Randgold’s Q1 profit jumps 42% on strong gold price

Randgold Resources has posted a 42% increase in net profit for the first quarter due to high gold prices, despite lower output.

LONDON (Reuters) - 

Randgold Resources Plc's <RRS.L> first-quarter net profit jumped a below-forecast 42 percent, the African miner said on Tuesday, as record-high gold prices offset weaker production.

Randgold shares rose as much as 10 percent in thin volume, reversing losses over the past two weeks, partly lifted by a buoyant gold price. The shares were trading 5.5 percent firmer at 24 pounds by 0934 GMT, compared with a 1.6 percent increase in the UK mining index <.FTNMX1770>.

"It strikes us that the earnings, while good if you look historically, were pressured by increasing costs of production," said Seymour Pierce analyst Charles Kernot.

"We have a few questions as far as the company is concerned ... but the market clearly takes a more optimistic view and of course we've got a much better gold price backdrop as well." Seymour Pierce has a "sell" rating on the company.

The spot gold price <XAU=> has surged about $20 per ounce since Friday, taking into account moves when UK markets were closed on Monday for a public holiday.

The firm, which has two mines in Mali and is developing another one in Ivory Coast, said net profit hit $18.2 million in the quarter from $12.75 million in the year-ago period.

WEAKER PRODUCTION

Attributable production was 103,649 ounces, down 5 percent versus same period in 2007 and down 13 percent compared to the previous quarter, mainly due to lower grades.

Chief Executive Mark Bristow told Reuters that second quarter output should improve slightly compared to the first and second half output should rise versus the first six months.

"We should do a little better, Morila will be slightly better in the second quarter than the first," he said in an interview, referring to the firm's jointly owned mine in Mali.

Randgold downgraded its full-year production estimate for Morila by 6.5 percent, but Bristow said the firm still expected to meet its target of flat overall production for 2008.

Total unit cash costs per ounce surged 37 percent year-on-year and 12 percent versus the previous quarter.

"Industry wide cost pressures, especially the sharp increase in oil prices ... continued weakening of the dollar and an increase in general consumables and commodities also impacted negatively on costs," a statement said.

Gold sales jumped 38 percent to $87 million as gold prices climbed. The current spot price at around $876 per ounce is 27 percent stronger than 12 months ago, although it has come down from a record peak of $1,030.80 touched on March 17.

Bristow said AngloGold Ashanti <ANGJ.J>, its joint venture partner at Morila, was still considering whether to sell its 40 percent stake in the mine, but a decision was expected by the end of May.

Bristow reiterated that Randgold was still interested in buying AngloGold's stake at the right price. (Reporting by Eric Onstad; Editing by Louise Ireland)

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