Publications
Partners
London - West Africa-focused miner Randgold Resources has cut its 2011 production target for the second time this year after a “perfect storm” of difficult mining conditions, work stoppages and a mill breakdown at its Tongon mine in Ivory Coast.
The cut to 690 000 - 700 000 ounces for the year - from previous, already trimmed guidance of 740 000 - 760 000 oz - sent the gold miner’s shares down by more than 4% on Monday.
Analysts had previously been expecting an output boost in the last months of the year after the miner predicted a “record” quarter.
The FTSE 100 gold miner blamed tough third-quarter conditions at Tongon that persisted into the fourth quarter, including wet weather and mining through harder transitional ore.
Workers separately downed tools as the miner negotiated an agreement with a newly-established union.
Randgold was also hit by a mill failure as well as a more complex than expected connection to the power grid.
Its Loulo mine in Mali, meanwhile, has experienced lower than forecast production, though the complex is making “significant progress towards getting back in line with its fourth-quarter production forecast”, Randgold said.
“Looks to be a 'perfect storm' at Tongon,” Numis analysts said in a morning note, adding they now expected cost guidance, previously at $600 per ounce, to be hit “significantly”.
“We had been sceptical on the previous guidance, particularly on costs, and currently have full-year numbers of 733koz at $690/oz in our model ... Our numbers likely to come down again and expect the shares to be well off today.”
Randgold had originally hoped to keep its cash costs per ounce below $600 for the year, but earlier this month the company said they were still above $700.
At 08:30 GMT, Randgold shares were down 4.3% at 6 485 pence, underperforming a 2.2% rise in the broader UK mining sector.
Randgold had said earlier this month it was in “good shape” to meet the bottom end of its 740 000 to 760 000 oz target for the year. That target had already been revised from 750 000 to 790 000 oz after abnormal rainfall hit production at its Loulo/Gounkoto mining complex in Mali.
The revised output will still be well above 2010, when the miner produced about 440 000 oz.
The company hopes to be producing 1.2 million ounces of gold a year by 2015.
Randgold is the only pure gold producer in the FTSE 100, although Russia’s Polymetal and Polyus Gold are planning to join it there.
