Gold must be heated to its molten state to form bullion, but the flames from one miner's kiln appear to have spread to its share price.
Shares of pan-African gold miner Randgold Resources
With quarterly earnings out this week, though, Fools are reminded to leave past performance in the past and focus on the road ahead. Randgold is certainly a money-maker (pun intended?), recording a 56% increase in free cash flow and a 10% boost to revenue thanks to an impressive 23% increase in gold production from the company's flagship Loulo mine complex in Mali. Profit attributable to shareholders, however, slipped 17% from the prior year period to $14.7 million, highlighting a pair of red flags that Fools are advised to keep in "mined" (see what I did there?).
Toxic soup in the molten pot
Randgold shares may be leading the pack, but in retaining a substantial hedge book of forward gold sales at excruciatingly low prices, Randgold joins Barrick Gold
The other balance sheet item of note is Randgold's exposure to auction rate securities. ARS paper remains impossible to value because no functioning market for them exists. The original $49 million "investment" is now estimated to be worth $33.6 million using that fanciful "mark-to-model" method, and an additional $5 million has been set aside in 2009 to absorb anticipated losses. I expect further loss provisions to impact profits going forward.
From the company's exciting mine development pipeline, to a promising acquisition that's pending, fuel for Randgold's fire remains plentiful. I simply want to ensure that investors enter the fire with eyes wide open.
- Geithner can't turn GOLD to lead.
- The top 10 reasons to hold gold, bar none!
- Anatomy of a world-class gold mine.