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Randgold bucked the trend in the mining sector, reporting a 41 per cent rise in first-half earnings despite continuing troubles in Mali, its key market.
The London-listed miner, which has mines in Mali and Ivory Coast and is building a fifth in Democratic Republic of Congo, said gold production rose 16 per cent on the first half of last year, to almost 376,000 ounces, with net income rising to $245.9m.
Mark Bristow, Randgold’s chief executive, distinguished between the military coup in Mali last March, which prompted a sharp fall in the company’s share price, and the continuing unrest in the north, where rebel groups seeking independence and Islamists have been fighting the government and each other.
Mr Bristow told analysts that the miner’s practice of using local management meant teams had stayed in place and that key people in government were in their jobs throughout the crisis.
Randgold shares rose 1.55 per cent to £62.85.
Cash costs per ounce rose only 6 per cent year-on-year to $703 and fell 6 per cent from the first to the second quarter. “We’re a growing company,” said Mr Bristow. “We are growing throughput and grade and with that comes a lower cash cost.”
While the gold price has stayed high, down only about 7 per cent in the past year to $1,615 per ounce, miners of the precious metal have faced rising operating costs, as well as difficulties in finding large new gold projects and in building them to budget.
Randgold said construction at its Kibali project in Congo was proceeding well, in line with its target to start producing in the final quarter of 2013. “Given the recent gold sector capex blowouts, we continue to believe that if Randgold avoids an overrun it will be an exceptional achievement,” said analysts at Liberum.
Barrick Gold, the largest global producer, last month said its Pascua-Lama project in South America would cost 50-60 per cent more than expected.
Randgold’s pre-tax profit rose from $197m to $269.5m, as earning per share increased 32 per cent to 225 cents.
Randgold, the darling of the gold sector, has maintained its sheen. Phlegmatic chief executive Mark Bristow, lauded by analysts for knowing his company down to the last drill-bit, was in Mali at the time of last year’s coup steadfastly reassuring investors. Fresh from a 13,000km charity motorcycle ride from England to the Ivory Coast, Mr Bristow could this week report higher production and profits, signs that cost pressures are abating, while underlining the company’s commitment to exploring for future growth. Delivering the ambitious Kibali project without the delays or cost incontinence characteristic of the sector is Mr Bristow’s next challenge. On a 13 times forward earnings multiple, Randgold still trades at a premium to UK peers. For now, that looks justified.