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Randgold’s shares opened up 4.5 per cent as the Africa-focused gold miner hiked its dividend by 56 per cent after the company generated more cash than expected last year, following a record year of production.
The miner said profit increased by 38 per cent in 2016 to $294.2m as production rose by 3 per cent. It raised the dividend to $1 a share following a boost in net cash to $500m, ahead of analysts’ expectations.
Randgold benefited from an 8 per cent increase in the gold price it received over the period to $1,244 a troy ounce and a reduction in its cost of production by 6 per cent to $639 per ounce. It said it is targeting production of between 1.25m to 1.3m ounces for 2017 and cash costs of $580 to $630 a troy ounce.
Gold prices have recovered this year, rising 5 per cent to trade at $1,223 a troy ounce as demand increases for a safe haven investment.
But the precious metal also faces headwinds from possible US rate hikes. Higher interest rates are generally bad for gold since it provides no yield.
The gold market also faces declining production after years of cost-cutting by miners. Randgold has said it aims to develop three new mines over the next five years. It is committed to spending on exploration and aims to spend between $50 to $60m in 2017, the company said.
“We have shared with the market our 10-year plan, which shows how we plan to sustain our profitability over the next decade at a gold price of $1,000 per ounce,” Mark Bristow, chief executive, said.
“It also envisages – but does not depend on – the development of three new mines over the next five years.”