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Randgold's record Q2 surge

Randgold Resources has continued to drive forward production in the face of a faltering gold price
August 10, 2015

Randgold Resources (RRS) released encouraging half-year figures against a backdrop of faltering precious metals prices and renewed speculation over a probable US rate rise. The Africa-focused gold miner continues to deliver on the operational front with improvements in grade and recovery rates.

IC TIP: Hold at 3819p

A marked step-up from the Loulo-Gounkoto complex in Mali drove Randgold's second-quarter production above 300,000 ounces for the first time. The scale benefits fed through into unit cash costs, which fell 3 per cent from the previous quarter to $684 (£438) an ounce, in turn boosting profit from mining operations by 5 per cent to $151m. Profit would have been even more impressive if Randgold had managed to hive off a higher proportion of its mine inventories. Presumably the full-year figures will benefit.

Although there's no shortage of pessimism with regard to the trajectory of gold prices, Randgold has continued to invest in its capital projects and is moving steadily towards full owner-miner status at the Yalea and Gara underground mines. The group finished the half year with a net cash position of $108m - some achievement in an industry mired in debt. But management is taking nothing for granted and is devising a strategy designed to ensure the group remains cash-flow positive even if gold prices fall by 25 per cent from current levels.

Broker Investec Securities gives adjusted EPS of 254¢, against 251¢ in 2014.

RANDGOLD RESOURCES (RRS)
ORD PRICE:3,819pMARKET VALUE:£3.56bn
TOUCH:3,818-3,822p12-MONTH HIGH:5,750pLOW: 3,638p
DIVIDEND YIELD:1%PE RATIO:26
NET ASSET VALUE:3,410¢NET CASH:$108m

Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2014577200138nil
2015479133110nil
% change-17-34-20-

£1=$1.56