Randgold Resources - shiny, shiny

Randgold Resources: Mining companies can be very tricky beasts for income investors. Whenever they bring a resource on-stream, their initial temptation is to re-invest in further exploration and development rather than hand cash back to shareholders as dividends. The problem then, is that any project is subject to the assault course of proving a resource, sorting out local politics, taxation and practicalities like actually getting product to an end market. Even then you are at the hands of the commodity’s price (for them gold) unless you double-guess the market by selling forward production. In Randgold’s case the main operations are in the Ivory Coast, Mali and the Democratic Republic of Congo. Not impossible jurisdictions but still volatile as we saw with the 2011 Civil war in Ivory Coast whilst the DRC struggles to overcome patchy infrastructure and corruption. Randgold’s stated aim is to produce 1.1m to 1.3m ounces of gold per annum with a cash cost of $650-$700 per ounce. These latest results show that they are well on course to meet this production target. Randgold is one of the best gold operators, but this is reflected in a higher market capitalisation to book value than many peer companies. You will get more gearing to the gold price in a smaller gold company, but if just buying physical gold seems unimaginative then Randgold may well be the third way to consider, although a sub 1% yield is clearly not going to be the main temptation.

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about.