Randgold: Q1 Production and Profits Lower but Guidance Unchanged

As readers of lawrieongold will know, Randgold Resources is a gold mining company I cover more comprehensively than most as its stock is an important constituent of the FTSE 100 index here is London.  It has released its Q1 2018 financials and production data today and I will be attending CEO Mark Bristow’s presentation to analysts at the london Stock Exchange later today.  In the meantime, to keep readers up to date, here is the company’s own release on the Q1 figures, but bear in mind as a company press release it will present the data in the best possible light!  Hopefully more detailed analysis will be available following Bristow’s presentation later.  He is not a CEO who tends to bypass difficult questions!

KIBALI SHINES AS RANDGOLD MAINTAINS ANNUAL PRODUCTION GUIDANCE

London, 10 May 2018  –  Randgold Resources said today its 2018 production guidance remained intact despite a softer first quarter in which it contended with multiple challenges.

Following the full commissioning of its underground mine, Kibali in the Democratic Republic of Congoincreased quarterly production by 22% compared to the corresponding quarter of the prior year and is on track to achieve its 2018 target of 730 000 ounces.

In Côte d’Ivoire, Tongon’s production was impacted by a series of work stoppages.  With operations now back at full capacity, the mine is committed to clawing back most of the lost production.  Randgold’s flagship operation, the Loulo-Gounkoto complex, made a strong start to the year although changes in the mining schedule affected the underground grade, impacting on production.

Results for the quarter, published today, show group production lower at 286 890 ounces (Q4 2017: 340 958 ounces) and total cash cost per ounce higher at $720/oz (Q4 2017: $627/oz).  Profit was down at $66.5 million (Q4 2017: $87.1 million).  Cash and cash equivalents grew by 3% to $739.5 million while the company remains debt-free.  At the recently held AGM, shareholders approved the 2017 dividend of $2 per share, a 100% increase on the previous year.

Chief executive Mark Bristow said coming off a strong prior quarter and record performance in 2017 the company had anticipated a slower start to this year with a gradual build-up throughout the year.  Despite the issues that arose, it was still confident of meeting its annual production guidance of 1.30 to 1.35 million ounces.

“It was a very active quarter, in which we ramped up the underground production at Kibali, advanced the Gounkoto super pit project and the development of the Baboto satellite pit at Loulo, and prepared the Ntiola satellite deposit at Morila for mining,” Bristow said.

“At the same time we also successfully handled the difficult labour situation at Tongon, sorted out the sequencing at Loulo and continued negotiations relating to the new mining code with the DRC government.  This demonstrates the depth and competence of our management team, and its ability to deal with complex operational and socio-political issues on multiple fronts.”

During the quarter, exploration highlighted the potential to add ounces at Kibali, Loulo and Tongon as well as new reserve opportunities at the Massawa project in Senegal.  Bristow said Randgold was also aggressively hunting for its next big project in the African gold belts as well as further afield.

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Randgold’s Tongon to claw back lost Q1 gold production

As followers of the company will be aware Randgold Resources has had to overcome a succession of problems at its big Tongon gold mine in Côte d’Ivoire – initially by technical problems at the mill and most recently by work stoppages by its labour force.  Although a relatively short life operation – it has around three and a half years’ life remaining based on its existing resource, although the company is working to expand this through brownfields exploration around the current operation.

Randgold CEO, Mark Bristow, is a big supporter of new gold mining exploration in Côte d’Ivoire and the country’s government’s attitude towards mining investment and development and is working hard to try and find new projects there which fit in with its new mine development policies.

Bristow tends to visit all the company’s operations each quarter ahead of the quarterly financial announcements – 2018 Q1 figures are due in the next 2 weeks.  On a visit by Bristow to Côte d’Ivoire last week the company made the following statement on the latest situation at Tongon and the intent to make up any lost production stemming from the recent work stoppages.

 Production at Randgold’s Tongon gold mine was impacted during the first quarter of 2018 by a series of work stoppages which started with the employees of the mining contractor and then spread to other operations.

Management said while this would impact on the mine’s production guidance of 290 000 ounces for 2018, it was making a determined effort to recover most of the lost output, with operations now back at full capacity.  To mitigate the downtime effect and lost plant throughput, Tongon processed ore from the run-of-mine and scats stockpiles during the stoppages and also used the opportunity to upgrade parts of the plant to achieve a higher and more consistent throughput going forward.

Chief executive Mark Bristow told a local media briefing that the mine’s management had been supported in resolving the situation by the highest level of the government as well as parliament members and local authorities, and, along with the workers and union leadership, these parties had also agreed on a constructive process to workshop solutions and prevent similar issues in future.  It was encouraging to note, he said, that government fully acknowledges the importance of Randgold and Tongon to the Ivorian economy, and the fact that Tongon represents the single largest investment in the country’s mining industry.

“The history of Tongon has reflected the occasionally turbulent socio-political nature of its environment and a misunderstanding of the mining business which is a relatively new activity in the country, but management has dealt effectively with the challenges that have come their way.  The mine is managed by a majority Ivorian team and of its 1,700 employees, only 40 are expatriates.  Their record speaks for itself: since it was commissioned in 2010 Tongon has produced 2.7 million ounces of gold and in 2017 it posted record results, despite the slow start to the year,” Bristow said.

“Tongon has three-and-a-half years of life left as things stand but we are actively looking for means to extend this and a number of exciting near-mine opportunities are currently being evaluated by the exploration team.  We’re also exploring for new gold discoveries elsewhere in our large permit portfolio in Côte d’Ivoire, where we intend to retain a long term presence.”

At the same time, however, Tongon is planning for life after its eventual closure by developing an economically viable agribusiness to provide replacement income for former workers and the surrounding communities in line with its sustainable development policy.

We can probably expect a couple of further statements on the company’s other operations ahead of the release of the Q1 figures due on May 10th.  Randgold (LSE: RRS, NASDAQ: GOLD) has been one of the foremost gold mining growth stories with current annual gold production of some 40.9 tonnes putting it in 15th place among the world’s major gold miners, according to precious metals consultancy Metals Focus (See: Top 20 Global Gold Miners – Newmont narrows the No. 1 gap.  

 

 

Randgold ‘problem child’ gold mine coming right.

For any other mining company, the Tongon gold mine, owned and operated by Randgold Resources, might be deemed a great success.  But for Randgold, which likes to stick to its production projections for all its operations in West and Central Africa, it has been something of a problem child underperforming against its scheduled output targets due to a succession of technical issues.  But even so it has still been a significant producer of the yellow metal at the kind of levels that would still be the envy of many other mid-sized gold mining companies.

Randgold CEO, Mark Bristow, on the occasion of a visit to the mine and to its host country ahead of the company’s second quarter results, due out the first week of August, has told the media in Cote d’Ivoire’s capital, Abidjan, that Tongon  continues to ramp up production as it tracks its 2017 target of 285,000 ounces of gold, making it a globally significant gold producer, but with a relatively short four year life remaining.  But Bristow went on to say that with Tongon now operating to plan, its focus had shifted to finding additional reserves and resources to replace depleted ounces and extend the mine’s life beyond its four years remaining.  The chances are that Randgold will be able to achieve this as the area around Tongon is seen as highly prospective for smaller satellite orebodies – and the company has a good track record of eking extended lives out of its Malian gold operations – notably at Morila which is still producing gold despite originally being due for closure some years ago.

Bristow also confirmed his long held view of Cote d’Ivoire’s exceptional prospectivity and its positive attitude towards foreign investment in the gold mining sector.

Elsewhere in the West African nation, Bristow commented that Randgold’s exploration programmes have defined a large target at Boundiali in the Fonondara corridor, which he described as ‘potentially the most exciting gold prospect in West Africa’.  The company has just completed its annual review of its exploration targets, which Bristow said had also highlighted very positive results from its other holdings in the country.

As to Tongon itself, and its contribution to the Ivorian economy, Bristow commented that last quarter it declared its second dividend, of which the government’s share, including taxes, was US$20 million (FCFA 12 billion).  In total, Bristow claimed that the Tongon mine has contributed just under $1 billion (FCFA 520 billion) to the Ivorian economy in the form of royalties, taxes, dividends, salaries, payments to local suppliers and community investments since it started production in 2010.

We will presumably get a further update on Tongon when Randgold delivers its Q2 results on August 3rd when Bristow himself will also deliver an update to London analysts and media on the company’s overall performance so far this year and its future prospects.  Randgold has, unlike most of the other large global gold miners, managed to keep itself debt free and cashflow positive through maintaing some very strict new mine investment criteria.

Randgold Resources: Tough Quarter, Good results

Followers of perhaps the best performing gold mining major of the past few years are directed to the following article I’ve published on the Seeking Alpha website: Randgold: Tough Quarter, Good Results.  Interestingly Randgold (LSE: RRS, NASDAQ: GOLD)’s stock price has not risen nearly as much as some of its peers but that is because of its far better performance while virtually all the other major gold stocks were dropping like stones.  It has no debt, has not needed to take any impairments and is operating a progressive dividend policy where again most of its peers have been slashing their shareholder payments.  It has thus just announced a 10% dividend increase to $0.66 a share.

Highlights from Q1 2016 are as follows:

  • Profits up 19% quarter on quarter and 25% on corresponding quarter of prior year
  • Production down 11% quarter on quarter but up 4% on corresponding quarter of prior year
  • Total cash cost/oz up 3% quarter on quarter but down 8% on corresponding quarter of prior year
  • Cash increases 19% to $253.8 million on the back of reduced total cash costs and higher gold price
  • Solid quarter from Loulo-Gounkoto with production in line with plan and significant decrease in total cash cost/oz
  • Morila delivers steady performance with lower costs
  • Tongon production impacted by quaternary crushers commissioning and power supply interruptions
  • Kibali completes challenging quarter including optimising 100% sulphide feed, compounded by mill downtime
  • New Moku JV adds 1 275km2 to Randgold exploration portfolio in same greenstone belt as Kibali
  • West African exploration programmes deliver positive borehole and trench results
  • Shareholders approve 10% increase in annual dividend of $0.66 per share

In addition to the article on Seeking Alpha linked above, you can download the full quarterly statement at http://www.randgoldresources.com/quarterly-reports-page/3321

Randgold’s problem child coming right

It is perhaps a little unfair to refer to Randgold Resources’ (NASDAQ: GOLD, LSE: RRS) Tongon gold mine in Cote d’Ivoire as a ‘problem child’.  It has always been a significant gold producer, but has faced its fair share of problems in achieving planned gold recoveries including key plant failures, power supply irregularities, a fire and difficulties in fine tuning to reach design parameters.  For many mining companies, though, Tongon’s current production level  – close to 250,000 ounces a year – would not define it as a problem operation, but given Randgold’s continuing success in achieving perhaps stronger results at its other West and Central African mines, Tongon stands out as perhaps not doing quite as well as the company’s other mines in comparison.

Following his latest visit to the operation, Randgold CEO, Mark Bristow, has told local media that Tongon was continuing to make headway in its drive to overcome technical issues, with gold production up 7% to 242,948 ounces in 2015 as the flotation upgrade and crushing circuit extension programme started delivering results.  He reported that the mine has also now commissioned its fourth-stage crushing circuit, completing an extensive capital project designed to improve throughput and recovery.  The new circuit is currently being optimised.

“Tongon is targeting annual production of 290,000 ounces in 2016 but there are still significant challenges in its way.  Chief among these is the continued instability of the grid power supply, which has a major impact on the mine’s cost structure.  The Tongon team is in discussion with the Ivorian power utility to resolve this problem,” Bristow said.

It was also continuing its drive to extend the life of the mine through exploration, with the latest drilling results indicating the potential for additional reserves and resources within and below the existing open pits.

Overall a positive assessment.  Randgold has always been open in discussing any technical difficulties at its operations and it looks as though Tongon is near to achieving its design parameters and it remains a significant contributor to the company’s annual attributable gold production which remains at comfortably over 1 million ounces a year – and growing.

Randgold sees Tongon gold mine pass major milestone and ups Cote d’Ivoire exploration

Randgold Resources’ world class Tongon gold mine in Cote d’Ivoire has not been without its problems, but even so it has now paid off its shareholders’ loans of $448 million, used to partially fund its capital investment of $580 million, thereby moving it into a dividend-paying position.
Speaking at the mine’s quarterly briefing for local media, Randgold CEO, Mark Bristow described this as a significant achievement, particularly in the context of a global gold mining industry currently characterised by capital write-downs and impairments.
Although Tongon is only Randgold’s third largest mine – after Kibali in the DRC, and Loulo-Gounkoto in Mali – and is still operating below full capacity, it is a very significant gold mine by any standards, and is targeting gold output of  260,000 ounces, at a total cash cost of $820 per ounce,  in the current year.

“Tongon has already paid close to $90 million to the Ivorian state in the form of royalties and taxes and the country will now benefit even more from the dividends the government will receive through its 10% carried interest in the mine as well as the increased revenue when Tongon starts paying full corporate tax at the end of this year,” Bristow said.  He noted that since its commissioning five years ago, Tongon had also contributed more than $600 million to the Ivorian economy in the form of payments to local suppliers and had invested almost $6 million in community upliftment projects.

Bristow has also frequently described Cote d’Ivoire as being a highly prospective country in which to explore for new gold mining operations and has praised the government for its approach to foreign investment in the mining sector which it considers very favourable for attracting new business.
“Ongoing exploration around Tongon has increased its reserves after depletion by 18% since 2009, extending its remaining life by another year.  We also continue to look for more multi-million ounce deposits elsewhere in this highly prospective country, and we are about to launch our biggest-ever exploration drive in Côte d’Ivoire.  This will include a fresh look at the Nielle permit, which hosts Tongon, and a geophysical survey, followed by a diamond drilling programme, across our holdings in the north of the country,” he said.

He also cited Tongon as a particularly good example of the success of Randgold’s policy of recruiting, training and empowering nationals of its host countries to run world-class mines in Africa.  The mine’s workforce is 97% Ivorian and only two members of its management team are not Ivorians.

Bristow also noted that Tongon has won the President’s Award as the best mine in Côte d’Ivoire for two successive years.

Randgold’s promising Cote d’Ivoire gold exploration targets

Randgold Resources CEO, Mark Bristow, has just given a quarterly update to media in Abidjan in Cote d’Ivoire where the company operates a major gold mining operation – the Tongon mine.  The mine has had some problems which have prevented it meeting its full capacity, but is continuing to make good progress in resolving these.

Bristow likes the mining environment in Cote d’Ivoire where it has a good relationship with the government and he has continued to praise the country’s new mining code which he feels is supportive of those foreign potential mine developers looking to work there.  Consequently he is also focusing some significant gold exploration work on the highly prospective Ivorian geology.

 

Speaking at the company’s quarterly update for local media, Bristow said Tongon’s recovery rate was improving, despite the problems presented by the erratic grid power supply, which management was addressing with the power utility.  Following the commissioning of the new hydrocone crushers, work is continuing in conjunction with the equipment supplier to achieve the design performance level, and it has been decided to upgrade capacity by installing a fourth stage of three additional crushers at the end of the existing circuit.

“Looking beyond Tongon, we’ve stepped up our exploration effort in Côte d’Ivoire on the back of its positive new mining code, and the results are confirming our belief in the high potential of the country’s prospectivity,” he said.

“We’ve taken a fresh look at our Nielle permit, which hosts Tongon, and a number of targets for follow-up have already been generated.  The most exciting suite of new targets is in the Boundiali permit.  These include the very significant new target, Fonondara, and a series of other targets covering a strike of 60 kilometres at the western margin of the Boundiali belt, believed to be an extension of the Syama belt in Mali.  A first-phase diamond drilling programme is currently underway at Fonondara and Sani.”

At Fonondara, six trenches over a 1.5 kilometre strike have exposed a system which averages 16 metres at 2.96g/t.  Drill results beneath the trenches have returned best results of 16.53 metres at 3.38g/t including 7.40 metres at 5.88g/t from the main zone and 8.83 metres at 28.62g/t including 4.10 metres at 61.05g/t in the footwall.  Results from Sani are pending.

On the Mankono permit, a very promising bulk mining target has also been identified, with trenches grading up to 1.8g/t over widths of 100 metres, and on the Fapoha permit, just south of the Nielle permit, three contiguous targets have delivered good initial sampling grades over a 13 kilometre strike with consistently anomalous pits in the target structure grading up to 8g/t.

“We are very encouraged by the government’s commitment to building and diversifying the Ivorian economy, among other things by facilitating foreign investment.  Combined with the country’s geological assets, this is creating new opportunities for the mining industry which Randgold, with its long-established presence here, is particularly well placed to grasp,” Bristow said.

Randgold’s Tongon gold mine on track to meet this year’s target production.

Randgold Resources’ Tongon gold mine in Côte d’Ivoire is on track to achieve its production and cost guidance for 2015 after a year in which its management made significant progress in dealing with the recovery and throughput challenges that had hampered the operation in its early stages, CEO Mark Bristow told a meeting in Abidjan, capital of Cote d’Ivoire.

Although Tongon is smaller than Randgold’s big Kibali gold mine in the DRC and its Loulo-Gounkoto complex in Mali, Tongon is still a major world class gold mine in its own right and its host country’s biggest gold producer.  However it has had to overcome a number of problems since its start-up in 2010 – initially logistical as a result of civil conflict, and then technical, and it has yet to reach its initially planned full gold output potential of around 300,000 ounces a year.  However at long last it does seem to be getting close.

Speaking at the mine’s quarterly update for local media, Bristow noted that the commissioning of its new flotation circuit and the ongoing expansion of the crushing circuit were having the anticipated impact on production and costs, steadily lifting Tongon towards its designed performance level.  The construction of the upgraded flotation circuit is complete and automation and optimisation are underway.  At the same time, Sandvik and Randgold are still jointly working on optimising the crushing circuit upgrade to meet Tongon’s planned production outputs.

Following the recent dry season’s impact on the Ivorian power utility’s power generation capacity, there has been constructive cooperation between the utility and mine to minimise the impact.

The mine is forecasting production of some 260 000 ounces of gold at a total cash cost of $820 per ounce in 2015.  At the current gold price, it should be able to repay its capital this year as scheduled.  In the meantime, continuing exploration has replaced all the reserves consumed by mining in 2014, effectively extending Tongon’s life by another year.

Bristow said that with operational pressure easing, management had been able to advance Tongon’s ambitious social initiatives, designed to develop a sustainable agribusiness as the mine’s economic legacy to the community.  The strategy has two components: an industrial agribusiness to replace the mine after its eventual closure and a community agribusiness based on small farming operations.  Work is underway on the construction of a fish farming project capable of delivering almost 10 tonnes of fish per year, while several women’s market garden projects have already produced their first crops.

In February the Ivorian Prime Minister, Daniel Kablan Duncan, and the Minister of Industry and Mines, Jean-Claude Brou, accompanied by high-ranking officials, visited Tongon, and Bristow said he was heartened by their interest in and support for the sustainability initiatives.

“Ultimately projects like these succeed only when there is a significant engagement by government, at central as well as local level, and when the local community is actively involved,” he said.

To continue building a good working relationship with local businessmen, Tongon hosted an on-site lunch for 35 entrepreneurs from the Korhogo region in March, providing them with an overview of the operation and identifying opportunities for co-operation.

Randgold says troubled Tongon gold mine to deliver this year

Randgold Resources’ Tongon gold mine in northern Cote d’Ivoire has been underperforming primarily due to some technical problems, but now, according to the company these problems are behind it and it is now geared to build up to full design capacity this year.  This has involved replacing its crusher circuit and installation of a flotation section which between them should see a boost in mill throughput and an improvement in recovery.  At full capacity Tongon should produce in excess of  260,000 ounces of gold a year – currently it is languishing at around 30,000 ounces or more short of this target.  Even so it has been a profitable, and significant, gold producer and Cote d’Ivoire’s biggest gold mine.  More information should be available with the publication of the Randgold’s Q4 and 2014 results next Monday when company CEO, Mark Bristow, will be presenting these in Cape Town on the sidelines of the big Mining Indaba conference.

Read Randgold’s latest release on Tongon issued today, and set out below

Randgold Resources’ Tongon gold mine is poised to deliver on its designed capabilities in 2015, chief executive Mark Bristow told a media briefing here today.

Bristow said the mine’s management team had spent the past year building a solid foundation for Tongon’s future growth by dealing with some serious technical issues such as the replacement of a faulty crushing circuit and generally improving efficiencies while curbing costs.

“Towards the end of last year the recovery programme was producing signs of improvement in key areas such as throughput and recovery.  By now the beneficial effects of those improvements are real and the full flotation circuit upgrade is on track for completion by the end of the quarter,” he said.

“While ramping up production at Tongon, we’ll also continue working with the Ivorian government in their drive to position the country as a preferred destination for new investment in gold exploration and mining.  Côte d’Ivoire’s new mining code is investor-friendly but it should now be actioned as a matter of urgency.  We’re still waiting for the approval of our new permits that will enable Randgold and Côte d’Ivoire to start reaping the benefits of all the good work that has been done.”

Bristow pointed out that Tongon’s tax holiday ends this year.  At the same time, it is forecast to pay back its capital, which means that the State should start to share in the value created in the form of corporate taxes and dividends, on top of the revenue from royalties and other taxes and duties.