Randgold Lifted by Higher Gold Sales

February 5, 2013 at 10:23

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Civil war and military coups failed to tarnish Randgold Resources as more gold and a higher price earned per ounce propelled full-year profits at the Africa-focused miner.

The FTSE 100 company reported $568.2m in pre-tax profits for the year ended December 31, compared with $497.2m in 2011, as revenues rose 17 per cent to $1.3bn. Earnings per share rose from 4.16 cents to 4.65 cents, while management proposed a 25 per cent increase to the annual dividend to 50 cents per share.

The company, which has mines in Mali and Ivory Coast and is building a fifth in the Democratic Republic of Congo, sold 10 per cent more gold ounces than in the previous year, while it benefited from a 5 per cent increase in the average gold price it earned to $1,652 per ounce. Cash costs, however, rose 18 per cent to $583.3m because of lower ore grades and development costs incurred at the Gounkoto mine in Mali.

Mark Bristow, Randgold’s chief executive, said the company would ramp up output once the DRC-based Kibali mine begins production late this year.
“Our chief objectives for this year are to pour first gold on schedule at Kibali, get Tongon back on target, maintain the strong performance at Loulo-Gounkoto,” he said. “Beyond that, our sights are still set on reaching our annual production target of plus 1.2m ounces of gold by 2015.”

Overall gold production increased to 794,844 ounces, up from 696,023 ounces.
That was principally because of a production increase at Randgold’s Loulo-Gounkoto mine complex, which accounted for nearly two-thirds of production, despite a military coup and subsequent civil war occurring in Mali. By contrast power outages at its Tongon mine, in the Ivory Coast, contributed to production there dropping to 210,615 ounces from 250,390 ounces.

Michael Starke, an analyst at Standard Bank, said Randgold faced some unresolved issues.

“We’re slightly more cautious about the year ahead given some of the power supply issues at Tongon in the Ivory Coast which have interrupted production in recent months,” he said. “At the same time capital costs for Kibali have risen and, while it’s not a blow out, there are questions as to whether the mine will be able to deliver a full year’s production in 2014.”

The results cap a successful, if politically turbulent, year for Randgold whose first-half earnings rose by over 40 per cent as production increased.

Mr Bristow said that the miner, which reported net cash of $403m, was able to ride the worst of the political upheaval in Mali, its key market, through its practice of using local management teams who stayed in place along with key people in government during the country’s crisis.

Randgold shares closed up 190p, or 3.1 per cent, to £62.75.