Mali's future as a major African gold producer now seems assured with the completion of an expansion programme at the Syama gold mine ahead of schedule.

During the last three years South Africa's mining companies have spread their wings and taken on international competition to carve a permanent place in the rest of Africa for themselves. Randgold Resources was established in August 1995 to house the non-South African exploration assets of Randgold and Exploration Company. In October 1996 Randgold Resources acquired BHP Minerals Mali Inc and the company obtained a 65% (since increased to 75%) interest in Somisy SA which in turn owns 100% of the Syama Gold Mine in Mali in west Africa. BHP (Broken Hill Properties) is a major international Australian mining company.

In July 1997 Rand Gold Resources was listed on the London Stock Exchange and raised $82.5m in new equity. A $63m expansion programme has been fast tracked at the Syama mine and by the end of the September 1998 quarter the first phase cost target of reducing cash operating costs to below the $250/oz levels was achieved. Chief executive of Randgold Resources, Dr Mark Bristow said this demonstrated the positive effects of the expansion programme at Syama. The first phase of the expansion programme has now been completed and the second - designed to further cut costs to $210/oz and lift production to 270,000 ounces a year - was on track for completion in November 1998.

In the year prior to the acquisition of the Syama mine by Randgold Resources, annual production was 133,524 ounces and cash operating costs were $321/oz. After purchasing Syama, Randgold Resources introduced changes in the ore management and mine planning - both critical aspects in the mining operation. The company also identified inefficiencies in the ore crushing and milling process. The benefits of the capital expenditure programme are shown by the decline in cash operating costs from $321/oz in the quarter to 30 June 1998 to $276/oz by 30 September 1998.

Phase one and two of the Syama expansion programme included the installation of two regrind mills and the flotation circuit which were fully commissioned in July 1998. The purchase of two second-hand ball mills shortened the lead time by some seven months and reduced the capital cost originally estimated at $68m by $5m.

This crucial expansion exercise was achieved ahead of schedule and within budget. With the second phase of the improvements at Syama being commissioned during November 1998, some seven months before the original time-scale estimated at the time of the London stock exchange listing of the company, the two distinct phases of the capital expenditure programme have effectively been compressed into a single phase with an earlier overall target completion date.

Forecast production at an annual rate of 270,000oz at cash operating costs of around $210/oz forecast from the first quarter of 1999. For the quarter ending December 1998 the directors expected cash costs of $249/oz. Annual gold production to March 1998 totalled 120,253oz. From the purchase of the Syama mine from BHP to 30 September 1998, about 269,000 ounces of gold has been produced from the mine representing an annual rate of slightly under 135,000 ounces.

The Syama gold mine is located in the Sikasso region of Mali, some 280km south-east of the capital, Bamako and 800km from the port of Abidjan in Cote d'Ivoire. The mine was originally commissioned in January 1990 as an open-pit oxide gold mine a cost of $35m. In September 1994, the Australian mining company, BHP, completed a further $89m expansion programme enabling exploration of the deeper sulphide ore body. Milling of sulphide ore commenced in September 1994. Earlier gold output was mainly based on oxide reserves, which have now largely been depleted, although stockpiles of low and medium grade oxide and transitional ore remain to be processed.

Randgold Resources increased its shareholding in Somisy SA (Somisy) to 75% with the acquisition of a further 10% from the World Bank's International Finance Corporation (IFC). The government of Mali owns 20% of Somisy and 5% is owned by the IFC. As a result of the financing structure of Syama, Randgold Resources has the right to 92% of the net cash flow from the mine.

As a matter of principle, Randgold Resources employs the highest possible percentage of local residents in all the countries in which the company operates. At Syama 577 of the 657 employees are Mali citizens who are well represented in management structure, up to the most senior level. All exploration teams are managed administratively by local residents, while local geologists form the core of the exploration teams. Exploration at Syama is on-going.

The Syama mine is the only gold producer in Randgold Resources but it has a number of advanced exploration properties and is the largest holder of exploration ground in Mali. The resource base at Syama is 6.58m ounces and is currently expected to have a 10 year mine life and this is probably a conservative estimate. The current mine plan envisages the open pit mining will extend to a depth of 330 metres, based on proven reserves of 3.32m ounces, but drilling has confirmed ore grade mineralisation continuity to a depth of at least 550 metres.

Resources, however, include underground stockpile and satellite deposits. There is potential for underground bulk mining.

At the end of September 1998 some $55.2m had been invested at Syama since the expansion programme began with a further $5.3m earmarked for completion making a total of $60.5m. This compares to an estimate of $60.7m at the time of the international offering on the London Stock Exchange. Randgold selected Mali as a mining project company in 1993 because of its excellent geological prospectivity and political stability.

Around six deposits with over one million ounces of gold have been discovered in the country. The group's exploration activities in Mali account for over 50% of the company's exploration budget and it is also involved in Cote d'Ivoire, Senegal, Burkina Faso and Tanzania.