Randgold Resources Ltd. News | The Twelfth Magpie

Why I’d buy and hold this FTSE 100 cash rich, dividend champion all the way through to 2030

Rupert Hargreaves — Thu, 01 Nov 2018 11:00:07 +0000

In my view, there’s only a small number of companies out there that are worth buying and holding for a decade or more. Indeed, since the turn of the century, the average lifespan of listed companies has declined dramatically, and it seems as if it is now harder than ever before for investors to find long-term winners.

However, some companies still have what it takes to stand the test of time, and in my view, gold explorer Randgold Resources (LSE: RRS) falls into this bucket.

All that glitters

Randgold is, in my opinion, the world’s most efficient gold producer. It is committed to a set of rules which mean that it will only take on the most lucrative projects.

These guidelines have helped the company thrive over the past decade as other gold miners, obsessed with expanding production at all costs, have wasted billions on expensive vanity projects. Randgold, on the other hand, will only start to develop a mine if it can produce an internal rate of return (a method of calculating a rate of return on investment) of 20% or more. Management will also only commit to a project if it has the potential to produce 200,000 ounces or more of gold per year, with the cost of production per ounce in the lowest quartile globally.

These rules have enabled it to thrive as other producers have struggled. The group’s operating profit margin has averaged 31% over the past five years. Unfortunately, the firm has no control over the global gold price, so earnings bounce around from year-to-year, depending on what prices it can get for its output. After hitting a high of $432m in 2012, pre-tax profit slumped to $189m in 2015 before recovering to $278m for 2017. Analysts are expecting a figure of $261m for 2018.

Randgold’s balance sheet is strong enough to manage this volatility. At the last count, the company had a cash cushion of $717m and no debt. This is enough to keep the lights on if the price of gold plunges and to maintain the dividend policy for the foreseeable future. And talking about dividends, the shares currently yield 3.3% after the firm hiked its annual payout to $2.69 per share yesterday.

Global leader

All of the qualities listed above indicate to me that this is an excellent buy-and-forget investment. What’s more, as a gold miner, demand for the group’s output is unlikely ever to tail off. The price of gold might fall, but there will always be demand for the yellow metal as a store of wealth.

To cement its position as the world’s leading producer of gold, it is currently pursuing a tie-up with Canada’s Barrick Gold. The $6bn deal, which received approval from South African anti-trust regulators today, will see them combining to create New Barrick Group with Barrick Gold holding a 66.6% stake and Randgold the rest. The enlarged entity should be able to push down costs and chase more significant projects, yielding better margins and returns for investors.

So, if you’re looking for a potentially future-proofed company to include in your retirement portfolio, in my view, Randgold certainly deserves further research.

The post Why I’d buy and hold this FTSE 100 cash rich, dividend champion all the way through to 2030 appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Why I’d buy gold stock Randgold Resources Limited in 2018

Rupert Hargreaves — Mon, 05 Feb 2018 14:16:32 +0000

Over the last few days, gold has proven itself as an excellent hedge for investors against market turbulence.

While stock markets around the world have taken a tumble following concerns about rising US inflation and bond yields, the price of gold has remained relatively unchanged and has certainly not seen the same type of volatility as equities.

Unfortunately, owning gold directly can be a complicated and expensive business, which is why gold mining stocks tend to be a better buy for investors. Randgold Resources (LSE: RRS) is in my view one of the sector’s best bets.

From strength to strength

Today the company announced that for the seventh year in a row, it has managed to increase its gold production. Output for the year to the end of December increased by 5% to 1.315m ounces while the total cash cost of each ounce mined decreased by 3% to $620.

Thanks to a higher average gold price throughout the year, total profit for the period rose 14% to $335m with the group’s overall net cash on the balance sheet rising 39% to $720m (along with the current market capitalisation of £6.6bn). With this sizeable financial cushion in place, management has decided to double the full-year dividend to $2 per share (or around 1.4p).

A gold proxy

The investment thesis for Randgold is simple. The shares offer a proxy on the price of gold. Operational gearing means the firm’s investors will profit substantially if the price of gold moves suddenly higher, and unlike owning the commodity directly, rather than having to pay to store gold, the shares currently support a dividend yield of 2%. This isn’t much, but considering the annual charge for storing gold could be as high as 1%, it makes a big difference.

Randgold’s smaller peer Centamin (LSE: CEY) has all the same qualities as its larger sector peer but is a cheaper investment. Compared to Randgold, which currently trades at a forward P/E of 27, shares in Centamin trade at a forward earnings multiple of only 18. The stock also supports a much higher dividend yield of 4.1%, which once again, when compared to the 1% usually charged to store physical gold, looks to be a high return (it is around 0.9% above the market average dividend yield as well).

The stock’s low valuation can be attributed in part to Centamin’s poor performance for fiscal 2017. Thanks to higher than expected fuel costs, its all-in sustaining cost of producing an ounce of gold rose 14% during the period. These higher costs resulted in a 13% fall in core profit.

Still, Centamin is run conservatively, and management has been using the rising gold price to fortify its balance sheet. At the end of fiscal 2017, the company had a net cash balance of $360m, which works out at around 14% of the firm’s overall market capitalisation.

Time to get defensive

Gold is one of the world’s most defensive assets, and as a result, gold miners are themselves a great defensive play. As I’ve written before, due to rising global geopolitical and economic uncertainty, I believe gold is an excellent hedge against risk in 2018. Both Centamin and Randgold offer the same kind of hedge with the added bonus of dividend income.

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Undervalued gold miners could be the buying opportunity of the year

Rupert Hargreaves — Fri, 21 Jul 2017 12:00:17 +0000

With the uncertainty surrounding Brexit growing, it’s a difficult time for UK investors. The best way to protect against Brexit and other, as-yet-unknown, geopolitical issues is to buy gold, or better yet, gold miners.

Unlike buying the yellow metal directly, miners offer income in the form of dividends as well as greater potential upside thanks to operating leverage.

Perfect buying opportunity?

Shares in Acacia Mining (LSE: ACA) are sliding this morning after the company issued its interim results for the six months ended 30 June, which show a 22% fall in revenue for the period to $392m and a 13% decline in underlying EBITDA to $161m. This revenue decline is a result of a spat with the government of Tanzania over gold and copper royalties. The government claims Acacia owes royalties on undeclared shipments and these issues have forced it to suspend its dividend.

Still, as a long-term buy, it remains strong. Last years shares in the miner traded as high as 600p, and a return to full production could drive a rally back up to this level. Based on current City estimates the shares trade at a forward P/E of 10.5 falling to 7.4 for 2018.

The market’s best miner?

Randgold Resources (LSE: RRS) is without a doubt one of the world’s best gold miners. Over the past five years, as the company’s peers have struggled to survive while the price of gold has fallen, Randgold has prospered, and cash has continued to flow for the group. Even though pre-tax profit has stagnated, since 2012 the miner’s cash balance has risen to $516m (from a low of $40m) and shareholder equity has risen from $2.6bn to $3.5bn. Randgold has no debt.

With this level of value creation, it’s no surprise that shares in the company have risen by around 500% over the past 10 years excluding dividends.

In the years ahead, Randgold’s cash generation will only continue and certainly improve. Over the previous five years, management has cut the total cash cost of production by around $100 per ounce to a little over $600 and at the same time production has risen from 800,000 ounces per year to over 322,000 ounces per quarter. Capital spending peaked at $630m in 2013 and has since fallen to around $250m for 2016. These figures indicate that in the years ahead Randgold will become a cash machine as it mines and sells its gold and saves, rather than spends, the proceeds.

With this being the case, it looks as if the shares are almost as safe as gold itself, except gold does not pay a dividend. Randgold has never been a dividend champion as management has preferred to hold cash back and develop projects. But now capital spending has come to an end, City analysts expect it to increase the payout in the years ahead.

Analysts have pencilled in a dividend of 150p per share for 2017 giving a dividend yield of 2.2%. Further growth of around 30% is expected for 2018 giving a yield of 2.8%.

The post Undervalued gold miners could be the buying opportunity of the year appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These are the best 5 stocks of the past 10 years

Harvey Jones — Mon, 20 Jun 2016 17:00:20 +0000

Past performance is no guide to future results but you can still learn a lot by looking at which stocks have done well, which have done poorly, and which have thrashed the market.

The following five stocks are the current members of the FTSE 100 that have performed best over the last decade, according to research from platform AJ Bell produced exclusively for the Motley Fool. Naturally, this doesn’t mean they’ll perform so well over the next decade.

PaddyPower Betfair

Paddy Power, founded in 1988 by merging three Irish bookmakers, has always had an aggressive expansion strategy. The expansion continued with last year’s £5bn merger to create international multi-channel betting and gaming group Paddy Power Betfair (LSE: PPB). If you’d been prescient enough to invest £5,000 in Paddy Power 10 years ago your money would now be worth £65,520. The stock has also delivered 10 successive years of dividend increases but its current yield of just 2.06% and pricey valuation of 32.75 times earnings suggest the odds of further market-thrashing growth are low.

ARM Holdings

Cambridge-based multinational semiconductor and software design company ARM Holdings (LSE: ARM) has been a ten-bagger over the last decade, turning £5,000 into a whopping £53,439. The runaway growth years seem to be over, and the stock is down 11% over the past 12 months. Recent slippage in iPhone sales, which feature its chips, have led to a rewiring of expectations. You still have to pay an ARM and a leg for the stock, which trades at more than 40 times earnings. That isn’t a price I would pay.

Ashtead Group

Equipment rental firm Ashtead Group (LSE: AHT) has never been seen as one of the FTSE 100’s glory boys yet it has turned £5,000 into £38,760 over the last decade, and delivered 10 years of successive dividend growth. Again, the real fun looks to be over, with the stock down 12% over the last year. Yet this could be a good entry point, as the valuation is now an undemanding 11.68 times earnings, with earnings per share (EPS) forecast to rise 6% in the year to 30 April 2017, and 9% the year after that. This still marks a continuing slowdown from its former rampant double- and triple-digit EPS growth (332%, 82%, 48%, 34% and 36%) so expect a steady rather than spectacular future.

Compass Group

Catering and support services provider Compass Group (LSE: CPG) is another unsung FTSE 100 hero, turning £5,000 into £37,795 in 10 years. Success has gone to its head, with a pricey valuation of 23.87 times earnings, and lowly 2.26% yield. Share price growth of 17% in the past year suggests it hasn’t lost its bearings, and still has forward momentum on its side.

Randgold Resources Limited

Investors in precious metals miner Randgold Resources Limited (LSE: RRS) have struck gold over the last decade, with the stock turning £5,000 into £35,864. Yet it’s down 47% in the last three years as the gold price trailed away following the 2011 Eurozone crisis, despite a recent revival. Randgold trades at a tempting 10.47 times earnings and may be useful as a portfolio diversifier.

Russ Mould, investment director at AJ Bell, notes that Randgold is the only one of the top five to cut its dividend three times in the last decade. It’s the exception that proves the rule with a strong pattern of the best performing companies offering progressive dividends. “This goes to show how stock markets are get-rich-slow mechanisms, not-get-rich quick schemes,” Mould says. That’s one thing the past most definitely does tell us.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and Paddy Power Betfair. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

As gold recovers, is it time to buy Centamin plc, Fresnillo plc and Randgold Resources Limited?

Rupert Hargreaves — Mon, 23 May 2016 10:49:04 +0000

This year has seen a sharp change in fortunes for gold miners. As concerns about global growth and the state of the world’s financial system have weighed on the wider market, this has sent investors rushing to the yellow metal, which is widely considered to be an insurance policy against market volatility.

And this year’s rally in gold prices has been extremely welcome news gold miners, which have spent the past two or three years hunkering down, cutting costs and writing off billions of dollars of investment as the price of gold has languished.

However, now gold prices are recovering, investors are rushing back into the gold mining sector. For example, shares in Randgold Resources (LSE: RRS) have gained a staggering 48% year-to-date outperforming the wider FTSE 100 by around 49% excluding dividends, and there could be further upside to come for the miner if gold prices continue to rise.

Sector leader

Randgold is one of the best-managed miners in the world, and the company could be the perfect play on the gold price. It has a very conservative operating model and will only take on projects with a 20% internal rate of return based on a gold price of $1,000 per ounce. This strict investment policy means the miner hasn’t commissioned expensive vanity projects, and the group has a cash-rich balance sheet with Q1 cash and equivalents of $213m.

Randgold has AISC (all-in sustaining costs) of $797 per ounce and analysts at Bank of America believe that a 5% move in the gold price could boost the company’s earnings before interest tax depreciation and amortisation by as much as 12%.

Randgold isn’t the only miner that’s outperforming the wider market this year off the back of higher gold prices. The company’s peers Fresnillo (LSE: FRES) and Centamin (LSE: CEY) are also showing impressive gains for the year.

Small-cap champion

Shares in small-cap miner Centamin have gained 75% so far this year as the company has continued to improve its operational ability, lower costs, increase output and maintain a conservative business model.

At the end of Q1, Centamin reported that it was debt-free and unhedged with cash, bullion on hand, gold sales receivable and available-for-sale financial assets of $230.7m, up around 50% year-on-year. AISC are $900 per ounce.

Centamin’s shares currently trade at a forward P/E of 13.2 and support a dividend yield of 2%.

Lagging the pack

Fresnillo has only seen the value of its shares rise by 52% so far this year, which is still an excellent gain, but the company’s shares are lagging behind some of its more operationally efficient peers such as Randgold and Centamin.

After reporting earnings per share of only 4.9p for the year ending 31 December 2015, City analysts expect Fresnillo to report EPS of 20.2p for this year. On this basis, the company is trading at a forward P/E of 53.5 and is set to support a token dividend yield of 0.8%.

The post As gold recovers, is it time to buy Centamin plc, Fresnillo plc and Randgold Resources Limited? appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.