Resolute ready to reopen Syama (April 19, 2004)

Perth-based gold miner Resolute Mining has exercised an option to buy the majority interest in the Syama gold mine, in southern Mali, from Randgold Resources (GOLD-Q).

Resolute will buy Randgold’s 80% interest in Syama’s operating company, Socit des Mines de Syama, for US$6 million and assume US$7 million in debts. In addition, Mines de Syama carries rehabilitation liabilities estimated at US$2.6 million. The Malian government retains a 20% working interest, and Randgold retains a US$10-per-oz. royalty on the first million ounces of production from Syama, and US$5 per oz. on the next 3 million oz.

Randgold shut down Syama in 2002 after sustaining a string of losses from the mine when gold prices were low. Resolute optioned Randgold’s interest in April of last year for a fee of US$75,000 per month.

A prefeasibility study concluded that an operation producing 220,000-250,000 oz. annually could be economic and that resuming production would require a capital expenditure of US$47.7 million to US$55.4 million.

Remaining proven and probable reserves at Syama amount to 12.9 million tonnes grading 3.93 grams gold per tonne, at a cutoff grade of 1.75 grams per tonne. The proposed pit design has a stripping ratio of 4.7-to-1. The reserve is part of a measured and indicated resource of 31.9 million tonnes grading 2.98 grams per tonne; an additional inferred resource of 15.8 million tonnes, averaging 2.95 grams per tonne, has been calculated.

The only major change to the operation will be the addition of a flotation circuit to produce sulphide and carbonate concentrates, which will feed an existing roaster. The carbonate concentrate contains only “a modest amount” of gold but consumes sulphur dioxide in the roasting process, limiting air pollution.

The new plant would have a capacity of either 2 million tonnes or 2.6 million tonnes annually. Studies based on a 2-million-tonne throughput indicated a cash cost of US$270 per oz. to produce 220,000 oz. Bumping the annual throughput up to 2.6 million tonnes brings costs down to US$250 per oz. and production up to 250,000 oz.

Resolute expects to have a final feasibility study ready for lenders in another six months. It estimates construction would take a further 15 months.

Along with exercising the option on Syama, Resolute also advised Etruscan Resources (EET-T) that it would exercise its option on Etruscan’s Finkolo property, immediately south of Syama. In a deal last November, Etruscan gave Resolute an option to earn a 42.5% interest in Finkolo by spending US$2 million on exploration by the end of March 2006. The government retains a 10% carried interest, and a private Malian company, Bagoe National, has a 5% carried interest plus a 2% net smelter return royalty.

Resolute can earn a further 8.5% by spending another US$1 million within two years of vesting its original interest. Etruscan can vest its own interest by paying US$225,000 to Bagoe before July 18, 2004.