The share price of Randgold Resources (LSE:RRS) peaked at 9750p back in July 2016 before dipping to 5430p by the year-end. The stock had another bullish run, reaching 8194p in summer 2017 but has again fallen back. However, while the chart is shaping up to look interesting for entry, political issues are overshadowing Randgold.
Mining is an essential industry for the Democratic Republic of Congo – the country is Africa’s biggest Copper and Cobalt producer – and the government wants a bigger slice. It’s introducing a new code which will increase royalties payable and taxes on profits, and as you’d expect, the mining companies are not agreeable.
Randgold is teaming up with Glencore and a number of other major miners in the region to oppose the new code. The group said they would defend their investments ‘by all domestic and international means at their disposal’.
Chartwise, Randgold is currently testing a key support level that splits the price action in half. It runs from the peak of 2015 and has been called on for support a number of times before. A look at the Relative Strength Index (RSI) indicates, although oversold, it is not hugely so – there’s room for further downside. The next support level is at 5429, which could be bolstered by other trendlines intersecting it should it be reached over the next month or so.
All that glitters
The Gold price has been trading sideways with little decisiveness recently, as has the strength of the dollar. With equity markets looking gloomy, Gold may well start to shine soon. Obviously many investors buy Gold producers for exposure to the metal, but comparing Randgold with it over the past year shows the company valuation has become a little disconnected from the commodity.
In the event profits are less affected by the new legislation that the market expects, today’s price could prove to have been a great opportunity, however with so much uncertainty; it remains a risky play.
Author: Stuart Langelaan
Disclosure: The author of this piece does not own shares in the company mentioned
