Published on 16th September 2012
Randgold Resources is the largest listed gold miner in the UK. The company is exploring in Burkina Faso, Côte d’Ivoire, DRC, Mali and Senegal. As well, Mark Bristow, its South African chief executive, has also said he would be interested in M&A. This is because valuations of smaller gold miners have plunged, which marks a departure from his usual strategy of explore-discover-build and is evidence of how far gold equities have fallen. There is country risk in Mali (although it has been waning) and in the DRC. However, Bristow is very experienced in working in such backdrops after building Randgold up from scratch. Furthermore, Ben Bernanke pulled the trigger on QE3 on Friday, which is positive for the gold price, as it weakens the dollar. This makes gold cheaper in other currencies. It also prompts fears of inflation - and gold is seen by many as a natural hedge. Credit Suisse said on Friday that its model suggested this round of QE could propel gold to $2,000 an ounce. Over the last year Randgold shares have – more or less – shadowed moves in the gold price. They are trading on a current-year earnings multiple of 21, falling to 16.8. This is not cheap, but the gold price is in the driver's seat. Buy, says Questor.