Randgold Resources’ strong project investment continues to serve it well

Management at Randgold Resources recently announced a 41% quarter on quarter earnings boost for the three months to March, to US$13.1 million. The earnings uplift was driven by increased production and a higher gold price. Production rose by 3% quarter-on-quarter to 110,313 ounces, while cash costs of US$461 per ounce were in line with the previous quarter. There was also a 14% year-on-year increase to attributable reserves after depletion. So great news all round!Looking at the miner’s individual operations, Mali’s Loulo mine led the way increasing production by 17% to 70,826 ounces thanks to higher ore grades and slightly higher milling throughput. This was achieved despite the planned nine-day shutdown for the plant expansion project that will boost production by approximately 30%. The enhanced production led to a 4% reduction in Loulo’s per ounce cash costs.

Meanwhile, production at Morila was down 16% to 98,718 ounces. The reduction was in line with expectations, as the operation converted from mining to stockpile treatment. The cash cost per ounce at Morila was 3% up from the previous quarter, mainly due to the reduced production. Management’s real achievement though was the substantial progress made on a range of expansion, development and exploration projects, designed to ensure sustainable production and profitable growth.

Foremost of which is the Yalea underground mine development at Loulo. The project, combined with the plant expansion, is anticipated to increase Loulo’s annual production to 400,000 ounces by 2010. The company made a record advance of 605 metres during the month of March, keeping the project on track to achieve its goal of ramping up to 120,000 tonnes of ore per month by the end of this year.

Planning at Gara, the proposed second underground mine at Loulo, is being finalised with development scheduled to start during January 2010 whilst at Gounkoto, also on the Loulo permit is shaping up as a significant new discovery.

Meanwhile, the development of the group’s Ivory Coast based new Tongon mine, which is scheduled to pour its first gold during the fourth quarter of 2010, is gaining momentum. Work on project infrastructure has made significant progress and the main contractor's personnel, as well as the Randgold’s management teams, are currently mobilising to the site. During the March quarter the company also completed the scoping study on Massawa. The study confirmed that this is a very robust project with an initial Inferred Resource of 3.39 million ounces. Management estimate that the project is capable of generating returns in excess of 20% at a gold price of US$650 per ounce. This is particularly exciting given our view that gold prices will achieve higher averages. 

Exploration and corporate expenditure for the March quarter of US$11.0 million was 6% higher than the previous quarter, and included expenditure on the Massawa project as well as share-based payments and increased bonus accruals. The company’s strategy of building growth through strong project investment continues to serve it well and has the company positioned strongly for 2009 and beyond.
by Fat Prophets

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