Fresh surge at Randgold Resources

Mining shares have just had one of the best weeks in living memory. A poor market in general, coupled with predictable profit-taking, means most of the heavyweights are in the red Monday. But not Randgold Resources, the blue-chip gold miner that's just unveiled a great set of results.

Despite tough markets, Randgold has just had "one of the best years in the company's history," according to chief executive Mark Bristow.

Over 1.2 million ounces of gold were produced in 2015, up 6% on the year before and in line with company guidance; so was a 3% drop in cash cost per ounce to $679. And while a 9% slide in the gold price and higher spending caused a 22% slump in net profit to less than $213 million (£148 million), earnings per share of 203 US cents beat City estimates. Investec wanted 193 cents.

The Loulo-Gounkoto complex in Mali, near the border with Senegal "came back strongly" after a shaky start in 2015, producing 630,167 ounces. Management now thinks it will deliver over 600,000 ounces every year for the next decade at a total cash cost of around $600 per ounce, or less.

Kibali, a huge mine in the Democratic Republic of Congo, beat forecasts again, producing 642,720 ounces, up 22%, at $604. It should top 600,000 ounces for the next 12 years, say chiefs.

Strong operational cash flow meant Randgold also ended the year with net cash of $213 million, up $82.8 million over the year and a $44.9 million increase since 30 September.

Randgold's shares shot up almost 5% Monday, taking the rally in 2016 so far to over 33% and the surge since last September to more than 50%. Incredibly, our technical analyst John Burford called it absolutely right.

Near the bottom of the market on 14 September 2015, John said: "Randgold shares have taken quite a knock, but I believe we may well be setting up for a very large rally, which could last many months."

And, after hitting 5,000p last week, John added, "the main trend, however, is now up and the market should eventually challenge the key 5,800p level in due course".

Gold seen as safe haven

Randgold is so popular now because gold is typically perceived as a reliable store of value; a safe haven asset which does well when equity markets get ugly. Demand also rises when the US currency weakens, as it becomes cheaper for buyers swapping their own currency for the dollars in which the precious metal is priced.

But all this buying has put Randgold shares on a forward price/earnings (PE) multiple of around 38 times on current estimates, dropping to a still eye-watering 27 times on 2017 forecasts. Historically, it's been more like 20-25 times.

"Randgold is one of the few companies to still generate earnings growth on our forecasts, while its investment discipline has left it well placed to withstand the current environment," writes Investec Securities.

"The scarcity of similar alternatives has left Randgold even more premium-priced than normal. Our forecasts are under review, pending incorporation of the results."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.