CLICK HERE FOR FULL REPORT AND DISCLOSURES
3 May 2012
Randgold Resources (RRS.L)
Closing Price: 5,350p
Rating: Under Review
The first quarter result is slightly weaker than we had expected, but in
line with RRSs guidance of a weak start to the year, then ramping up
through the year as higher grades and volumes are delivered.
RRS remains
commited to its FY11 guidance of 825-865koz at US$650/oz (Investec
849koz at US$653/oz).
Our target price and recommendation are under
review as the Mali political situation reportedly improves.
Analyst
briefing today at 12pm.
* The March quarter production result of 165koz was weaker than
the 175koz we had expected.
It equates to a 660koz/pa run rate, well
below the FY12 guidance of 825-865koz.
Notwithstanding the lower
production, cash costs have been contained at US$667koz (close to FY12
guidance of US$650/oz), assisted by the timing of gold shipments and
subsequent deferral of associated mining costs.
RRS states that it
"remains committed" to FY12 guidance of 825-865koz at US$650/oz.
* RRS ended the quarter with a US$457m cash balance, down from
US$488m at the start of the period, after capex of US$112m.
* Operationally, a key highlight was that the third mill at
Loulo-Gounkoto Complex has been commissioned and RRS is now looking at
the opportunity of lifting throughput to 5.4mtpa (versus current planned
capacity of ~4mtpa.
A preliminary economic assessment has been
undertaken in this regard: expected expansion capex of $120m, cash costs
of $850-875/oz, IRR of 23-52% at long term gold prices US$1200-1600/oz
respectively.
* RRS reports that it has seen little disruption as a
consequence of the Mali coup and it expects Mali operations to continue
to run at full production, following return of civilian rule.
The
discrepancy between our recommendation and target price has reflected
this Mali uncertainty and this is now under review.
Hunter Hillcoat
+44 (0) 20 7597 5182
Louise Collinge
+44 (0) 20 7597 5779
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