Johannesburg, 10 July 2013 - The recent drop in the gold price has highlighted the need for governments of mineral-rich countries to cooperate with mining companies in the optimal development of their resources, says Randgold Resources chief executive Mark Bristow.
Speaking at a media briefing here, Bristow said the two parties should be united in a common purpose but sometimes seemed like ships passing each other in the night. “Governments are tempted to harvest the green shoots before the enterprise comes to fruition; the gold mining industry tends to exaggerate the risk without fully addressing its own internal problems,” he said.
This disconnect arose from the mistaken perception that gold mining companies must have made extraordinary profits during the long bull run in the gold price, Bristow said. In fact, with escalating costs cramping margins, most gold companies had not managed to create real value and at the height of the boom the industry had actually been ex growth. The declining gold price meant that many gold mining companies were now again having to fight for survival, as evidenced by a spate of write-downs and abandoned projects.
“The pursuit of quality assets has led gold companies away from their traditional hunting grounds and towards regions which are more prospective but present a greater risk. All these regions are now competing with each other for mining investment, and while Africa has the advantage of great mineral wealth, its competitors generally have better infrastructures, greater skills pools and more sophisticated economies,” he said.
In order for African countries to attract mining investment and benefit fully from their mining industries, they should participate fully in the value creation process.
“Real value is created by the discovery of multi-million ounce deposits and their development into profitable mines. Governments’ role in this should be firstly to provide a stable, business-friendly regime that will attract investors, and then to partner the mining company in the development process, driving the project up the value curve and sharing fairly in its returns,” he said.
Randgold owns and operates the Loulo complex in Mali and the Tongon mine in Côte d’Ivoire, and also operates the Morila joint venture in Mali. In addition, it is currently developing the giant Kibali project in the Democratic Republic of Congo.
“When the gold price started turning down, we reviewed all our business plans and adjusted them where necessary. Our key objectives remain intact, notably the aim of exceeding 1.2 million ounces of production by 2015,” he said.
“With our robust operations, low costs and no debt, and Kibali on schedule to pour its first gold before the end of this year, Randgold can face any realistically foreseeable gold price scenario with equanimity.”
Bristow said the current squeeze on the industry had in fact created new opportunities for Randgold, as gold mining juniors with quality assets had to seek elsewhere the support no longer available from bankers and investors. “While our core strategy remains organic growth, we have entered into a number of earn-in joint ventures on promising projects, most recently the agreement announced last week with Taurus in Mali,” he said.