Randgold Resources (GOLD, Financial) had another quarter of strong record production that helped the company put forward impressive numbers on the board. Its net profit for the second quarter jumped 54% to $162.3 as against $105.3 million, in the same quarter last year. Randgold for the second quarter produced a total of 277,283 ounces of gold, an upsurge of 41% as compared to the corresponding period a year earlier, driven by particularly from its flagship Loulo-Gounkoto complex in Mali, Ivory Coast. Also, its total cash cost per ounce was down approximately 12% from the second quarter last year.
Better times expected
Looking forward, Randgold remains on track to deliver 1.2 million ounces of total production in 2015. This year it plans to deliver about 550,000 ounces of gold and therefore is executing various smart moves in order to enhance its production portfolio. It has recently started production at the paste backfill plant in Yalea and remains on track to improvise and replace float circuit at Tongon.
Yalea plant has huge potential, especially Yalea south ore body that should drive its production going forward as the company is progressing well with the drilling activities at this plant. Randgold is also focusing on the inventory of resources for its Tongon operation and plans to invest in these projects strategically to make them last longer.
In addition, it continues to see huge production for its flagship Loulo-Gounkoto complex at Mali in Ivory Coast that should drive its sales in the second half of the year. Moreover, it is observing a substantial decrease in the cash costs and a strong production, driven mainly through grade and recovery rates. Randgold is also planning to expand its Loulo project, basically the circuit upgrades. It is ramping up a new and innovative 10-ton oxygen plant at Loulo-Gounkoto and has a concrete plan to invest in its HFO projects that should assist the company in lowering the power costs at the plant.
Impressive execution
Furthermore, the company executed various initiatives that helped its DRC mine in Central Africa to produce an upgraded production of 20,000 ounces of gold. These initiatives have also assisted the company to produce approximately 20,000 ounces of gold from 10,000 ounces of gold earlier at its mine at Kibali. This improved production at various plants and mines should certainly drive its sales in the second-half of the year.
Randgold is also advancing with its underground mine developments at Kibali that are expected to be completed by 2017. The company is making good progress with respect to its MZ3 underground zone extension and signing on the resources, along with drilling activities that should also add value to its growing production profile. Also, the company remains committed with its exploration initiatives that should lift its performance in the coming years and enhance its profitability.
Meanwhile, Randgold is also concentrating on enhancing its costs through various strategic moves that helped the company increase production up to 40% during the reported quarter. The company has rolled over a super pit at a cash cost of $1,210 per ounce as against $1,350 per ounce estimated earlier, which is certainly a good sign for the company. Also, the company is concentrating on the infill drilling that should help the company to keep this cost effective momentum in the future.
Apart from these strategic moves, the company also remains well on track to replace its vibrocones with hydrocones that should undeniably enhance its throughput activities. Besides, the company is also focusing on the removing the poor grade stockpile material and investing much in the processing material that should assist the company in producing rich quality of mining ore going forward.
Conclusion
Randgold Resources is currently trading at the trailing P/E of 23.62 and forward P/E multiple of 16.48 that indicate fair valuations for the stock that has a lot of room to grow in the future. Moreover, the analysts have estimated CAGR of 7.40% this year and 35.30% next year and 5.60% for the next five years that reveals both the short as well as long term growth for the company.
