Randgold hunting for next big discovery

JOHANNESBURG (miningweekly.com) – LSE- and Nasdaq-listed Randgold Resources is on the hunt for its next “big discovery” as it aims to hike its 2016 exploration budget.

The Africa-focused group was making steady progress in its quest, said CEO Mark Bristow, who described exploration as the engine that drove its business and expanded its footprint in its target areas.

“We can afford to build our next new mine without recourse to the market, thanks to our robust balance sheet,” he said.

In line with this, the gold miner had set aside some $60-million for corporate and exploration expenses for 2016, a significant rise on the $45.1-million spent in 2015 – already a double-digit increase on that spent in the preceding year – as the group grew more serious about increasing exploration activity, principally drilling, during the year.

Randgold had, over the final quarter of 2015, accelerated its exploration and corporate expenditure spend, posting a 39% quarter-on-quarter and 291% year-on-year increase to $13.6-million during the three months to December 31, mostly owing to increased exploration expenditure in Ghana of $3.3-million.

The company described 2015 as a successful year in the field, with drill rigs testing a range of the group's most advanced targets and methodical geological work in trenches and on outcrops progressing a range of exciting prospects across the portfolio.

Last month, Randgold entered three exclusive joint venture (JV) agreements with juniors Loncor Resources, Kilo Goldmines and Devon Resources, all of which held permits over the Ngayu Archean greenstone belt some 200 km south-west of the Kibali project, in the Democratic Republic of Congo.

It negotiated the right to earn into 65% of each of the three projects through the completion of a prefeasibility study (PFS).

Randgold has also entered into a JV with a subsidiary of fellow listed Alecto Minerals for the exploration and development of the latter’s Kossanto West gold project, in Mali. The project comprised the Kobokoto East and Koussikoto exploration permits.

Randgold would fund all costs up to the completion of a PFS to gain a 65% interest in the project.

This emerged as the company mulled the pay-out of a higher year-end dividend as it had "buck[ed] industry trends” and delivered its “best year” yet in 2015.

During the year under review, Randgold delivered record production and strong cash flows, while reducing the total cash cost per ounce amid a challenging market.

“Production and costs were in line with the company's annual guidance, with production setting a new record of more than 1.2-million ounces, up 6% on the previous year, and group total cash cost per ounce down by 3% at $679/oz,” said Bristow.

“Randgold is now in a unique position to continue delivering value to all its stakeholders. Our mines can continue to generate cash flows at gold prices well below the $1 000/oz level. Our positive production and cost profile extends beyond ten years.”

“Randgold is one of the few companies to still generate earnings growth on our forecasts, while its investment discipline has left it well placed to withstand the current environment. Consequently, it trades at an ever-increasing premium to its peers,” Investec said in a comment to clients on Monday.

“The company is still actually delivering earnings to measure a [price-to-earnings ratio], unlike many of its global peers, and its disciplined and conservative investment model has left it well placed to withstand the current environment,” Investec added.

Strong cash flows from Randgold’s operations had boosted cash on hand 158% to $213.4-million.

However, the decline in the gold price had shaved the miner’s profit for the year to $212.8-million for 2015, compared with $271.2-million the year before.

Basic earnings a share decreased 20% to $2.03.

Total cash costs for the year under review increased 4% to $822.7-million, while the total cash cost per ounce dropped 3% to $679/oz for the year.

Gold sales for the year contracted some 3% to $1.4-billion on the back of the 9% drop in the average gold price received of $1 152/oz.

The board proposed a 10% rise of the final cash dividend to $0.66 a share for the year under review, plus an optional scrip dividend.