Gold sector’s demise: Bristow blames fund managers
Johannesburg - South African businessman and chief executive at London-listed Randgold Resources Mark Bristow yesterday blamed fund managers for contributing to the demise of the gold mining industry.
“I blame fund managers. The allocation of capital has been a disaster. They have been allowed to manage a long-term industry on a quarterly basis,” he told journalists yesterday, ahead of the 2015 Joburg Indaba: Investing in Resources and Mining scheduled to start today.
Fund managers are employed by large institutions, such as pension funds or insurance companies, to manage the investment of money on its behalf.
Bristow sounded alarm bells about the gold mining sector’s cutting back on exploration in the wake of falling gold prices, rising costs and waning demand.
The gold price climbed to $1 307.62 (R17 399) an ounce in January and has since fallen by 11 percent to be quoted at $1 165 an ounce yesterday.
He said mining houses had not learnt from their investment mistakes even if the gold price was low.
“Today, everyone is cutting back on capital expenditure. They tell you how they will reduce costs,” Bristow said, adding that he was bullish about gold.
Randgold was investing $50 million a year on exploration, Bristow said.
“My prediction is that the gold industry will have to restructure in order to survive. This is an industry that needs to have something done to it. The most important thing is what we choose to do,” he said.
Bristow, who started Randgold Resources 20 years ago, said that at that time South Africa was the world’s number one gold producer. The country had declined to become the world’s seventh biggest producer of gold and now contributed only 5 percent towards global production.
He said $150 billion was raised in the past 10 years, including $90bn of equity and $60bn debt. “Around $70bn of the $90bn in equity has been impaired,” he said.
Randgold has been one of the only gold producers that has not reported an impairment as mining houses buckled under the pressure of the gold price downturn. At the end of the quarter to June, Randgold had cash of $109.2m available and no debt on its books.
Its peers including Barrick Gold have around $11bn in debt.
Randgold has a 45 percent interest in the Kibali project in the Democratic Republic of Congo and also operates the Tongon mine in Ivory Coast, among others.