Randgold Resources sticks to its knitting

[miningmx.com] — RANDGOLD Resources’ (Randgold) CEO Mark Bristow is “ecstatic’ over gold at $1,400/oz but stresses such prices will make no difference to the group’s development strategy.

Instead, the extra profits would be used to set out a clear and sustainable dividend cover and dividend policy for shareholders.

He commented, “we are currently in a strong growth phase but we don’t want to become a huge gold group chasing marginal ounces which are payable only at these high price levels.

“We would rather be a smaller, quality group producing highly profitable ounces and paying out large dividends to our shareholders.’

Bristow pointed out that Randgold’s expansion programme to 2014 when the Kibali mine in the Democratic Republic of Congo (DRC) will be commissioned had been budgeted on a forecast gold price of $900/oz.

He told Miningmx, “on that basis the peak funding requirement comes during 2012 when our available cash will fall to around $170m after which it will start to grow again.

“If $1,400/oz is maintained then we start to grow our cash from next year and, by the time we commission Kibali in 2014, we will have close to $2bn in free cash.’

Bristow said Randgold’s approach had been to invest carefully in the right kind of assets instead of just “spending money’ chasing lower grade projects through what he termed “desperate merger and acquisition deals.’

“We have been decisive and we have not sat on our hands when we have seen world class assets become available such as Kibali,’ he commented.

Latest key developments at Kibali have been the cessation of artisanal mining on the project site and the start of the Relocation Action Programme (RAP) which will ultimately relocate some 3,500 families from 14 villages into a new town.

The land for the new town, to be called Kokiza, has been acquired and model houses built for selection by community members.

The Catholic Church has agreed in principle to move its local church from the project site to Kokiza so that it may remain at the heart of the resettled community.

Bristow said more than 50% of the people previously engaged in illegal mining on the Kibali site were now working in local home industries such as the manufacture of bricks “which they are selling back to us and making real money.’

He said the end of artisanal mining on the site had been negotiated with the government authorities and state mining partner Okimo.

He added: “That was crucial. Our position was that the mining lease belongs to us and we will be paying taxes on it to the government.

“We were not prepared to have so-called artisanal miners – effectively illegal miners – continue to operate on our ground because then the debate starts over who that ground actually belongs to.

“We have bulldozed and terraced the areas formerly used by the artisanal miners.’

SALES UP

Randgold sold 123,830oz of gold in September quarter (June quarter – 111,150oz) for revenues of $115.8m ($102.6m) as the production problems that affected the Loulo plant during the June quarter were dealt with.

Profit for the quarter was $28.2m which was double the profit in the 2009 September quarter, but 23% down on the June quarter profit because of a $13m write back in the June quarter.

Adjusted for the write back the September quarter profit was 20% up on the June quarter profit.

The group’s new Tongon mine in Cote d’Ivoire poured its first bar of gold on November 8 after milling the first ore in the second half of September.