Randgold takes beating, but vows to reach 1.25moz gold forecast

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

RANDGOLD Resources CEO, Mark Bristow, described the second quarter as “one of the toughest in years”, but vowed to catch up on its 1.25 million ounce gold production target in the second half of its financial year.

“We made 45% of our production target in the first half and so have 55% to make in the second. That’s not such a big ask,” he said in an interview with Miningmx today.

He added that improved grades from its Loulo-Gounkoto mine in Mali and its Democratic Republic of Congo mine, Kibali – which it shares with AngloGold Ashanti – would boost production.

BMO Capital Markets said it would slightly improve its full-year forecast to 1.25 million oz at a total cash cost of $643/oz from 1.24 million oz at $633/oz previously. However, Goldman Sachs described the quarter as “… particularly disappointing as both Tongon and Kibali were down quarter-on-quarter”.

Randgold’s second quarter production, which came in at 281,494 oz, was 4% lower quarter-on-quarter – a development largely attributable to the extended downtime of a mill at the Tongon gold mine in Côte d’Ivoire.

With production down, total cash cost per ounce rose 12% to $727/oz which led to an 8% decline in second quarter profit to $58.7m, a performance that saw shares in the £7.7bn gold company fall 9% in the first hour of trade in London.

However the company increased net cash 6% quarter-on-quarter and cash holdings rose 7% to $272.7m. “We paid a dividend this quarter and still increased cash after this. It’s all in the gold price,” said Bristow.

“The fact that we are profitable is significant; all the mines were profitable, and it comes back to the old thing that we plan at a gold price of $1,000/oz,” he said.

Commenting on the gold market, Bristow said that the gold price would remain volatile over the next one or two quarters as there was “a lot of confusion out there with the Fed maybe raising rates the UK lowering them”.

On an interim basis, profit for the six months to June was up 11% whilst production was flat; the total cash cost was 1% lower year-on-year.

Amid a relatively paucity of good news in short-term operations, Randgold pointed to its medium to long-term growth prospects. “The real value add is in our brownfields expansions,” said Bristow.

There were significant extensions of the Gara underground mine a Loulo while “everything was green” for the development of a superpit at Gounkoto both of which had “no major demands on capital,” said Bristow.

“Then at Kibali we have a big focus on building flexibility and we continue to add to this. It was flexibility which helped us to blow the lights out last year,” he said.

In terms of exploration, Bristow said there were “very exciting” and advanced projects in Côte d’Ivoire. “So the whole resource triangle starts to fill up in this quarter,” he said.

UK-listed gold stock Fresnillo, which mines in Mexico, doubled profit for the year and outlined capital expansion totaling $1.3bn over the next two financial years which Goldman Sachs said was an indication that gold firms were on the growth trajectory again heading into the quarterly reporting season.

“I dare say this suggests that the [gold] industry hasn’t learned and might do the whole thing [ambitious expansion] over again,” said Bristow.

“There’s a lot of money chasing the gold stocks at the moment, but we’ve never flipped-flopped with the gold price which will be volatile in the next quarter or two,” he said. “The production profile for industry is downwards whatever you do which is healthy for the gold price,” said Bristow.