Mining costs are likely to fall this year and boost profit margins, in contrast to last year’s “spiralling costs”, Randgold Resources chief executive Mark Bristow said on Monday.
Mr Bristow said that 2008 had been “a tough year” as the group faced rising costs while trying to develop new gold mines in West Africa. But costs had started to fall in the fourth quarter, he said, led by lower fuel prices, and this was set to continue in 2009. “We are aiming for cash costs per ounce of gold between $400 and $450, in contrast to $467 per ounce last year,” he added.
In 2007, the average cash cost per ounce of gold produced was $356.
Gold production at Randgold is due to increase this year with the expansion of the Loulo mine in Mali, with total output expected to rise from 428,426 ounces in 2008 to about 490,000 ounces in 2009.
Another jump in gold output is due in 2010 with the opening of the Tongon mine in Ivory Coast.
Mr Bristow said that Randgold was “well-positioned” compared with other mining companies as it had no debt and was now sitting on more than $250m in cash.
“We are producing a lot of cashflow and are capable of investing in our own future,” he added.
He said that, unlike other companies that are cutting back spending, Randgold’s capital expenditure would be $210m this year, with the bulk being spent on the construction of the Tongon mine. Randgold had no need to seek extra financing and expected to end the year with a cash balance of about $150m.
Revenues for 2008 rose 20 per cent to $338.6m, while Randgold’s pre-tax profits rose 7 per cent to $71.6m as higher gold prices outweighed higher costs and a 3.6 per cent dip in gold production.
The company proposed a final dividend of 13 cents a share, up from 12 cents in 2007.
Shares in Randgold rose 2 per cent to £30.99 on Monday. The mining stock has risen by more than 50 per cent in the past three months, reflecting an increase in the gold price and Randgold’s promotion to the FTSE 100 index.