In the realm of gold mining, it pays to be a low-cost producer, and that’s what helps this gold miner be today’s Stock of the Week.
Randgold Resources Ltd. (GOLD) is the world’s best-run gold-mining company, but it is much less followed by analysts than larger firms in the sector. Gold appears to be ending a four-year bearish phase, making this a good time for investors to have a position in gold—not the physical metal, but a firm poised to benefit even more strongly than than the metal as prices rise.
Randgold’s cost to mine gold is about $650/ounce, so profits are growing steadily even with fairly low gold prices, which were above $1,370 per ounce as of early August. Revenue of $1 billion last year should grow to $1.2 billion this year and $1.4 billion in 2017. And production growth is steady as well. It will be up 6% this year and as much as 7% next year at a time when most gold miners are shrinking capacity.
Randgold, based on the island of Jersey, off the coast of France, is simply a better-run company than competitors. In particular, it works well with local people and governments in the areas of sub-Saharan Africa where it has mines—Côte d’Ivoire, Democratic Republic of Congo, Mali and Senegal. It operates in an area that is prone to instability and conflict, but its small dividend of $0.66/share/yr., recently yielding 0.6%, helps offset that and appears secure.
Earnings per share: 2017 est./$4.50…2016 est./$3.85…2015/$2.01.
This Week’s Expert
Robert T. Lutts is president of Cabot Wealth Management, Salem, Massachusetts, which manages $575 million, and author of The Great Game of Business. ECabot.com
Bottom Line Personal’s experts have beaten their respective benchmarks over the most recent five-year period or longer. We ask each contributor to choose stocks that he/she thinks have significant appreciation potential over the next 12 to 24 months.
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