* Possible increase in dividend
* Q2 mining profit of $150.6 mln
* Q2 gold production falls 6 pct
* Shares fall as much as 12 pct (Adds CEO comment at briefing)
By Mamidipudi Soumithri and Zandi Shabalala
Aug 4 (Reuters) - Randgold Resources Ltd RRS.L could hike its dividend payout by the end of the year, it said on Thursday, as strong gold prices improve its cash position, although second-quarter profit was flat after its gold output fell short of forecasts.
Investor uncertainties including Britain's vote to leave the European Union spurred spot gold XAU= to a two-year high early in July.
At the end of its second quarter, Randgold's net cash reached $273 million and cash reserves should rise to $500 million by the end of the year, Chief Executive Mark Bristow said.
"We don't want to sit on a growing, lazy balance sheet... we have always said once we get to half a billion we will re-look at the pace of that dividend increase," Bristow told Reuters on the sidelines of a results briefing.
The firm paid $52 million in dividends in the second quarter, flat on a year ago.
Randgold on Thursday reported flat second-quarter profit from mining, as lower production and a rise in costs offset higher gold prices.
Gold production during the quarter was hit by mechanical breakdowns at a mill in its Ivory Coast mine and technical problems at its operations in the Democratic Republic of Congo, the company said.
But Bristow said the flagship Loulo-Gounkoto complex in Mali should ensure it met its full-year production target of 1.25-1.3 million ounces.
The firm's stock fell as much as 12 percent early on Thursday, but later recovered to trade around 4 percent lower, compared with a roughly 1 percent fall across the sector. .FTNMX1770
Analysts were cautious after Randgold's output undershot forecasts.
"Given that the gold price is rising right now they could increase the dividend sooner than the market had expected. But whatever they lift the dividend has to be sustainable," Investec mining analyst Hunter Hillcoat said.
Investec had forecast second quarter production of 295,000 ounces at cash costs of $653 per ounce. Randgold reported production of 281,494 at cash costs of $661/oz.
The company reported a $150.6 million profit from mining for the three months to June 30. ($1 = 0.7520 pounds) (Editing by Barbara Lewis and Ruth Pitchford)