Randgold Resources profits up in 2006

Mid-tier gold miner Randgold Resources (GOLD-Q, RRS-L) saw its earnings increase on higher gold prices and bigger production numbers in 2006.

The company reported earnings of US$50.9 million (US14 per share) on revenues of US$258.3 million for the year, against earnings of US$47.9 million on revenues of US$151.5 million in 2005.

The narrow US$3-million increase in earnings, in a year when revenues were up 70%, reflected the beginning of full taxation on the Morila gold mine in southern Mali; operating profit, before tax, was up 54%.

The company declared a US10-per-share dividend for the year.

Production costs were up significantly, thanks to a falling U.S. dollar and the rapid rise in oil prices. Randgold’s company-wide cash produciton cost was US$258 per oz., and its total cash cost US$296, for the year. In 2005, cash costs were US$169 and total cash costs US$201 per oz.

Randgold estimated that 25% of its mining costs were taken up by diesel fuel purchases, and 30% by mining contractors’ charges. Those, too, increased substantially in 2006.

Both Morila, where Randgold holds a 40% interest in a joint venture with AngloGold Ashanti (AU-N, AGD-L, AGG-A, ANG-J) and the Malian government, and Loulo processed lower-grade ore in 2006, as had been predicted by their mine plans. The lower grades (4.2 grams per tonne at Morila and 3.2 grams per tonne at Loulo, versus 5.9 grams and 4.5 grams in 2005) also contributed to the higher cash costs.

Project hedges cost Randgold money, with slightly more than a quarter of Loulo’s production delivered into contracts at an averge US$434 per oz. Still, average gold prices of US$604 per oz., about 35% higher than in 2005, swelled the top line.

Randgold has started decline development at the Yalea underground mine, part of the Loulo project, and has finalized a mine design for another Loulo deposit, Gara, which has a reserve of 11.1 million tonnes grading 3.9 grams gold per tonne based on final feasibility studies. Production from Gara should start in 2009.

At the Tongon deposit in Cte d’Ivoire, a feasibility study is planned this year, with a 30,000-metre drill program.