Randgold Resources has held talks about acquiring Moto Goldmines
Randgold chief executive Mark Bristow said he spoke with the management of Moto, which was planning to develop the largest mine in the Democratic Republic of Congo (DRC), about making an all-stock purchase of the Australian-based company.
Some Moto shareholders had indicated they might support such a transaction, Bristow said in an interview in Hollywood, Florida, where he is attending the BMO Capital Market Global Metals and Mining Conference.
"We've had discussions with management to try to convince them that an equity deal with us is good for everyone," he said. "It makes sense to do a paper deal."
Bristow, who has overseen construction of two mines in Mali and a third in Ivory Coast, wants to tap Moto's Congolese gold resource, which may contain as many as 22 million ounces of the metal.
Moto executives talked with the DRC for more than two years before agreeing this year to give the government 30 percent of the project, which is in the country's northeast.
Moto chairman Sam Jonah would not comment on whether his company had been in talks with Randgold on a possible transaction.
"If we had anything to share, we'd share it with the public," Jonah said on Wednesday from Johannesburg. "There is nothing of significance we need to share."
Negotiations on a possible purchase would mark the second time Bristow has tried to acquire a company headed by Jonah, who is a former chief executive of Ashanti Goldfields.
In 2003 and 2004, Bristow competed unsuccessfully to buy Ashanti, which was finally purchased by AngloGold - the precursor to AngloGold Ashanti.
Moto's project in the DRC would yield 400 000 ounces of gold a year and was expected to start production in 2012, Andrew Dinning, the company's president, said in February.
The mine was expected to cost $483 million (R4.8 billion at Wednesday's exchange rate) to develop and would produce 3.3 million ounces of gold over about nine years at a cost of $294 an ounce, according to a presentation posted on Moto's website.
Digging the mine would first require environmental approval, construction of supporting infrastructure and the relocation of people, said Bristow.
"It's a long way to go before you can develop it," he said.
Randgold had $257.6 million in cash at the end of 2008, the company said in a US regulatory filing in February.
At a gold price of $800 an ounce, the company would have $500 million in cash reserves by the end of 2011, when it planned to almost double production from existing mines to about 800 000 ounces a year, said Bristow.
At $1 000 an ounce, the company would have $800 million in cash at that time, he said.
The price of gold reached a 2009 high of $1 007.70 an ounce last Friday.
An all-stock deal would allow Moto's shareholders to retain exposure to the DRC development while benefiting from Randgold's existing mines and a new project planned for Senegal, said Bristow. - Bloomberg