Randgold ‘problem child’ gold mine coming right.

For any other mining company, the Tongon gold mine, owned and operated by Randgold Resources, might be deemed a great success.  But for Randgold, which likes to stick to its production projections for all its operations in West and Central Africa, it has been something of a problem child underperforming against its scheduled output targets due to a succession of technical issues.  But even so it has still been a significant producer of the yellow metal at the kind of levels that would still be the envy of many other mid-sized gold mining companies.

Randgold CEO, Mark Bristow, on the occasion of a visit to the mine and to its host country ahead of the company’s second quarter results, due out the first week of August, has told the media in Cote d’Ivoire’s capital, Abidjan, that Tongon  continues to ramp up production as it tracks its 2017 target of 285,000 ounces of gold, making it a globally significant gold producer, but with a relatively short four year life remaining.  But Bristow went on to say that with Tongon now operating to plan, its focus had shifted to finding additional reserves and resources to replace depleted ounces and extend the mine’s life beyond its four years remaining.  The chances are that Randgold will be able to achieve this as the area around Tongon is seen as highly prospective for smaller satellite orebodies – and the company has a good track record of eking extended lives out of its Malian gold operations – notably at Morila which is still producing gold despite originally being due for closure some years ago.

Bristow also confirmed his long held view of Cote d’Ivoire’s exceptional prospectivity and its positive attitude towards foreign investment in the gold mining sector.

Elsewhere in the West African nation, Bristow commented that Randgold’s exploration programmes have defined a large target at Boundiali in the Fonondara corridor, which he described as ‘potentially the most exciting gold prospect in West Africa’.  The company has just completed its annual review of its exploration targets, which Bristow said had also highlighted very positive results from its other holdings in the country.

As to Tongon itself, and its contribution to the Ivorian economy, Bristow commented that last quarter it declared its second dividend, of which the government’s share, including taxes, was US$20 million (FCFA 12 billion).  In total, Bristow claimed that the Tongon mine has contributed just under $1 billion (FCFA 520 billion) to the Ivorian economy in the form of royalties, taxes, dividends, salaries, payments to local suppliers and community investments since it started production in 2010.

We will presumably get a further update on Tongon when Randgold delivers its Q2 results on August 3rd when Bristow himself will also deliver an update to London analysts and media on the company’s overall performance so far this year and its future prospects.  Randgold has, unlike most of the other large global gold miners, managed to keep itself debt free and cashflow positive through maintaing some very strict new mine investment criteria.

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Randgold’s problem child coming right

It is perhaps a little unfair to refer to Randgold Resources’ (NASDAQ: GOLD, LSE: RRS) Tongon gold mine in Cote d’Ivoire as a ‘problem child’.  It has always been a significant gold producer, but has faced its fair share of problems in achieving planned gold recoveries including key plant failures, power supply irregularities, a fire and difficulties in fine tuning to reach design parameters.  For many mining companies, though, Tongon’s current production level  – close to 250,000 ounces a year – would not define it as a problem operation, but given Randgold’s continuing success in achieving perhaps stronger results at its other West and Central African mines, Tongon stands out as perhaps not doing quite as well as the company’s other mines in comparison.

Following his latest visit to the operation, Randgold CEO, Mark Bristow, has told local media that Tongon was continuing to make headway in its drive to overcome technical issues, with gold production up 7% to 242,948 ounces in 2015 as the flotation upgrade and crushing circuit extension programme started delivering results.  He reported that the mine has also now commissioned its fourth-stage crushing circuit, completing an extensive capital project designed to improve throughput and recovery.  The new circuit is currently being optimised.

“Tongon is targeting annual production of 290,000 ounces in 2016 but there are still significant challenges in its way.  Chief among these is the continued instability of the grid power supply, which has a major impact on the mine’s cost structure.  The Tongon team is in discussion with the Ivorian power utility to resolve this problem,” Bristow said.

It was also continuing its drive to extend the life of the mine through exploration, with the latest drilling results indicating the potential for additional reserves and resources within and below the existing open pits.

Overall a positive assessment.  Randgold has always been open in discussing any technical difficulties at its operations and it looks as though Tongon is near to achieving its design parameters and it remains a significant contributor to the company’s annual attributable gold production which remains at comfortably over 1 million ounces a year – and growing.

Randgold sees Tongon gold mine pass major milestone and ups Cote d’Ivoire exploration

Randgold Resources’ world class Tongon gold mine in Cote d’Ivoire has not been without its problems, but even so it has now paid off its shareholders’ loans of $448 million, used to partially fund its capital investment of $580 million, thereby moving it into a dividend-paying position.
Speaking at the mine’s quarterly briefing for local media, Randgold CEO, Mark Bristow described this as a significant achievement, particularly in the context of a global gold mining industry currently characterised by capital write-downs and impairments.
Although Tongon is only Randgold’s third largest mine – after Kibali in the DRC, and Loulo-Gounkoto in Mali – and is still operating below full capacity, it is a very significant gold mine by any standards, and is targeting gold output of  260,000 ounces, at a total cash cost of $820 per ounce,  in the current year.

“Tongon has already paid close to $90 million to the Ivorian state in the form of royalties and taxes and the country will now benefit even more from the dividends the government will receive through its 10% carried interest in the mine as well as the increased revenue when Tongon starts paying full corporate tax at the end of this year,” Bristow said.  He noted that since its commissioning five years ago, Tongon had also contributed more than $600 million to the Ivorian economy in the form of payments to local suppliers and had invested almost $6 million in community upliftment projects.

Bristow has also frequently described Cote d’Ivoire as being a highly prospective country in which to explore for new gold mining operations and has praised the government for its approach to foreign investment in the mining sector which it considers very favourable for attracting new business.
“Ongoing exploration around Tongon has increased its reserves after depletion by 18% since 2009, extending its remaining life by another year.  We also continue to look for more multi-million ounce deposits elsewhere in this highly prospective country, and we are about to launch our biggest-ever exploration drive in Côte d’Ivoire.  This will include a fresh look at the Nielle permit, which hosts Tongon, and a geophysical survey, followed by a diamond drilling programme, across our holdings in the north of the country,” he said.

He also cited Tongon as a particularly good example of the success of Randgold’s policy of recruiting, training and empowering nationals of its host countries to run world-class mines in Africa.  The mine’s workforce is 97% Ivorian and only two members of its management team are not Ivorians.

Bristow also noted that Tongon has won the President’s Award as the best mine in Côte d’Ivoire for two successive years.

Randgold’s Tongon gold mine on track to meet this year’s target production.

Randgold Resources’ Tongon gold mine in Côte d’Ivoire is on track to achieve its production and cost guidance for 2015 after a year in which its management made significant progress in dealing with the recovery and throughput challenges that had hampered the operation in its early stages, CEO Mark Bristow told a meeting in Abidjan, capital of Cote d’Ivoire.

Although Tongon is smaller than Randgold’s big Kibali gold mine in the DRC and its Loulo-Gounkoto complex in Mali, Tongon is still a major world class gold mine in its own right and its host country’s biggest gold producer.  However it has had to overcome a number of problems since its start-up in 2010 – initially logistical as a result of civil conflict, and then technical, and it has yet to reach its initially planned full gold output potential of around 300,000 ounces a year.  However at long last it does seem to be getting close.

Speaking at the mine’s quarterly update for local media, Bristow noted that the commissioning of its new flotation circuit and the ongoing expansion of the crushing circuit were having the anticipated impact on production and costs, steadily lifting Tongon towards its designed performance level.  The construction of the upgraded flotation circuit is complete and automation and optimisation are underway.  At the same time, Sandvik and Randgold are still jointly working on optimising the crushing circuit upgrade to meet Tongon’s planned production outputs.

Following the recent dry season’s impact on the Ivorian power utility’s power generation capacity, there has been constructive cooperation between the utility and mine to minimise the impact.

The mine is forecasting production of some 260 000 ounces of gold at a total cash cost of $820 per ounce in 2015.  At the current gold price, it should be able to repay its capital this year as scheduled.  In the meantime, continuing exploration has replaced all the reserves consumed by mining in 2014, effectively extending Tongon’s life by another year.

Bristow said that with operational pressure easing, management had been able to advance Tongon’s ambitious social initiatives, designed to develop a sustainable agribusiness as the mine’s economic legacy to the community.  The strategy has two components: an industrial agribusiness to replace the mine after its eventual closure and a community agribusiness based on small farming operations.  Work is underway on the construction of a fish farming project capable of delivering almost 10 tonnes of fish per year, while several women’s market garden projects have already produced their first crops.

In February the Ivorian Prime Minister, Daniel Kablan Duncan, and the Minister of Industry and Mines, Jean-Claude Brou, accompanied by high-ranking officials, visited Tongon, and Bristow said he was heartened by their interest in and support for the sustainability initiatives.

“Ultimately projects like these succeed only when there is a significant engagement by government, at central as well as local level, and when the local community is actively involved,” he said.

To continue building a good working relationship with local businessmen, Tongon hosted an on-site lunch for 35 entrepreneurs from the Korhogo region in March, providing them with an overview of the operation and identifying opportunities for co-operation.