Randgold Slumps as Production Shortfall Raises Costs

Randgold Resources Ltd., a producer of the metal in West Africa, fell the most in six months in London trading as costs surged after power cuts curbed output.

Costs per gold ounce mined rose 39 percent to $665 in the second quarter from a year earlier after power outages at the Loulo mine in Mali slowed operations, Randgold said today in a statement. The company reduced its full-year guidance and said it would be within 5 percent of a 477,000-ounce target.

“One major negative is that group cash costs continue to increase and are high,” Dominic O’Kane, an analyst at Liberum Capital Ltd., wrote in a note. “Randgold’s valuation is only justified by successful delivery.”

The company, which is developing its first underground mine at Loulo to access higher-grade ore found deep under the earth’s surface, follows gold-mining peers Petropavlovsk Plc and African Barrick Gold Ltd. in lowering full-year guidance.

Randgold fell 320 pence, or 5.6 percent, to 5,395 pence, by 4:30 p.m. in London, the steepest decline since Feb. 4.

“We’re at a point where we have identified the issue” in Mali, Chief Executive Officer Mark Bristow said in an interview in London today. “By the fourth quarter we should be settled.”

Net income jumped to $34.4 million in the second quarter from $14.9 million a year earlier as gold prices increased, the company sold shares in Volta Resources Inc. and it wrote-back an earlier provision, according to Randgold’s statement.

Sales were little changed at $102.6 million, while gold output fell 23 percent to 93,880 attributable ounces. Gold for immediate delivery averaged $1,196.53 an ounce in the period compared with $922.13 in the corresponding three months of 2009.

Randgold is developing mines in Senegal, Mali and Ivory Coast, and last year agreed with South Africa’s AngloGold Ashanti Ltd. to acquire Moto Goldmines Ltd., which has a deposit in the east of the Democratic Republic of Congo.

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