Randgold set to exceed payout after strong start to 2017

Mark Bristow, CEO, Barrick Gold Corporation. Pic: Martin Rhodes

RANDGOLD Resources was likely to pay a significant higher dividend after its current financial year even after increasing the last dividend payment 52%, said CEO Mark Bristow.

“We already have far in excess of our $500m buffer that we like to keep on the balance sheet with only the first month of the current quarter underway,” he said in an interview.

“Our policy is to pay everything out once we have the buffer and the board is satisfied our capital needs are met. We are not doing funny payout ratios or paying in bits; it’s a full payout in arrears at the year-end,” he said.

Asked if a much improved dividend payment over the recent $1/share dividend was on the cards in 2018, Bristow said: “I should think so”.

Operationally, Randgold turned in a solid first quarter of its 2017 financial year producing 322,470 ounces of gold, 10% more than in the first three months of the previous year.

At $619/oz, total cash costs were 4% lower year-on-year and although neither production or costs matched the record production in the previous (December) quarter, Bristow was satisfied with the result.

From an earnings perspective, the year-on-year performance was solid: share earnings came in at 74 US cents per share versus 58c/share in the 2016 March quarter. Cash increased nearly $100m to $600m before a $1/share dividend payment.

“Randgold delivered strong Q1/17 results, further demonstrating the ability of the portfolio to consistently achieve production and cost targets,” said Andrew Breichmanas, an analyst for BMO Capital Markets.

“The company appears well positioned to meet full-year guidance of 1.25-1.30 million oz at at total cash costs of $580-630/oz, particularly as production is expected to be slightly weighted towards the second half,” he said. Randgold’s production last year totalled 1.25 million oz.

Bristow told Miningmx previously that the company had identified the development of three new mines over the next five years and that it had an aspirational gold production target of 1.5 million oz.

Production was largely driven by Loulo-Gounkoto, its mine in Mali, which produced 186,366 ounces in the quarter. This was a decline against the December quarter owing to a four-day stoppage at the mine.

There was also a nine day work stoppage at Tongon in Côte d’Ivoire which led to a 21% decline in gold production to 7,220 oz for the quarter while Kibali in the Democratic Republic of Congo reported a 23% decline in output owing to planned lower grade ore. Compared to the March 2016 quarter, Tongon, Loulo-Gounkoto and Kibali produced more gold. Morila increased gold output 2% quarter-on-quarter.

Bristow said the stoppages at the Mali and Côte d’Ivoire mines were unrelated. In the latter there had been mutiny during January among soldiers in the country’s second largest city Bouake which Bristow said had “ended up in a general strike”.

“The organs of the state responded quickly and an agreement was reached. I think workers understood it. The country is still grappling with national conciliation and bridging the north and south divide,” he said. A similar revolt among soldiers had occurred in November 2014.

“I think it helped that Randgold was operating in the country during the civil war in 1997,” said Bristow of the firm’s relationship with the Ivorian government. Randgold subsequently commissioned Tongon in 2010 after restarting work in 2007.

In Mali, however, Bristow acknowledged the group had been late in managing remuneration of employees in the lower grades which had triggered a work stoppage after unions demanded wage increases.

“But we saw this as an opportunity to capture a new understanding of work behaviours at the mine without acceding to any additional payments,” he said.