Do Rare Earth Minerals PLC’s Latest Results Make It A Better Buy Than Anglo American plc & Randgold Resources Limited?

Should you buy Rare Earth Minerals PLC (LON: REM) ahead of Anglo American plc (LON: AAL) and Randgold Resources Limited (LON: RRS)?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Rare Earth Minerals (LSE: REM) are around 3% higher today following the release of its first half results. That’s despite the company reporting a wider pretax loss for the first half of the year versus the same period last year, with it being £1.2m compared to £200k in 2014.

The key reasons for the increased loss were higher administrative costs, with them increasing by around two-thirds to over £1m, as well as the lack of a one-off gain from an equity swap settlement which occurred in 2014. In fact, Rare Earth Minerals recorded a loss in its equity swap settlements of £100k against a profit of £450k last year. Furthermore, finance costs also rose from just £6k last year to £110k in the first half of the current year, which contributed to a greater pretax loss.

Despite this, Rare Earth Minerals remains bullish on its future. It remains committed to making further investments in its key projects and, on this front, clearly has considerable future potential. That’s at least partly because demand for lithium, for example, is set to rise over the medium to long term as the world shifts to cleaner power. So, while it currently has no revenue and is burning through cash, Rare Earth Minerals could become a highly profitable business in the medium to long term – especially since its various projects have considerable potential.

However, for many investors, making a profit right now is of utmost importance. That’s especially the case since the resources industry is enduring a challenging period, which arguably makes investment within the sector more difficult to come by. As such, buying shares in profitable companies could limit risk moving forward, which is why Anglo American (LSE: AAL) and Randgold Resources (LSE: RRS) are very enticing buys right now.

In the case of Anglo American, it is shifting its focus away from South Africa, which is a sound move due to the challenges it has faced (notably with employee relations) in its traditional home market. This should lead to fewer production issues in future and, while Anglo American made a loss last year, it is due to turn that performance around and post a pretax profit of £1.65bn, with growth of 7% forecast for next year. This puts Anglo American on a forward price to earnings (P/E) ratio of just 10.7, which indicates that there is upward rerating potential.

Similarly, Randgold Resources is also expected to have a strong 2015 and 2016. It is due to follow five years of profitability with another year in the black in the current year, with next year forecast to see earnings rise by 23%. This has the potential to improve investor sentiment in Randgold Resources – especially since the company has a price to earnings growth (PEG) ratio of just 1. And, while the price of gold is continuing to disappoint, global economic turmoil could strengthen demand for the precious metal and cause Randgold Resources’ profitability to head northwards at an even faster rate.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Anglo American. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »