Morning Mumble: Randgold disappointing Volte Face (with apologies)

Good Morning,

The news of Randgold (RRS) and AngloGold Ashanti's (JSE: ANG) joint venture agreement for the Obuasi gold isn't great. The asset has a long-standing saga where many have failed before RRS. With the Ghanaian taxation issues, so far this morning have only been considered by one analyst. The expansion and redevelopment of Obuasi is not fully decided yet, but in the interim there will no doubt be some bullishness around the potential. 

The Ghanaian tax authorities (GTA) operate a ring-fence policy, whereby profits cannot be offset by other operational areas. The GTA will have to reconsider the corporate income tax rates of 35% and an additional tax of 10% on mining companies, as a result of declining expenditure and the commodities rout. Having considered Randgold's positives, yesterday’s purchases were cut at a pathetic profit, with significant time wasted and being left with cash!  

There are much better assets out there at depressed prices that $1B invested in would produce better returns. Many times has Amara met the criteria for Bristow's commentary with the benefit of an operational blank sheet and sizeable savings to be had if the CAPEX was committed sooner rather than later! 

The hope of yesterday's news by the market, has eroded any benefit even for the longer-term. Although the joint venture is at an explorative stage, why will Obuasi at an operational level be any different for Randgold? In the current climate it's simply a care and maintenance parasite on any company’s balance sheet. 

Whether its Elephant country or not (FT), prudence dictates purchasing a decent asset with a better outlook than Obuasi. Good money after...As a reminder, PWC's Mining Taxes and Royalties and an article that AngloGold Ashanti's might want one to quickly forget.  

Disappointing waste of time on RRS and perhaps losing ones mind! When investors thousands of miles away from the mine can assess the benefits or lack of in investing in Ghana, concerns should prudently be raised. More later...

Atb Fraser