Thursday, 5 November 2015

Randgold - thoughts on the latest quarter from the world's best listed gold miner

Randgold Resources has been a favourite gold equity holding of mine for a while now.  Recently I have noted (link here) the value below the £40/share level and accordingly bought more stock during the summer (it is for full disclosure the number #1 holding in my pension fund):


The share pulled back today (c. -4% as I write) and over the past few weeks.  Of course it is convenient (and quite reasonable) to blame the fall back in the gold price as the US dollar has pushed up with the re-emergence of expectations of an imminent rate rise by the Federal Reserve...


...but more of this later. 

Onto the numbers.  I actually thought they were basically fine with record production, an enhanced net cash position and cash costs remain well under control (below US$700/ounce). So much better than certain other large cap gold companies I could mention (link here)....



So what struck me about the numbers?  For the second quarter in a row I thought the prospective exploration potential remains excellent both in Mali...


...as well as across the whole Continent at the company's operations (note the first mention in a quarterly report of the Ghana opportunity which made news during the last couple of months - post deal close hopefully before the end of the current quarter I believe there should be further interesting newsflow here). Kibali in the DRC remains a real standout.  


Otherwise what really stood out were the company's comments about the broader industry.  We all know that the commodity supercycle of a few years ago is well and truly over...

...but this chart on the gold industry generally is fascinating.  This is the deep value in the Randgold story: sustainable, growing, high grade production at a low cash cost and properly rationalised at US$1,000/ounce gold:

Of course no surprises that the stock has performed (and over longer time periods massively outperformed) and my view remains very clear.  I will buy more stock below a £40 share price.  

And macro-wise, what about the fears of an interest rate rise on gold/commodity stocks that are denominated in US dollars?  Well...it just might be a great opportunity given that the biggest fear in markets is always fear itself...


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