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Resilient Randgold planning dividend delivery

6th November 2014

By: Martin Creamer

Creamer Media Editor

  

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JOHANNESBURG (miningweekly.com) – Resilient Randgold Resources, which has returned to its debt-free status after repaying its revolving credit facility, said on Thursday that its dividend plans remained firmly in place, despite the gold mining industry as a whole finding itself in a tight spot as the price of the precious metal falls.

The London- and Nasdaq-listed gold mining company, which has managed to continue to grow its dividend profile over seven years, said it had every intention of continuing to do so.

“Randgold may well be in a position to be among the last men standing,” said Investec mining analysts in a note.

With third-quarter (Q3) $172.6-million profit from mining up 6% quarter-on-quarter, Randgold is also one of the few gold-mining companies that has not impaired any assets.

Instead, as the industry becomes increasingly stressed, Randgold is sharpening its merger-and-acquisition focus, while remaining mindful that early disposals may not be of the best assets.

“We’re after those ice-cream assets that are going to only dislodge a little later in the process and we’re keeping a sharp lookout,” Randgold CEO Dr Mark Bristow told Mining Weekly Online in a post-Q3 results interview.

Up to now, organic growth has served the company well, producing 37% more gold production in the first nine months of this year than in the same period last year.

“With production standing at 860 366 oz at the end of September, we’re well on our way to passing the million-ounce landmark before the end of this year,” Bristow added.

In deciding on its 2015 budget, the company is also looking forward to spending more on exploration, where it is invariably counter cyclical.

When gold fell below $1 000/oz years back, Randgold set out to make a 20% return on a gold price of $1 000/oz, which gave it the benefit of a rocketing margin when gold moved to $1 900/oz.

Even at the depleting Morila gold mine in Mali, where mining is scheduled to cease in 2017, closure plans fly at a gold price of $1 000/oz

That high-margin period enabled the 19-year-old company to build up sufficient capital to fund a new phase of growth, the high point of which has been the successful Kibali gold mine in the Democratic Republic of Congo, which is poised to be a 650 000 oz/y on-average producer for the next dozen years.

“If you look at Kibali’s 145 000 oz for this quarter, it is nearly there on the run rate already, and it’s only our third quarter after switching the engines on,” Bristow said, adding that Tongon in the Ivory Coast was destined to settle at the 260 000 oz/y mark, after production and recovery efficiencies were increased and costs decreased during Q3.

Production at the group’s flagship Loulo-Gounkoto complex was 8% down at 160 286 oz but still on track to beat its 2014 guidance of 640 000 oz.

“If you look at that run rate, Loulo-Gounkoto is going to get close this year to what we gave as guidance for next year, of around 680 000 oz,” he said.

Tongon increased quarter-on-quarter production by 22% to 63 832 oz on improved mill feed grade, gold recovery and mill tonnage throughput, and total cash cost an ounce was reduced by 15% to $799.

Randgold’s Q3 production of 299 000 oz was at cash costs of $692/oz, with operating cash flow at $125-million, up from $73-million in the Q2, Investec mining analysts noted.

Capital expenditure of $190-million, was running below the $340-million planned for the year.

Gold sales for the quarter of $376.8-million were 6% up on the previous quarter and total cash cost an ounce dropped 1%.

“It’s also a good feeling to be back in the black after repaying our revolving credit facility. We’re still growing our existing businesses and our recently restructured and reinforced exploration team is out in the field hunting for additional ounces and new opportunities,” said Bristow, who has been CEO since incorporation of the company, which was founded on his pioneering exploration work in West Africa.

The geologist with a PhD from Natal University has led the company's growth through discovery and development, in which he is a firm believer.

Edited by Creamer Media Reporter

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