Randgold's Fourth-Quarter Profit Falls 10% as Gold Prices Dropby
Randgold is the best performer in the FTSE 100 this year
Company aims to mine 1.25-1.3 million ounces of gold in 2016
Randgold Resources Ltd., the best performer in the U.K.’s benchmark stock index in 2016, climbed to a one-year high after proposing to increase its annual dividend by 10 percent on the back of strong cash flow.
The board intends to raise the payout to 66 cents a share, the Jersey, Channel Islands-based company said in a statement Monday. Profit in the three months through December declined 10 percent from a year earlier to $44.5 million as higher production failed to offset lower gold prices, it said.
“We will continue to increase our dividend and continue to grow our cash until we get to $500 million cash on the balance sheet,” Chief Executive Officer Mark Bristow said in an interview in Cape Town. “We haven’t cut capital, we haven’t cut exploration.”
While gold producers’ profits have been hit after the metal tumbled to a five-year low in December, a rebound in bullion prices since then has buoyed shares. Randgold has built up cash because its mines are profitable at prices above $1,000 an ounce and unlike many rivals, it’s debt-free. Cash on hand more than doubled to $213.4 million last year, while production and costs were in line with the company’s forecast, it said.
“Randgold is one of the few companies to still generate earnings growth, while its investment discipline has left it well placed to withstand the current environment,” Investec Plc said in a note to investors today.
Bullion prices have jumped more than 10 percent this year to $1,177 an ounce as turmoil in global markets spurred demand for a haven. The world economy is still confused and the gold industry is better placed than diversified miners or oil producers, Bristow said in an interview on Bloomberg Television Monday. He said there’s an even chance of a global recession this year.
The stressed environment for gold miners will present opportunities for Randgold to acquire assets, Bristow said.
“The problem is the valuation of the assets,” he said. “We need more of a squeeze before you pop out assets that would fit our criteria. We’re not a consolidator, we’re an exploiter.”
Randgold, which mines the metal in West Africa and the Democratic Republic of Congo, produced a record 1.21 million ounces last year at an average cost of $679 an ounce. It’s targeting output of 1.25 million ounces to 1.3 million ounces this year.
The shares rose 3.8 percent by 12:15 p.m. in London trading, the biggest gain in the U.K.’s FTSE 100 Index. The stock is up for an eighth day and has advanced 33 percent this year.