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African gold miner and explorer Randgold Resources’ Kibali gold project in the DRC has successfully started production and still in line with capital forecasts.

African gold miner and explorer Randgold Resources’ giant Kibali gold project in the Democratic Republic of Congo has successfully started production well ahead of its original year-end target and still in line with capital forecasts, writes Vicky Sidler.

The mine has been brought into production ahead of schedule after a massive operation which included the resettlement of more than 4 000 families to a new model village and the substantial upgrading of the local infrastructure. The construction process alone has required a team of more than 7 000 people on site at one time.

“It has been an enormous feat of geology, metallurgy, engineering and logistics, as well as negotiation and diplomacy,” says Mark Bristow, chief executive of part-owner Randgold Resources, which is developing and operating the project. Kibali represents an initial investment of US$1.7 billion by Randgold and its partner, AngloGold Ashanti.

“Kibali is the fifth world-class gold mine Randgold has delivered to its stakeholders since 2000 when Morila was commissioned, and it is significant that we are doing so at a time when the gold mining industry generally is cancelling projects, cutting budgets and revising growth plans downwards in the face of the drop in the gold price. This again illustrates the merit of Randgold’s long-term strategy of creating value through discovery and development, and of continuing to invest in our future even when the gold price turns down,” notes Bristow.

The mine

The Randgold development team had only moved on site in January 2010, and since then has built a world-class gold mine in one of Africa’s remotest regions, more than doubling its reserves to 11 million ounces and increasing its resources to 21 million-plus ounces.

Randgold is developing and operating the open-pit mine, which will rank as one of the largest of its kind in Africa, with a projected annual production of some 600 000 ounces of gold, reserves of 11 million ounces and resources of 21 million ounces. With the earlier start-up, Kibali is expected comfortably to exceed its production forecast of 550 000 ounces of gold in 2014.

The mine is being developed in two concurrent phases at an estimated initial cost of US$1.7 billion, starting as an open pit operation, with the underground mine, already well advanced, scheduled to access ore in 2015.

In the first phase, the plant’s oxide circuit has been commissioned early and is treating oxide ore from the stockpile of more than a million tonnes already produced by the open pit mine. The sulphide circuit will be commissioned in the second quarter of 2014.

Phase 2, which runs concurrently with Phase 1 but extends to 2016, will include the completion of the underground mine, where development is already well advanced. The underground mine is scheduled to access first ore in early 2015 with stoping operations starting later in that year. Kibali will also commission four hydropower facilities during the two phases to allow the mine to access low cost energy from the abundant hydropower potential in the DRC.

The enormous relocation programme, which has involved the resettlement of more than 4 000 households in 14 villages on the Kibali site to a new model town, Kokiza, has also been completed on schedule. The administration of Kokiza is now in the process of being handed over to a local administration.

DRC focus

The new Kibali gold mine could be the catalyst for substantial long-term value creation in the DRC and is destined to be an enormous economic boon to its Congolese stakeholders: the state, which has a 10% interest in Kibali through SOKIMO, the Province Orientale, where Kibali is located, and the local community.

“Over the lifetime of Kibali, approximately half of its profits will go to the DRC State in the form of royalties, taxes and dividends. By next year, it will be providing employment to more than 2 500 people on site, almost all Congolese nationals,” says Willem Jacobs, Randgold’s general manager operations for Central and East Africa.

“More than half of its senior management are Congolese, while almost 100 Congolese have been trained as skilled operators at our West African mines. In addition to our locals-first employment policy, we also give preference to sourcing our goods and services from local suppliers, which spreads the economic benefit of our activities even wider.”

“Randgold sees itself as an enabler of regional development, and in line with this belief we have succeeded in interesting investors as well as the Congolese government in cooperating with us to establish a palm oil production business in the Province Orientale, where Kibali is located. With much of Kibali’s construction now complete, the work force has been reduced by some 2 500, and the proposed palm oil venture would not only ameliorate the impact of this but could make the DRC an exporter of oil and soap.”

The history of mining in Africa is littered with projects that had failed to realise their potential because exploiting developers and greedy governments had sought to cash in prematurely instead of focusing on value creation, says Bristow.

“In Province Orientale, Kibali’s stakeholders have an opportunity to start with a clean slate, and to demonstrate to the world what can be achieved in Africa through a real partnership between a mining company and its hosts. To date, Randgold has delivered all that it undertook to do, and more. We expect that the Congolese authorities will also keep their side of the bargain, among other things by building the administrative capacity required to fulfil their obligations under the mining code,” says Bristow.

Full steam ahead

Bristow believes that, having failed to create any real value during gold’s 10-year bull run, the mining industry is now again facing a struggle for survival, but adds that increased production and reduced costs should enable Randgold Resources to remain profitable in the face of a decreased gold price.

The successful development of Kibali is a tribute to Randgold’s experienced and multi-skilled team. “This is the fifth major gold mine we have built in Africa and the lessons we have learned in the process have proved invaluable to us in bringing a project of this magnitude into production ahead of schedule and on budget,” says John Steele, Randgold’s capital projects executive.

“Important as early production may be, it is still only the first step in achieving this project’s great potential,” added Kibali general manager Louis Watum. “Our focus is now on commissioning of the rest of the metallurgical plant and the hydropower stations as well as progressing the underground development.”

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