Randgold Resources to remain dividend-driven midtier producer

7th March 2013 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO (miningweekly.com) – Africa-focused miner Randgold Resources on Wednesday affirmed its intention to remain a dividend-driven midtier gold producer in a global mining environment of rising costs and difficult equity and debt markets.

CE Mark Bristow said that after the past number of years’ sustained gold price above $1 000/oz, any midtier gold miner that was in production should by now have shored up significant free cash flow with which to fund growth projects.

He said Randgold could technically afford to build a new $600-million mine every five years, while maintaining attractive dividend payouts. So comfortable is the company, that in February it had lifted its yearly dividend for the period ended December 31 by 25% to 50c a share, compared with 40c a share for 2011.

Speaking at an investor presentation hosted by Rangold during the Prospectors and Developers Association of Canada’s show, Bristow said, as long as there was about $600-million to $700-million cash in the bank to work with, he was happy to distribute the rest as dividends.

He emphasised that the company saw itself as a good potential joint venture partner for juniors.

Randgold, which is currently constructing the $990-million Kibali gold mine in the Democratic Republic of Congo (DRC), would, however, not consider new projects under three-million ounces.

Bristow, who owns just less than 1% of Randgold, and who had in recent years been a strong advocate against proposed far-reaching changes to the mining codes within the DRC and in other African countries in which it operates, dispelled a number of ‘fads’ that he said seemed to plague the gold mining industry lately.

Among these he said the industry’s current focus on ‘capital discipline’ was misguided. He said this had become a trend as investors were merely seeking to recover money lost through bad investments.

“This is the resource extraction business. One needs to constantly invest in exploration [which is usually the first expense to be cut] to replace reserves.”

He also jested that the next fad to come would be the unbundling of the major mining companies, owing to their complex capital structures having become less economical.

To this end, he said he ideally saw Randgold as maintaining a production profile of between 1.5-million to two-million ounces that would deliver an ideal yield for “real value creation”.

The company in 2012 produced 794 844 oz of gold. The company targets production of 1.2-million ounces of gold by 2015.