Randgold Resources shares tipped as a ‘buy’ as group enjoys hike in sales despite lower bullion prices

8th February 2016

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Miner Randgold Resources has reported that sales have risen over the fourth quarter, despite lower gold prices hitting profits.

The group’s chief executive Mark Bristow described 2015 as one of the best years in the company’s history as it faced down the challenges surrounding the embattled gold mining industry to post performance improvements and advances on every front.

Production and costs were in line with the company’s annual guidance, with production setting a new record of more than 1.2m ounces, up 6% on the previous year, and group total cash cost per ounce down by 3% at $679/oz.

Strong cash flows from the operations boosted cash on hand by 158% to $213.4m according to the group. But profit for the year was $212.8m against the previous year’s $271.2m, reflecting the decline in the gold price, which over the past 12 months has slipped by 5% and is currently trading at some $ 1173.22 per ounce.

Randgold has however proposed a 10% increase in the annual dividend, reflecting the strong cash flows generated by the business.

Bristow said: “It’s easy to achieve when the stars are all aligned but it’s a lot more difficult in a market as challenged as this one, which makes these results even more pleasing.

“Randgold is now in a unique position to continue delivering value to all its stakeholders.  Our mines can continue to generate cash flows at gold prices well below the $1 000/oz level.

“Our positive production and cost profile extends beyond 10 years.  Our exploration teams are not only replenishing the ounces we mine but are making significant progress in the hunt for our next big discovery.”

Commenting on the group’s latest numbers Helal Miah, investment research analyst at The Share Centre said that while profits have slipped by 10% compared to the same period last year, investors should acknowledge that since January, the price of gold started to rise once more.

Overall he recommends Randgold as a ‘buy’ for higher risk investors who believe stress in financial markets are likely to remain an influencing factor in 2016.

He said: “Randgold says it’s in a unique position where it can continue to generate cash flows despite the gold price being well below $1,000 an oz. level.

“The gold mining industry is under severe stress and this is a company that will not be immune but investors should note it has, and will more than likely continue to, perform better than its peers.

“At a forward price to earnings multiple of 36 times, the shares are rich compared to the peer group. However, this factors in the prospects from the groups exploration programme and expansion of the resource base.”

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