Randgold increases dividend despite fall in profits, hints an acquisitions on the horizon

 
Billy Ehrenberg
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Turmoil in the gold-mining industry is generating growth opportunities (Source: Getty)

The figures

Randgold Resources, the South African gold miner, suffered a 17 per cent drop in annual profits in the year to December, despite gold production for the year breaching the 1m ounces mark.

The drop was mainly the result of a falling gold price, although the number of ounces sold also dropped by four per cent in the fourth quarter.

Despite the setbacks, the board decided to bump its dividend proposal up by 20 per cent to 60 cents (39p).

Group gold production was up substantially in 2014. It rose 26 per cent to 1.1m ounces, up from 910,374 ounces in 2013. The cost of an ounce of gold sold in 2014 was $698, down from $715 in 2013. Randgold did, however, cut costs by two per cent over the financial year.

Production weakened towards the end of the year, falling four per cent. This was largely down to decreased production at the group’s Loulo-Gounkoto and Tongon operations, but was offset by increases in Kibali and Morila.

Group capital expenditure is expected to be $330m in 2015.

Why it’s interesting

Slower gold prices may end up drastically reshaping the industry. Gold hit a four-year low in November 2014, after 2013 had set the tone for falling prices.

The lower prices (gold started 2013 at $1,686 an ounce and fell to $1,199 by the end of 2014) mean smaller miners such as Randgold have begun to hint at acquisition opportunities. Larger companies may have to streamline their assets, meaning companies such as Randgold can pick up the offcuts.

What Randgold said

Mark Bristow, Randgold’s chief executive said:

Our long standing goal of reaching an annual production of 1.2m oz in 2015 is now comfortably within reach, and we are already looking beyond that to our next big step forward. We remain strongly committed to exploration and our geologists continue to scour the gold fields of West and Central Africa for multi-million-ounce deposits.

Bristow also hinted at acquisitions in the future:

The current stress in the gold mining industry is also generating what may well prove to be transformational growth opportunities and we are closely monitoring this situation.

In short

A pretty positive set of results in the face of a hostile market. It will be interesting to see how the situation evolves and how prices develop through 2015.

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