Gold Miner Raises Dividend by 52%

Investors set to cash in as FTSE-listed mining company reveals gold production has hit record levels 

Emma Simon 6 February, 2017 | 12:04AM
Facebook Twitter LinkedIn

Investors are to share a bumper pay out, as Randgold Resources (RRS) – the FTSE-listed mining giant – revealed it is to raise its dividend by 52%, following its sixth consecutive year of gold production gains.

Gold production in its African mines was now at record levels, the company said.

In its fourth quarter results, Randgold said that sales were up by 11% year-on-year, and profits were up by 38%. Gold production increased by 26% compared to the previous quarter. This strong performance enabled it to raise the dividend to £1.00 per share.

Higher Gold Production at Lower Cost

The company has also been helped by a relatively buoyant gold price. Gold prices over the past year have averaged at $1,244 per ounce. But Randgold has also benefitted from keeping a tight rein on production costs. Randgold said that total cash cost per ounce mined was down 6% on the previous year.

Shares were up by almost 5% in early trading on the back of these strong results.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown said: “Today’s massive dividend hike is at the heart of what makes Randgold attractive to investors.”

He added: “The group has once again demonstrated its ability to keep a firm grip on costs, even as production increases, and is taking steps to refresh the portfolio.”

Gold Miners Remain “Risky” Investment

Hyett added: “The group’s high quality, lower cost mines aim to be profitable at $1,000 dollars an ounce, a price we haven’t seen since the financial crisis. However, this remains a play on the gold price and that brings risks.”

Helal Miah, investment research analysts at The Share Centre added: “Clearly the fate of the company lies in the direction of the gold price, but we have long liked Randgold Resources based on its solid operational performances. Furthermore, costs continue to fall, there are low levels of debt on the balance sheet and its exploration potential also looks promising.”

As the share price of this company is so closely tied to commodity prices, Morningstar rates the uncertainty value of Randgold as “extreme”. This is reflected in its performance in recent years. Over one year Randgold investors have seen the stock increase by 35% - although this share price rise has been helped by sterling falling significantly in value over 2016. The company’s revenue is generated in dollars.

Over three years the share price has risen by 16% but over a five year period the share price has fallen by 1% - compared to an 7.97% rise in the FTSE 100.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Facebook Twitter LinkedIn

About Author

Emma Simon

Emma Simon  is a financial journalist, specialising in investment and consumer issues, writing for Morningstar.co.uk