African-focused gold miner Randgold posted a strong overall performance in Q3 2014 supported by the ongoing ramp-up of the Kibali mine in the DRC.
Randgold achieved record production in the quarter and the company’ costs were well maintained in the period, Randgold announced in its quarterly report released on Thursday.
Gold market cyclicality
The gold price hit its lowest level in four years on Wednesday dropping to $1 160 representing a steady decline from its high point of almost $1 800 per troy ounce.
According to Randgold Resources CFO Graham Shuttleworth, cyclicality is an inescapable characteristic of the gold market, adding that in order to secure long-term profitability, mining companies need to structure their operations and manage their margins accordingly.
“In the mining industry all decisions are essentially long term ones and it’s very difficult to backtrack if you get them wrong. During the boom most miners reset their businesses for much higher gold prices than we have now, and they’re consequently finding it very difficult to deal with the downturn,” he explained.
Lure of the boom
Shuttleworth said the company did not succumb to the lure of the boom as Randgold over the past three years calculated its reserves and designed a long-term mine plan at $1 000 an ounce.
“Because we didn’t follow the herd, all our businesses remain profitable at current spot prices and, unlike much of the industry, we haven’t had to close, downsize or write down our assets,” he said.
Randgold’s 2015 goals
- Add value at Massawa through the development of an accurate geological model including the high grade quartz-stibnite structures in the Central Zone
- Identify new opportunities across the Mako Belt and within Senegal
- Maintain focus on the Senegal-Mali shear zone and leverage knowledge of the Loulo district
- Research Mali South further and study new areas of interest around Morila South
- Expand the Ivorian portfolio
- Actively pursue opportunities along the northern margins of the Congo Craton through the DRC, South Sudan, South Uganda, South Kenya and Tanzania
- Build the Kibali resource and expand the Randgold footprint in Central Africa
- Continue to monitor other opportunities across Africa and globally
Kibali production target
Randgold CEO Mark Bristow said the Kibali mine is well on its way to achieving its goal of delivering an average of 650 000 ounces per year over the next 10 years.
The miner’s positive third quarter report reflected the contribution of the Kibali mine and the impact of expansion and upgrade projects at the other operations.
Gold production of 299 320 ounces represented an 8% increase compared to the previous quarter, with production for the first nine months of the year up 37% on the comparable period in 2013.
Profit from mining of $172.6 million was up 6% quarter on quarter and by the end of the quarter Randgold had returned to its debt-free status having repaid its revolving credit facility.
Randgold’s production stood at 860 366 ounces at the end of September, and the company is ‘well on our way to passing the million-ounce landmark before the end of this year’, said Bristow.
“It’s been another challenging quarter but our operations have done well and it’s particularly gratifying to note that despite the growth of the scale and complexity of our operations, our safety record continues to improve,” he said in a statement on Thursday.
Bristow said while the Ebola outbreak in West Africa had not directly affected Randgold’s mines, the group had mounted an extensive campaign to protect its employees and host communities against the disease.