Two turnaround gold stocks I’d buy today

Roland Head explains why he’s bullish about these dividend-paying gold miners.

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.

Today I’m looking at the contrasting fortunes of two stocks I believe are among the top buys in today’s gold market.

Get out of jail free?

Has troubled Tanzania-based gold miner Acacia Mining (LSE: ACA) just been given a ‘get out of jail free’ card by its majority shareholder?

A statement on Thursday morning certainly suggests to me that the company has new grounds for optimism in its dispute with the government of Tanzania.

The firm’s share price has fallen by more than 50% since May as a dispute with the government has prevented normal levels of gold exports. Acacia’s majority shareholder, Barrick Gold Corporation, has been negotiating on its behalf with them.

Last week it was reported that Barrick had agreed a solution, but that Acacia might have to pay $300m as part of a settlement. This looked like a problem. Andrew Wray, Acacia’s chief financial officer, was quoted in the Financial Times as saying: “We don’t have the ability to make an upfront $300m payment”.

Problem solved?

Fast-forward a few days and Acacia has issued a new statement. The company notes that Barrick Gold has increased its provision with respect to Acacia’s historical tax liabilities, from $128m to exactly $300m.

Is this just a coincidence, or is this part of a plan by Barrick to ease Acacia’s path back to normal operations? In my view, the latter is more likely. The firm’s shares have risen by 5% following the news, suggesting that other investors are cautiously optimistic.

A potential bargain

A proposal for a settlement with the Tanzanian government is expected early in 2018. If a deal is agreed, I believe that Acacia should be able to return fairly quickly to normal operations.

If you share this outlook, then you may want to note that the firm’s shares currently trade on a 2018 forecast P/E of just 5.5, with a prospective yield of 6.6%.

These forecasts clearly imply that the mining company will return to business as usual next year. There’s still a risk this won’t happen. But if it does, the shares could be a bargain at current levels.

My top choice for income

Shareholders at Highland Gold Mining (LSE: HGM) don’t need a get out of jail free card.

The Russia-focused firm’s shares currently trade at an attractive 10% discount to their book value, with a forecast P/E of 9.

This company has always been run with a focus on providing an income for shareholders, and brokers expect a full-year dividend of $0.11 per share this year. That’s equivalent to a tasty 5.8% dividend yield.

One potential risk is that more than 40% of this firm’s shares are controlled by a small group of wealthy Russia-based businessmen. These include Chelsea FC owner Roman Abramovich and Highland’s executive chairman, Eugene Shvidler. Should they choose, I’d expect this group to be able to change the future direction of the firm.

However, there’s no sign of this so far. The group’s operational performance seems good too, with gold production up by 14.6% during the third quarter. Broker forecasts have also edged higher, suggesting to me that this stock remains a strong buy.

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.

Roland Head owns shares of Highland Gold Mining. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

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

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »