Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Randgold Resources: flashing below the 4000p share price level again

By Chris Bailey of Financial Orbit

9 November 2015 02:40

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I actually was not going to write-up Thursday’s quarterly update from the world’s best larger cap gold mining stock Randgold Resources (RRS). The numbers showed good progress: rising production at an attractively low cash cost, a building net cash balance and exciting prospective exploration development opportunities.

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Comments

alcira16247

9 November 2015, 03:29

Chris

Do you have an opinion on the investing merits in Franco Nevada?

I must admit Franco is my own favourite ‘gold play’ and has made fantastic returns over the years during both good and bad times.

Whilst Rangold is a first class company, I’d argue Franco with its worldwide investment portfolio provides a safer hedge against political uncertainty and potentially better growth and income returns, too.
JustCurious

9 November 2015, 06:39

Chris

Another share I would appreciate your view on is Perseus Limited (mentioned on this website over the weekend). I have only had a superficial look, but it looked ridiculously promising on the face of it:

- Market cap ~A$185m
- Cash on balance sheet ~A$103m
- No debt
- Cash flow generative from operations
- P/E of ~2 (!)

What am I missing?
Chris Bailey

9 November 2015, 11:11

@ALCIRA16247 thanks for the comment. I think you make a fair point for a period of precious metal price uncertainty and instability. Royalty businesses probably will outperform. However through some combination of too much debt/extraordinarily loose monetary policy and overt Chinese precious metals acquisition I think to have a bit of operational as well as financial leverage to the gold price makes sense. I prefer to avoid the indebted situations and hence Randgold’s high grade, production growth, clean balance sheet and smart management attracts me. Good luck with FNV. I don’t own it but my gut instinct is that you will do fine with it.

@Justcurious – there are far better people than me to look at A$185m market cap companies. My quick observation using this recent presentation http://www.perseusmining.com.au/aurora/assets/user_content/PRU%20pres%20updated(1).pdf : (1) note the $1000+ all in cost i.e. not much of a margin if at all at prevailing gold prices; (2) I note the low grade. Neither of these points are impossible and a deeper look aligned with some valuation analysis may highlight an opportunity but it is not one to tempt me personally.