Randgold hit by output fall from strikes
MINER Randgold Resources has cut its 2011 production target for the second time this year after a “perfect storm” of difficult mining conditions, work stoppages and a mill breakdown at its Tongon mine in Ivory Coast.
The cut to 690,000-700,000 ounces for the year – from previous, already trimmed guidance of 740,000-760,000 ounces – sent the gold miner’s shares tumbling 7.9 per cent.
Analysts had previously been expecting an output boost in the last months of the year after the West Africa-focused miner predicted a “record” quarter.
The FTSE 100 gold miner blamed tough third-quarter conditions at Tongon that persisted into the fourth quarter, including wet weather and mining through harder transitional ore.
Workers separately downed tools as the firm negotiated an agreement with a newly established union.
Randgold was also hit by a mill failure as well as hurdles with its expected connection to the power grid. Its Loulo mine in Mali, meanwhile, has experienced lower than forecast production, though the complex is making “significant progress towards getting back in line with its fourth-quarter production forecast”, Randgold said.
“Looks to be a ‘perfect storm’ at Tongon,” Numis analysts said in a morning note, adding they now expected cost guidance, previously at $600 per ounce, to be hit “significantly”.
“We had been sceptical on the previous guidance, particularly on costs, and currently have full-year numbers of 733koz at $690/oz in our model … Randgold had originally hoped to keep its cash costs per ounce below $600 for the year, but are still above $700.