Randgold’s first quarter profits down

While generating more profit from its mining operations, rising costs and lower production meant a decrease in net profit for Randgold Resources (GOLD-Q, RRS-L).

For the first quarter of 2006 the African focused company reported a net profit of roughly US$13 million, down roughly US$4 million from fourth quarter 2005 net profits of US$17 million.

The company says the end of a tax holiday at its Morila mine in Mali was part of the reason for a decrease in profits.

In New York on May 8 the company’s shares were trading at US$25.82, up 11 on roughly 440,000 shares.

Total production for the quarter was down to 119,000 oz. from 126,000 oz. for the fourth quarter of 2004, and cash costs were up to US$281 an oz. compared with US$236 an oz. for the respective periods.

The company blames lower grades at both its Morila mine and at its recently commissioned Loulo mine – also in Mali — for the lower ounces and higher costs. The installation of a hard rock crushing circuit at Loulo pushed up unit costs the company says.

In fact, Loulo was responsible for roughly US$21 million of the total US$33.7 million cash costs for the quarter.

In a press release issued on May 8 the company chose to stress the positives associated with its investments both in its mining operations and in its exploration programs.

It points to the second phase of the Loulo plant getting back on track as one such positive. The phase’s progress was threatened by a defaulting contractor, but now is expected to be finished by the end of the second quarter.

Also a plant expansion at Morila boosted throughput by 11%. That increase partially compensated for the expected grade decline.

A drilling program at Morila has given strong results, producing an additional 510,000 oz. of reserves and increasing the proportion of reserves in the proven category from 50% to 70%.

The company is also bullish on its exploration within the Loulo region. It says the area is showing the potential for further extensions to the known orebodies as well as identifying new deposits.

Randgold’s chief executive Mark Bristow notes in the release that much of the depletion of the resource through mining in 2005 had been replaced by the year-end.

Elsewhere the company says its Tongon project in the Cte d’Ivoire, has the potential to become the company’s third mine.

But that will only happen if the war ravaged country can return to political stability. General elections are scheduled for later this year. If the outcome of those elections is satisfactory, the company says it will complete its feasibility study within two years.