Companies: RRS   

Randgold Resources says drilling has increased probable gold resources at Tongon in Cote d’Ivoire 52 per cent to 2.4 million oz.

The West Africa-focused company, which made the equivalent of £33.5 million pre-tax last year on gold sales of £145.5 million primarily from its mines in Mali , increased pre-tax profits another 57 per cent year-on-year to £12.7 million in the first three months of 2008 on gold sales up 38 per cent to £44 million. A strong gold price helped profitability, despite rising diesel costs.

Output at fully listed Randgold’s flagship Loulo mine in Mali fell 7.3 per cent to 63,249 oz. Cash costs rose 12 per cent to $440 an ounce overall, with Loulo’s costs rising 7 per cent to $470 an ounce against today’s $879.6 price.

Chief executive Mark Bristow says the expected start of the Yalea underground mine within the Loulo complex will drastically improve the economics at Loulo. He argues it will help grades recover from a depressed 3.1 grammes of gold per tonne of ore to 3.4 or 3.5 grammes a tonne.

Bristow suggests Yalea should enable the mine teach its target output of 400,000 tonnes a year by 2010, offsetting the trend at Morila, where this year’s production estimate has been cut by 35,000 oz to 430,000 oz, as it becomes primarily a stockpile re-processor. Randgold is looking for ‘another Morila’ in Mali and is looking at prospects in Cote d’Ivoire, Senegal, Burkina Faso and Ghana — and there are suggestions Bristow could even cast his net beyond Africa.

If gold’s average price returns to $900 an ounce or more for this year, he dues not quarrel with suggestions the company could increase net profits 60 to 70 per cent this year. The shares, recommended by Growth Company Investor at £12.06p in 2006, now stand at £23.04p, valuing the company at £1.7 billion, and should fare better than several others in the sector.

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Randgold Resources	LSE	£1871.46m	2450.00p	-12.00p
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