[miningmx.com] – RANDGOLD Resources would resist dipping into its $200m revolving credit facility provided the gold price stayed above $1,000/oz, said the UK-listed firm’s CEO, Mark Bristow.
“At $1,300/oz we’re in good shape,’ he said. Asked if this meant continuing to finance the Kibali project from operating cash flows, Bristow added: “Yes, we won’t draw down on the revolver’.
Shares in Randgold Resources gained 8% in London today after the group said it had produced third quarter gold of 233,676 ounces at cash costs of about $662/oz. The profit for the quarter increased 76% to $81.3m from $46.3m in the June quarter. As a result, the company remained net cash positive with $17m in the kitty.
“The third quarter was our peak spend and we did it from operating cash flow. It is a major achievement for me and for our finance team,’ he said. Randgold has spent $545m so far this financial year against $255m in operating cashfow with the balance financed from cash reserves.
The project was brought into production early and Bristow said Randgold Resources and its joint venture partner, AngloGold Ashanti, would improve on the 30,000 oz in production it was expected to produce this year.
All in all, Kibali, which is situated in the Democratic Republic of Congo, is on track to produce 550,000 ounces non-attributable gold production in the 2014 financial year. “We’re fairly comfortable with that figure but I say that with some caution,’ said Bristow.
“We have still to complete the sulphide circuit and that is always more difficult than the oxide circuit,’ he said of plans by the joint venture partners to build out the gold mine’s processing plant.
The project is also moving towards building an underground mine, taking total capital expenditure to R1.7bn. Said Investec Securities: “The company remains ungeared . so has ample capacity to weather this [capital expenditure].
“If Kibali is able to deliver its targeted 550koz in FY14, it will go a long way to rebuilding the balance sheet’.
“Our fourth quarter will be a good quarter,’ said Bristow. “A new mine certainly makes a big difference. It is a big step change in the same way that we announced a big step change in 2011 (Loulo-Gounkoto),’ said Bristow.
The third quarter operating performance was largely down to a strong performance from Loulo-Gounkoto higher grades and improved in recoveries resulted in a 36% increase in production to a record 165,146 ounces. Total cash costs at that mine were $616/oz, 23% lower.
Said Roger Bade, an analyst at Whitman Howard in London: “Before we get too carried away with strong Q3 numbers it should be pointed out that the annualised return on shareholders’ funds was only 11.7%.
“However the market will probably ignore this small technicality and focus on the headlines which are very strong”.
Commenting on proposed changes to the mining code in the Cote d’Ivoire where Randgold Resources operates its Tongon mine, Bristow said a fourth draft of the legislation had been completed and the changes were heading towards “a successful conclusion’.
“They have dropped the concept of a capital gains tax and the country’s new mines minister [Adama Toungara] has said he wants the new mines code to be one of the most competitive in the world,’ said Bristow.
