There’s nothing like a roaring gold price to bring out the forecasters!

Investors are scuttling for a refuge from the slumping dollar and surging energy costs. And low and behold, Citibank, Gold Fields and leading US coin dealer Blanchard, to name a few, all see $1,200 gold on the horizon!

We think it must be the "better to push on an opening door" syndrome!

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The miners are being outshone by the metals themselves. Yet mining shares continue to outperform the general market. The FTSE Global Mining Index was up 10% in the first half, compared to a 13% decline in the FTSE Global All-cap Index.

Miners of gold, however, have not been among the best performers... yet!

Still if these forecasts materialise, the worst could be over for some. Take Randgold Resources (RRS:L), a mid-tier explorer, developer and — importantly — producer in Africa.

Randgold first roused our interest back in July 2007 when the share price hovered around R12. By April 2007 it reached R28 — a gain of more than 130%!

But then, it all started to go wrong...

Then the slide began, as a result of cost and production fears. More than a third of its value was wiped out, along with other mid-tiers.

But Randgold still has all the ingredients for success. Chief executive Mark Bristow is not deterred by a market driven "purely by instant gratification". He is going for continued "organic" growth. That means Randgold finding its "own gold, so we’re not forced to buy ounces at a premium by the demands of a bull market."

Hitting its targets by 2011 will increase attributable annual production from Randgold’s West African mines by 50%. The figure will be a whopping 600,000 oz.

Randgold has great key objectives — to make falling output and ore grades a thing of the past and to aggressively tackle soaring costs. It may have raked in higher gold prices this quarter, but cash costs were up 47%.

In spite of that, net profits still rose 42%. And the production pipeline holds promise. Two existing open pit operations have just produced 63,249oz at a cost of $470/oz . They are on target to deliver 265,000oz this year. A new high grade underground mine has started to deliver, too. By 2010 it will be producing 400,000 oz — result! Another is in the final planning stages.

Randgold has its fingers in plenty of pies

Its project in the Ivory Coast is enjoying a "steady improvement in the political climate". Randgold has also recently announced a 52% increase in the more reliable "probable" reserves category.

In a world where production is falling, new deposits are crucial. Randgold has a good track record here. In Tanzania, it has decided to enter phase two of the 500,000 oz joint venture with AIM-listed African Eagle. A geological model has given good reason to do so.

All in all, Randgold’s net profits could increase by as much as 70% this year, Bristow reckons. Not bad!

And it is scanning the horizon for more! Africa may be Randgold’s "home-turf", but it is not averse to taking its skills elsewhere to new and profitable gold targets.

So, keep mining,

Erin and Isabel

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