Bristow chides 
gold producers

You can always count on Mark Bristow to tell it like it is, which frankly is why The Northern Miner gets up at the crack of dawn to attend Randgold Resources’ annual breakfast presentation at the Prospectors & Developers Association of Canada convention.

As the industry’s top analysts and mining media tuck into their fruit plates in a quiet boardroom at the Sheraton Hotel, CEO Bristow typically begins his talk with a summary of how the gold industry has got it so wrong and let its shareholders down. (Randgold, naturally, is the exception to the rule.)

“We’ve been through the super-cycle and at the back end of this cycle we as an industry have not been able to create any value for anyone — the only thing we did is take our salaries home,” Bristow said. “Most gold companies are trading at between 50% and 60% below their 2005 share prices, and if you look at the amount of equity that has been issued, it’s amazing.”

The industry has “delivered US$90 billion of equity to the market and raised US$50 billion of debt, and we haven’t delivered a single extra ounce in production as an industry.”

Commenting on another favourite theme — impairments — Bristow said it was interesting to see how quickly impairments came out of the woodwork when the gold price stopped going up. In fact, the gold price hadn’t even started its decline, he says, before the industry saw impairments emerge.

“The gold industry has impaired over US$70 billion — it has actually impaired more than its combined market cap today — and that really sums up our industry,” he said.

Bristow blamed “short-termism,” among other things, for destroying value, and noted that the lack of a longer-term vision also has had serious ripple effects on the analyst community.

“There’s no long-term investment in this industry,” he warned. “Not only do the mining companies buy things at the top-end of the market and then write them off, [but] bankers [also] employ analysts at the top of the market and get rid of them at the bottom end, and this is when we need analysts.”

As for Randgold’s own track record, he says, it’s a different story on pretty much every metric.

Last year, for example, was the company’s best in 20 years.

In addition, while the three major North American gold producers pointed to between a 10% and 15% reduction in gold production by 2020 at the recent BMO conference, Randgold, by contrast, is investing in exploration and expects to grow its ounces.

“We are well prepared for this cycle because we’ve worked furiously at our portfolio over the last two years and are demonstrating that organic growth is one of the few ways, if not the only way, to create value for stakeholders.”

Bristow also noted that Randgold’s definition of value is the inherent value in a company that can be distilled into each share, or each piece of scrip, that its shareholders earn.

“It really boils down to what are the reserves per share — viable reserves net of debt — that you can distil into a share, and whether it’s tonnes of iron ore or pounds of copper, or ounces of gold. It’s a simple equation that you can’t hide behind.”

He then pointed to the performance of the top-10 gold producers over the last decade. “You can see that today, there are half as many ounces per share in the top-10 producers, and you can see how Randgold stands apart. We have doubled the amount of ounces that we had 10 years ago per share.”

Equally, if not of more importance, he added, is the quality of those Randgold ounces.

While the grade of those ounces produced by the top-10 gold producers over that period have halved, he said, the grade of the ounces Randgold has produced has stayed the same, if not risen slightly higher.

“We are still mining below our reserve grade and we will continue to do that until 2020,” he forecast. “By that stage, as I hope I’ll demonstrate, we’ll add more ounces to the portfolio.”