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Randgold rides along

Randgold is still making money and increasing gold production in spite of the big drop in bullion prices
August 11, 2014

Rewind to this time last year and Randgold's (RRS) shares and earnings were reeling from a plunging gold price. Now, London's highest-profile gold producer must be pleased to be reporting a more stable performance. Net profit in the first six months climbed 11 per cent to $151m (£89m) on gold production totalling a whopping 561,000 ounces - up over 40 per cent year on year after the launch of the Kibali mine in the Democratic Republic of Congo.

IC TIP: Hold at 5040p

True, those earnings remain well below the $244m booked two years ago. And there have been a few ramp-up problems at Kibali and the Tongon mine in the Ivory Coast. Yet Randgold's average cost of production remains firmly in the lowest quartile of gold producers, having fallen to just $693 an ounce, from $818 last year.

But by far the biggest driver of Randgold's earnings - and consequently share price - is the price of bullion. The yellow metal has bounced around between $1,200 and $1,400 an ounce this past year, and seems to have found solid support around $1,300.

Broker Investec Securities placed its forecasts under review, following unexpectedly high depreciation and amortisation charges for Kibali.

RANDGOLD RESOURCES (RRS)

ORD PRICE:5,040pMARKET VALUE:£4.7bn
TOUCH:5,040-5,045p12-MONTH HIGH:5,440pLOW: 3,600p
DIVIDEND YIELD:0.6%PE RATIO:27
NET ASSET VALUE:3,221¢NET DEBT:1%

Half-yeara to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2013514146126nil
2014577200138nil
% change+12+37+10-

£1=$1.69