Randgold Resources Ltd. (GOLD) is among Africa's largest gold mining companies, operating primarily in the western and central regions of the continent. Its common stock is also widely traded, averaging more than 1 million shares changing hands per day.
The formidable gold miner has seen its share of good and bad news lately, with the balance tilting more toward the negative.
Randgold vs. the Mali Government
One major issue facing Randgold is an ongoing dispute the government of Mali. Officials in the country are demanding that the company pay half of its current tax liability—as calculated by the government—before any further negotiations over what is owed will be discussed.
Mali is one of four African countries in which Randgold Resources is actively conducting gold mining exploration: It additionally operates in the Côte d'Ivoire (Ivory Coast), the Democratic Republic of Congo (DRC), and Senegal.
Reuters and Mining Weekly have reported that the Mali government has pegged the tax burden at nearly 47 billion West African CFA francs, or the equivalent of about $80 billion. Not surprisingly, public relations representatives for Randgold dispute the total of the tax claim, which obviously calls into question how much half of that sum would be. The government is also requesting pertinent tax documents that it says the company has yet to provide.
It is estimated that Randgold's mines contribute as much as 11% of Mali's annual GDP. The nation is Africa's third-largest gold producer, with an output of 50 tonnes of gold per year.
This tax dispute in Mali notwithstanding, Randgold has seen an uneven performance from its stock price. Shares of GOLD staged a small recovery on mild trading volumes last week, with more than 390,000 shares changing hands on October 7th. It is listed on the NASDAQ.
However, its shares have been mired in a decidedly downward trend after a fantastic month of June that saw prices jump nearly 50%. GOLD was trading around $120 per share as recently as mid-August; in the time since, it has fallen sharply to below $85 per share, wiping out billions in market value. The company is currently valued at a market capitalization of about $8 billion.
42% of Randgold's shares are actually institutionally owned. This would imply that the firm is structurally important to the African economies in which it operates. Right now, most analysts have given the stock "Buy" or "Hold" ratings, while very few consider it a "Sell." This makes sense not only because of its current price levels, but also because it's boasting positive growth in its earnings per share (EPS), which has not been a widespread phenomenon across the gold mining sector. It also pays shareholders a decent dividend.
Although the company still has issues to resolve, the fact that GOLD has tumbled so far actually provides some optimism that it has plenty of room to rise going forward.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.