be around 100,000oz.

So why is Ivory Coast significant?

Well, because of probably the most under-reported news of the week.

Perseus said it had intercepted some big gold grades at its Tengrela project in Ivory Coast. These included 20m at 65.5 grams/tonne, 86m at 3.2g/t and 78m at 1.7g/t. The explorer has a feasibility study in progress at present.

So, here we have a company that has 5.3 million ounces of gold in Ghana and now looks as if it is on the track of another lode in the country next door.

Perseus must be the subject of intense scrutiny by more than one potential acquirer. And mark those words: Lihir did not go to Ivory Coast to just mine 120,000oz a year. The comment was in the context of doing more exploration at Bonriko, but the Lihir people can’t help but keep looking with watering mouths at Perseus. That acquisition would surely erase the memory of the Ballarat Goldfields disastrous buy.

And not that Tengrela is a new story. It was owned in the late 1990s by the former Leo Shield Exploration, now Caspian Oil & Gas (CIG) via listed life as Shield Telecommunications and then Afminex. Unfortunately for Leo Shield, South Africa’s Randgold withdrew from its joint venture in 1999 after spending $780,000, saying it found geochemical results disappointing.

It’s always nice to see someone else make disastrous moves. You can just taste the schadenfreude - only the Germans would have a word that means the malicious enjoyment of other’s misfortunes.

Someone at Randgold must be kicking themselves.

The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice.