Thursday, 6 August 2015

GOLD is still the gold standard: catching up with Randgold

Randgold's quarterly numbers today were the usual differentiated from the sector crowd affair.  I just don't mean that their shares have outperformed the peer group (which they have - see below)...


...but even despite recent challenges like slip sliding gold price the underlying key metrics at the company continue to shift in the right direction (including a record quarterly production and attractive cash costs).  
And the benefit of this is shown in the numbers below.  Despite continuing to invest in their operations and a backdrop of falling gold prices, Randgold pushed their net cash balance up over the last year.  Such is the benefit of having profitable double digit return on capital operations at an assumption of US$1000/oz gold.  On the conference call the company even confirmed that this cash would rise (assuming US$1100/oz gold) to around US$700m by 2017 (and even at US$1000/oz gold to US$500m). That's an annualised around 5% free cash flow...not shabby at all.

I am tempted to summary conclude that the rest of the quarter as steady as she goes...but gold mining is not like that at all especially in West and Central Africa but it is testimony to the strength of the Randgold underlying local mine management teams (predominately African locals) that issues were relatively few and far between.  To update two aspects I touched on in my last write-up the Loulo area mine in Mali continues to look very prospective for them...

...and I was pleased to see in Cote d'Ivorie that some of the issues around gold recovery rates are being sorted out.  
For the London list - as I noted here at the start of the year - a sub £40 share price is a steal.  If you want to own one gold stock then surely it has to be Randgold Resources.  



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