Randgold Resources (GOLD, Financial) is pleased with the growth momentum that it is seeing under its camp. The bearish gold market has impacted the gold companies largely, but Randgold’s edge cutting planning and successive growth in the production led it to survive the headwinds. The company on the back of this has also gained much market share in the past and is also impressive on the exchange now. Moreover, it is for the eighth consecutive year, Randgold has made an impressive increment in the dividend offering to its shareholders. This is likely to be received positively by the investors in future. Let us zoom in to Randgold’s business and what strategies it is undertaking to remain competitive in this bearish gold market?
Why Randgold is getting better
The key reason behind Randgold soaring so high is its risk-taking ability. The company successfully replaced the reserves that it mined in the previous year using the same criteria keeping $1000 gold price. This gives a competitive advantage to the company against the other companies as they couldn’t afford to keep the profit levels at the declining gold prices. Another key aspect that can be an advantage to Randgold is its attractive and growing balance sheet even in this bearish market.
The company has successfully expanded its revolving credit facility from $200 million to $400 million. The company is also impressive in terms of liquidity as it has firepower of access to $500 million which is further growing as it moves in to this dynamic industry with ample of opportunities beforehand.
Randgold is now focusing on improving its production further. It is seeing good opportunities in Gounkoto. It has undertaken exploration initiatives that will search for more opportunities beneath the Gounkoto pit. Randgold is expecting this to deliver another 400,000 ounce resources. This camp ramp up the company’s production leading it to hold a competitive position in the market.
A closer look at the operations
Randgold has upbeat expectations for long term. But in this smooth flow it is expecting 2016 and 2017 to be slightly soft. The reason behind this is, as the company is ramping up the digging operations, the deeper they go the lesser production is expected. To be still in good shape, Randgold is primary focusing on small sets like pits. The company is expecting this focus on small pits to bring flexibility in next couple of years. To be on a defensive side, Randgold is also planning to ramp up the production to around 700,000 tons. The company is targeting minimum 3 million ounces by the end of 2018. All these facts are indicating a promising long term opportunities with Randgold.
Randgold is excited about its opportunities in other areas also. It is planning to expand its business by stretching its footprints in some of the potential areas such as Congo, Cameron, South Sudan, Kenya and Tanzania.
Conclusion
Moving to its fundamentals, the stock looks impressive with a trailing P/E of 30.57 while the forward P/E of 24.20 is also indicating good earnings growth in the near term. It is expected to attract the investors with a solid profit margin of 21.51%. Considering all such facts and strong results and dividend increment, I would like to suggest the investors to definitely pick Randgold Resources in their portfolio as it is a good pick.
