Resolute refocuses on Mali

Even as Resolute Mining (RSG-A, RMGGF-O) – the second-largest gold producer listed on the Australian Stock Exchange – prepares to wind down its Golden Pride mine in Tanzania over the next 24 months after 12 very successful years and more than 1.8 million oz. of gold production, its gold profile over in West Africa only seems to be growing.

Its cornerstone asset in Mali called Syama has over 6 million oz. of contained gold as well as substantial exploration upside.

“It’s a very big orebody,” in Africa’s third-largest gold producing country, Peter Sullivan, Resolute’s chief executive, told The Northern Miner, during a recent stop-over in Toronto.

Resolute owns 80% of the project with the rest held by the government of Mali, a country about the size of Ontario. Syama is 300 km southeast of the capital city, Bamako and 30 km from Mali’s border with Côte d’Ivoire.

The project is ramping up to full production and Sullivan forecasts the mine should be producing about 250,000 oz. gold a year starting in 2012. In the first half of this year Syama is expected to produce 47,340 oz. gold at a cash cost of US$1,045 per oz.

Those costs (about one-third of which are diesel-power generation costs) are expected to come down as soon as Syama is connected to the national grid at a cost of about US$42.2 million, a feat targeted for the end of 2012.

Currently Resolute’s plans for Syama encompass an open pit that will be mined for about 10 years before the launch of an underground phase. The deposit remains open at depth, and management estimates that about half of the 6 million oz. gold the deposit is estimated to contain, sits below the current pit design, which extends to a depth of about 400 metres.

Sullivan says there is potential to increase production and extend the mine life at Syama with an additional 1 million oz. gold along strike to the north and south of the main pit. (Reserves stand at 2.2 million tonnes grading 2.7 grams gold per tonne; measured and indicated resources of 5.4 million tonnes at 2.1 grams gold per tonne; and inferred resources of 5.9 million tonnes at 2.1 grams gold per tonne.)

Resolute controls about 50 km of strike along the Syama shear zone, and the company is considering building a dedicated oxide circuit that would deliver an extra 70,000 oz. gold a year over a mine life of about seven years.

A final feasibility study on expansion plans at Syama is expected before the end of 2011. Resolute bought Syama from Randgold Resources (RRS-L, GOLD-Q) in 2003 for US$13 million when lower gold prices made processing Syama’s carbonaceous and refractory ore unattractive.

“It was a great buy for us,” Sullivan said.

The ore is treated using conventional four-stage crushing, ball-milling, sulphide flotation and dewatering, roasting, calcine leaching, and elution at the rate of about 2.4 million tonnes per year.)

Last year the operation produced 77,926 oz. gold from 1.3 million tonnes treated at a head grade of 2.69 grams gold per tonne and a metallurgical recovery of 68.7%. Since then, recoveries have improved and today are in the low 80% range, Sullivan said.

As for mining in West Africa, Sullivan says, Mali has been “pretty stable for the last 20 years,” and argues that unlike some other countries in Africa and indeed other parts of the world, the current president, now in his second term of office, has said he will step aside when his term ends.

“We’re in a great position in West Africa, which is quite a popular area for new discoveries right now,” he said. “We’ve got a very big position in Mali and it’s the major asset of our group.”

Elsewhere in Africa, Resolute holds 10,000 sq. km of permits on early stage exploration ground in Côte d’Ivoire covering over 200 km of greenstone belts northeast of Newcrest Mining‘s (NCM-A) Bonikro mine, and has delineated 10 high-priority multi-element soil anomalies.

In Australia, production for the first half of 2011 from its Ravens-wood operation in northern Queensland is estimated to be 57,076 oz. gold at a cash cost of A$952 per oz. (US$965). (Ravens-wood consists of the Mt. Wright underground mine and the Sarsfield open pit, which was shut down in 2009.)

Resolute believes Mt. Wright will produce 1 million tonnes per year at a grade of 3.5 grams gold per tonne for a total of 100,000 oz. gold per year.

With Mt. Wright and Sarsfield, the Ravenswood operation has total reserves of about 1.5 million oz. gold. Mt. Wright has reserves of 9 million tonnes grading 2.7 grams gold, while Sarsfield has reserves of 38.3 million tonnes grading 0.8 gram gold.

The company plans to reopen and expand the Sarsfield open pit. Resolute reckons there is a resource of 1.8 million oz. gold below the current pit outline and plans to restart the open-pit mine and treatment plant at a cost of about US$72 million.

An internal scoping study late last year assessing the benefits of expanding the Sarsfield pit confirmed that using the existing Nolan plant to treat ore from Sarsfield, in conjunction with underground ore from Mt. Wright, at a rate of 5 million tonnes per year, would support a 10-year operation for both the underground and open-pit operations with average production of 140,000 oz. gold per year at an estimated cash cost of US$860 per oz.

In addition, Resolute recently discovered the Welcome Breccia deposit, about 40 km away from the Nolan plant. Drilling intersected 113 metres of 7.7 grams gold per tonne from a depth of 316 metres in the third hole drilled.

By the end of this year, Sullivan said, Resolute will have virtually eliminated its US$160 million in debt and on a net basis will be completely un-geared.

The gold producer is currently un-hedged.

In Sydney, Resolute is trading at about A$1.31 per share and over the last six months has traded in a range of A$0.73 per share to A$1.53 per share. It has 467 million shares outstanding with a market capitalization of about A$850 million.