“Being a pure gold play is our big mantra,” Bristow reiterates to Mining Weekly.
The high gold price notwithstanding, Bristow contends that the gold industry is “not in good shape”, and, to make matters worse, some bankers, he laments, are encouraging dubious gold listings, under the guise of entrepreneurship.
Randgold Resources, a consistent performer, emerged from gold tough times as a far stronger performer, achieving a net profit of $18,2-million for the 2008 March quarter, up 25% on the previous quarter and 42% on the corresponding 2007 quarter.
Bristow says that the entry of many into other metals along with gold is confusing investors, who are turning to exchange-traded funds (ETFs) for the gold exposure pure gold companies traditionally provided.
But, he argues, they are paying through the nose to do so. For instance, for an investment of $875, ETF investors get one ounce of gold, whereas, if they invested that amount in Randgold shares, they would buy two ounces of gold, along with two options – in the form of two reserve ounces and two resource ounces – as well as put themselves in line for dividends.
Also, because Randgold’s reserves are growing, those initial two ounces of Randgold gold are increasingly becoming more than two ounces, Bristow points out.
“But, when you buy equities, what you have to take a view on is risk – management, operational and political risk,” he says – and that’s the difference between an ETF and equity, which is, perhaps, riskier, but comes with significantly more leverage.
A consistent performer, Randgold Resources’ latest set of solid quar- terly results saw profit materially overcome industry cost pressures.
Bristow likes to point out that the overwhelming majority of information technology bubble companies floundered, and believes the same could happen to dubious new start-ups that are being enthusiastically led to listing on stock markets.
“Going from junior to big producer is not easy, and when you get on the treadmill, you have to keep replacing ounces.
“All the big boys, bar Barrick, have been caught in the trap of going long on promise and short on delivery,” Bris- tow harangues.
“The gold in- dustry is not in good shape”, and is bereft of the big dividend payouts of the base- metals industry, despite the high gold price. Many mines are still marginal even at the higher gold price, causing one leading fund manager to lament that some gold-miners are paying more in fees than in dividends.
If nongold metal credits are subtracted from some margins, there is no margin increase at all.
On top of that, there has been a decrease in gold supply and, if the lower volume is multiplied by the margin, there is no real logic to support the significant growth in market capitalisation of the gold industry on world stock exchanges.
Randgold Resources has created significant wealth for the people of Mali, paying $550-million into the Malian economy in salaries from Morila mine alone.
Loulo, also in Mali, is likely to pay over considerably more in time, and Tongon is now being built in Côte d’Ivoire.
Last year, Morila and Loulo contributed $90-million to the Mali treasury in taxes, royalties and other earnings.
To listen to Mark Bristow speaking, click here