UK Edition
Questor share tip: Randgold Resources gold shares soar on solid results
Randgold Resources
£60.00 +700p
Questor says HOLD
Gold miner Randgold Resources [LON:RRS] remains one of the best defensive options as market jitters send the gold price higher, and the shares rose more than 12pc on a solid set of annual results.
However, the miner isn’t immune to the commodity sell-off and it is feeling the pain from lower gold prices.
Pre-tax profits slumped by $93m to $260m for the year to the end of December. The 6pc increase in production to 1.21m ounces was not enough to offset the 9pc fall in the price of gold last year.
The company is also exposed to areas where geopolitical risks are high including Mali, Ivory Coast and the Democratic Republic of Congo.
Randgold is well-placed to weather the storm. The company has a strong balance sheet with no debts and $213m in cash at the end of December, up from $141m nine months earlier. The annual dividend was increased by 10pc to 66c (45p).
The company has undergone a major investment phase to reduce its cost of production and can live with lower gold prices for longer than many other smaller and higher-cost producers.
Looking out over the long term, Randgold is likely to be a survivor of the commodities downturn and should be able to buy discounted assets at some point in the cycle.
Trading on 27 times forecast earnings, the shares are by no means cheap and investors are being asked to pay a handsome premium for exposure to gold.
That said, this looks like one of the best places to get pure gold exposure through buying shares in a FTSE 100 listed company. Hold.