Author: Paul Ploumis 08 May 2015 Last updated at 03:37:33 GMT
(Kitco News) - It looks like gold mining companies are going through some of the ugliest times in the last 15 years as one leading mining executive said he has not seen the sector this bad in years.
Mark Bristow, chief executive officer at South African-based and Africa-focused Randgold Resources Ltd. (NASDAQ:GOLD), said that rising gold prices essentially saved gold miners in the early 2000’s when the industry was going through difficult times.
“Around the world gold companies are mining a shrinking reserve base, it’s all starting to be written about now, more and more people are talking about it, and there’s just no way you can continue to mine a declining reserve grade and think you can increase your revenue stream,” he said. “The last time the industry was in such dire straits, in our view, is when the gold price came to its rescue ultimately in the early 2000’s after the hedging debacle.”
Gold prices began a decade long bull run in 2001 that saw prices peak at a little over $1,923 per ounce in September 2011.
Bristow noted that he doesn’t think the same kind of white knight bull run is in the cards to bring gold miners out of their doldrums this time.
“It’s hard to see the gold price moving out of the $1,000 to $1,400 range, right now it seems to be range bound in the middle of that range,” he said. “The point I would make is for this to change, we would need to see a sharp drop in production and some serious reinvention of the industry as a whole.”
The company reported their first quarter 2015 results early Thursday morning. Profits were down 16% to $143.9 million, from $171 million, year-on-year due to increased costs and lower gold prices.
Profits increased 5% quarter-on-quarter while gold production totaled 279,531 ounces – it was lower quarter-on-quarter, as well as year-on-year, as the company mined lower grades during the quarter, which they said was planned.
Total cash costs per ounce of gold decreased to $708 per ounce. Net cash generated from operations rose from $69.3 million to $101.7 million. The company noted cash on hand rose 71% to $141.2 million.
Gold sales were lower year-on-year totaling 344,632 ounces compared to 362,919 ounces. Gold sales rose 1% quarter-on-quarter.
Bristow highlighted the company’s mantra of extracting profitability from its assets over production.
“There’s no way you can deliver on this sort of strategy if you’re relying on the gold price, or decreasing grade, so that you can grow your production,” he said.
He also added the company views this environment as opportunistic to find good deals.
“While organic growth remains our core strategy, we are on the lookout for acquisitions, or joint-ventures opportunities that might meet our investment criteria,” Bristow said.
Courtesy: Kitco News