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Denver - Randgold Resources is not interested in mining low-grade gold ore or increasing exploration spending even though gold has risen to $1 000 an ounce, the chief executive of the Africa-focused gold producer said on Tuesday.
Randgold, whose operations are solely based on African countries including Mali and Senegal, was "done with acquisitions for the time being," CEO Mark Bristow told Reuters in an interview at the sidelines of the Denver Gold Forum.
Asked if Randgold will boost its exploration budget due to gold's rally above $1 000 an ounce, Bristow said the gold mining industry as a whole does not usually follow through with a long-term strategy.
"Exploration is something you shouldn't use like an accelerator, you should not have to step on it when the gold price is up, and take your foot off the accelerator when the gold price is down."
"When you see some of the bigger mining companies, in their desire to grow, accept lower-grade, high-volume assets, that changes your whole risk profile."
If the price of gold comes down, companies that venture into lower-quality gold mines do not have the same flexibility as companies working with higher-grade gold ore, Bristow said.
"We do not manipulate our exploration budget according to the market sentiment. We change our exploration budget according to the opportunity and qualities of our exploration portfolios."
As for the price of gold, Bristow stood by his forecast that gold would hit $1 200 an ounce by the end of the year. Spot gold was trading at $1 006 an ounce on Tuesday.
"Gold price is in a very good place at the moment. We have survived at these (high) levels despite deflationary pressures that the world is seeing.
"Once this reckless printing of money by the major economies of the world falters through, you have to deal with the significant devaluation of the paper money systems of the world," and inflation fears should prompt investors to diversify into gold and other hard assets, Bristow said.
In July, Randgold and top African miner AngloGold Ashanti teamed up to buy Moto Goldmines, which owns a project in the mineral-rich Democratic Republic of Congo (DRC).
"There is no doubt in mind that the DRC represents a new game for us in terms of managing risk," he said.
Bristow said that the key to manage geopolitical risk was to build a strong relationship with the government.
"If you can maximize profit from a mining operation, the government is happy because they get tax, and the shareholders are happy because they get dividends...but the industry fails to do that from time to time," Bristow said.
- Reuters
