RBC Capital lifted its recommendation for the FTSE 100-listed firm to ‘market perform’ from ‘underperform’, while notching up its price target by 800p a share to 6,600p.
The call was made on valuation grounds following the recent weakness in the share price. However RBC thinks next year will be key for the Kibali Mine in the Democratic Republic of Congo.
The operation’s potential to generate significant cash flow could support a very decent dividend with the yield averaging around 4.5% for full-years 2018 and 2019.
“Randgold's CEO Mark Bristow has continually talked to the ability for Randgold to return significant cash to shareholders,” said RBC in a note to clients.
The London arm of the Canadian bank said the miner has stated it will look to hold no more than US$500mln on the balance sheet.
For the current year, RBC estimates surplus cash will be in the order of US$706mln. On its existing production trajectory, the free cash flow yield will be a healthy 5.4% going forward, based on a US$1,300 an ounce gold price.
Currently the price of the yellow metal is US$1,276.30, down US$6 an ounce overnight. It punctured the US$1,300 floor at the end of last month.
Randgold’s share price has reflected this downward trend, losing around 500p a share in less than a week. And at 9.45am today it was off a further 50p at 6,835p.