The gold sec­tor ac­cord­ing to Rand­gold’s CEO

Finweek English Edition - - IN THE NEWS - BY DAVID MCKAY

Rand­gold Re­sources CEO, Mark Bris­tow, has never been short of an opin­ion, es­pe­cially re­gard­ing the gold sec­tor’s abil­ity to blow it­self up. He thinks re­luc­tance to close loss-mak­ing mines is another tap on the self-de­struct but­ton. “The in­dus­try is long past the point where it could have rein­vented it­self.

“The in­dus­try is now strug­gling with sur­vival. It can’t get out of its own debt be­cause it doesn’t have enough qual­ity re­serves. Banks too are too scared to pull the plug. […] It isn’t pleas­ant,” he said in an in­ter­view with Fin­week.

If that sounds like mor­bid­ity, it’s worth ref lect­ing that Rand­gold is one of only a hand­ful of gold min­ing firms that has its head clearly above wa­ter. Debt-free, and gen­er­at­ing prof­its from its West African mines, the com­pany is keep­ing a close eye on merger and ac­qui­si­tion op­por­tu­ni­ties, although Bris­tow’s pref­er­ence is for or­ganic growth.

That’s the model the com­pany has pur­sued since in­cep­tion 20 years ago on 7 Au­gust 1995. Born in the teeth of the last gold price de­pres­sion, when the me­tal was priced at $252/oz, Bris­tow’s Rand­gold al­most went out of busi­ness. Hav­ing come through near ex­tinc­tion just af­ter in­cep­tion is per­haps why Bris­tow is an arch-con­ser­va­tive when it comes to plan­ning around the gold price.

The declines in the gold price and gold pro­ducer share prices to­day are well doc­u­mented. An­gloGold Ashanti has lost 61% of its value in the past 12 months and has sur­ren­dered three-quar­ters of its to­tal value – equal to R100bn – in the past five.

Oddly enough, the gold price was trad­ing at only $100 more per ounce in Au­gust 2010 than to­day’s level, but the tra­jec­tory was up­wards. The gold price sub­se­quently climbed to $1 420/oz by mid-De­cem­ber in 2010.

What’s changed is in­vestors have be­come dis­il­lu­sioned with the sec­tor’s in­abil­ity to cap­i­talise on those good times, pro­vid­ing pre­cious lit­tle in re­turns and spend­ing a wealth in de­vel­op­ment which ac­counts for the debt pres­sure to­day.

“The last drop in the gold price brought the cliff ev­ery­one is talk­ing about into fo­cus,” said Bris­tow. “It’s al­most like the in­dus­try wants to self-de­struct. Com­pa­nies are just min­ing gold now in or­der to cover their debt,” he added.

Rand­gold’s Ton­gon mine is lo­cated in the north of Ivory Coast.

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