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Randgold Resources (LSE:RRS) proved the positive implication of the old axiom, “If you fail to plan, you plan to fail.” The company’s keen understanding of the gold market and its anticipation of a decline in the price of gold during 2013, positioned itself to described its annual results for 2013 this morning for “one of Randgold’s best years.” Investors liked what they read, driving Randgold’s share price up more than 4.6% to 4387.0. That is an increase of 194.0 pence.
The strategy that Randgold employed, if not simple, was certainly bold. In a market where the price is declining, but the demand is not, they set out to increase production whilst simultaneously reducing cash cost per ounce. The concept is fundamental for the survival and success of any company, but especially so for those dealing in commodities where the price is beyond their own control. Randgold’s strategy was based as much on correct market expectation as is was on the application of fundamental business principles. The point is that principles are only powerful when they are properly applied.
The icing on the cake is that, not only did Randgold take production to unprecedented levels, it also positioned itself to perpetuate the progress at least through 2014. Randgold expects that the 15% increase in overall production for 2013 is the foundation upon which they will generate a 25% to 30% increase in the new year.
CEO Mark Bristow observed that his company had “anticipated the shift in the gold market and [was] able to align our operations the the changing environment in good time, securing our sustained profitability at the lower gold price.” As, he shared, having implemented this strategy in good time was, perhaps, the essential factor that allowed the company to remain profitable and operating in line with its goals despite difficult circumstances common to the gold market. In fact, even though the overall dollar results were less than 2012, the board has recommend paying a 50¢ dividend, unchanged from the previous year.
Whilst others may be cutting back, Randgold’s strategy has put it in a position from which to push forward to its goal of mining in excess of 1,000,000 ounces in 2014. Bristow said that, “We’ll be investing capital of some US$330 million in our growth projects and a further US$60 million in exploration. Exploration success, more than any other factor, has differentiated Randgold from the rest of the gold mining industry, and we are sustaining our strong focus on the hunt for new discoveries as well as additional ounces for our existing ore bodies.”
Even when expressing the usual caution intended to temper forward-looking statement, Bristow’s ebulliance was evident. “The year ahead is going to be a tough one, but I am confident that we’re in good shape to deliver on our objectives again. We’ll be investing capital of some US$330 million in our growth projects and a further US$60 million in exploration.”
Bristow closed his remarks with a bit of swagger, and perhaps a thumbing of the nose to other mining entities, indicating that Randgold will also be investigating acquisition and joint venture opportunities in 2014 that have been “generated by the current stress in the industry.”
