Randgold has a war chest of $500 million to $700m to acquire assets from floundering rivals
THE GOLD industry was a “busted flush”, said Mark Bristow, surveying the ruin wrought by a 38 percent slump in the bullion price from a 2011 peak. For the Randgold Resources’ chief executive that is an opportunity.
“This is an exciting time,” Bristow said at his London office. “The industry blows it’s brains out every time. The reason we’re still in the industry is because the competition isn’t that sharp.”
The world’s biggest gold mining firms racked up $30 billion (R328bn) in debt during a 12-year bull run for the precious metal that spurred acquisitions and new mines.
That has become a milestone as costs escalate and gold tumbled from a record $1 921.17 an ounce in September 2011 to $1 189.62 in London on Friday.
Randgold, the best performing gold mining firm in the past decade, was debt-free and profitable at current gold prices, Bristow, who has a war chest of $500 million to $700m to acquire assets from floundering rivals, said.
With no debt and good cash generation, Randgold is well positioned to be a predator.
“If you look at our history, we have never gone to a gun fight with a knife. We’re getting ready and we’ll go to the gun fight with a bazooka,” he said.
Under Bristow, Randgold has generally shied away from doing deals.
The gold producer built its business by finding its own mines, making discoveries in Mali, Senegal and Ivory Coast. The exception was the 2009 acquisition of Moto Goldmines with AngloGold Ashanti for about $500m.
“With no debt and good cash generation going ahead, even at low gold prices, Randgold is well positioned to be a predator,” Investec said.
“It may still take a little more pain before Randgold makes acquisitions.”
Bristow said the company would be willing to repeat the Moto model by buying with a partner, meaning it could look at assets that cost as much as $1.4bn. The chief executive said the company’s equity was “super powerful” in the current market.
While Randgold hunts for new mines, many of its rivals are mired in debt.
AngloGold, the world’s third-biggest producer, is implementing a range of “selfhelp measures” to cut its $3bn debt by a third over the next three years.
Barrick Gold, the biggest gold producer, is trying to cut costs and is considering asset sales.
Randgold, which has risen almost sixfold in the past decade, operates four mines and plans to produce as much as 1.2 million ounces of gold this year. The company will post a 2014 profit of $259m, according to the average of nine analyst estimates compiled by Bloomberg.
Bristow said: “The big question here is ‘Are the gold miners going to go bust?’” – Bloomberg
Randgold holds a rather unique position in the gold mining sector in that, unlike many of its rivals, it is in a strong position to make acquisitions. Mark Bristow, the chief executive, says the company’s equity is ‘super powerful’ in the current market.