JOHANNESBURG/TORONTO (miningweekly.com) – LSE- and Nasdaq-listed Randgold Resources maintained profitability – albeit at lower levels – during the first half of the year despite a downturn in the gold price.

The group on Wednesday reported that its first-half profit of $135.7-million – a decline from the $245.8-million recorded during the corresponding period the year before – was weighed down by the lower average gold price received, which fell from $1 648/oz during the six months to June 2012, to $1 505/oz during the interim period under review.

The average gold price fell 17% quarter-on-quarter from $1 638/oz in the three months ended March 31, to $1 363/oz during the second quarter.

CEO Mark Bristow told Mining Weekly Online's Toronto office that Randgold had already repositioned itself to deal with the low gold price, adding that the second half of the year should see the company significantly lifting its gold output and reducing costs further.

He said Randgold had a large degree of flexibility in its high-grade deposits that enables it to weather the depressed gold price.

“The industry cannot survive at $1 300/oz. It was already struggling at $1 600/oz to start with. There are market whispers that majors are expecting to make some hard decisions to either close or sell unprofitable operations during the second half of the year,” he said in a telephonic interview from the UK.

He added that the company's business model was designed to deliver returns at lower gold prices and it had, therefore, not been forced to write down its reserves as these had been calculated at $1 000/oz.

Randgold delivered gold output of 395 220 oz during the interim period, marginally down from the 375 977 oz produced in the six months to June 2012, while gold sales recorded a slight decline from the 375 046 oz sold in the interim period last year, to the 374 143 oz sold in the first half of this year.

However, production fell from 199 013 oz in the first quarter to 196 207 oz in the second quarter, while gold sales fell to 185 489 oz during the quarter under review, from the 188 654 oz sold in the March period.

Liberum Capital, in a note to clients, commented that the group’s operations were in line with the production guidance of 395 000 oz at a cash cost of $818/oz.

Quarter-on-quarter, Randgold achieved 7% lower group cash costs at $795/oz in the June quarter, compared with the $841/oz reported in the prior quarter.

“Gold sales and net profit were in line with Liberum estimates, but the earnings a share of 126c is a miss on consensus of 148c a share,” Liberum noted.

The gold producer’s earnings a share fell from the 225c recorded during the six months to June 2012.  During the June quarter, Randgold delivered basic earnings a share of 50c – a 34% fall from the 76c achieved in the prior quarter.

Randgold had reviewed all its business plans at the beginning of the year and, where necessary, aligned them to the drop in the gold price, and was now “well placed to sustain its profitability”, Bristow commented.

“Overall the operations performed broadly in line with expectations with a few small disappointments … [and] we expect a much stronger second half in terms of both production and costs,” Liberum added.

Bristow pointed to the Kibali project, in the Democratic Republic of Congo, being on track to start gold production in October at a cost of about $600/oz, the Loulo and Gounkoto operations were accessing "purple" higher-grade sections in their orebodies and Tongon was continuing its turnaround to improve recoveries.

He also noted that there was no exploration cost cutting on the cards for Randgold, noting that this was indeed the opportune time to build footprints. To that end, Randgold had so far this year already announced three new joint-venture partnerships with junior explorers in a pinch, who had prospective projects in areas Randgold felt comfortable operating in.

“In addition, projects are under way across the group to increase throughput and recoveries and reduce unit costs further,” he explained.