Gold price set for biggest weekly jump in 20 months on haven demand
The precious metal has surged around 30% so far this year, supported by healthy central bank buying.
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.
At the company’s annual general meeting held in Jersey on 8 May 2018, shareholders approved a final dividend for the year ended 31 December 2017 of $2.00 per share, a 100% increase on the prior year. Since its first dividend in respect of the 2006 financial year, the annual dividends have increased by 1 900% over that 11 year period.
The cash payment will be made on 18 May 2018 to shareholders who were on the register as at 23 March 2017. The ex-dividend date was 22 March 2017. The exchange rate for payment to those shareholders who have elected to receive the final dividend for the year ended 31 December 2017 in Pounds Sterling is: $1 = £0.7395.
Chief financial officer Graham Shuttleworth says the sustained dividend growth validates the group’s business model and reflects the profitability and financial strength of the company, which at year end had net cash of more than $700 million and no debt. The company intends to maintain a net cash position of around $500 million to fund new growth opportunities and any surplus capital will be returned to shareholders.
The history of economic development in Africa has been one of largely unplanned changes primarily driven by external forces. The decolonisation process which started in the 1960s ended exploitation by the European powers, but also ushered in a long and destructive flirtation with Marxism and dictatorial rule in the newly independent countries. The end of the Cold War and Soviet sponsorship led to a degree of democratisation, opening the door to foreign investment and a period of growth supported by global institutions such as the World Bank, UNDP and IMF. The supercycle in commodity prices starting at the turn of the century sharpened investment for Africa’s mineral resources resulting in an acceleration of funds flowing into new projects and an associated increase in revenue flow to the governments of mineral rich countries.
Randgold GM operations for Central and East Africa Willem Jacobs says that by 2015, however, the tide turned. The commodities boom had ended, developed countries had to deal with their own economic problems and the World Bank and IMF indicated that they were looking to reduce their commitment to deficit funding of African countries, who they encouraged to find ways to balance their own books.
“The need to support growing populations against a background of fledgling economies and the absence of external funding prompted a resurgence of resource nationalism across the continent, with many governments seeking increased revenues, disregarding the long term negative consequences of their actions. This trend has been particularly evident in the recent run of mining code revisions and the introduction of more aggressive tax regimes. In extreme instances, there have even been attempts to change existing fiscal and legal stability provisions,” says Jacobs.
“These actions by governments are having a substantial negative impact on the extractive industries (minerals, oil and gas) which are one of the main drivers of economic growth in these countries. The extractive industries not only generate tax revenue and employment, but also provide fixed investment in mining ventures, support infrastructural development, facilitate the transfer of much needed technical skills, promote the establishment and growth of local suppliers and secondary industries, and are in general valuable corporate citizens. It is not just the direct and indirect taxes that the industry contributes – the economic multiplier effect associated with mining ventures has a material positive impact on economic growth, but is often overlooked,” says group GM corporate finance Victor Matfield.
“Extractive businesses have some very distinctive characteristic: it takes a long time to find profitable deposits, and large up-front fixed investment is required to bring these deposits into mine production. Due to the size and long term nature of such investments, potential funders need the assurance of a stable legal, fiscal and administrative structure in the host country. In African countries, the need for stability is even more important given the risks and challenges associated with remote locations, poor infrastructure and socio-political volatility. Unfortunately, in the rush to prematurely harvest revenues, the recognition that consumptive industries such as mining need to constantly re-invest to ensure long term viability, is often missed.”
African countries need sustainable economic development and the development and exploitation of their natural resources should be an important building block in a broader national economic plan. The only way to achieve this is by attracting international funding for the sensible and profitable development of the mining industry as an integral part of such a plan. What is often lost on politicians and even the global institutions that are there to support the development of the emerging and developing economies, is that developing economies are competing for investment with countries elsewhere in the world that offer better infrastructures and skills, friendlier regulatory regimes and greater stability.
African countries and their sponsors, politicians and business leaders are in fact once again at a crossroad. The high road is a mutually beneficial partnership with private enterprise, that will deliver sustainable, long term economic growth. The other road leads to a slow death of industry and ultimately their economies, for the sake of short term gain.
CEO Mark Bristow says Randgold recognises the challenges faced by investors in these more challenging and less developed regions of the world, but they should also note the opportunities of undeveloped resources and the importance of participating in the host country’s development.
“There is no better way to kick-start an economy and drive infrastructure development than through direct fixed investment to develop world-class mines and their associated infrastructure. Randgold’s strategy is to create real value for all stakeholders through the discovery and development of world-class gold mines run by competent local management teams. It does that through investing in host country nationals and developing local businesses and the technical skills capable of supporting an industry which adheres to world best practice as it has done in its mines across West and Central Africa,” says Bristow.
Randgold has published its annual report and accounts for the year ended 31 December 2017 which is available for viewing and/or downloading from Randgold’s website at www.randgoldresources.com. A copy has been submitted to the National Storage Mechanism and is also available for inspection at www.hemscott.com/nsm.do. The company has also filed its annual report on Form 20-F with the US Securities and Exchange Commission, which is also available for viewing and/or downloading from Randgold’s website and at www.sec.gov. For a hard copy or USB device containing the report, contact Kathy du Plessis at [email protected] or call +44 20 7557 7738.
Randgold had one of the best years in its history of achievement and delivery in 2017, posting another production record off an already high base and pruning the cost of production to its lowest level in six years. At the same time, the group continued to replace its attributable reserves and measured and indicated resources at the same or better grade, the company says in its annual report.
With profit for the year up 14%, cash and cash equivalents rising to $720 million and the company’s robust 10-year business plan firmly in place, chief executive Mark Bristow says Randgold continues the hunt for its next world-class gold deposit through the expansion of exploration programmes in West and Central Africa and the evaluation of its potential next mine project at Massawa in Senegal. At the same time, it is also examining global growth opportunities.
“Irrespective of any new projects, however, our 10-year plan shows us remaining profitable at a long term gold price of $1 000 per ounce and generating cash that will support significant investment in our future as well as the continued payment of dividends,” he says.
Also in the annual report, chairman Christopher Coleman says despite challenges Randgold remains committed to its partnerships with its host countries.
“The mutually beneficial relationships it has patiently forged with its host countries and communities are serving it well, and over the years the company has effectively dealt with the differences that inevitably arise in even the most well-intentioned partnerships,” he says. “Randgold is consequently confident that it is well-equipped to cope with the occasional turbulence in its operational climate.”
The successful commissioning of the automated materials handling system at Kibali gold mine’s underground operation is supporting the planned ramp-up in production, says Randgold’s chief executive Mark Bristow.
Bristow told a quarterly briefing for local media and stakeholders that Kibali was on track to achieve its 2018 production guidance of 730 000 ounces, a 22% increase on the previous year’s output. Aside from the continuing optimisation of the underground system and the construction of the mine’s third hydropower station, scheduled for commissioning towards the middle of this year, the giant Kibali project is now complete. Later this year, Kibali will move from underground mining by contractors to owner-mining, as has already happened at Randgold’s Loulo mines in Mali.
Kibali ranks as one of the most automated underground gold mines in Africa and the third-largest open-stoping gold mine in the world. Bristow noted that it represented an investment of more than $2.7 billion over an eight year period, demonstrating the importance of providing investors in a long term industry such as mining with reliable tax and fiscal stability guarantees.
“The investment in Kibali was motivated by the stability provision in the 2002 mining code, which in our view has been triggered by the recent promulgation of the 2018 code. We trust we shall be able to reach consensus on this issue with the government, which we believe is critical to future investment in the country,” he said.
Despite challenges, Kibali remains committed to advancing the development of its remote region and continues to invest in the employment and upskilling of local people. More than 90% of its employees are Congolese nationals, and so far this year it has spent almost $50 million with local contractors. Over the total project period this totalled $1.6 billion.
Azambi, the third and final hydropower station to be built at the Kibali mine, is on schedule to produce first power in July this year with immediate full integration into the Kibali grid. It is being built entirely by an all-Congolese team.
Randgold’s Loulo-Gounkoto gold mining complex in Mali, already one of the largest of its kind in the world, is still expanding, with the Gounkoto super pit and the new Baboto satellite pit joining its Yalea and Gara underground mines.
Speaking at a site visit for local media, chief executive Mark Bristow said the complex’s all-Malian management team, which steered it to a record performance in 2017, had made a good start to this year, although production was expected to be lower than the previous quarter on the back of forecast lower grades, reflecting the sequencing of mining lower grade blocks at both Loulo and Gounkoto. Although slightly delayed, mining of the Baboto satellite pit was now well on track to support the complex with softer oxide ore feed.
“We expect grades to pick up and production to increase through the rest of the year to deliver our production guidance of 690 000 ounces for 2018,” said Tahirou Ballo, the GM of the complex. Mr Ballo noted that production from the underground mines continued to show a steady improvement since Loulo took over the mining from contractors in 2016.
Chiaka Berthe, the West African GM of operations, said the Loulo-Gounkoto complex represented the largest foreign investment to date in the Malian economy. After all these years it was still investing in new mining projects like the Gounkoto pushback and the new Baboto satellite pit he said. The country is rich in other gold opportunities, and Randgold continues to search for extensions to the known orebodies as well as new discoveries in its extensive Malian landholdings.
In the meantime, Randgold also continues to invest substantially in the sustainable development of its host communities. Some 5 000 students are enrolled at 17 schools built by the company, and last year 52 of them were awarded bursaries for further study. Randgold is also advancing the development of commercially viable agribusiness enterprises, to mitigate the socio-economic impact of the complex’s eventual closure. The project already includes five incubation farms and an agricultural college with 70 students.
Randgold is actively advancing the development of commercially viable agribusiness enterprises, to mitigate the socio-economic impact of the complex’s eventual closure. The project already includes five incubation farms and an agricultural college with 70 students.
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 in Abidjan 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 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.
Randgold has again produced a detailed account of its sustainability initiatives. The company’s annual sustainability report has been published as part of the 2017 annual report.
Successful sustainability management is just good business, says Randgold Resources chief executive Mark Bristow in the company’s sustainability report for 2017.
“This year, for example, our investment in our anti-malaria programmes has led to a fifth consecutive year-on-year drop in malaria incidence for our local communities but also helped reduce workforce absenteeism caused by malaria by 16%. Our achievement in meeting over a third of our energy needs from clean, renewable sources, and recycling almost three-quarters of our water also brings significant cost savings that help us deliver more value to our host countries, host communities, employees and investors,” he says.
Bristow notes that Randgold’s sustainability drive still faces substantial challenges, including the presence of HIV/AIDS in the regions where it operates, illegal artisanal mining around its sites and further injury reduction at its mines. The company therefore continues to create and nurture sustainability awareness and efforts in every part of its business, every day.
Since 2000, Randgold has paid more than $2.8 billion to its host country governments in the form of taxes, royalties and dividends. At the same time, it has created 20 000 jobs and ulplifted the communities around its operations by building schools, clinics and houses, providing potable water and generating new income-earning opportunities.
Randgold’s new partnership with the Niokolo Koba park in Senegal is typical of its ecological sustainability initiatives. The park is a world heritage site but has been on the endangered list since 2007 because poaching is reducing the animal population and illegal mining is degrading the environment.
Randgold is working with the park authorities on an integrated aerial and ground survey, using some 70 automatic cameras, 15 ground teams, six vehicles and a Cessna 210. Once all the data has been collected and analysed, it will be used to review the park’s conservation programmes and improve them where necessary. It will also be included in the environmental and social impact assessment of Randgold’s Massawa project, some 23 kilometres away.
Randgold has long worked onsite, within the community and in its host countries to promote gender equality and greater female participation in the mining industry and the wider workforce.
Leading by example, the group in 2017 numbered three female non-executive independent directors (out of six) on the main Randgold Resources board. It employs 143 women, two of them as executives and the rest at senior, supervisory and other levels. All our female employees have wage equality with men in similar jobs.
Attracting women to the historically male-dominated extractive industries can be challenging, particularly in countries where gender norms, cultural traditions and restrictive legislation are obstacles to their participation.
Randgold has therefore declared 2018 as the Year of the Woman, and will be intensifying female-focused initiatives designed to highlight the attractive career opportunities within the group and the industry, and to sensitise authorities and communities to gender equality issues.
Here we profile some of the women who are already important players in the Randgold team.
Gladys-Chloe Etusia Angoezi joined Kibali as the mine started implementing the underground automation project and is now its control room operator.
Aminata Bamba is a planner of engineering services and has been closely involved in Tongon’s capital projects. She heads the mine’s planned maintenance team and also manages mine village maintenance.
Kadiatou Coulibaly is a drill and blast engineer at Loulo’s underground operations. After graduating as a mining technician she joined Loulo as a trainee in 2013 and was promoted to her present position in December. In the meantime, she has obtained a Master 1 degree in mining engineering.
Clara Kasongo Kakudji is a civil engineer who is part of the Kibali owner’s team supervising the construction of the Azambi hydropower plant, ensuring the quality of the civils and earthworks in a project being undertaken by a consortium of Congolese contractors.
Mamaye Kouma is a senior planning engineer, coordinating all the engineering maintenance activities at the Loulo-Gounkoto complex as well as training planning section employees across the group. She holds a degree in electronics and joined Randgold at Morila in 2006 as an instrumentation technician.
Diamante Kafuti Museba is a geologist who joined Randgold at Kibali in 2012. She currently heads the greenfields exploration programme at the mine and is second in command to Kibali’s exploration manager.
Jeanne Ouattara was a Randgold trainee who worked on the development and implementation of Tongon’s flotation procedures. A chemical engineer by training, she is now a metallurgist in the recovery section of the mine’s plant.
Sarah Quick is a senior geologist with an MSc in geology and 12 years’ experience on exploration projects across West and Central Africa. She joined the company’s generative team after completing her studies in geologic remote sensing in the Netherlands.
Chimene Somo joined Randgold in 2013 as a trainee and is now a mining engineer and medium term planner at Tongon, coordinating the financial, supply chain, administration and mining functions of mine planning.
Sara Soro is an administrator in charge of Tongon’s mine village as well coordinating the mine’s transport and travel arrangements. She is the president of Tongon’s women’s committee.
Lallata Zara Togola is a civil engineer who joined Randgold in 2011 and subsequently was involved in planning Morila’s transition to TSF reclamation and the development of the Domba, Ntiola and Viper open pit mines. She has since moved to Loulo-Gounkoto, where she is the complex’s first female mine planner.
Ybab Tiongson is the systems procurement officer for the Loulo-Gounkoto complex and oversees the demand planning for all critical commodities, a challenging task. Part of the Randgold team since 2011, she is delegated to act on behalf of the HOD and superintendent from time to time.
Lucie Kikadi Usungu is Kibali’s human resources manager and has been in charge of this function from the project’s feasibility study through the construction phase to the current ramp-up in underground production. A legal graduate, she has in-depth knowledge of the DRC’s labour legislation.
Three of Randgold’s six independent non-executive directors are women and while its female employees are still relatively low in number it is worth noting that on average they earn more than the males because they generally hold more senior positions.
While Randgold is therefore rightly regarded as a leader in gender equality in the workplace in its host countries, it recognises that much more needs to be done to achieve parity, not only in industry but in society at large, and that this should start at school.
When the company first arrived in its host communities, the number of schoolgoing girls there was very low. Today, thanks in a substantial measure to Randgold’s efforts, the ratio of girls to boys is virtually 50:50 from junior to high schools, and the girls slightly outnumber the boys among the top performers. The pass rate at these schools, incidentally, is higher than the national average in their countries by a wide margin.
Randgold is now intensifying its gender-equality drive by ensuring that the top-performing girls gain access to tertiary education.
