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Rangold Resources (LSE:RRS) share price dropped 55.00 pence today to 6065.00, likely in response to a fire in the Tongon gold mine in Côte d’Ivoire over the Christmas shutdown. The holiday is typically a time when maintenance staff can make needed repairs without interrupting manufacturing operations. Apparently, however, someone must have forgotten to snuff out the yule log before they went home on Christmas Eve.
Although Randgold has yet to reveal the source of the fire, we do know that it has been extinguished and that there were no injuries. Damage was limited to 2 cyclone clusters, a feed pipe, flotation cells, blowers, and other components for both milling surfaces.
The key to getting back into regular production will be the lead times of obtaining the parts and components necessary to repair the damaged sections of the processing lines. Whilst some of the repair work can begin immediately, and the milling circuits are expected to be operational in less than a fortnight, major repairs are expected to take up to a month after receiving the spare parts that are now being sourced.
That cautionary statement fails to include the fact that the types of equipment needed at Tongon are not typically off-the-shelf items. Cyclone clusters, for instance, would, more than likely, have to be built to order, so that adds yet another element of time to the recovery process.
Whatever equipment or parts are needed, the reestablishment of operations is always dependent upon the last component to arrive. Although Randgold’s official announcement is straight-forward and well worded, the reality is that it could be well into February before operations resume.
In the meantime, Randgold has adjusted it’s production forecast for the Tongon project downward from 280,000 ounces to 208,000 ounces. The good news is that both its Loulo facility and Morila mine are in good shape. The company expects that Loulo will meet its production goal of 500,000 ounces and that Morila will handily exceed the 200,000 ounce projection for the year.
Long term investors should keep in mind that this is not an indication of operational or managerial weakness. It is a rare and unexpected accident that temporarily interrupts production. The real test of management and operations will be evidenced by how quickly the mine can be back at full operations.
It may have been difficult for Randgold execs to sit in front of the fireplace on Christmas Eve without thinking about the problem that has beset them, but there’s a new year on the horizon and, overall, for Randgold, things aren’t so bad as they may seem.
