With his first at-bat in the high-stakes bailout game, Treasury Secretary Tim Geithner struck out. Onlookers yearned for a base hit with a detailed game plan for the next round of government intervention, but instead watched helplessly as the markets were tagged out. Perhaps he might try juicing before his next appearance.
Meanwhile, precious-metals-related miners continue to round the bases as investors seek a safe haven from the perilous equity markets. Gold punched through $940 Wednesday morning, while the stock with the golden ticker symbol surged more than 10% intraday. Randgold Resources (NASDAQ:GOLD) released earnings and production forecasts this week that make a compelling case for owning some GOLD.
Against a backdrop of a mining industry reeling from the massive commodity price declines of 2008, Randgold delivered a 33% year-over-year increase in adjusted net income for the fourth quarter. Production rose 6% from the previous quarter to more than 107,000 ounces, bringing the yearly total to within 2% of guidance, at more than 428,000 ounces. Randgold Resources recorded an 11% cost decline to $459 per ounce, corroborating prior assertions by Yamana Gold (NYSE:AUY) CEO Peter Marrone and Barrick Gold (NYSE:ABX) CFO Jamie Sokalski that gold mining costs had peaked sometime in the third quarter.
Forecasting an enticing 15% production increase for 2009 and a further $30 per ounce cost reduction, Randgold looks very well positioned, even relative to many of its peers. Oh, and it's doubling 2008's capital expenditures to help mine development projects along. A cash position of more than $250 million and prospects for robust cash flow permit this company to reassure investors that growth projects remain intact, despite the ongoing disruptions to the global flow of credit.
Premium ore grades, with an average of 3.22 grams (or 0.104 ounces) per tonne for the 8.5 million ounces of gold ore reserves, provide another Foolish reason to consider some GOLD. Whereas each tonne of ore in Kinross Gold (NYSE:KGC)'s reserves contains an estimated 0.018 ounces of gold, Randgold Resources averages more than five times that concentration. The flagship La Ronde mine at Agnico-Eagle Mines (NYSE:AEM) boasts a more impressive grade, at 0.14 ounces per tonne, but even mines with far lower grades can qualify as world-class. Such mines include the Yanacocha mine, shared by Newmont Mining (NYSE:NEM) and Buenaventura (NYSE:BVN).
For all of these reasons, I believe Randgold Resources could be pure GOLD.
Further Foolishness:
- Gold will be fine in 2009.
- This junior explorer has struck bonanza grades.
- Yawanna have Yamana.
