Randgold profit soars as it outlines five-year plan

Randgold Resources announced a new focus on three new projects over the next five years on Thursday, as it reported a strong third quarter performance keeping it on track to meet its 2016 guidance.

The FTSE 250 firm said forecast cash flows generated from operations were expected to support funding for the three new projects the company has set, as well as increasing dividends.

Results for the quarter showed profit of $77.3m in the three months to 30 September, up 32% on the previous quarter and 58% on Q3 2015, while earnings per share increased by 35% quarter on quarter and 17% on 2015.

Production of 301,163 ounces was up 7% quarter on quarter and in line with the previous year, and total cash cost per ounce of $663 was 9% lower quarter on quarter and 5% down on the prior year's corresponding quarter.

Net cash generated by the operations increased by 18% quarter-on-quarter, leading to a cash balance of $361.1m at period end.

Chief executive Mark Bristow said Kibali and Tongon had bounced back well from the technical issues that had plagued them in the first half of the year, while the flagship Loulo-Gounkoto complex continued on its steady course.

He said it was worth noting that despite the high level of activity, there had been zero lost-time injuries across the group during the quarter.

“Tongon got its mills back up at the end of June and Kibali ramped up production, boosting group throughput by 13%,” Bristow said.

“Unit costs were also better, with decreased processing costs supported by lower strip ratios at Tongon and Kibali.

“The higher gold price also contributed to the significant increase in profit.”

Bristow said if the gold price stayed above $1,250 per ounce, and the company delivers on its forecasts, it should get close to a $500m net cash position at year end.

Turning to exploration, Bristow described the company's strategy as "three in five" - the defining or securing of three new projects in the next five years, be they from the company's exploration portfolio or from new business initiatives.

Current priorities were to fast-track the development of the Boundiali structures with the aim of making a world-class discovery; to establish whether Massawa or Gbongogo could replace Tongon; to define mineable satellites around Tongon while replacing depletion at the other mines; and to continue driving generative programmes to feed the company's resource portfolio.

The Gounkoto Super Pit feasibility study is nearing completion and if the project goes ahead as expected, it will significantly enhance the Loulo-Gounkoto complex's production and cost profiles, the board said.

In the meantime, new targets at Loulo's Yalea and Gara operations are being investigated in a programme which has already delivered 600 000 additional resource ounces at Gara.

“Loulo-Gounkoto and Kibali are both strongly placed to produce in excess of 600,000 ounces per year for the next 10 years, and Tongon's life of mine continues for at least another five years,” Bristow commented.

“In the meantime, the prospects for our next mine or mines are taking increasingly tangible shape.

“Considering that we have a business that is designed to be profitable at a gold price of $1 000 per ounce, I believe that Randgold still stands alone in terms of its ability to create and deliver real value.”