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Randgold Resources drops as it cuts production guidance after heavy rain

A rising stock market and another increase in the gold price should, you would have thought, benefit a precious metal miner like Randgold Resources.

Sadly for the company it has issued a downbeat trading update, specifically noting problems at its Loulo and Gounkoto sites in Mali with abnormal rainfall swamping pumping capacity and cutting off service roads. Randgold said around 40% of the region’s expected annual rainfall had fallen in the past 12 days.

It hoped things would get back to normal in September, but even so it has reduced its annual production guidance from 750,000-790,000 ounces to 740,000-760,000 ounces. Charles Kernot at Evolution Securities issued a sell note, saying:

Randgold Resources is not immune to production downgrades and profit warnings, and we believe that this risk is not reflected in this company’s market valuation. We continue to believe that this company is considerably more expensive than all of the other gold stocks which we cover.

The company’s shares are currently down 55p at £62.85. © Guardian News & Media Limited 2011 | Use of this content is subject to our Terms & Conditions | More Feeds