BUSTED FLUSH

The Star Early Edition - - COMPANIES - Thomas Biesheuvel

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

PHOTO: 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.

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