Randgold pulls plug on mine

Denver — In response to low gold prices, Randgold Resources has suspended mining operations at the Syama gold mine in southern Mali. The company, a subsidiary of Randgold & Exploration Co. (RANGY-Q), says the move in designed to preserve the resource for future mining.

Randgold Resources has a 75% interest in the open-pit operation, which saw its operating costs rise in 2000. The remaining interest is held by the Malian government and other investors.

During the first half of the year, Randgold carried out a rationalization program; nonetheless, the operation experienced power disruptions and several pitwall slides. Delays in implementing a new power plant further hampered production in the third quarter.

The mine produced 119,433 oz. in the first nine months of 2000. Cash operating costs increased steadily during 2000, from US$299 per oz. in the first quarter to US$362 in the third. Fourth-quarter figures have yet to be released.

The cost of shutting down the operation is expected to be US$30 million. However, the mine will continue to produce gold from the heap-leach pads as long as this practice remains profitable.

At the end of 1999, Syama contained 2.7 million oz. in reserves within 26.7 million tonnes grading 3.1 grams per tonne. The operation contains a resource of 56.2 million tonnes at the same grade, equivalent to 5.6 million oz.

Mothballing Syama will have a significant effect on Mali’s growing gold sector, lowering output by as much as 10%. In January, before Randgold’s announcement, the Malian government estimated gold production could reach 50 tonnes, or 1.6 million oz., in 2001. Most of this production comes from the Sadiola operation, a joint venture between South Africa’s AngloGold (AU-N) and Iamgold (IMG-T).

In 2000, AngloGold purchased a 40% interest in the Morila mine from Randgold for US$130 million. At full operation, the mine should produce 420,000 oz. gold per year.

The Malian government holds an 18% stake in Sadiola and 20% of Morila. Despite the shortfall from Syama, Mali is expected to remain the third-largest gold-producing nation in Africa, behind South Africa and Ghana.