Randgold Resources (Price: 5005p | Target: Under Review | Rec: Under Review) Randgold produced 277koz in 2Q at cash costs of $701/oz (Investec 286koz at $691/oz), taking 1H production to 718koz.

1H14A earnings of $127m (EPS 138cps) were ahead of 1H13A’s $116m (EPS 126cps), but well below 2H13A’s $163m (EPS 174cps) and well below our 1H forecast of 165cps.

While there has been a c.$20/oz drop in the average gold price since 2H13A, earnings are also impacted by increasing D&A charges as Kibali ramps up.

Analyst briefing at 12pm. * Randgold’s 1H production of 561koz (Investec 570koz) is en-route to FY14E production guidance of 1.13-1.20moz (Investec 1.16moz).

1H cash costs were $693/oz (Investec $692/oz), with FY14E costs guided at $650-700/oz. * The company had recently provided updates on some of its operations, including Tongon technical issues (flotation circuit and crushers).

Operating cashflow for 2Q was $73m, up from $50m in 1Q.

Capex for 1H stands at $138m, versus $340m planned for the year.

RRS has drawn down $50m of its $200m credit facility, but the balance sheet remains strong (this is the only debt it has). * Our estimates, rating and target price (based on an equal blend of NPV and three-year forward multiples) are under review pending incorporation of the 1H13A results.

RRS remains the go-to gold stock in London, but is fully valued under our base case assumptions ($1,300/oz gold) trading at a 28% premium to our NPV and at 22 25x FY14E-FY16E earnings.

It is not, however, out of kilter with its growth-oriented global peers, Eldorado (ELD CN), Yamana (YMI CN) and Goldcorp (GG US).

The key risk to our outlook is the gold price, which in turn is dependent on geopolitical and macroeconomic issues, while increased government tax grabs and ongoing project delivery remain lesser risks.
To access the full note please click here Analyst: Hunter Hillcoat +44 (0)20 7597 5182
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