TORONTO (miningweekly.com) – Africa-focused gold miner Randgold Resources had lifted its second-quarter profit by a significant margin, despite having dealt with political uncertainty in Mali and potential mining policy changes in the Democratic Republic of Congo (DRC).
The London-based miner on Thursday said it was “firing on all cylinders” as it posted a second-quarter profit of $141.9-million, which was an increase of 36% on the previous quarter.
With a record performance from Randgold’s flagship Loulo-Gounkoto complex, in Mali, production for the quarter increased by 27% to 210 534 oz against the previous quarter’s 165 443 oz.
This helped to dispel investor concerns about the political stability of the country. Randgold CEO Mark Bristow said in an interview that the company “had no enemies” in the country, and that it was clear that the broad-based transitional government now in power was on the way to restore its mandate within the next year.
“The government of Mali is gearing up to wage war on the rebel insurgents in the north-east of the country – the direct consequence of international military action in Libya. We are confident that any such action would not affect our operations,” he said from London.
Islamist militant groups controlled about two-thirds of Mali after taking advantage of a secular rebellion by Tuareg nationalists earlier in the year.
While the total cash cost per ounce of $723 for the six months was up 6% year-on-year, reflecting the higher cost of production at Tongon mine, in Côte d’lvoire, total cash costs for the quarter were $703/oz, down 6% from the previous quarter, supporting a trend to lower cash costs on the back of higher grades and increased production.
Bristow said that in line with his guidance, the company would continue to see lower production costs until 2015, driven by higher production output and by the high grades that form part of its strategy of maintaining a portfolio of ‘quality’ mines.
During the quarter Randgold had also advanced the development of the giant Kibali gold project in the DRC. Construction of the processing plant and the first hydropower station as well as openpit mining and underground development were now under way and on track for first production towards the end of 2013.
Bristow told Mining Weekly Online that the DRC is considering changing its mining code and that he recently represented the mining industry at a government workshop. He said considering the wealth of minerals resources the country hosts, it was not globally very competitive, and although his advice was that the current mining code should be implemented more consistently, “any change might just be for the better”.
However, he noted that the company is protected by its accord with the DRC government, and should any changes to the code be promulgated, it would only become effective on Randgold’s operations after ten years.
Another highlight of the quarter was that the Gounkoto mine, which was officially opened on August 6, repaid all its capital in its first year of production and declared a maiden dividend of $65.1-million in the quarter.
“The most outstanding achievement of the quarter, however, was that of the Loulo-Gounkoto complex, which set new records in profit, production and underground development while continuing to reduce costs and reaching one million lost-time injury-free hours.
“Despite the political crisis in Mali during the quarter, the complex’s production reached a new high of 132 481 oz, with the plant processing a record one-million tons and the Yalea underground development stepping up to 1 000 m/m – another record.
“Set to deliver 500 000 oz in the year, the complex is now poised to take its place as one of the largest gold producers in Africa,” he said.
Randgold’s Tongon mine, in Côte d’Ivoire, also showed a steady increase in production after successfully negotiating a “tricky” transitional zone of the orebody. Ore treated rose from 756 000 t to 853 000 t quarter-on-quarter, with production rising from 47 141 oz to 56 432 oz in the quarter. The plant is scheduled to reach its designed sulphide processing capacity during the third quarter.
Bristow said the business runs its financial projections using a conservative estimate of about $1 000/oz and any price for gold above that is seen as a bonus. “Everybody is currently skittish about the gold price and its inherent volatility. In light of the current uncertain world economy, there certainly exists more upside potential for the gold price,” he said.
Further, Bristow noted that there were some extremely prospective areas surrounding the Kibali project, as well as two new targets in Mali. Such projects are critical for the company to continue its strong growth trajectory.
He added that Randgold is also looking at the opportunities being created by the current dynamics of the gold mining industry, particularly in the junior sector; however, he said there currently were not any particular new projects that fit the company’s high-quality portfolio.
The company’s Nasdaq-listed stock traded 4.28% higher at $98.77 apiece on Thursday.