Randgold to invest $1bn in two years

2012-02-06 13:38

Randgold Resources will invest $1 billion (about R7.5 billion) over the next two years into building the Kibali mine in the Democratic Republic of Congo (DRC).

The investment will also cover further development of the underground operations at the Loulo complex in Mali.

Interviewed at the Mining Indaba conference in Cape Town today, Randgold chief executive Mark Bristow said this would be funded out of retained cash and would not affect Randgold’s stated policy of growing its dividend.

Randgold more than trebled attributable profit to $377 million (2010 financial year – $103.5 million) for the year to end-December and doubled its yearly dividend to $0.40 a share, despite last year being “the most difficult year of my career by far”, according to Bristow.

During last year, Bristow was involved in serious motor cycle accident in Senegal which required emergency evacuation to South Africa where he spent more than a month recuperating.

The newly-opened Tongon mine in Cote d’Ivoire also had to cope with the impact of that country’s civil war early last year and a number of operating problems towards the end of last year.

Bristow pointed out that, if the gold price stays above $1 600 for the rest of this year, then Randgold would have built up $450 million in retained cash by the end of the year.

This meant the group would be able to meet all its funding commitments out to 2015 to reach its targeted yearly production level of 1.2 million ounces of gold even if the gold price were to drop back to $900 an ounce.

 825 000 ounces and 865 000 ounces for this year.

Bristow said management was targeting total cash costs – after royalties – of less than $650 an ounce for this year mainly due to a significant, estimated increase in Loulo’s production contribution.

“Continued growth in production over the following five years is forecast from increasing grades out of the
Loulo/Gounkoto complex and with Kibali adding to production in 2014,” Bristow said.

“On the back of this forecast increase in grade, the group total cash costs based on current prevailing input cost parameters are forecast to reduce towards the $500 an ounce to $550 an ounce range over the same period.

“People seem surprised by the upside potential at Randgold Resources but they should not be.

“The difference between us and the rest of the gold sector is that we are growing production by mining into higher grade deposits and we are not issuing any equity.

“When you do that combined with a high gold price then you create real value.”

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