Randgold and AngloGold beef up on Moto

Randgold Resources (GOLD-Q, RRS-L) and AngloGold Ashanti (AU-N) are showing their faith and optimism in the recently acquired Moto gold project by buying another 20% stake for US$113.6 million.

The two Africa-focused gold miners are acquiring the stake from their partner at the project — Office des Mines d’Or de Kilo-Moto (OKIMO), a Congolese para-statal entity.

The deal will take both Rangold and AngloGold each to a 45% interest with the remaining 10% staying with OKIMO. Randgold said its 50% share of the US$113.6 mllion will come from its existing cash resources.

A key motivation behind the deal is that OKIMO’s former 30% stake was a carried interest, meaning that Randgold and AngoGold would have had to pay for 100% of the capital expenditures to receive 70% of the returns.

And while OKIMO maintains its carried interest status, a 10% stake is a far more palatable number.

Randgold and AngloGold completed their acquisition of OKIMO’s former partner — Moto Goldmines — on Oct. 15 of this year in a deal that valued Moto at roughly $534 million.

With new ownership, however, comes a new name for the project as the joint ventured company will be called Kibali Goldmines and the project will take the company’s name.

Randgold’s chief executive Mark Bristow calls the project “one of the largest undeveloped gold deposits in Africa” and says the company’s arrival there marks its “expansion into a new and exciting gold belt.”

Bristow did, however, acknowledge that the project was not without its challenges. While such challenges were not named, experienced investors are well familiar with the travails of doing business in the DRC.

To help mitigate some of those risks the companies signed off on a protocol with the government designed to give investors some peace of mind.

The protocol states that all exploitation permits held formerly by Moto Goldmines will be renewed and assured the new owners that so long as the joint venture complies with DRC mining legislation, the permits will continue to be renewed at their earliest renewal dates.

The government also agreed that no further payments will be required of the two companies, but an additional fee of US$4.5 million is to be made to the government in connection with the protocol.

Another important element of the protocol is that the government confirmed that its mining legislation contains “the totality of the taxes, royalties and other fees payable to the Government of the DRC in relation to mining activities in the DRC and guarantees the stability of these provisions as provided in the DRC mining legislation.”

Randgold said it is sending in the same team to develop the mine that had recent success with its Morila and Loulo mines in Mali. The team is also currently building the Tongon mine in Côte d’Ivoire.

Both Randgold’s and AngloGold’s regional business knowledge and government relationships should also go a long ways towards making the development of the mine as smooth as possible.

A feasibility study done on the project by Moto in March 2009 called for open pit and underground mining with probable reserves of 5.5 million oz. and planned production of 2.4 million oz. of gold in the first five years of operation.

Randgold said it plans to announce a definitive timeline for the development of the project by January of next year. By that time, it says, it will have completed an updated geological model. It will then optimize the feasibility study, and re-estimate reserves and resources.