Mining profits rise at Randgold despite lower gold price

Randgold Resources updated the market on its second quarter on Thursday, reporting a 5% uptick in its profit from mining on a quarter-on-quarter basis, with net cash generated from operations rising 49%.

The FTSE 100 company did highlight the fact it paid a $188.8m dividend in the quarter as well.

It said gold production was 9% higher on a quarter-on-quarter basis at 313 302 ounces, with its total cash cost per ounce down 3% to $697 and gold sales rising 5% to $411.5m, despite a lower gold price.

Profit from mining was 6% higher at $190.6m, with net cash generated by the operations rising by 49% to $95.5m.

The firm’s profit for the period fell to $58.37m from $66.52m in the quarter immediately prior, however.

At Kibali, Randgold said underground mining was ramped up as planned, with continued improvements in throughput and recovery helping to boost production to a record 201,742 ounces, up 17% on the prior quarter.

Total cash cost per ounce decreased 11% to $651, which was said to be reflective of the higher grade as well as lower power costs from increased hydropower.

The mine's third and last hydropower station was currently being commissioned.

At the end of the quarter, Randgold said Kibali's underground operation successfully transitioned from contractor mining to owner mining, following the example of the Loulo mines.

As at Loulo, the move was expected to deliver cost reductions and efficiency improvements, with Kibali remaining on track to beat its 2018 production forecast.

The board said the Loulo-Gounkoto complex performed in line with its plan, increasing production by 4% to 150,117 ounces while progressing the Gounkoto super pit project.

Since the quarter, Randgold said itself and the Malian government had agreed on a revised investment convention for Gounkoto to support the development of the super pit.

At Tongon, Randgold said the project recovered “well” from a series of work stoppages in the first quarter, which carried over to the start of the second quarter to increase production by 12% to 65,259 ounces.

Since the end of the quarter, however, a new work stoppage halted operations, and the mine was now working on a recovery plan to get back to full production, with expected annual production revised to around 250koz.

Morila's results were also said to have been in line with plan, as it moved towards closure.

Its agripole project, designed to mitigate the socio-economic impact of closing the mine, was awaiting final government endorsement.

Randgold said that while the operation was mainly processing tailings, it had also started mining the Ntiola satellite pit.

In Senegal, an updated base case on the Massawa project confirmed the “robustness” of the project and the upside potential as it progressed through the final feasibility study to an investment decision expected by the end of the year.

Randgold said that in addition to the potential benefits of ongoing drilling below the central zone, the government's electrification roll-out plan - which envisaged grid power access at Massawa by 2022 - could have a “significant impact” on the project's economics.

On the exploration front, the company said its brownfields reserve replacement teams made “significant progress” at Kibali, Yalea and Tongon, which would “reinforce the robustness” of the group's 10-year business plan, which was profitable at a long term gold price of $1,000 per ounce.

The company said its greenfields exploration, including airborne and ground geophysical surveys, continued to advance the exploration portfolio which also included the new Bambadji permit across the border from Loulo in Senegal.

Chief executive Mark Bristow said the quarter's results highlighted the Randgold team's ability to “deal effectively with multiple challenges”, including the work stoppages, continuing negotiations with the DRC government about its new mining code, the sequencing of the Gounkoto pit pushback and Ntiola's permitting delay.

“The Tongon work stoppage is obviously a challenge, but we take comfort from the government's leadership in ensuring measures are taken to protect the assets and that they are dealing with the situation,” Bristow said.

“We are still assessing its impact but at this stage we still believe that, given Kibali's strong performance, we are on track to be within the group production and cost guidance for 2018.”