A further indication that equity markets are returning to ‘normality’ is a growing level of M&A activity. African focussed gold miner Randgold Resources (LSE, RRS) has not missed the boat acquiring Moto Goldmines, a move which has bolstered the group’s gold reserve base at a time when the price of gold looks set for further strength.
Moto’s main draw is its namesake project located in the Democratic Republic of Congo or DRC. As per an optimised feasibility study carried out in March this year, the project boasts ‘probable’ mineral reserves of 5.5 million ounces of gold and 20 million ounces of resources.
This proved the trigger for a flurry of corporate interest and prompted Randgold’s near US$500 million part equity, part cash offer. Encouragingly, the takeover sees Randgold partner once again up with Anglogold Ashanti, with whom it has previously combined at the Morila mine in Mali; the doubling of the intellectual capital in our view will drive the Moto project forward with greater success.
The project itself is considered one of the biggest and best that Africa has to offer. Just how big is best demonstrated by the fact that the planned mine life is currently estimated at 16 years. And although located in the DRC (which is regarded as a high risk mining area), we believe the acquisition will prove a shrewd piece of business.
Elsewhere, Randgold’s projects and developments are moving ahead at a rate of knots.
Third quarter production numbers are due out shortly however if this years second quarter performance is anything to go by, Randgold’s flagship Loulo mine (located in Mali) will post another quarter on quarter output jump. Randgold’s other producing mine, Morila (also in Mali) may have been successfully converted from a mining operation to stockpile treatment however it will contribute to earnings for some time yet.
Although Moto may be the big money signing receiving all the attention, Randgold has plenty of home grown projects waiting to break into the first team and become earnings accretive.
In the Ivory Coast, the Tongon project is on track to begin gold production in the fourth quarter of 2010. At the last time of asking probable reserves stood at 3.16 million ounces. In addition, earlier this year the Randgold announced a 3.4 million ounce inferred resource at the Massawa target in Senegal. A pre feasibility study is set to follow before the…
