Stock of the week: Randgold Resources
The price of gold rose to another year high today, continuing a four month run, which is having a positive impact on African mining group Randgold Resources. Over the years, Randgold has proved to be one of the best performing gold miners around the world and over the medium to longer-term we believe this will continue. For investors who want exposure to the precious metal, this company is our preferred option.
In an uncertain macro-economic and geopolitical environment, investors are keen on exposure to gold and gold miners. Main drivers for increasing gold prices in the near term could come from the renewed stress in the financial system, tensions in the Middle East, emerging market central banks as they attempt to diversify their foreign exchange exposure and increasing demand for gold jewellery, particularly in Asia.
Brexit, the unconventional US president and upcoming elections in Europe will add to the geopolitical uncertainties and to the attractiveness of gold.
The group’s principal operations are in Mali, a country with significant levels of political instability. While the tensions have in the past impacted confidence in the company’s share price, the operations on the ground remained largely unaffected. Interested investors should appreciate that the company has been fairly consistent in increasing production, manufacturing record amounts of gold each quarter.
Randgold has returned to a debt-free status and its net cash position has reached close to $600m after dividend payments. This is a share for investors looking for capital growth who are willing to accept a higher level of risk.