‘Great year' for Randgold as on way to 1 million oz/y gold by 2013

Randgold Resources has come up with strong figures for Q4 and for the whole of 2009 and has sharply increased its dividend and has a significant new project pipeline ahead.

LONDON - 

Speaking to assembled analysts in London, Randgold Resources CEO, Mark Bristow, told of a ‘great year' for his company, albeit also a challenging one, but one which would position it well for the years ahead.  And, on the face of things that is a pretty accurate description.  Profit was up 79% year on year, 185% quarter on quarter and 315% on the same quarter a year earlier, while this was achieved with a strong balance sheet with US$590 million in cash and no net debt.

Record production at the Loulo gold mine in Mali over the year was coupled with a strong gold price which reached an average of $1,012 an ounce during the fourth quarter.  The old flagship Morila mine, which is now just processing relatively low grade stockpile material, performed very well too , producing 341,661 ounces of gold over the year leading to a profit of $66.7 million overall, but Randgold's share is at 40%, the remainder going to former operator AngloGold Ashanti and the Mali government. Now the Loulo mine is also nearing its potential despite a hiccup when Randgold management needed to take over from the mining contractors.  Even so Loulo set new records in December, did even better in January and is still making progress this month.  Development of the inclines into the Yalea underground section are behind schedule and this is key as the open pit is becoming depleted.

Randgold's next mine to start producing gold is Tongon in Cote d'Ivoire where construction on site is well in progress and the first gold pour is anticipated for the fourth quarter this year.

Progress was made on Massawa across the border from Mali in Senegal and the Board has given the green light to proceed to a full feasibility study here.  However some technical and metallurgical difficulties are anticipated - in part because of some of the bonanza type gold grades which are being seen.  Bristow said that values of up to over 1,000 g/tonne have been found and it is key not to lose some of this in the process.

But, perhaps the latest discovery, Gounkoto, also in Mali, may overtake Massawa as being the next Randgold discovered property to come on stream after Tongon.  Bristow is obviously very optimistic on this project reckoning it could be a second Morila with an already-inferred resource of 2.65 million ounces and growing.  Drilling is showing great consistency, and good gold grades, over a near surface deposit which is around 1.3 km long and down to around 250 m in depth.  A prefeasibility study is under way and due for completion in the current quarter.  Assuming all goes well, a mine at Gounkoto could be on stream by early 2013.

Probably the jewel in the crown though is Kibali (formerly known as Moto) in the DRC.  Randgold is the operator and is partnered by AngloGold Ashanti - a combination which worked well at Morila. Both companies hold 45% with the remaining 10% held by DRC government entities.  The takeover of Kibali was only completed in the second half of 2009 and Randgold mobilised its team on site in October and has already seen the indicated resource increased by 23% and reserves by 67%.  Indicated and inferred resource is now at 19.76 million ounces and reserves 9.19 million ounces for a combination of open pit and underground mining.  This would be a big mine and could cost $800 million or more to build given its remote location and lack of local infrastructure.  Even so mining could be under way by 2014.  It adds another degree of risk to the Randgold portfolio of projects given there is still some nervousness about the strength and control of the DRC central government in remoter areas of this big country.

ANNUAL PROFITS AND DIVIDEND

Randgold's overall profit for the year was $84.3 million, up from $47.0 million the previous year and the company has announced it is to raise its full-year dividend by 30% to 17 cents a share.  Gold output rose to 488,255 attributable ounces from 428,426 ounces in 2008.

Looking ahead, Randgold faces another complicated year as it needs to keep its projects on track, and top management will be more stretched juggling additional projects and exploration properties.  The track record to date has been pretty positive in this respect, but Kibali is an order of magnitude bigger than has been handled to date in an area where it is easy to overstretch on costs, and Gounkoto and Massawa are planned to be brought into production over the same time period.  Capital commitments over this period will also be high and although Randgold has a strong balance sheet with lots of cash this is going to be depleted over the next few years as the new properties are brought into production.

Randgold, though, has a history of outperforming its peers in the stock market and although some analysts feel deep down that the stock is perhaps overvalued, few will go out and say so, as those who have done so in the past have consistently been proved wrong!

Meanwhile Randgold's exploration teams remain hard at work, mostly operating in areas around its existing operations with a number of highly prospective targets under active investigation.  The company has an ethos of growth through its own exploration activities, although, as has been seen with Kibali it does not rule out growth by acquisition too.

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