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Randgold Resources: Investor Day plus fire at Tongon

Contributed by Fox-Davies Capital

Randgold held an Investor Day in London on the 3rd December 2012 and on the 24th December announced that there had been a fire at the Tongon mine. Our model has now been updated for both of these events.

It has been a disappointing year for the Tongon mine. Early in the year there were production problems and on the 24th December there was a fire in the cyclone cluster in the milling circuit. We believe the rubber lining caught fire. Repairs have been initiated but production guidance has been revised downwards to 208k oz for 2012. The model has been revised accordingly.

The Investor Day yielded much information on exploration, future production and power. This is a particularly important issue at Tongon and in 2012 resulted in numerous power outages.

We were especially impressed with the underground potential at Gounkoto and the general exploration potential at Kibali. We have modelled Kibali on the basis of the current ore reserves with the open pit ceasing production in 2020. After that time we have the mine operating as an underground operation only at 3Mt pa until the current reserves are depleted. Whilst we would be surprised if this scenario is the actual outcome, we can only model on the basis of the known ore reserves.

We have also taken the opportunity to update the model for the actual gold price for the December quarter, which was lower than our forecast.